Old-Age Pensions

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Title:     Old-Age Pensions
Author: Edward Hartpole Lecky [More Titles by Lecky]

There are many signs that the question of old-age pensions is destined to assume a great prominence in England; although it is probable that the large increase of national expenditure which is certain to follow the unhappy war in South Africa may, for some time, postpone actual legislation on the subject. The generation has passed away which witnessed the enormous abuses of Poor Law relief that existed, under the old English Poor Law, before 1834, and the rapid diminution of pauperism that was effected by the sterner administration introduced in that year.

The principles of poor-law relief which were then recognised by the best minds in England have been somewhat forgotten. These principles were that, while in England provision is made for the support of all who are absolutely destitute, it is of the utmost importance that on the whole the condition of the pauper should be a less eligible one than that of an independent labourer; that nothing should be done that could diminish habits of thrift, forethought, and steady industry among the poor; nothing that could weaken their sense of the necessity of providing for their latter days, or of their duty of supporting, when they have the means, their aged parents and relations. In accordance with these principles it was laid down that outdoor relief should be either absolutely refused to the able-bodied or only granted under most exceptional circumstances; that the workhouse test, with its stringent, deterrent discipline, should be steadily maintained; that relaxations and special favours granted out of public funds should be limited, as far as possible, to cases of special calamity which it was impossible for any prudence or foresight to have averted.

It would certainly be a great exaggeration to say that these principles have disappeared. Indeed, the robust, independent, self-respecting character which it was the object of the Manchester School to encourage is abundantly displayed in the gigantic Friendly and other working-class Co-operative Societies which have so largely increased in England during the last half-century. Two of these Friendly Societies--the Manchester Unity and the Foresters--have each of them more than seven hundred thousand members on their roll. At the same time, it is equally certain that in many quarters a different, and, in my opinion, very dangerous, spirit prevails. In England as elsewhere there is an increased tendency to aggrandise the functions of the State and to look to State aid or State control rather than individual or co-operative effort as the remedy of every evil. Social questions have assumed a greater prominence in politics; and, with the lowering of the franchise, the vague State Socialism, which, in different degrees, pervades most working-class politics, has given a bias to both parties in the State. It has become prominent in every election and has produced many rash pledges.

The close connection between taxation and representation, which was once considered the cardinal principle of English Liberalism, has, in a marked degree, diminished, both in Imperial and local taxation. It used to be contended that those who chiefly paid should chiefly regulate, and that taxation should be as much as possible the voluntary grant of the taxpayers, restricted to their common purposes. But in many quarters a different belief has grown up. It is held that in the hands of a democracy taxation should be made the means of redressing the inequalities of fortune, ability, or industry; the preponderant class voting and spending money which another class are obliged to pay. The income-tax is so arranged that a large majority of the voters are exempt from its burden; a highly graduated system of death duties is now nearly the most prominent of our Imperial taxes; and the Local Government Act of 1894 has placed local taxation on the most democratic basis. The latter has given the power of voting rates to many who do not pay them; and, by abolishing the nominated, or ex-officio, guardians, and the plural voting of the larger ratepayers, it has almost destroyed the influence of property on local taxation.

At the same time the doctrine has arisen, and is now sedulously propagated in England, that the State ought to undertake to provide at the public expense for all old persons, or at least for all deserving old persons, who have not succeeded in obtaining a sufficient livelihood for themselves; that this provision should not be regarded as an eleemosynary grant, but as a positive right; and that, in order to free it from the taint of pauperism, and take away from the recipient all reluctance to receive it, a new fund should be created, entirely distinct from poor-law relief, and administered by some other tribunal than the poor-law guardians.

The claim has been supported on another ground. The immense improvement of the material condition of the English working classes during the last half-century is beyond all question; but it is much more evident among the young and the strong than among the old. The intense competition of modern industry, stimulated to the highest point by free trade, by the factory system, and by the vast development of machinery, has expelled the old and feeble from some of its most important fields; and the influence of trade-unions in enforcing, in each trade which they can control, a uniform and minimum wage, has obliged the employer to employ only the most efficient labour.

