Suggestions for a scheme of old age pensions; with an introductory chapter dealing with the report of the Committee on old age pensions

Preface

The " Suggestions for a Scheme of Old Age Pensions" is a reprint of certain proposals which I ventured to submit for the consideration of the Committee appointed in July, 1896. Encouraged by a few friends, who are interested in the movement towards securing for the deserving poor some better provision in old age than they now enjoy, to disinter this scheme from its peaceful tomb in the pages of a Blue-Book, I publish it without alteration in the form in which it was submitted to the Committee on Old Age Pensions.

These proposals were framed with the object of avoiding the serious objections which can be raised to any contributory system, without disregarding the opinion that pensions should be conferred as a reward and encouragement to thrift. I claim for the plan no more originality than can be attributed to the Report of the Old Age Pensions Committee, and no freedom from the errors of judgment which relieve the sterile monotony of the conclusions accepted in that document. No one, however, who is sincerely anxious to arrive at a solution

406163 vi Preface

of this problem will deem any suggestions amiss which are not advanced without some study and consideration. The editor of the National Review has kindly allowed me to use as an introduction to this pamphlet an article I have contributed to his review.

LIONEL HOLLAND.

Introduction

THE REPORT ON OLD AGE PENSIONS.

The Report of the Committee on Old Age Pensions, which was appointed in July, 1896, has at length been issued. The circumstances which led up to the appointment of this Committee may be sufficiently indicated in a few sentences.

For some years there has prevailed a "widespread expectation, in and out of Parliament, that some provision other than that made by the Poor-Law should be devised for the assistance in old age of those among the poor who have led respectable and industrious lives ;" and in the year 1893 a Royal Commission was entrusted with the duty of ascertaining whether any alterations were desirable in the methods of Poor-Law relief to meet the case of the aged poor, or whether assistance could be otherwise afforded to them. The deliberations of that Commission, in so far as they relate to suggestions for a system of Old Age Pensions, were negative in result. The Commissioners had before them, among other proposals of less defined provisions, the scheme of the informal Parliamentary Committee associated with viii Introduction

the name of Mr. Chamberlain, and that of Mr. Charles Booth ; they reported their inability to recommend the adoption of any of the schemes submitted to them, but expressed a desire that their inquiry should not preclude the future consideration of plans which might be thereafter proposed. A Minority Report was also presented. This Minority of the Commissioners, including among them two members of the present Cabinet, Mr. Chamberlain and Mr. Ritchie, advocated more definite action : the appointment of a small Committee whose functions should not be limited to an " examination of all the schemes " which might be laid before it, " but should extend to the construction, if possible, of a practical scheme, either based upon, or altogether independent of, any of those submitted. ... It should," they were of opinion, " lay down the principles to which any scheme should conform," especially in relation to its financial aspect and its influence on habits of thrift and self-reliance.

The Royal Commission on the Aged Poor presented their report in February, 1895. Between that date and the date of the General Election, the spring-time for projects of social reform, the movement in favour of State or State-aided Pensions developed rapidly. The leaders of the Opposition sanctioned the demand for State assistance to the industrious poor in old age, and when the defeat of the Radical Government occurred and the present Ministry came into office, the new Ministers accepted, as responsible advisers to the Crown, " Old

Introduction ix

Age Pensions " as an integral part of the legislative programme upon which they appealed to the country for support. They therefore took a step in advance of the position assumed even by the Minority section of the Old Age Commissioners. By including Old Age Pensions among the subjects upon which, if the electors confirmed them in power, the Government intended to legislate, the present Ministry crystallized " the widespread expectation " into anticipations which could be reasonably entertained, and gave the electorate to understand that they viewed the suggested departure, not only as just and expedient in principle, but as practicable in application.

Among the projected social reforms commonly accepted by the party now in power, and endorsed by its leaders, to none was given greater prominence at the last General Election than to the " amelioration of the lot of the aged poor " by some system of pensions. In the purely agricultural districts of the eastern counties, in the manufacturing cities of the midlands, in London and in Glasgow, from the South of England to the North of Scotland, by the recognised chiefs of the party and by its rank and file, scarcely an Address was published, scarcely a speech delivered without some reference, more or less definite in its character, but invariably favourable, to the promotion of legislation with a view to improving the position and safeguarding the independence of industrious people in their old age.

