HC Deb 01 May 1957 vol 569 cc203-43

3.22 p.m.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell)

I beg to move,

1. That persons who, either as insured persons or as employers, pay, or are liable to pay, contributions under the National Insurance Act, 1946, as amended by subsequent enactments (hereinafter referred to as "national insurance contributions"), shall be liable in addition to pay contributions, to be known as national health service contributions, as follows:—

  1. (a) any person who pays, or is liable to pay, national insurance contributions as a person of any of the descriptions specified in the first column of the Table set out below, except in paragraph 4 of that Table, shall be liable to pay national health service contributions at the weekly rate specified in relation to that description in the second column of that Table;
  2. (b) any person who is liable to pay national insurance contributions as an employer shall, for each person employed by him, be liable to pay national health service contributions at the weekly rate specified in the second column of paragraph 4 of that Table.

2. That national health service contributions shall be paid to the Minister of Pensions and National Insurance, but, as between that Minister and the Minister of Health and the Secretary of State, shall he taken to be so paid for the benefit of the Minister of Health, towards the cost of the national health service in England and Wales, and of the Secretary of State, towards the cost of the national health service in Scotland, in such shares as the Treasury may determine, subject to—

  1. (a) provision for the expenses of the Minister of Pensions and National Insurance attributable to the collection and application of those contributions, and the payment into the Exchequer of sums retained by that Minister on account of those expenses;
  2. (b) provision for estimating the sums to be paid to the Minister of Health and the Secretary of State on account of the shares of national health service contributions due to them respectively; and
  3. (c) provision for treating the sums so paid to the Minister of Health as sums received by him under the National Health Service Act, 1946, otherwise than as sums required to be transferred to the Hospital Endowments Fund, and for treating the sums so paid to the Secretary of State as sums received by him under the National Health Service (Scotland) Act, 1947.

3. That, in consequence of the provision made by the preceding paragraphs of this Resolution, it is expedient to provide—

  1. (a) for reducing the weekly rates of national insurance contributions specified in the said Act of 1946, as amended, for persons of the descriptions specified in the first column of the Table set out below, by the amounts specified in relation to those descriptions in the third column of that Table;
  2. (b) for discontinuing the making of payments out of the National Insurance Fund under section thirty-seven of the said Act of 1946;
  3. (c) for applying (with or without modifications) the provisions of the enactments relating to national insurance, and of the Orders in Council and regulations made thereunder, to national health service contributions;
  4. (d) for removing limitations on the power of the Parliament of Northern Ireland to pass corresponding legislation;
  5. (e) for the making, on account of national health service contributions, of payments to the Exchequer of Northern Ireland, and to the appropriate authority or fund in the Isle of Man, in cases where corresponding financial adjustments are made on account of national insurance contributions;
  6. (f) for other matters incidental or supplementary to the matters aforesaid.

TABLE
Description of person Weekly rate of national health service contributions Reduction of weekly rate of national insurance contributions
s. d. s. d.
1.Employed men between the ages of 18 and 70, not including men over the age of 65 who have retired from regular employment … … 1 4½ 8½
2. Employed women between the ages of 18 and 65, not including women over the age of 60 who have retired from regular employment … 1 0½ 6½
3. Employed boys and girls under the age of 18 … … … … 8½ 4½
4. Employers (for each person employed) … … … … … 3½ 1½
5. Self-employed men between the ages of 18 and 70, not including men over the age of 65 who have retired from regular employment … … 1 8 10
6. Self-employed women between the ages of 18 and 65, not including women over the age of 60 who have retired from regular employment … 1 4 8
7. Self-employed boys and girls under the age of 18 … … … 1 0 6
8. Non-employed men between the ages of 18 and 65 … … … 1 8 10
9. Non-employed women between the ages of 18 and 60 … … 1 4 8
10. Non-employed boys and girls under the age of 18 … … … 1 0 6

I think I should first explain to the Committee how it comes about that a Bill designed to institute a separate National Health Service contribution and to increase the amount of the contribution which has heretofore been paid, together with the National Insurance contributions, for the purposes of the National Health Services, requires to be founded upon a Ways and Means Resolution.

The National Health Service element in the present joint contribution, after being paid into the National Insurance Fund, is subsequently transferred to the Exchequer, and under these new proposals the new National Health Service contribution, although in a slightly different form, which I will explain later, will also find its way at one stage of the story into the Exchequer.

In point of form, therefore, the proposals represent an increase in the amounts paid by the public which pass into the Exchequer and in consequence of that, in accordance with the practice of the House, the Bill for the purpose requires to be founded upon a Ways and Means Resolution.

These proposals, for which this Motion paves the way, have a twofold purpose. The first is to separate out as a distinct contribution the sum in respect of the National Health Service—the 10d., if I may so refer to it—which has heretofore been paid for the purpose of the National Health Services and to constitute this as a National Health Service contribution; and the second purpose is, by doubling the size which that element has so far had, to restore it to something approaching its originally intended rôle in the financing of the National Health Service.

Mr. James Griffiths (Llanelly)

Will there be one stamp or two?

Mr. Powell

There will be one stamp.

Those who have taken any interest in our National Insurance scheme will, of course, be familiar with the fact that from the beginning the 10d., the National Health Service element, has been separate from the rest of the contribution. It has been separate in that, unlike the rest of the contribution, it was paid from the Fund, where the rest remained, into the Exchequer. It was separate in the sense that it did not constitute a qualification for receiving benefit. There was no direct or necessary connection between the payment of this element in the National Insurance contribution and the entitlement to the benefits of the National Health Service. It stood thus upon a different footing from the rest of the combined payment.

Finally, whereas the rest of the combined payment was, actuarily, at any rate, and on certain assumptions, designed to meet the whole cost of the insurance benefits, it was never contemplated that this element should represent more than a fraction of the cost of the National Health Service.

The history of this element, this 10d., goes back fifteen years to the Beveridge Report, and it is not without interest at the present day to glance back for a moment to the Beveridge Report.

Mr. J. Griffiths

I should be glad if the Minister would tell me the purpose of making this change. Previously, there was a contribution towards National Insurance which was composed of several elements—for example, pensions, unemployment and sickness. One of the elements was a contribution of 10d. to the National Health Service. What is the purpose of now making it a separate contribution? I gather that there will be only one stamp. In the Table contained in the Motion the headings to the columns are: Weekly rate of national health service contributions and Reduction of weekly rate of national insurance contributions. Can the Minister explain the purpose of the change?

Mr. Powell

I will come later to the detailed provisions of the Motion but, as I have pointed out—

Mr. Griffiths

This is not a change of detail. It is not merely increasing the amount to be paid from the Insurance Fund to the cost of the National Health Service; it is the creation for the first time of a new National Health Service contribution, which was not in the 1946 Act. Apart from the quantitative change, what is the reason for making this fundamental change?

Mr. Powell

The right hon Gentleman calls it a fundamental change, but I have already reminded the Committee that the National Health Service element in the present contribution has always been different in kind, in purpose and in treatment from the rest. Indeed, there has been a good deal of misunderstanding and misapprehension as to the nature, the amount and the effect of the National Health Service element and I should have thought that it would have commended itself to the Committee that this entirely separate nature of the element should be recognised and that the separateness both in the purpose and in the treatment of this element should be recognised by a step separating it as a different kind of contribution, marked openly with the purpose to which it is in the future to be devoted, as it has always been devoted in the past.