The old man who could once easily obtain a little work at low wages now finds it much more difficult; and the recent legislation compelling the employer to compensate his workmen for all accidents that take place in his employment, even when those accidents are in no degree due to any negligence on his own part or on that of his servants, has acted in the same direction. Such serious obligations have been thrown on the employer in the more dangerous trades, that he is obliged in self-defence to restrict himself to the workmen who are least liable to accidents; and they are naturally those whose strength, activity, and eyesight are at their best. Among the recipients of poor-law relief the proportion of men over sixty-five is enormously great; and some figures which, in 1893, were brought before the Commission on the Aged Poor, made a great impression on the country. It was stated that in a single year 29.3 of the whole population over sixty-five were in receipt of poor-law relief in England and Wales; and assuming that a third part of these old persons belonged to the well-to-do, it was calculated that not much less than three in seven must fall into the ranks of pauperism.

There has been much controversy about the accuracy of this statement; and, even if it be admitted, a good deal has been said to attenuate its force. In the poor-law system as it was reformed in 1834, it was a first principle that the workhouse, with its painful and degrading associations, was to be the chief form of poor-law relief, and that outdoor relief should only be granted on exceptional occasions and on stringent conditions. This provision has been gradually relaxed. Outdoor relief, which, in the eyes of the poor, carries with it very little of the discredit and dislike that gathers round the workhouse, is now by far the larger part of poor-law relief; and in many districts it is administered with great laxity.

It has been proved by the clearest evidence that the immense majority of the aged and deserving poor who are in receipt of poor-law relief only receive it in the form of outdoor relief, and very often only in the form of medical relief, and that if they go to the workhouse it is only when their peculiar circumstances make it desirable for them to do so. Wherever a more stringent system of relief is imposed, pauperism invariably and rapidly decreases; and Mr. Loch, the Secretary of the Charity Organisation Society, has collected much evidence to show that, on the whole, old-age pauperism is diminishing, though it has not been diminishing at the same rate as pauperism under the age of sixty. The administration of the workhouses has also greatly improved; and the poor-law infirmaries are becoming hospitals which are largely resorted to in time of sickness by many who might easily avoid them. On the whole, old-age destitution is, and must be, a grave question for philanthropists; but there has been great exaggeration about its magnitude and its hardships.

The expediency of devising a new and better method of providing for the destitute aged poor of deserving character has long been smouldering obscurely in English politics; but it obtained a real importance for the first time when a very strong Royal Commission, under the presidency of Lord Aberdare, was appointed, at the beginning of 1893, to inquire into the question. After long and careful inquiry, and after hearing a great multitude of witnesses, this Commission reported in the spring of 1895. The majority of the members, while recommending various reforms in the administration of the poor-law, reported decisively against any system of old-age pensions, either in the form of endowment or assisted assurance, as likely to do more harm than good; but a minority, which derived special importance from the presence of Mr. Chamberlain, refused to accept this decision as final, and urged that the question should be submitted to a smaller body of experts. In the election which took place in 1895 the question appeared frequently upon the platform, and many members on both sides of politics pledged themselves on the subject.

The weight which is always attached to the speeches of Mr. Chamberlain gave a great impulse to the movement. He never countenanced the idea of universal old-age pensions, which was already advocated by many; but he strongly maintained that special provision, apart from the poor-law and in the shape of pensions, might, and ought to, be made for the old and deserving poor; he expressed his belief that such a measure 'would do more than anything else to secure the happiness of the working classes'; and he suggested as the most feasible scheme that 'whenever a man acquires for himself in a Friendly Society or any other society a pension of 2s. 6d. a week the State should come in and double that pension.' Mr. Chamberlain, however, did not insist on this precise proposal; but he gave the question a great prominence; and among politicians on both sides there was a manifest tendency to make party capital out of it.

A purely non-party Committee, presided over by Lord Rothschild, and consisting mainly of distinguished financial authorities connected with the permanent Civil Service, and therefore removed from active politics, was appointed in 1896, in accordance with the recommendation of the Aberdare Commission, to inquire especially into the question of old-age pensions; and it reported in a document of conspicuous ability. It was unanimous in condemning as impracticable or dangerous all the schemes for such pensions that were brought before it; and it fully confirmed the views of the preceding Commission. The report, and the evidence on which it is based, clearly show the ways in which measures intended for the benefit of the working class may prove in the highest degree injurious to them.