It is, then, reasonable to affirm that the application of

b x Introduction

some scheme of Old Age Pensions to meet the problem of old age pauperism is an essential part of this Government's programme of legislation. Not only was the necessity of a departure in this direction publicly favoured by the foremost men in the Unionist forces, but they persevered in their advocacy subsequently to the publication of the Report of the Commission on the Aged Poor, and undeterred by its nugatory character. That Report was issued, and its conclusions, or paucity of conclusions, widely canvassed in the spring of 1895, giving ample space for any reconsideration of policy before deciding upon the character of the appeal to be made to the constituencies. But no alteration of policy was announced ; the members of the Government and the rank and file of their followers continued to maintain the question of pensions for the aged poor in a prominent position in their electoral forecast.

There is at present no reason to doubt that it was only after careful consideration and in all good faith that Ministers accepted the responsibility of attempting to grapple with this problem. The sense of political honour at Westminster is at least as reliable as the commercial integrity of the City. Occasionally a buoyant market and a multitude of investors will persuade a few gentlemen of solid financial reputation to support an unduly favourable estimate of some industrial venture, or to become enamoured of an African Eldorado ; and it may be that the prospect of a new Parliament and a change of Government inspires in ardent politicians ex-

Introduction xi

pectations of a prosperous era of halcyon days of trade and social improvement, which, if past experience is of value, years of plodding and painful progress would be unable to realize. But to suggest that a proposal for legislation thus commonly accepted as an urgent necessity by the representatives of the Unionist party at the General Election, and formally approved by the Unionist chiefs, is to be shelved or rejected, is to argue that the leaders in the public life of Great Britain are not one whit better than the shabbiest promoters of a bogus company.

It is not necessary to impugn the good faith of the Government, to doubt the wisdom hitherto of their policy in regard to this question. Having accepted the principle of State-aid for the industrious poor in old age, this Government had to decide upon the most practicable and beneficial application of that principle. They apparently acquiesced in the recommendation of the Minority Report of the 1893 Commission, that a further investigation by a small Committee, with a view to formulating a scheme of its own or endorsing some scheme submitted to it, would be serviceable, and might indicate the lines which Parliament could advantageously pursue. But their acquiescence was only apparent. They appointed a small Committee ; but neither in the scope of the reference to it, nor in respect to its composition, did they fulfil the recommendations of the Minority Report.

If the Government were actuated only by anxiety for further informed advice to enable them the better to xii Introduction

apply a principle entertained in all sincerity, the procedure most likely to be of service to them seemed fairly plain : to appoint a small Committee — a Departmental Committee with some expert members, or a Select Committee, which to my mind would have been a preferable body for the purpose, and would have equally been able to avail itself of expert opinion — but in either case composed of gentlemen who might be supposed to favour, or at any rate not to be adverse to, the principle which it was the purpose of the Government to establish ; to arrange that this Committee should act under a reference wide enough to enable it to test every proposal submitted to it which might promise to repay examination, and with a specific direction to endeavour to construct a practical scheme or schemes for the consideration of the Cabinet and Parliament, and to indicate the principles to which any such scheme should conform.

Unfortunately the more obvious course was not the course adopted by the Government.

The Departmental Committee, which was constituted under a Treasury Minute of July, 1896, was somewhat unsuitable in its composition for the object for which it was avowedly established. An acceptable chairman was nominated in Lord Rothschild ; but of the eight other members of the Committee, four were permanent officials representing respectively the Treasury, Board of Trade, Post Office, and National Debt Office — representatives of a section of the community justly held in high esteem, but not popularly supposed to be

Introduction xiii

partial to legislative departures involving any additional levy upon the National Exchequer. Of the other four members, consisting of Mr. Brabrook, the Chief Registrar of Friendly Societies, whose experience and advice were essential to any body charged with an investigation of this character, the actuaries to the Atlas Insurance Company and the Manchester Unity of Oddfellows, and the Parliamentary agent of the Ancient Order of Foresters, one at least of them had publicly given expression to his dislike to any system of subsidized or State pensions, and, on the other hand, there was no reason to gather that any one of them was already favourably disposed to the movement. The Minority Commissioners of the Royal Commission on the Aged Poor had it " brought home " to them " only too plainly " during the course of their inquiry that the composition of that Commission, however admirable for the purposes of criticism, was " far from favourable to the work of construction." This opinion, passed by Mr. Chamberlain, Mr. Ritchie, and their co-signatories upon the composition of the Commission of 1893 upon which they served, applies with equal force to the Committee appointed in 1896 by the Ministry to which Mr. Chamberlain and Mr. Ritchie belong. The work of construction must be consigned to men who have not only the ability but the desire to construct. When this Government decided that voluntary schools were deserving and in need of pecuniary support, they did not hand the matter over to a council of Liberationists to advise xiv Introduction

whether they could recommend any proposals to that end. Army reformers would scarcely care to depute the strengthening our forces and remodelling our army system to a Committee composed of officials of the War Department with a couple or so of the Little England party to assist them in their deliberations. No satisfactory scheme of Old Age Pensions will ever be formulated until the duty of devising such a scheme is confided to men who unreservedly accept the principle which is involved.