If I may bring the Committee back for a moment to the origin of this National Health Service element, we find that in his Report of 1942, in discussing the financing of the comprehensive Health Service, which was one of the presuppositions of his social insurance scheme, Sir William Beveridge, as he was then, wrote: There is no obvious reason, apart from a desire to keep the insurance contribution as low as possible, why insured persons should be relieved of this burden wholly, in order that they may bear it as taxpayers. If importance attaches to preserving the contributory principle for cash benefit, it attaches also to contribution for medical treatment. He concluded: There appears to be a case for including part of the cost of domiciliary treatment in the insurance contribution. Accordingly, he recommended that a sum of 10d. in respect of an adult male employee and appropriately smaller figures in respect of other contributors should be included in the weekly contribution for the purposes of the National Health Service.

In the Memorandum which was attached to the Beveridge Report, the Government Actuary of that day calculated that the 10d. would bring in £40 million a year. The same Memorandum assessed the total gross cost of the National Health Service at £170 million. So it was the conception at that time that this contributory element of finance would represent something approaching one-quarter of the gross cost of the entire service.

That proposal of the Beveridge Report, in precise terms down to the employer's fraction of the 10d., was adopted both by the Coalition Government in 1944 and in the 1946 National Insurance Bill of the party opposite. It is, therefore, from that original recommendation that the element now to be made formally, as it is already in reality, separate, and has to be increased, originates.

The Government Actuary who made the estimate in the Memorandum of 1942 may well feel some satisfaction with his foresight, for his estimate that the 10d. would bring in £40 million has been exactly and punctually fulfilled. Almost precisely £40 million is the yield of this element in the present financial year.

Mr. Ellis Smith (Stoke-on-Trent, South)

That is what actuaries are for.

Mr. Powell

There is no reason why we should not recognise their successes.

Every other feature of the landscape, however, has changed. The gross cost in this year of the National Health Service is not the £170 million which was estimated in 1942, but is no less than £690 million; so that of that gross cost the yield of the 10d. today represents, not nearly a quarter, not something over 20 per cent., as was the intention embodied in the 1946 Bill, but 5.8 per cent.

Dr. Barnett Stross (Stoke-on-Trent, Central)

Can the hon. Gentleman give the proportion that it represents of the national income both then and today?

Mr. Powell

I am not sure that I see the exact relevance of that. What we are concerned with is the relationship between this element and the other elements in the finance of the National Health Service.

Dr. Stross

The Minister has stated that the cost today is running at £690 million, whereas in 1942 it was estimated that it would run at £170 million. I ask him, therefore, whether he can compare £170 million of the national income then with £690 million of the national income today.

Mr. Powell

I have no doubt that when the gross national product of the two years is taken into account, the increase in real cost of the Service between the 1942 estimate and the present year's expenditure is, of course, not so large as the gross figures suggest. That does not, however, affect the ratio with which I am dealing. I am dealing with the fraction of the gross cost which is financed by one means or another and I have pointed out that the fraction of the gross cost, whatever it may be, whatever be its proportion of the gross national product, which is financed by these contributions has fallen from the originally contemplated quarter or fifth of the war and immediate post-war years to 5.8 per cent. today.

Mr. J. T. Price (Westhoughton)

Will the Minister give way?

Mr. Powell

It may be that I am about to meet the point that the hon. Member has in mind.

It is true that since the 1946 National Insurance and National Health Service Bills, another element of finance of the National Health Services has been introduced—actually, it was in 1949 by the party opposite. I refer to the charges paid by patients for certain elements of the Service. It is fair to take into account those charges upon the users in connection with these contributions made by insured persons.

Nevertheless, even if the payments which it is anticipated will be received in the present financial year are taken into account, they and the contributions together still account for only just over 11 per cent. of the gross cost of the Health Service, or scarcely more than half the amount which it was expected and intended should be yielded by the contributory element when the scheme was started.

Mr. J. T. Price

I should like to ask a question. When the Minister is putting to the Committee the difference between the anticipated yield of the 10d. in 1942 and the yield realised today of 5.8 per cent., he must take other things into account, also. For example, the Beveridge Report anticipated that there would be a liability for unemployment of 8 per cent. In fact, that expected 8 per cent. has turned out to be only 1 per cent. Therefore, although the Minister isolates the one element, we are entitled to argue the other points as well.

Mr. Powell

The lower incidence of unemployment may well affect considerations applying to the insurance element of the contribution but they have no relevance to the specific Health Service element. Nothing can overturn the fact that the proportion of the gross cost of the Service which is now met contributorily has fallen steadily and sharply since the inception of the scheme until it is now scarcely more than one-quarter of what was envisaged by the party opposite when launching both schemes in the year 1946. The doubling of the National Health Service element to form the new National Health Service contribution will, in fact—

Mr. J. Griffiths

The Minister refers to a new National Health Service contribution. I gathered from him earlier that there is to be only one stamp and, therefore, one contribution. Why does he continually refer to a new contribution? I gather that there is to be one contribution and one stamp and a division between the various elements, one part of which will be a contribution towards the cost of the National Health Service. This will not be a new contribution. It will be an increased contribution paid on one single stamp. Let us get that clear.

Mr. Powell

One can have one stamp which is used to collect two separate contributions. Hitherto, the stamp has been used to collect two entirely separate elements devoted to different purposes by different channels. That will be so in the future as in the past. All that is happening is that we are more formally, clearly and explicitly recognising the separateness and earmarking, as it were, the National Health Service contribution to the purpose for which it is designed.

This National Health Service contribution—I will not call it new in future, in case I should flush the right hon. Gentleman—in the amount proposed in the Resolution, will still represent only about 11.6 per cent., or, if one adds for good measure the yield of the charges, some 17 per cent., of the gross cost of the Service; so that it will be still below the fraction of the gross cost which it was anticipated originally would be met in this way.

The constitution of a separate National Health Service contribution so designated will have a result which, I think, the debate of 19th March showed was in accordance with the intentions of both sides of the House. It will have an effect upon the allowance of certain elements in the contribution for taxation purposes. The result will be that, except of course in the case of an employer engaged in trade or business, the National Health Service contribution—the old and the new element—will not in future rank as an allowance for tax purposes. This result, which was announced by my right hon. Friend the Minister of Pensions and National Insurance on 17th April, is both logical and fair. It is logical because these benefits in respect of which contributions are paid will themselves be tax free.

By way of illustration, the Committee will recall that when, in 1949, the unemployment, sickness and maternity benefits were made tax free, a consequential change in the tax law was made to the effect that the element attributable to those benefits did not run as an allowance against tax. It is, therefore, surely logical that these contributions in respect of an untaxed benefit should not run for tax allowance.

The second ground upon which I claim that this result is entirely fair is the one made both by the right hon. Gentleman opposite and my right hon. Friend in the debate to which I have referred, namely, that if this contribution runs as an allowance against tax there is almost a hyper-regressive effect, in that the more tax a person pays, and the higher his income is, the less he contributes in this way towards the maintenance of the National Health Service.

Dame Irene Ward (Tynemouth)

In view of the interesting point that my hon. Friend has made, am I now to understand that we are to have a recasting of this tax matter, in relation to the whole of the National Insurance contributions? He will he aware that at the moment those who do not pay tax are paying more for their social insurance benefits than those who do. I am glad to know that he has this point in mind.

Mr. Powell

Yes, but my hon. Friend will recognise that there is a difference between the relationship of a contribution and a benefit which is taxed when it is received and a contribution and a benefit which is untaxed when it is received. We are here dealing with a benefit which is untaxed in the hands of the recipient, and we must find some other occasion upon which to pursue the relationship between the contribution and a taxed benefit.

Dame Irene Ward

But it is very interesting.

Mr. Powell

I now turn to the Motion itself, and I want briefly to draw the attention of the Committee to its effects. Paragraph 1, taken in conjunction with the first two sub-paragraphs of paragraph 3, has the effect, of which I have already spoken so many times, of reducing the National Insurance contribution by the amount of the existing National Health Service element and constituting a National Health Service contribution of twice the amount of the present element.