If the matter could have been decided by pure reasoning, this report might have been generally accepted as decisive. But many of the supporters of the Government had at the election made speeches in favour of old-age pensions. One of its most powerful members had thrown his weight into the scale. The idea had taken hold of great sections of the working classes. The trade-unions, that see in increasing old-age poverty the chief drawback to their policy of enforcing in each trade a uniform and minimum wage, were naturally delighted that the State should undertake, out of public funds, to remove their difficulty. A number of Bills dealing with the question had been introduced into the House of Commons by private members; and the reluctance of the Government to take it up had become a favourite form of party attack. The Government acted as perhaps most Governments, under the circumstances, would have done. While refusing to give any pledge, and repudiating any sympathy with the idea of universal pensions, and insisting that an encouragement of thrift should be an essential condition of any old-age pension scheme, they refused to admit that a false departure had been made; and they appointed a new Committee--of which the writer of these lines was a member--to report upon the best means of improving the condition of the aged deserving poor, and upon the feasibility of dealing with their case by old-age pensions.

Mr. Chaplin, the President of the Local Government Board, an experienced and very popular member of the Cabinet, presided over the Committee; and the fact that he drew up the report of the majority gave that report its chief political importance. The Committee consisted largely of members who had already committed themselves deeply in favour of old-age pensions; and it will hardly be disputed in England that it carried with it much less financial and political weight than its predecessors; and that the majority report--which was carried by 9 to 4--is more remarkable for the boldness of its recommendations than for the cogency of its reasoning. It completely, and almost contemptuously, discarded the conclusions of the majority of the Aberdare Commission, and the unanimous opinion of the Rothschild Committee; and it recommended that old-age pensions, derived in part from Imperial and in part from local sources, and varying from 5s. to 7s. a week, should be granted to all the deserving poor who had attained the age of sixty-five and whose incomes did not exceed 10s. a week. It proposed that these pensions should be granted by committees established in every poor-law union and elected by the poor-law guardians; that they should be revised every three years; and that they should be distributed through the agency of the post-office.

On the great difficulties that seemed so formidable to its predecessors it touched very lightly. How many of the poor were likely under the proposed system to become pensioners, and what burden of taxation was likely to be thrown on the State, were questions that were put aside as irrelevant to the inquiry. To meet the enormous difficulty of deciding upon the real merits, and of investigating the real circumstances, of the great masses of independent and industrious labourers who live in the manufacturing towns, or are constantly moving from one great centre of population to another, and circulating in quest of work through the whole extent of the Empire, it was suggested that the relief be confined to those who were resident in a single locality; and it was pointed out that a number of charities, endowed out of old legacies or donations, and applying to particular classes or districts, had come to be administered by the Charity Commissioners, and that in this restricted field they had been able to convert a large part of the income at their disposal from doles into permanent pensions.

The thrift test and the character test, which previous inquirers had found it almost impossible to establish on a satisfactory basis, were defined on the loosest lines. The pensioner must not, during the preceding twenty years, have been sentenced to penal servitude or imprisonment without the option of a fine; he must not, during the same period of time, have been in receipt of poor-law relief 'other than medical relief or unless under circumstances of a wholly exceptional character'; and he must have 'endeavoured to the best of his ability, by his industry and by the exercise of reasonable providence, to make provision for himself and those immediately dependent on him.'

The extreme vagueness and the extreme elasticity of such provisions are sufficiently manifest; and it is difficult to see how they can give any real assistance in practical legislation; while they leave the door open to the largest and most lavish expenditure. I have endeavoured in a minority report to deal with these questions at somewhat greater length than my present space will admit; but a few pages may suffice to give an outline of the case of those who believe the new policy to be both mistaken and dangerous.

Nothing is more certain or more cheering in the condition of modern England than the extraordinary diminution that has taken place, during the present generation, in pauperism. It began with the reform of the poor law in 1834; and although it has been found possible to relax greatly the stringency of the poor-law regulations that were then made, it has steadily continued. Much of this is due to the increase in the rate of wages which has taken place in most departments of English industry, and which has been accompanied by a great decrease in the cost of most of the chief necessaries of life, as well as by a considerable reduction in the hours of work. Sir Robert Giffen, in the very remarkable paper which he published, in 1883, on the condition of the working classes in England during the preceding fifty years, has shown that in every class of work in which it is possible to make a comparison the wages of the labourer have in these fifty years risen at least 20 per cent., and in most cases between 50 and 100 per cent.; and he has clearly demonstrated that no other section of the community has obtained so large a proportion of the increase of the national wealth, and improved in so great a degree in material prosperity.