But if the choice of the personnel of the Committee was unfortunate and not conducive to productive result, the reference under which it was required to act was. conceived even less happily; ill-conceived at once in* what it permitted and refused to permit. The investigation of the Committee was not focussed by any clearly' specific direction upon the endeavour, after examining" " all the schemes" laid before it, to construct a practical scheme or schemes for the guidance of Parliament, and " to lay down the principles to which any scheme should conform." From the terms of the reference, it coujd not • be inferred that the demand for Old Age Pensions had been already acquiesced in by the Government, and that the business of the Committee .was to advise upon the best method by which effect could be given to a settled principle.

But it is the limitations which were inserted in the"* reference, even more than those which were omitted, which have effectually operated to deprive the Report of

Introduction xv

this Committee on Old Age Pensions of any material weight, and of any degree of finality ; nor can the Government plead that these restrictions were imposed through mere careless oversight or ignorance on their part. They had warning of their destructive tendency ; but preferred to invite an impotent conclusion, and they have secured it.

" We have found that of the numerous schemes submitted to us, the greater number are excluded from consideration under the terms of our reference. . . ." " Within the limits marked out by our reference we have not received and we are unable to construct any scheme," etc. . . . " Any pension scheme coming within the terms of our refer -

■ cnce would be limited," etc. . . .

Such is the refrain of the Report ; paragraphs perforated with this depressing moral are to be found '"scattered through its columns. They supply the password which the reader has to master before he can •thread its barren pages. " The terms of our reference " are to the Committee'what King Charles's head was to Mr. Dick.

Upon Her. Majesty's Government must rest the responsibility alike for the composition of the Committee and the limitations imposed upon its deliberations. But the members of the Committee have observed these limitations with a ready and loyal acquiescence, with a

■ faithfulness deserving of more recognition than Ministers on mature consideration are likely to extend. They might have petitioned the Treasury, had they so desired, xvi Introduction

to widen the terms of their reference ; but they preferred, on the contrary, to interpret the limiting words with a refinement and precision which go far to- justify their designation as an " expert " Committee, and with an appreciation of exact verbal values which will rejoice the soul of Professor Raleigh.

The Committee was instructed to consider schemes " for encouraging the industrial population, by State-aid or otherwise, to make provision for old age ; and to report whether they can recommend the adoption of any proposals of the kind."

" Encouraging " differs in degree from ' compelling' ; any scheme containing an element of compulsion is ruled out of court. ...

"Encouraging the industrial population." — "The industrial population" is not to be confounded with. ' a part of the industrial population,' or 'a section of the industrial population.' The greater includes the* less, but the less is not the greater. The members of friendly societies, trade unions, and cognate associations form a portion only of the industrial population ; proposals therefore suggesting preferential treatment for members of these societies cannot be entertained.

" Encouraging the industrial population to make provision " is not co-terminous with " to make provision." All methods which do not involve a direct contribution from the beneficiary are discarded.

" Encouraging the industrial population to make provision for old age " cannot strictly be construed to

Introduction xvii

include provision against sickness or any other contingency of life except old age proper. Thus the contribution of the beneficiary must be a contribution specifically applied towards his own maintenance in age, and no other test of thrift is acceptable. It might be argued, indeed, by the unsophisticated materialist, that old age is a relative circumstance dependent on the health of the individual and his capacity to follow with ordinary vigour his accustomed employment, that whilst some men may justly be termed old at 60 years of age, some could not be correctly so described at 65 ; and that a man who has provided for himself from the time when his health and energy have become impaired by advancing years has, in •fact, been providing for himself in old age, although his 65th birthday, the moment the Committee reckons old age. as existent,- has not been passed. So nice is the discrimination of the Committee, that it can differentiate between the case of a man who provides 5s. a week from 65 to 70 years of age for himself, and is rewarded from 70 years onwards, to 75 years of age — supposing him to live so long — by a weekly pension of 5s. wholly sustained by the State, and that of a man who provides 2s. 6d. per week for himself from 65 to 75, and receives from the State the other 2s. 6d. during these years. Although the respective contributions towards this old age provision of the individual and the State would be identical in either instance, the latter case the Committee is at liberty to examine, the former it is precluded from entertaining.

xviii Introduction

And so the process of elimination is brought to a triumphant conclusion. Four only out of the hundred and more schemes submitted — including the proposals of the informal Parliamentary Committee and of Sir Henry Burdett — pass this rigorous preliminary test. This result is not surprising ; but it is surprising that, having once narrowed down their inquiry within these dimensions, the Committee contrived to spend two years on an investigation which one might have supposed could have been adequately accomplished in two months.