Paragraph 2 deals with the machinery by which these elements will be made. The course of payment will be that my right hon. Friend the Minister of Pensions and National Insurance will, after deduction of the costs of collection, transfer the amount collected by way of National Health Service contribution to my right hon. Friends the Minister of Health and the Secretary of State for Scotland for the purposes of the National Health Services. Under the respective National Health Service Acts those sums will then be paid by them to the Exchequer, but the Treasury will authorise the application of the sums so paid as appropriations in aid of the National Health Service. Thus, the connection of these contributions with the National Health Service, however devious, is firmly established.

The Committee may note that the Treasury plays a part in this mechanism of determining the respective shares, I hasten to assure the Committee that there is nothing sinister about this. The basis of sharing between the Health Services of the two countries will be on the same principle as has been applied hitherto to the National Health Service element of the contribution, and the purpose of the determination by the Treasury of the shares is simply to ensure that rough apportionments, instead of precise calculations of individual payments, can be made. It is really a device to simplify accounting.

There are one or two detailed provisions in paragraph 3. Hon. Members will see that in sub-paragraph (d) provision is made for the Ulster Parliament to legislate on this matter. That is necessary because these contributions will be paid by Crown servants, amongst others, and unless expressly permitted to do so the Parliament of Northern Ireland cannot impose burdens upon Crown servants. Paragraph (e) provides the necessary mechanism for the new adjustments which will have to be made between the social service finances of Great Britain, on the one hand, and the Isle of Man and Northern Ireland, on the other.

I have endeavoured as briefly as possible to indicate to the Committee both the purport of the Resolution and its general purpose, and my right hon. Friend the Minister of Health will be able to deal, at the end of the debate, with the matters that I have left untouched.

3.57 p.m.

Miss Margaret Herbison (Lanarkshire, North)

We take very grave objection to the contents of this Motion. The Financial Secretary quoted Lord Beveridge. I have not his exact words, but he pointed out that Lord Beveridge seemed to think that it might be rather silly to relieve our people of their insurance burden merely to increase their tax burden. Surely the Minister and the Government realise that those who pay insurance and those who pay Income Tax are not always the same persons, and that many people who will be asked to pay this extra contribution of 8d. per week—the lowest paid wage earners—will find it a very great burden.

Mr. Powell

Income Tax is not the only tax.

Miss Herbison

I am dealing particularly with Income Tax.

Mr. Powell

Lord Beveridge was not.

Miss Herbison

It is of the greatest importance, because most of the National Health Service finance is taken out of what is contributed by way of Income Tax. If that is not the case it still behoves the Government to examine the rest of their taxation structure and to see that it does not bear heavily upon the people who can least afford to pay taxes. Whether we take it as coming from Inland Revenue or from other sources it still means that, as a result of the decision of the Government, in a very short time the lowest paid wage earners will have to pay an extra 8d. a week for the National Health Service.

I would remind the hon. Member that the recommendations of the Beveridge Report, have not been infallible. When my hon. Friend raised the point about the basis of unemployment, the Minister pointed out that we were not dealing with unemployment. Of course we are not. In this Motion we are dealing with a proposal by which the Government think they can get more money out of the people through National Insurance contributions, instead of placing the burden on those who could most easily bear it.

Let the Committee consider the National Insurance contribution burden, the taxation burden, and all the burdens which have been put by this Government upon the wages and salaries of our people to meet the costs of the National Health Service. We see that the additional burden is not only an increase of 8d. in the contribution. In considering these we cannot leave out of account the additional burdens of prescription charges, the extra charges for dental treatment, the extra charges for surgical appliances—all extra burdens put upon the shoulders of the people least able to bear them. This extra 8d. is, I hope, the last of the burdens which this Government will have a chance of putting on our people.

If we link the burden imposed by this Ways and Means Resolution to what has happened to the National Health Service under this Government we see that the insured workers today are worse off than they were before the National Health Service was introduced in 1946.

Sir Keith Joseph (Leeds, North-East)

rose—

Miss Herbison

When I have finished this part of my speech I will give way.

Ordinary workers who paid contributions from 1911 onwards were able to get medical attention and whatever medicine they needed, without any additional cost if they were ill. That provision now has disappeared, and now this additional burden is put upon them.

The Financial Secretary made great play with the proportion of the amount of the National Health Service cost which is met today out of National Insurance contributions, compared with the proportion which Beveridge estimated we should obtain from them. When the Government were considering that did they take into account the proportion of the old people and of the insured workers? Many of our old people have to make far greater use of the National Health Service than many of the insured workers. Were we to examine this we should find that the cost to the National Health Service per head of the old people is much greater than the cost per head of those who are still working. Was that taken into account when the Government decided to add this extra 8d. to meet the cost of the National Health Service?

When my hon. Friend the Member for Stoke-on-Trent, Central (Dr. Stross) asked what was the proportion today of the national income which went to the National Health Service the Financial Secretary, rightly at that moment, I think, said that that did not relate to the matter with which he was dealing, for he was dealing with the proportion which was going from National Insurance contributions to the National Health Service, compared with the estimate made by Beveridge of the cost.

However, it is of very great importance that we should consider the effect of this extra 8d. The question we have to consider is: is the National Health Service today taking a bigger proportion of our national income than it was in 1948? Does what it is taking today far exceed that estimated by Beveridge in 1942? The Financial Secretary said he did not have the figures, but that he thought that possibly it was not taking a greatly increased proportion. The fact is that it has decreased.

I have the figures here. In 1948 to 1949 the proportion of the whole national income that went to the National Health Service was 3.51 per cent. The following year it went up to 3.75 per cent. In 1950 to 1951 it fell slightly because of the charges which were then made for the National Health Service by the Labour Government. In 1951 to 1952 it fell even further. In 1952 to 1953 it was 334 per cent. The latest figure of which I can get an estimate is that for 1953 to 1954–3.24 per cent. So, since the introduction of the National Health Service in 1948 to 1949, the proportion of the national income which it has taken has declined from 3.51 per cent. down to 3.24 per cent. now.

In the light of these figures it seems to me that the Government have no case at all for raising this contribution. In particular, they have no case at all for imposing it upon the low-wage earners, who will find it in the nature of a poll tax which they will be ill able to pay.

We shall not vote against this Motion since, I understand, the Bill will be coming forward next week—

Sir K. Joseph

rose—

Miss Herbison

If the hon. Member will wait just a minute I will give way. As I said at the beginning, we strongly oppose this Motion, for the reasons which I have given and for many other reasons, which, know, my hon. Friends will adduce. I ask the Government, even at this late hour, to rethink this matter and to decide that this burden which they are proposing to impose is one which many of our people are quite unable to bear.

Sir K. Joseph

I have been following the hon. Lady's argument closely, and I see her difficulty in escaping the fact that the Labour Government established a contribution which exceeded, as a proportion of the cost of the National Health Service, the combination of the contribution now suggested and the prescription and all other charges which have been made. The question which, I am sure, the Committee would like the hon. Lady to answer is: where would she look to find the £40 million? Is it to come from raising charges, or is it to come from the raising of direct or indirect taxation?

Miss Herbison

If the hon. Member has read the Report of the Guillebaud Committee he will realise that we have no intention of raising this extra money by putting additional charges on the National Health Service. One way in which, we feel, it would be correct to raise this additional amount would be that of taxing the people who could well afford to pay the additional taxation.

4.9 p.m.

Dame Irene Ward (Tynemouth)

I do not want to delay making the point I want to make by engaging now in this Income Tax controversy, but I was very glad indeed that the subject was raised by the Financial Secretary, because I had been looking forward to its being discussed in this Chamber and I feel now that, as my hon. Friend has brought it up in this debate, we shall be able to have a very full discussion of it sooner or later.