But the mere increase of wages is but one element of this improvement. The very mainspring of the prosperity of the great masses of the British working classes is to be found in their increased sobriety, and in the habits of thrift and providence that have followed the spread of education. The statistics of the Friendly Societies, the Industrial and Provident Societies, the Building Societies, the savings-banks, and of countless other institutions, created by voluntary working-class effort for the purpose of insuring against sickness or death, and providing working-class investments, attest in the clearest manner the rapid growth of provident and thrifty habits among the wage-earning classes. In no other respect is the improvement of the nation so marked and so indisputable and no element in the national character is more important to its prosperity and to its enduring greatness. In the evidence that was brought before our Committee, it was shown that since 1849 the pauperism of Great Britain had been reduced from 62.7 per 1,000 to 26.2 per 1,000, if lunatics and vagrants are included, to 22.8 per 1,000, if lunatics and vagrants are excluded.

The first, and most vital, condition of any sound legislation for the relief of poverty is that it should not impair these industrial qualities, or weaken these vast voluntary organisations of self-help which are their result. Can it be said that the old-age pension policy is compatible with this condition?

It proposes to open, in addition to the existing system of poor relief, a new fund, amounting to many millions of pounds a year, and drawn from compulsory taxation for the purpose of subsidising simple poverty; a fund to which it is to be rather creditable than otherwise to resort; a fund which is intended to deal, not with exceptional calamity, but with that which springs from the mere efflux of time, and which is, beyond all others, the most normal and most easily foreseen. It proposes to teach the whole working population to look to the State, and not to themselves, for the provision for their old age, and for the old age of those who might be dependent on them, and thus to destroy the most powerful of all motives to thrift--the very mainspring of productive and self-sacrificing industry. And it proposes to do this at a time when wages are higher than they have ever been before; when voluntary societies for securing the poor from want are flourishing and increasing as they have never done before; when the rapid decline of pauperism is one of the most marked and most universally recognised signs of national improvement. Can it be seriously believed that the addition of many millions a year to the State funds directly employed in the relief of poverty will, in the long run, tend to diminish pauperism or to encourage self-reliance and thrift?

Mr. Chamberlain and the other more considerable advocates of old-age pensions clearly see that if such pensions are to be of real value they must discriminate between the deserving and the undeserving; and they believe that they may have the effect of stimulating, instead of weakening, thrift. For this purpose several schemes have been devised.

The most popular Continental method of achieving this end is by a law obliging the working man in early life to insure against old age, and by supplementing the income derived from this insurance by a State subsidy. In Germany, where this system is actually carried out, the old-age pension is derived from three sources--viz. compulsory insurance by the workers, compulsory contribution by the employer, and a State subsidy. Compulsory insurance found for many years a powerful English advocate in Canon Blackley; and it has been recommended by a recent inquiry in Holland, which, however, refused to propose any system of old-age pensions. According to the best accounts, the German system has been far from successful either economically or politically; and it has certainly not prevented Socialism from becoming one of the great dangers of the State. Into this question, however, it is needless to enter, as it is now universally admitted in England that compulsory insurance for old age is an impossibility; for it would certainly be repudiated by the working classes.

A large group of proposals are to the effect that old-age pensions should be granted to all poor persons over the age of sixty-five whose total income is less than 10s. a week, provided that a certain portion of that income consists of a fixed annuity acquired by their own industry and thrift. It is urged that in most of the great branches of industry a deserving man in his earlier and stronger years could easily earn such an annuity; and it is suggested that the State should double it, or add to it sufficient to make it up to 10s. a week, or supplement it by a fixed grant of 2s. 6d., or 5s., or even 7s. a week.

The objections to such schemes are very serious. It is obvious that if they encourage a workman to save up to the amount required to secure a pension, they would have a directly opposite effect as soon as that amount had been attained. The first result of any addition to his income would then be to disqualify him for a pension. It is also obvious that the pensioner of sixty-five would have a strong inducement to abstain from the work he could easily do, and that if he continued to do it he would compete on exceptionally favourable terms with the workman who, though he had passed the prime of life, was not yet entitled to a pension, restricting his means of employment and beating down his wages. Many of the most necessitous and deserving poor would also be left unrelieved.

