Anxious to do Good by Alan Peacock

Author:Alan Peacock
Language: eng
Format: epub
Tags: Economist, activist, economic policy, politics, political action, liberalism, personal liberty, government, policy advisor, memoir, welfare, markets, liberal political philosophy, public action, education
ISBN: 9781845404659
Publisher: Andrews UK Limited 2013
Published: 2013-09-23T00:00:00+00:00

Annex 7.3

Manchester Guardian, 4 May 1956

The Earnings Rule: Case for Abolition, by Alan Peacock

There is a large body of official and unofficial opinion which accepts the Beveridge Report as holy writ. Quotation from this famous document is considered a substitute for reasoned argument. The report of the National Insurance Advisory Committee on the earnings limits for retirement pensions and widow’s benefits, discussed in yesterday’s Manchester Guardian, once again quotes reverently from the bible of the Welfare State, and represents a wasted opportunity for discussion of the whole rationale of the famous Beveridge ‘retirement principle’ which laid down retirement from work as a necessary condition in the granting of an adequate pension.

The committee itself cannot be blamed for the narrow terms of reference, for it was merely asked to consider what adjustment should be made in the present earnings limits. The possibility of querying the retirement principle and thus of considering the abolition of the limit was denied them. Perhaps the Minister of Pensions and National Insurance and his advisers forgot that Lord Beveridge himself was not disposed to defend the earnings limit when it was last considered officially by the Phillips Committee some eighteen months ago.

The details of the earnings limit are well known but the implications of it are not. From the point of view of equity there are serious anomalies which are difficult to rectify while economic considerations demand its immediate abolition. So far as equity is considered the fact that a retired person has his pension reduced by 1s for every 1s earned over £2 (£3 in the case of a widow) means that he or she is subjected to what is a marginal rate of tax of 100 per cent until the pension or benefit disappears. This tax is not an income tax; it is an earnings tax. Thus a retired person within the meaning of the National Insurance Acts who draws say £1 per week as the owner of rented property and a further £2 a week in gainful employment does not have his pension reduced but a person deriving the same income of £3 from gainful employment alone will have his pension reduced by £1 a week.

Anomalies

Again, no account is taken of fluctuations in earnings over the year: the limit is applied strictly on a weekly basis. A pensioner who takes a seasonal job and earns, say, £4 a week for three months will forfeit his pension for that period, but a man earning £2 a week for six months, the same aggregate sum, will lose nothing. In days when generous tax allowances are granted to industrial pension schemes and are promised to self-employed persons it seems anomalous to impose an earnings limit on a State retirement pension but not on industrial or Civil Service pensions - a point which Professor Titmuss and Miss Spelman stress in their brief note of dissent to the report.

The case in equity for the continuation of the earnings limit is not really discussed in the report, although some consideration is given to the question of averaging.

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