I have always believed, and I reassert, that it is quite wrong to allow those who pay Income Tax to get Income Tax reliefs while forcing those who do not pay Income Tax to pay—relatively, of course—higher contributions for the benefits which they receive out of the social insurance scheme. Owing to our procedure in the House it is very difficult to raise these matters because we are precluded from dealing with them on the Adjournment, so I am more than grateful to my hon. Friend for having brought this matter forward today, for that will open the door to debating it.

The hon. Lady the Member for Lanarkshire, North (Miss Herbison) has already taken the matter up, but I would say one word to her. I must point out that the Income Tax arrangements which impose a higher burden on the lower income groups in the payment of these insurance contributions was made by the hon. Lady's Government. I am only too delighted to know that at last they see the error of their ways, and I am sure that they will help to get this major injustice put right.

I should like to know whether the area covered by the Newcastle Regional Hospital Board will have full value for money as a result of these new proposals. I do not feel that people in the higher ranges of income object to paying a reasonable sum for value given. That is the whole basis of national expenditure in this country on what is properly referred to as the Welfare State. Taxpayers, and particularly direct taxpayers, pay a large sum into the Exchequer and they want value for money. That is a very natural desire and one to which we should all subscribe.

I hope that my right hon. Friend the Minister of Health, when he replies to the debate, will give a specific answer to my questions. After being a Member of the House of Commons for a long time, I realise that sometimes, when awkward questions are asked, Ministers give a very general answer and do not deal with the difficult details which are brought to their notice. This is a very good opportunity for my right hon. Friend to give a specific answer to a point which has been a very sore one among people in my region, which is governed for National Health Service purposes by the Newcastle Regional Hospital Board.

Will the people who live and work within that region, both those who pay Income Tax and those who do not, have the full benefit of the extra payment which we are now asked to make? Up to the present, many other parts of the country have had much better service under the National Health Service than we have had on the North-East Coast. My attitude—and I hope it is the attitude of my colleagues on both sides of the Committee who represent the North-East Coast—towards these new proposals will be governed by how we fare when we have paid the new contributions. In other words, shall we have value for money?

The seventh Report of the Newcastle Regional Hospital Board has, fortunately, just come to hand. Since this debate was to take place it was a heaven-sent opportunity for me to see just what the situation really was and to ask my right hon. Friend what proportion of the new payment will come to my region. This is a very important matter indeed. One has only to examine expenditure on the National Health Service to realise that a great many regions get a great deal more out of the Service than we do. This is the first time that we have been able to deal with the National Health Service outside the general National Insurance Fund as far as payments by the individual are concerned. That is why it is so exciting to me to be able to raise this matter today. I am very pleased indeed about it.

Now that we are to have a capital sum extracted out of the increased contributions paid by the community as a whole, I want to know what will happen to that money and where we in the North of England will come in. I should like to read one or two observations made by the Newcastle Regional Hospital Board. The Chairman, Mr. Collingwood, a very distinguished man who, with the officials, runs the Board very efficiently, says in the Report: As I said in the introduction to last year's Annual Report the Board would like to see this figure "— that is, the capital expenditure— increased to £2–3 millions, we receive just a little over £500,000 annually for capital expenditure— which would more closely represent the expenditure required to overtake in a reasonable time the deficiencies in accommodation and facilities in this Region. That brings me right up against this problem.

It is not so now, thank goodness, but in the old days our area was one of the special areas and for that reason our health services fell far behind those in many other regions which were much better off from the point of view of employment. When the National Health Service was brought into being, and general expenditure was allocated, we received a much smaller share than more fortunate regions because we had fewer hospitals and fewer specialist services.

I understand that to make up our deficiencies we require about £42 million. We are receiving £500,000 a year and we have calculated that we shall have to live—and I shall not do so—another ninety years before the Newcastle region has a health and hospital service comparable to that in some other parts of the country. The Chairman of the Newcastle Regional Hospital Board has made a very modest request. He has asked for only £2 million to £3 million. It would be absolutely superb if I could hear from my right hon. Friend that we were to have that sum annually from the extra contributions which we are now being asked to pay towards the National Health Service.

There is a further very interesting point. It is that we have less accommodation for convalescents under the Newcastle Regional Hospital Board than any region in the country. As the Financial Secretary is bringing forward this scheme to meet the mounting cost of the National Health Service, it is important that we should look for economies. It is quite obvious to anybody who is interested in the working of the Service that if there were more accommodation for convalescents we could have a quicker turnover and could make more hospital beds available. In the Newcastle region we have not the necessary accommodation.

We had the great good fortune to have the Parliamentary Secretary to the Ministry of Health visit my region only last week. I took him to look at a tremendous building which is under the control of the Newcastle Regional Hospital Board and happens to be in my constituency. It is a memorial home which was built as a convalescent home for miners—and we have a great number of very good miners in the Newcastle region.

I agree that that great building is not suitable now for a convalescent home, but the National Health Service took £135,000 from the area and left that great building on one of the best sites on the North-East Coast standing empty and unused ever since the National Health Service was introduced. We still have no good accommodation for convalescents and I should like to know whether, as a result of these increased contributions, we shall have something done and, if that building is to come down, we can have for the Newcastle region—not for my constituency—a really good convalescent home.

I can assure my hon. Friend the Parliamentary Secretary, who, I am sure, will agree with me, that the air of the North-East Coast is very stimulating and invigorating. Therefore, I should like to see a new convalescent home there which will meet some of our deficiencies.

This is what the Newcastle Regional Hospital Board says: Arrangements for Convalescence. …The Board continues to rely to a large extent upon the assistance given by other regions, more favourably endowed "— Please note "more favourably endowed —" with convalescent hospital accommodation. The assistance given during the year amounted to the equivalent of forty-nine beds occupied during the whole of the year and once again this assistance is gratefully acknowledged. We have to send out people to other regions for their convalescence. Instead of having to transport them to other regions for their convalescence, can we not have a little of this money so that some convalescent beds can be available for our people? Every time I think of that £135,000 which the National Health Service grabbed—and we are getting only £5,000 back this year for the whole of the region—I say that it is up to my right hon. Friend to tell us what benefits we are to get out of these increased contributions.

I will turn the screw only once more. Here is another thing which absolutely infuriates me. The present system of estimating means that we must spend the capital allocation by the end of the financial year, otherwise we lose it. Again, this is what the Newcastle Regional Hospital Board has to say about capital expenditure: The actual capital expenditure incurred during 1955–56 was £785,339, which was an underspending "— that is, on the estimates— of £12,693, equal to If per cent. This is the first year in the history of the Board that the capital allocation has not been wholly expended, and the underspending can be directly traced to the delay "— I underline "delay"— in receiving Ministry planning approvals in connection with the major projects of the new hospital for West Cumberland and the Middlesbrough General Accident and Orthopædic Department. It is intolerable that we should have to lose over £12,000, when, in any event, we are at the bottom as regards capital allocation, because the Ministry has not been able to pass our plans in time to let us use that money. So, again, I want to know from my right hon. Friend whether we can have that £12,000 made up? Otherwise, as we have those plans approved now, we shall have to meet the expenditure involved out of our estimates for next year. And as we have not had an increase this year, we shall have nothing with which to make up our deficiency.

So, as I have said before, I am delighted to know that as we have to take this unfortunate step of increasing contributions, there will be more money available. Also, I want to know what benefits those who live under the aegis of the Newcastle Regional Hospital Board will get out of that additional money. If I can be assured that we will be able to make up our deficiencies, then we might even feel that the increased contributions would be of benefit to us. If, however, we are not to benefit, and if these contributions merely go to make other regions better off than we are, we would be very foolish indeed to support the Government's new proposals.