Although it is true that in the more flourishing trades men could easily in early life save out of their wages a sufficient sum to acquire this annuity, there are large fields of industry in which such a saving would be almost or absolutely impossible. We have had melancholy evidence of how utterly insufficient most forms of women's wages are to provide the needed margin. The same thing is true of the agricultural labourer in the more depressed districts in England and in large tracts of Ireland and Scotland. Even in the more remunerative employments innumerable special circumstances would prevent a thrifty and deserving man from obtaining this annuity. Certainly no one is more deserving of compassion and State aid than the widow and young orphans of a working man; but the scheme we are considering would not only not help them, but would most seriously injure them. It is a direct incentive to the workman to sink his savings in an annuity which would terminate with his own life.

The whole policy, indeed, of attempting to turn all working-class savings into this one channel is a false one; and it has been shown that no kind of saving is in fact less popular among working men than the purchase of a deferred annuity. I may here be allowed to quote a few lines from my own report:

'In the infinitely various conditions of a working-man's life thrift will take many forms, and an attempt to prescribe a single form is eminently injudicious. The whole life-plan of a farmer whose farm will remain with him to the end will be different from that of an artisan or a domestic servant whose power of earning a livelihood depends entirely upon his physical strength. The former will probably find it most profitable to expend his savings on the improvement of his farm. Where the system of peasant proprietorship prevails most agricultural thrift is directed to the purchase and enlargement of farms. In Ireland it is largely directed to the purchase of tenant right, or to enabling the younger members of the family to emigrate.

'Nor is it true that even the artisan will find the purchase of an annuity the best thing to be aimed at. To buy a house or some furniture; to start a small business; to expend his savings in tiding over periods of slack or failing work; to avail himself of the advantage which some fluctuation in the market gives to the man who can transport himself promptly to a new locality or a new business is often far more to his advantage. Above all, money expended in settling his family is often his best policy as well as the course which is most beneficial to the community. At present a large proportion of working men look forward to their children to help them in their old age, and make it a main object of their lives to place them in a position to do so. It does not seem to me a wise thing for the State either to emancipate children from this duty or to induce every married working man to sink his savings in an annuity which will end with his life and from which his widow and children can derive no benefit. It is certainly not for the advantage of the country that in selecting between alternative ways of providing for old age he should be induced to choose that which throws the greatest burden on the State. With the vast increase of population, with the great fluctuations of modern industry, and with the rapid development of the colonies, it is extremely desirable both in the interest of the working men and of the State that they should be induced to transfer themselves from congested towns and from exhausted industries to new fields. A general pension system would certainly contribute most powerfully to prevent them from doing so.'

It has been proposed by others that the pension fund should be placed in the hands of Friendly or Benefit Societies, and that they should be intrusted with its administration, or that subscription to such societies for a certain number of years should be taken by the State as the thrift test. On the first proposal it is sufficient to say, that these great voluntary societies are themselves opposed to it; for if they were directly subsidised by the State, they would be obliged to submit to a State control of their management and their finances which they do not desire. It is observed that only a very small proportion of the subscribers to these societies ever find it necessary to come upon the poor rates; and if a system of old-age pensions were confined to these limits, it would act in the most unequal manner. Their members are drawn in a far larger proportion from the lucrative and flourishing trades than from those which are struggling and underpaid. Few women belong to them. In Ireland, which is the poorest part of the Empire, Friendly Societies scarcely exist; and the same thing is true of large districts in Wales and Scotland. The main result of such proposals would be to concentrate the new State fund for the relief of poverty on the richest parts of the Empire, and on the trades that need it the least.

The extreme difficulty of finding any efficient test of thrift is very evident; and those proposed by a large number of the advocates of old-age pensions are so easy as to be almost worthless. Some consider it sufficient that a man has for a certain number of years not been in receipt of poor-law relief, except medical relief or relief granted under 'exceptional circumstances.' Others would accept the mere fact that a man has lived to be sixty-five, as the drunken and disreputable workman seldom lives so long. A large number of resolutions have condemned Mr. Chaplin's report on the grounds that old-age pensions ought not to be confined to the 'deserving' poor; that they ought to begin at an earlier age than sixty-five; that they ought to be administered by a body totally unconnected with the poor law, so as to carry with them no taint of pauperism or eleemosynary relief. They ought, it is said, to be universal; to be looked on as a matter of strict right; to be considered as of the same nature as the pension given to the soldier or the Civil Servant.

