The Five Giants [New Edition]: A Biography of the Welfare State. Nicholas Timmins

of … ten years experience. I was to join the committee. We also had the exceedingly valuable help of Richard Titmuss, Brian Abel-Smith and Peter Townsend. This was the best job Crossman ever did.’ Jay went on:

      The two central principles which in the course of the argument became increasingly clear to us, and in the end won unanimous agreement were these; first that since the ordinary man or woman would rather pay £1 a week as an insurance contribution than as income tax, and so feel that he or she had earned their own pension, the contributory principle was right [a married man with two young children in 1956 still had to earn 97 per cent of average manual earnings to pay any income tax]; and secondly since a single fixed contribution and pension for all must mean either too high a contribution for the lowest paid, or too low a pension for the well paid, it was inevitable that the contribution and pension must be earnings-related in the future if pensions were eventually to ensure a decent living standard in old age.⁷⁰

      The chief snag, Jay records, was the rapid growth since 1948 of schemes run by employers – occupational pensions. In 1936 a mere 1.8 million people were members of such schemes. By 1956 that had risen to 8 million, around a third of the workforce, chiefly covering white collar staff including the civil service. The employers would resist higher contributions, arguing that they were already paying into their own schemes. A typically ‘English compromise’ was proposed: they would be able to contract out of higher contributions in return for the pensions they paid. Much of the credit for designing the scheme, which aimed eventually at half-pay on retirement against the fifth of average earnings that the existing pension provided, goes to Titmuss and his colleagues. The plan was published in May 1957, enthusiastically endorsed despite Crossman’s confession to his diary that its details remained ‘three-quarters baked’,⁷¹ and was thrown down as a challenge to the Tories. It was to take twenty years to come to fruition.

      Crossman’s plan was remarkable for abandoning ‘fair shares for all’, the wartime slogan Labour had adopted as a sound socialist tenet. Earnings-related pensions would mean more for the better off – a stark departure from Beveridge’s subsistence principle and a move towards more continental ‘citizenship’ models of social security. But it won union support. A TGWU-backed Fabian pamphlet was already arguing that: ‘The only test by which a pension can be judged is by its relation to the wage packet earned at work. This is the way the boss looks at his pension and that is the way we should look at ours.’⁷² The unions also backed a state-run scheme as occupational pensions were commonly not transferable: workers saw them as a form of golden handcuffs, tying people to particular firms and even enforcing discipline within them. The more perceptive Conservative critics, while vigorously in favour of private provision, also saw that lack of transferability meant that existing occupational schemes reduced labour mobility, an issue that was finally to lead to sweeping changes in pension provision in the 1980s. There was therefore the beginning of a cross-party alliance available.

      That was not evident in 1957–9. None the less John Boyd-Carpenter, the Minister for Pensions and National Insurance, was forced to respond in the face of these challenges and the escalating crisis over how to pay for pensions. Initially he dismissed Titmuss and his colleagues as ‘a skiffle-group of professors’ who had got their sums wrong.⁷³ When the sums broadly held up, he and others attacked the scheme as extravagant and inflationary, arguing that higher contributions by employers would mean higher prices – a point Beveridge drove home from his seat in the Lords as he spelt out his anathema to this departure from his principles.⁷⁴ Boyd-Carpenter’s final response was a vastly more limited scheme to introduce ‘graduated’ pensions. Above a low threshold, employees were to pay a percentage contribution on their earnings up to a £15 a week ceiling. This earned them ‘bricks’ of extra pension: 6d. (2.5P) a week for every £7.50 paid by a man and £9 by a woman. This was not strictly earnings-related, and no formal provision was made for up-rating the graduated pension alongside inflation. Younger workers were thus faced with the prospect that the ‘sixpenny bricks’ they had paid for early in life would be worth next to nothing when they retired. The scheme was presented firmly as an alternative for those who lacked occupational cover, and the benefits were deliberately limited to avoid competition with occupational schemes. For good measure employers were allowed to contract out on certain conditions. Finally, no secret was made of the fact that the higher contributions were intended at least as much to put the national insurance fund back into balance as they were to produce any sort of pensions revolution. The 1958 White Paper stated bluntly as its first objective: ‘to place the National Insurance scheme on a sound financial basis’.⁷⁵ The White Paper also formally abandoned Beveridge’s plan of relating contributions to the final cost of providing pensions. Instead, Boyd-Carpenter said, contributions would be set no higher than needed to balance income with expenditure as the scheme developed.

      The limitations of Boyd-Carpenter’s scheme brought fierce cross-party argument at the 1959 election. Labour branded it ‘a swindle’ and the minister ‘a good bargain’. He in turn charged that Labour’s plan was ‘financially unsound’. The issues were far too complex, however, to make much impact on the electorate and in 1961 the minister’s 1959 legislation came into force.