I hope there will be many speeches because now I want to join a deputation to try to harry another Minister to do something. I hope that when I come back the Minister will be able to give me the necessary information about what is to happen to this money, and whether we in the North-East will benefit.

4.25 p.m.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East)

I am surprised, but pleased, that the hon. Lady the Member for Tyne-mouth (Dame Irene Ward) has been able to widen the general subject for discussion and bring in the very important matters which she has been raising as to the use of the funds we are discussing today, and how they can be used to the best purpose in the North-East of England.

I will only follow her comment on that matter by saying that I fear she will be as disappointed on this occasion as she has been on many others in the past. The estimates upon which the Government are basing their figures and these proposals have been made available already to the House, and there is relatively little sign of the kind of increases of available funds for the specific proposals to which the hon. Lady referred in the information that has been given to the House about the provisions for the North-East of England and the Newcastle Regional Hospital Board.

For example, I would point out that the regional board is, rightly in my view, concerned with the fact that it has not been able to expand its specialist services as it has wanted to do. I myself have had some correspondence with the Minister of Health on this matter, and I fear it will still be as difficult as it was previously to get those extra specialist appointments made, even if the increased 8d. a week is voted. I am afraid that there are many other problems that we face in the North-East of England, and which many other regions face, too, that will still have to be met even though the 8d. is voted.

I have far less hope than the hon. Lady, I am afraid. I would be delighted if I could hear from the Minister of Health this evening, when he replies to the debate, that this extra provision, if voted by the Committee, will mean that the Board will no longer be restricted in the way it has been over specialist appointments. Not only has it been restricted in the ordinary financial sense by the size of the allocation, but it has also recently been restricted by the direct fiat of the Ministry of Health, which is denying opportunity to the board to make appointments, especially in the psychiatric and other services, which are in the view of the Board, and in our general view, extremely urgent.

So I would add that to the other points to which the hon. Lady has rightly been calling attention. It is true that in this area there is a large backlog of work which it has not been possible to overcome because of the very real restrictions on capital expenditure over a long period of years, and not only capital expenditure but ordinary running expenditure as well. I see that the Financial Secretary to the Treasury has left the Chamber for a moment. I am sorry about that.

Dame Irene Ward

Just to hear about spending the money that we want to spend.

Mr. Blenkinsop

The hon. Gentleman, as we all know, is a great Greek scholar. I was always brought up to fear the Greeks and the gifts they bring, and when the hon. Gentleman introduced this Motion by saying that he hoped that because he was Financial Secretary to the Treasury—I am delighted to see the hon. Gentleman back in his place again—none of us would be too suspicious of it, frankly, I am suspicious of it. Inevitably, I am suspicious of proposals coming from the opposite side of the Chamber, and I am also suspicious of this proposal coming from the Treasury.

We have some reason to be suspicious about it. I believe that here we are being offered only the thin end of the wedge. I believe that it is the desire of hon. Members opposite—it is their view, and I do not blame them for it; but I believe it is also their desire—gradually to convert the finances of the National Health Service so that it is a Service paid for by contributions in one form or another, either by flat rate insurance contributions or by charges imposed on the Health Service itself. This is a good opportunity to look at that principle rather seriously.

It is quite true, as the Financial Secretary said, that this had the respectable origin of a Beveridge Report recommendation, and that there was the implementation, in effect, of a subvention from the National Insurance Fund to the National Health Service in the past. The Financial Secretary claimed that all that he is doing on this occasion is to restore the value of that subvention and give it fuller formal approval and recognition. No doubt he is hoping that in that way people generally will recognise the amount which they are contributing through their weekly contributions to the National Health Service. All that is no doubt true, but, surely, while the hon. Gentleman was very careful to analyse the proportion of the total Health Service expenditure that has been met out of this flat rate contribution, what he was not doing at all was examining the effect upon the contributors themselves of these very heavy increases. He was certainly not doing that.

I suspect very strongly that what we are now facing in this Committee is the definite objective of hon. Members opposite to finance the National Health Service in large part out of insurance contributions and also out of charges of one kind or another in the National Health Service. After all, that would be generally in line with what the hon. Gentleman himself and others in his party have suggested in times past. It would not be out of character if they wished to do this.

Why is it that we should oppose this so strongly? Surely it is because we recognise that a flat rate contribution of this kind and of this magnitude is the most regressive kind of taxation that we could have. The right hon. Gentleman realised that, when this particular contribution is chargeable to tax—that is to say, when one could claim it as a deduction against tax—it becomes even more regressive in character, and to that extent he has recognised the point. It remains a very regressive tax, and we argue that it is far fairer to meet the cost, the undoubtedly very heavy cost, but not, in our view, an unreasonable cost—of the Health Service out of the general national revenue rather than meet it out of insurance contributions in this way.

I hope that it may be possible, before the debate is over, to get an assurance from the Minister that it is not his intention—I do not know what power he may have over his colleagues—to carry on this process of financing the Health Service out of insurance contributions. It is a very serious matter. Already, the total contribution is a very high one, and this is not the only increase that we have had. We have had others, and no doubt we will be faced with more before very long. It is all very well to talk about relating it to some rather spurious figure of average wages or earnings. What we have to realise is that these flat rate contributions have to be made by low-wage earners as well as by high-wage earners, and this becomes a very serious matter indeed for the very many workers who have very low rates of earnings at the present time.

Mr. Raymond Gower (Barry)

Is the hon. Gentleman really saying that, whatever the cost of a particular service may become, on no account would it be proper at any time to make any charge, but that the cost of that service should always be borne entirely by the general body of taxation?

Mr. Blenkinsop

I am not quite as hidebound as some hon. Members opposite often seem to me to be. I was quite prepared in the past, when considering these contributions, to consider the value and the possibility of some contribution coming from the Insurance Fund.

What I am arguing today is that the flat rate contribution has now reached such a size, both because of this contribution for the National Health Service and also because of the level of the insurance contribution, that it has become a very serious burden to people on low earnings, and that it is a matter which, I think we were generally agreed, should be looked at again. I hope very much that we shall have the opportunity, especially those of us on this side of the Committee, not only of looking at it again, but also of bringing in proposals that will make a valuable contribution towards it.

What I am saying, therefore, is that it is a matter of the level which this flat rate contribution has now reached, rather than a question of whether or not we should have a flat rate contribution. I am concerned with the size of the contribution, which seems to me to be a quite considerable burden upon lower paid workers.

It was very much in the minds of all of us in introducing the National Health Service in the early days that those who have to make claims upon this Service and the facilities which it could provide would not be faced with payments and contributions at that time, nor that those services would be restricted to people paying insurance contributions. I agree that that is not happening in this case, but I fear that the approach which right hon. and hon. Gentlemen opposite are making is leading us almost inevitably, stage by stage, to the position in which we are getting back to an insurance scheme, rather than maintaining the kind of National Health Service which we all had in mind when the National Health Service Bill was passed through this House.

A retrograde step is being taken by imposing this extra burden. I agree that we shall have the opportunity of discussing this matter in more detail when the Bill comes before us, and I am sure that we shall also have the opportunity of proposing Amendments and of making clearer the details of our opposition. I merely want to use this opportunity to try to obtain from Her Majesty's Government a statement as to their future intentions. Is this merely a step towards their longer term objective with regard to the financing of social services generally, namely, the objective of financing them more and more out of charges and out of flat rate contributions, or is this a "once-for-all" proposal to which we are being asked to agree?

The answer to that would have a very considerable influence on the attitude of many hon. Members to this matter, and I hope that the Minister of Health will be able to deal with the point and will not be too nervous of his relationship with the Chancellor of the Exchequer and with any of his other right hon. Friends.

4.40 p.m.