Discussion in any detail of the Conclusions at which the Committee has arrived must have about it an element of unreality. The limitations attached to its reference have deprived the Committee's Conclusions of the value which under happier conditions they might have possessed ; as it is, they have no title whatever to finality except in so far as they confirm the objections taken by the Royal Commissioners in their Report of 1895 to proposals based on the contributions of pensioners, the one class of schemes this Committee has held to be within the scope of its inquiry. Although for the purposes of destructive criticism the members of the Committee relax the superstitious homage they otherwise pay to the " terms of our reference," only within the accepted limits of their reference can weight be given to their criticisms.

In paragraphs 52 to 57 the Committee endeavours to depreciate the need of any system of Old Age Pensions by a somewhat elaborate train of argument. The evidence

Introduction xix

" appears" to it " to suggest" that men whose average weekly wages do not fall below 20s. can, with no serious difficulty, contribute 2d. a week from early manhood, or, if earning a slightly higher rate of wage, 4d. a week, to secure pensions of 2s. 6d. or 5s. a week at the age of 65 years. " These considerations," the Committee admits, " must not be pressed too far." From these considerations it derives, however, several somewhat crude deductions. Because, in its estimation, it is possible for a workman with an average wage slightly above 20s. a week to insure by his own efforts for a deferred annuity of thirteen pounds to begin at 65 years of age, the Committee infers that the only persons who may require State assistance in old age are those whose average weekly wage falls below 20s. ; that these persons form but a small proportion of the industrial population ; and that, even of them, but a small proportion above 65 years of age who are inmates of the workhouse — the bedridden, for instance, and " those who are no longer capable of the economical application of a small pension " — would under any system be able to support themselves independently.

It may be noticed that the initial consideration upon which the members of the Committee base these deductions is in itself not in complete harmony with a stricture they pass upon Sir Henry Burdett's proposals, in which they question the probability of men whose average earnings are from 15s. to 20s. a week being able for any continuous period to spare 9d. a week out of their wages xx Introduction

for the purchase of the provision against sickness and old age combined contemplated by Sir Henry Burdett. The weekly sum required from the age of 25 onwards to secure a deferred annuity of thirteen pounds at the age of 65, together with ordinary Friendly Society assurance against sickness, is from 8|d. to g-|d. It is impossible to suppose that the Committee deem it desirable that any working-men should cease to make provision against the more certain and imminent contingencies of life, such as the drain upon their resources caused by sickness and funeral expenses, which they now are customarily enabled to meet through the agency of friendly societies. If, then, it is improbable that a man whose earnings are slightly below 20s. a week can spare gd. a week out of them for any continuous length of time, can it be asserted with any confidence that the individual whose weekly wage is only slightly in excess of 20s. is able without difficulty to devote 8^d. or g^d. a week for forty years of his life to insurance against sickness and old age ? Yet it is upon this precarious assumption that the Committee constructs the argument by which it aims at minimising the need of any system of Old Age Pensions.

But even if we accept without reservation the inference of the Committee, that a working-man whose earnings exceed an average of 20s. can by his own efforts subscribe for a pension of 5s. a week from the age of 65 onwards, to acquiesce in a premiss does not necessarily imply acquiescence in a non sequitur. The Conclusions which the Committee arrives at from this proposition can

Introduction xxi

only be made acceptable by ignoring and misconceiving some of the essential conditions of existence among the poorer part of our industrial population.

We must ignore the weighty objections to deferred annuities as a form of thrift which were expressed in evidence before the Royal Commission on the Aged Poor and in principle endorsed by the Commissioners. That deferred annuities are unpopular as a form of investment, and demand a greater degree of foresight than can be reasonably looked for among young people, is certain. That they constitute a prudent or valuable mode of thrift has been seriously disputed ; and the fear has been expressed that to put a premium upon this form of saving might well be productive of economic harm by injuriously affecting other and more beneficial methods. Do the members of the committee hold a different opinion, and regard deferred annuities as a method of saving valuable in itself, preferable to other methods, and likely to be generally used ? If so, they can scarcely anticipate any general concurrence with their view, when they vouchsafe no reasons for rejecting the considered conclusions of the Commission on the Aged Poor. If, however, no such inference as to the opinion of the Committee is to be gathered from its suggestion as to a certain proportion of the industrial classes being in a position to purchase deferred annuities, what possible end is furthered by the statement of an irrelevant fact, and how can the statement be applied as an argument to depreciate the need of pensions ?