It is obvious that all this may carry us very far. It is estimated that some of the most popular proposals would involve an annual expenditure of considerably more than twenty millions of pounds--making allowance for the saving that might be effected in the ordinary poor-law relief, but not counting the cost of administration. And this expenditure would be a growing one; and once accepted it could hardly be withdrawn. The vast addition to the national debt that might follow a great European war or the great shrinkage of the national income that might easily follow some revolution in trade or manufacture, might render the burden of taxation incomparably more serious than at present; but once the great mass of the population had learned to regard State support in old age as their normal prospect and their inalienable right, it would be impossible, without producing a social revolution, to recede. All the advantages gained by generations of economical administration of the national finance would be nullified; while the certain result of this crushing addition to taxation would be to weaken incalculably the spirit of thrift, providence, and self-reliance, and at the same time to lower wages, by removing one of the great considerations by which they are regulated. And this reduction of wages would fall not only on the recipient of the pension, but also on multitudes who would never live to attain it. Nothing can be more certain than that a general system of pensions attached to the labour of the wage-earner must lower wages, at least among all those who are approaching the pension age; while it would prevent or retard their natural increase over a far wider area.

It would also most certainly bring with it the gravest danger of corruption. It would not be easy to secure the pure and the impartial administration of these vast funds; but the political dangers would be much more serious. It is proposed that the pension system should be first introduced on a small scale, but gradually extended till it included all the aged poor, or at least all who were deserving. Such a question would infallibly pass into the competitions of party warfare. It would become in most constituencies one of the most prominent of electioneering tests. Rival candidates would be competing for the votes of a wage-earning electorate who had a direct pecuniary interest in increasing or extending pensions and in relaxing the conditions on which they are given. Can it be doubted that in many cases their first object would be to outbid one another, and that national and party politics would soon be forced into a demoralising race of extravagance?

I cannot conclude without protesting against the supposition that those who think with me are indifferent to the great evil of old-age destitution and propose nothing for its relief. The committees which have most clearly pointed out the dangers of old-age pensions have also urged, that within the lines of our present poor-law system it is quite possible to do much, by an improved classification, to distinguish among the recipients of poor-law relief between the respectable and the worthless. Much has already been done, and in the most important unions the guardians have introduced a large amount of classification by merit. As I have already said, the immense majority of the respectable aged poor are now relieved only in their own homes or in comfortable infirmaries. The severe test of absolute destitution has in practice been greatly relaxed; there is a legal provision preventing those who are receiving help from Friendly Societies from being disqualified for relief; husbands and wives are no longer separated in the workhouse; and in some unions of which we had evidence much more has been done. This, however, depends too much on the will of particular Boards of Guardians, and there are in consequence great inequalities of treatment. The condition of the deserving poor may be greatly improved by relaxation in points of hours, discipline, and visitors, and by workhouse arrangements securing more universally that paupers who have lived respectable lives should not be obliged to mix with the drunken, the disreputable, and the hopelessly idle. And, though extensions of outdoor relief should be carefully watched, and entail great dangers, yet under wise and strict administration something more may be done in this direction.

But all this should be regarded as essentially poor-law relief, and not as the recognition of a claim of right for services supposed to have been rendered to the community. No form of State Socialism is more dangerous than the doctrine which has been countenanced by Prince Bismarck, and which is making many disciples in England--namely, that an industrious man, who has pursued his course in life with perfect independence, made his own contracts, chosen his own work, and been paid for it by stipulated wages, is entitled, if he fails in obtaining a sufficiency for his old age, to be placed as a 'soldier of industry' in the same category as State servants, and to receive like them, not on the ground of compassion, but of right, a State pension drawn from the taxation of the community. There is no real analogy between the relief that is very properly granted to such workmen in their destitution, and the pensions--largely of the nature of deferred pay--that are given by the State or by private employers, under the terms of distinct contracts, and for specific services duly rendered, to those who have entered into their employment and placed themselves under their control.

[The end]
Edward Hartpole Lecky's essay: Old-Age Pensions

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