Mr. Raymond Gower (Barry)

I have one or two comments to make on what has been said. It was difficult to find, in the speeches of the hon. Lady for Lanarkshire, North (Miss Herbison) and the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop), any mention of the magnitude of the figure with which we are dealing. It is fair to suggest that when the original Act was passed, in the Parliament of 1945, few people in the House of Commons at that time would have dreamt of such a figure as that now approaching £700 million per annum. That is one of the things which we must have in mind in considering a Motion of this kind.

Mr. Blenkinsop

Surely the hon. Member cannot be bemused by that figure in isolation. He must consider it in terms of our general national income.

Mr. Gower

I said that it is merely one of the things which should be in our minds when we are considering a Motion of this kind. That consideration seemed to be absent in both the speeches from the benches opposite.

Another consideration which we have to bear in mind is that we are dealing with a country which is today probably the most heavily taxed, in one form or another, in the whole world. The hon. Lady said—and one can sympathise with her point of view—that this matter could be dealt with by adding to the general burden of taxation. Superficially and speciously, that is a most attractive remedy. For one thing it is easily the most popular remedy, because it gives a comfortable illusion to many people. It is not a pleasant thing to propose a charge, but a charge does bring people sharply against the cost of the service, and on a matter of such dimensions we must face the question whether it is desirable to have a comfortable illusion.

It is very important that we should recognise that this is a most valuable Service. We are in a very fortunate position compared with countries which do not possess a Health Service of this kind, but we must be realistic and appreciate our privilege of having such a Service. It would be quite dangerous if we got rid of our financial difficulties in financing the Service by adding the cost to the general burden of taxation in the light of the fact that we are heavily taxed already.

The hon. Lady went further than that. She not only suggested that it was undesirable that there should be a flat rate, but said that indirect taxation had the same objections. One can sympathise with that kind of argument, because it is the easiest to put over to the broad mass of the people. But if we do away with these contributions, and with much indirect taxation, the hon. Lady and her colleagues must face the alternative which would be to impose a very high rate of direct taxation, probably one which would be almost unbearable, even to the more highly paid workers, because they would have to bear the burden of the persons who do not pay tax.

The hon. Lady and her colleagues must also recognise that if that policy is followed, it will bring a large number of people back into paying Income Tax. It is questionable whether that would be merely a small amount of Income Tax. If the policy is followed for National Insurance benefits, too, as hon. Members opposite believe it should be, the amount of direct taxation which would have to be paid, even by the people now earning moderate wages, would be extremely heavy, because they would have to bear the burden of those not paying Income Tax.

Miss Herbison

I should like to make it clear that I did not say that I was against all indirect taxation. The hon. Member seems to be supporting the Motion in the belief that the cost of the Service will be brought sharply home to the people. Does he support it in spite of the fact that some of the people to whom it will be brought home sharply are already finding it very difficult even to meet the present rate of contribution?

Mr. Gower

The hon. Lady is carrying the argument to its extreme. I said that not having the contributions would create for everybody a very comfortable illusion. I did not say that it is desirable to bring it sharply home, but it is perhaps a small virtue that it brings into our minds as legislators—and that is very important—the fact that this is a tremendous undertaking for any country, particularly a country with an economy so precariously balanced as our own.

My other point is of a more local nature. I gather that the money will be collected and, after the administrative expenses have been paid by the Minister of Pensions and National Insurance, in due course some of it will accrue to the Minister of Health in England and Wales and to the Secretary of State in Scotland. Obviously, therefore, the matter raised by my hon. Friend the Member for Tyne-mouth (Dame Irene Ward) will not apply to Scotland. Scotland is secure and is bound to have a reasonable share.

Is an arrangement being made to protect the interest of the Welsh Board of Health a body which has now existed for a long time? There is apprehension in Wales that there has been some loss of status in recent years by the Welsh Board of Health due to other administrative changes. As it is obvious from what my hon. Friend has said that the apportionment of the money in favour of Scotland is amply secure and as the hon. Member for Newcastle-upon-Tyne, East and my hon. Friend the Member for Tynemouth have already pressed for some assurance for the North-East will the administrative separateness of the Welsh Board of Health which has existed for the last thirty or forty years be recognised by some allocation of the money collected in this way?

4.47 p.m.

Mr. Frederick Lee (Newton)

I understand that the argument which the hon. Member for Barry (Mr. Gower) has just adduced is the classical Tory argument that here we have a Health Service which is open to every inhabitant of Britain, that the overall cost is rising each year and that we must, therefore, look at it from that aspect and say that the time has now arrived when everybody must pay a poll tax towards its cost, irrespective of his or her income, that everybody must pay a flat tax towards the total cost.

Such an argument swings more and more against the small wage earner, but at least it is an honest argument and an argument which we undertsand. It is an argument which has been heard from the Tory benches for a long time. It is fair to say that the people of Britain must decide between that argument and the argument from our side of the Committee, which is broadly that a free National Health Service is one of the finest ways in which the national income can be invested.

Mr. Gower

Again, the hon. Member is carrying my argument extremely far, because even if the Motion is passed a large amount if not most of the money will still be provided from the general body of taxpayers.

Mr. Lee

Of course it will. I do not dissent from that.

I want to proceed to the argument adduced by my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) and to take it further. The hon. Member for Barry wanted to isolate from his argument what one could describe as the Tory inflation since 1951. The fact that the £ has lost more than 4s. in value and other things like that are to be glossed over in the one statement that this huge and increasing amount of money must be met in some way other than the way we suggested, which is broadly the argument for increasing taxation as such.

The Financial Secretary would have done a better service to the Committee if he had been as plain and honest in his argument as was the hon. Member for Barry. The Financial Secretary tried to give us the usual deployment of figures to show that it was necessary to make this matter administratively possible, that we should now increase the actual amount which people pay for the Health Service. He did not refer to the main principle with which the Committee is now concerned. We on this side of the Committee are pledged to the reinstitution of a free National Health Service and at recent conferences we have affirmed our determination to proceed on that principle.

The Government have decided that they will not only introduce a contributory service, but will do so in such a way that it will be virtually difficult for the Labour Party when going into office to reinstitute a free National Health Service. I know that the hon. Gentleman was at pains to show us that a Labour Government introduced certain charges. But he knows as well as we do—and it was stated quite freely at the time—that those charges were intended to be purely temporary and that they would have been taken off at a given date. It was his own party which made the charges permanent.

The Government are now going to the next stage. The hon. Gentleman wants to argue that there is something rather illogical in the way in which a certain content of the National Insurance contribution went to the Health Service. I do not dispute that. It may be a typically illogical British way of doing it. The hon. Gentleman is now enshrining not only the contributory Health Service, but is putting it in such a way that it is common knowledge that a certain percentage is to be paid in the insurance contribution towards the Health Service itself. In other words, we are now instituting for the first time a contributory service instead of the free service which we had in mind.

I say at once that, from the point of view of those who feel in principle that there should be a contributory service, this is a natural development. I remember the present Minister of Labour, when he was Minister of Health and, indeed, even before that, often arguing the principle of the contributory Health Service. I thoroughly disagreed with him then and I disagree with him now. I can understand him thinking as he does, but it was really not good enough for the Financial Secretary to begin to enshrine that principle in legislation without even mentioning that he was trying to do so in any shape or form during the course of his speech. I should have thought that we ought to examine the problem from that point of view.

At present, there are very grave doubts as to whether our present system of contributing to National Insurance as a whole can go on much longer. We are coming to the argument of whether or not it will be possible for a very considerable section of the community to afford the higher charges of the National Insurance scheme which are now becoming necessary if the scheme is to be kept administratively possible. We are now, at the very moment when that issue is arising, saddling that section of the community permanently with a further handicap.