xxii Introduction

The reasoning of the Committee in these paragraphs is also vitiated by excluding any consideration of the claims of the female portion of the community, even of the widow who has assisted her husband in his efforts of thrift, foregoing during his life the present use of the savings which he was devoting in weekly contributions towards an Old Age Pension, savings entirely lost to her on his death. Women in their old age are at least as much in need of assistance as men ; few women among the industrial classes secure the average wage which the Committee regard as sufficient to enable the wage-earner to purchase a deferred annuity ; and the Conclusion of the Committee, that " the people thus in a position to require assistance must, in any case, form but a small proportion of the industrial population," can only be justified by reading a further limitation into its reference and interpreting "the industrial population" to mean the male industrial population only.

But the deductions which the members of the Committee come to by a process of abstract reasoning, based upon "evidence" which "appears to suggest," are so manifestly at variance with ascertained facts that it is astonishing that they did not suspect the presence of some flaw in their syllogism. How can their pronouncement be squared with the existing conditions — " that nearly 20 per cent, of the total population (rich as well as poor) above the age of 65 receive relief in one day, and nearly 30 per cent, in the course of one year ;" that while the proportion of paupers under the age of 65 to the popula-

Introduction xxiii

tion is only 8 per cent., it amounts to 25 per cent, in the years which follow 65 ; that although, for the most part, the members of the working-classes are " fairly provident, fairly thrifty, fairly industrious and fairly temperate," four out of every nine of them over the age of 65 years are numbered among the army of paupers ? No shower of acute syllogisms can sponge this record from the slate, nor pages of faulty deductions from doubtful premises.

The argument of the Committee receives no accession of strength from the rider, that " only a small proportion of those above 65 years of age who now appear as inmates of the workhouse or infirmary would, under any system of State-aided pensions, be able to support themselves independently." It is merely misleading. Returns for the years 1890 and 1892 show that more than two-thirds of the whole community of paupers over 65 years of age receive outdoor, not indoor relief ; and figures of a striking character will be found in an Appendix accompanying the Report, which disclose an ominous growth in the tendency to give outdoor in preference to indoor maintenance since the electoral changes of 1894. Even although it were the case, as the Committee infers, that the bedridden and " those who are no longer capable of the economical application of a small pension " would not, if possessed of a small annuity, be frequently able to find in the cottage of a relation or friend a more acceptable home than the workhouse, at any rate the remaining two-thirds of the industrial population over 65 years of age, who

XXIV

Introduction now in a greater or less degree receive assistance under the Poor-Law, but receive it outside the workhouse, might be enabled by State-aided pensions to support themselves in independence.

The members of this Committee have failed to realize the motive which animates the demand for State-aid to the aged poor. State pensions are not only sought for those people who under existing conditions are reduced in old age to actual pauperism, but, at least as imperatively, for those also who are kept off the rates by the assistance of friends or by private charity, or by their own painful and penurious struggles. " Such persons," the Commissioners of 1893 pointed out, " must sometimes endure great privation in their effort to avoid application for official relief, and they form a class quite as deserving of consideration as others who are actually numbered in the return as paupers." Does it in any degree satisfy this requirement to prove that a section of the male working-class can by continuous effort, even granting such effort to be wise, secure for themselves a deferred annuity of thirteen pounds after 65 years of age ? A sum of 5s. a week may in many instances enable an old person to obtain an honourable asylum with relations or friends ; as a State endowment it will supplement any savings an individual has been able to lay by, it will relieve him of the apprehension that a few years or months of enforced want of employment will dissipate any little capital he has collected, and that in his age he will be left naked to the Poor-Law authorities. But, dissociated from any

Introduction xxv

other resources, an income of 5s. a week is not sufficient to supply bare means of subsistence.

The reasoning pursued by the members of the Committee has no appropriateness to their Conclusion, unless it is their thesis that a man who is in receipt of an annuity of ^13 in old age, as a result of his personal efforts through life, has no actual need of, nor ethical title to, any assistance from the State. Although this view may harmonise with the destitution test of our Poor-Law procedure, the advocacy of State or State-aided Old Age Pensions is grounded by the majority of those who favour their creation upon a principle which is almost the converse of that which the Committee approves. Thrift and the possession of small hard-earned savings is not to be the disabling but the enabling test for the enjoyment of the bounty of the State. Instead of the command of a small self-secured annuity destroying a man's claim to consideration, it goes far to establish it.