I should have thought that the next logical stage in this Tory attitude towards the matter would have been to make it possible for people to contract out of the scheme altogether, because we are certainly coming to the point where for people in the lower income bracket the percentage which will have to be paid for the health part of the scheme will be pretty prohibitive. Therefore, unless there is some proposal, which I would deplore and which every hon. Member In this side of the Committee would deplore, for people to contract out of the scheme, that pattern of Tory legislation is incomplete. We have arrived at the point when, to get rid of the main objection to the present system, we shall have to get rid of those who represent the greatest liability to the scheme. Then the scheme will be composed only of those in the higher income brackets, who will be able to make it administratively possible.

The matter becomes quite hypocritical when one remembers that only a few days ago the hon. Gentleman opposite was deploying the argument in favour of giving back £34 million to Surtax payers because he thought that that would be an inducement to them in the weakened state of the national economy. When we get these two debates in the same week it is clear that the Government are proceeding in a very hypocritical manner.

The House has recently shown its concern about wage claims, industrial disputes, and things of that kind. Do not the Government realise that while this sort of policy is going on it is completely impossible for those charged with the conduct of industrial negotiations to act merely as if this had not happened, to act as though it was in isolation, a sort of Alice in Wonderland concept in which increases in expenditure of this type must be isolated from the fact that they are designed to lower the living standards of those who have to pay them?

We are moving into the phase in which we hope before long to see an industrial scheme. Is the same principle to be invoked there? Are we to have an additional impost upon those who have dared to be employed in industry merely because they take greater risks, because that is the real point of a contributory scheme? The greater the risk one takes, the greater the contribution one pays. Therefore, one is compelled to assume that, with the development of an industrial health service, that kind of principle will apply again. Indeed, one could apply the argument to industrial injuries and argue quite logically that the miner or heavy engineer should pay a greater amount towards the Health Service or towards industrial insurance in general than those who do not take the same sort of risks. In other words, we discourage people from going into the very type of industries upon which the life of the country may very well depend.

I believe it is important that this principle which I feel is now at stake should be stated clearly and that the attitude of the political parties towards it should also be stated clearly. One could almost come to the point where the working people would dread an increase in efficiency in the Health Service because the logical sequence of that would be that the amount they paid towards it would have to be increased. The Health Service is one of the greatest and most objective steps ever taken by this nation.

When listening to the speech of the hon. Member for Barry, I thought that if we looked at the global sum of £670 million involved and then looked at the amount of time lost in industry as a result of bad health, much of it attributable to the conditions in which people have to work, and if we could improve the facilities of the Health Service, we should have a proportionate decline in the amount of time lost in industry for health reasons.

Surely that would be the way not only to increase the efficiency of the Service, but to get a far greater return for industry itself. I hope that the Government will consider that kind of point instead of introducing what I believe to be a method of victimising those who are compelled to work under bad conditions, or those who, unfortunately, are unable to get a greater return for their labour than they are at present receiving.

I believe that we should look at general taxation far more than we are doing at present as a way of financing the Health Service instead of using this back-door method, for the first time since the Service was inaugurated, of introducing a contributory system which is meant to be permanent and which is couched in such a way that it would be most difficult to get rid of. That is the point which the Committee is discussing today.

5.0 p.m.

Mr. E. G. Willis (Edinburgh, East)

I agree very sincerely with the remarks of my hon. Friend the Member for Newton (Mr. Lee). Having listened to what one or two hon. Members opposite have said on the matter, I was not convinced with their argument. In the main, they seemed to be suggesting that we should do what we are doing to introduce a sense of reality into the matter. Whenever I hear the Tories talk about a sense of reality. I immediately wonder what is to happen to ordinary folk. This is precisely the argument which the Tories used when they cut the food subsidies. They said, "We must introduce a sense of reality by making people pay."

The result of that policy was a slash in the food subsidies—in the bread and milk subsidies. It has now resulted in a slash in the housing subsidy. People must be made to realise what it costs to build a house. This is the argument which we always hear, and whenever I hear it I am conscious of the fact that it is the prelude to an attack on those who can least afford it.

The issue at stake is a very simple one. The Health Service is costing a lot of money. How should we pay for it? The argument of the Government is that we ought to pay for some of it by means of a flat rate poll tax. It is not quite a flat rate because the contribution varies, but everyone should contribute. In the case of the employed man, it would represent 8d. a week.

The suggestion made from this side of the Committee is that we ought to pay in accordance with our ability to pay. Surely the fallacy of the argument of the party opposite is that it is a simple matter for a man with £20 a week to afford an extra 8d. a week, but it is not a simple matter for a person earning only £4 or £5 a week. The suggestion is indicative of the Tory state of mind and of the ignorance of hon. Members opposite. They seem to think that coppers do not mean much to people. Let them go into the homes of those with small incomes and see how the domestic budget is planned.

I have often listened to the Financial Secretary and been intrigued by the very clever manner in which he deals with statistics, but he has never convinced me that he knows much about human life. One cannot deal with human beings by juggling with statistics. In matters of this sort we are dealing with flesh and blood and with a vast variety of people. Some are living almost up to the hilt, struggling to get the things they need. An extra 8d. a week to such people represents the cost of a pint of milk, whereas to others it represents only about the third of the price of a cigar.

Mr. Powell

Did not the party opposite impose a flat rate contribution for this purpose?

Mr. Willis

I will argue that point with the hon. Gentleman at another time. At the moment, I want to pursue my argument. At present, we are discussing the activities of the hon. Gentleman and it is no alibi for him to cite what somebody did in 1947 or 1948. I am always rather intrigued with the arguments of the Tories and their endeavour to justify their actions by comparing them with what the Labour Party did. Do not they see that it is a great tribute to what the Labour Party did always to try to justify themselves for what they are doing by making the comparison?

That question does not mean a thing. We are discussing what the hon. Gentleman is doing here and I was in the course of suggesting to him that this amount means a great deal to people with small incomes. He should not forget, as I have said, that it probably means a difference of whether the members of a working-class home will get an extra pint of milk or not. It may mean nothing to hon. Gentlemen opposite and nothing to a man with an income of £20 a week. The greater the sum total of the insurance contribution increases, and it has been increasing very substantially, the greater the burden on the poorer people. It imposes a much greater burden and it is much more serious to increase the burden on poorer people by 8d. or a 1s. than to increase the burden on the wealthy people.

I do not know what sum the hon. Gentleman expects to get by this—[HON. MEMBERS: "£40 million"]. That is something like the amount which we gave away to Surtax payers a couple of weeks ago. I suggest that when this matter is examined in that light, and it is borne in mind that we suggest that people should pay in accordance with their ability, our case is unchallengeable. Surely, from a social point of view, that is a much better proposal. I should have thought that the lesson to be learned from the last century is that the more we do things socially, in the manner suggested by my hon. Friend, the better for the community as a whole.

Of course, it would have a consequence which hon. Gentlemen opposite do not like, the consequence of levelling things up; of reducing the gap between the various classes in society. Hon. Gentlemen opposite do not seem to like that, because the whole of the legislation which they have brought about has resulted in entirely the opposite happening. This is a bad thing for the Government to do. There is no justification for what the hon. Gentleman has said today. His arguments do not bear examination. I should have thought there were other ways of achieving this along the lines suggested by my hon. Friend. When we debate the Bill itself we shall have far more to say about these proposals and their effect upon the people than has been said during this short debate upon this Motion.

5.5 p.m.

The Minister of Health (Mr. Dennis Vosper)

My hon. Friend the Financial Secretary to the Treasury in, what I think the Committee will agree, was his usual lucid and logical way

Mr. Willis

I did not deny the lucidity of the hon. Gentleman. I said I was intrigued by it, but that it had little to do with human beings.

Mr. Vosper

I am glad to have the support of the hon. Gentleman.

My hon. Friend explained very clearly both the reason for this Ways and Means Motion and the purpose of the Motion itself and of the Bill which will follow it. I think the Committee realise that in many ways this Motion is an advance copy of the Bill which it will be my task to introduce to the House. Therefore, it would have been possible to have had a duplicate today of the debate which we shall have on the Second Reading of the Bill, and I appreciate the restraint of hon. Members in not taking up an undue proportion of time in discussion today.

Naturally, I do not wish to anticipate the speech which I shall make when I introduce the Bill. I intend to deal solely with the points raised this afternoon. I think it wise to repeat once again the purpose of this Motion. The purpose is twofold. First, it is to double the contribution at present paid to the National Health Service and, at the same time, to relieve the taxpayer—and by no means only the Surtax payer—of an equivalent amount. Secondly, it is to establish for the first time a separate National Health Service contribution.

I would say one further word about the contribution. My hon. Friend made it clear that this proposal has its origins in the Beveridge Report and the hon. Member for Newcastle-upon-Tyne, East (Mr. Blenkinsop) claimed respectability for it on that account. Of course, it has another claim to respectability, in that right hon. and hon. Members opposite did, in fact, give it their blessing. If hon. Members are in doubt about that, they should refer to the speech made by the right hon. Member for Llanelly (Mr. J. Griffiths) during the Second Reading of the National Insurance Bill. Right from that time up to the present it has been accepted by right hon. and hon. Members opposite that there shall be a direct contribution to the National Health Service, so there is nothing new about that. In 1946, as the Committee will be aware, the contribution was fixed at 10d. It was then thought that that would represent 20 per cent. of the total cost of the National Health Service. My hon. Friend dealt with what proportion that contribution now provides. I ask the Committee to look at it from the other point of view.

In 1946, it was anticipated that 72.4 per cent. of the total cost would be found from the Exchequer. In fact, year by year since 1946 the proportion financed by the Exchequer, that is by the taxpayer, has steadily risen. Last year, it stood at 80.2 per cent. When this proposal is implemented, the Exchequer—the taxpayer will find approximately 74.1 percent., which is still in excess of the proportion intended, in 1946, to be financed by the taxpayer. Therefore, if one accepts, as the Committee has done on previous occasions, that there shall be a direct contribution, it is not unreasonable that that contribution should be doubled to restore the position to approximately what it was originally.

There is one further argument which I would advance to those who have talked of hardship. Since 1946, when the contribution was fixed at 10d., there has been a considerable increase in wage rates and earnings. By 1956, there had been an increase in wage rates of 70 per cent, and in earnings of 99 per cent. The increase is, of course, even greater today. Therefore, on that account also, it seems to me reasonable that there should be an increase in the contribution.

If it is argued that a contribution of 1s. 8d. will be a hardship to people with low incomes, it can equally be argued, possibly with greater effect, that 10d. was a hardship in 1946. The hon. Lady the Member for Lanarkshire, North (Miss Herbison) spoke of the old people. I was not certain what point she had in mind, because the contribution will only be paid, as at present, by insured persons. If the hon. Lady had in mind those who have retired, they will be asked for no increase.

Miss Herbison

I know that when a person is retired and is paying no contribution, he makes no contribution towards the National Health Service. What I was asking the Financial Secretary was whether the Government had taken into account the increased proportion of old people—in other words, those who will be paying no contribution—as against the number of insured people when coming to a decision about the amount or proportion of the Health Service which is to be financed from contributions.

Mr. Vosper

I thank the hon. Lady for making clear the point. I had thought that possibly she was suggesting that this method of contribution was an increased burden on the old people, whereas this method of finance can, in fact, have the opposite effect.

Miss Herbison

Can the right hon. Gentleman now answer my original question?

Mr. Vosper

Both my hon. Friend and I are well aware of the point which the hon. Lady has in mind, but I do not think that this change in the method of financing is particularly affected by it.

The second purpose of the Bill will be to establish a separate contribution. This seemed to cause concern to the right hon. Member for Llanelly. At present, the contribution is paid direct into the National Insurance Fund and is thence paid by my right hon. Friend the Minister of Pensions and National Insurance as a lump sum to the Ministers of the Health Departments. Either because of that or for some other reason, as my hon. Friend the Member for Barry (Mr. Gower) said, there is undoubtedly confusion in the public mind as to the source of finance of the National Health Service. That was quite clear from the reaction to the publication of the proposals by my right hon. Friend the Chancellor of the Exchequer which have led to the Bill.

Probably many hon. Members of this Committee did not realise that they themselves paid 10d. a week, and neither more nor less, towards the finance of the National Health Service. Many people, I believe, thought that either the whole of their insurance contribution in some way went towards the National Health Service, or that none of it did. It seemed important to my right hon. Friend and myself that we should seek to establish more clearly in the minds of the public that a portion, but only a portion. of the insurance contribution went to the Health Service.

Dame Irene Ward

Will the new system be affected by the total exemption from payment of National Insurance contributions which people in receipt of not more than £ 104 a year can claim?

Mr. Vosper

The small income exemption will apply exactly as at present. There will be no change in that procedure.

It was our intention, therefore, to seek to establish in the minds of the public and of those who pay the contribution that part of their contribution goes to the National Health Service. For that reason, there has been a change in the procedure in that the contributions will no longer be paid into the National Insurance Fund, but, although collected by my right hon. Friend the Minister of Pensions and National Insurance, will be paid to the Health Ministers and thence into the Exchequer, where they will be treated as appropriations-in-aid.

In a further attempt to clarify the position—this answers the right hon. Member for Llanelly—the stamp will, in some form as yet to be determined, make clear that a portion of the contribution, although included in the same stamp, is to be devoted to the National Health Service. By that and other means, through publicity channels, we shall seek to establish this as a separate health contribution designed to meet a portion of the cost of the National Health Service.

My hon. Friend the Member for Tynemouth (Dame Irene Ward) must be congratulated on her ingenuity, which caused some surprise to me and, I think, to your predecessor, Mr. Hoy, in bringing, into the debate matters which I certainly had not anticipated would be in order. Of course, though this is an increase in the contribution, it is not an increase in the total National Health Service finance. The contribution, in fact, will be only sufficient to meet the estimates of regional hospital boards already approved by the Ministers. I must, therefore, disappoint my hon. Friend in that respect. I would add, however, that the capital allocations to regional hospital boards is, and always has been, made on a population basis, but that special consideration has been given to under-developed areas.

I had occasion only a few days ago to look at the estimates for the Newcastle Regional Board because of an allegation by another hon. Member that it was receiving an undue proportion of the finances available. I was satisfied on that occasion that both the hon. Member in question and the hon. Lady were wrong, but I take note of what she has said. She will have noted that my hon. Friend the Parliamentary Secretary gave up a great part of his Easter Recess to visit that Regional Hospital Board, partly in company with my hon. Friend. Beyond that, I cannot go on this occasion.

My hon. Friend the Member for Barry also raised the question of the Welsh Board of Health. I have no reason to suppose that the Welsh Board of Health will not have a fair share of this contribution or that that Board has in the past had a diminishing share of the available revenue. I am, however, meeting the Board in the near future and I will certainly take up the point made by my hon. Friend.

The hon. Lady the Member for Lanarkshire, North said that although the Opposition took exception to this proposal, hon. Members opposite would not vote against the Motion. They oppose it, I understand, as a regressive measure. In a sense, it is a progressive measure, because, as my hon. Friend the Financial Secretary said, by making this adjustment for Income Tax we are putting right something which has in many ways been a regressive measure since the introduction of this contribution in 1948. I cannot accept that this is by any means a regressive measure. I am pleasantly surprised by the small volume of protest which has been received by my Department and by the Departments of my right hon. Friends. The hon. Lady will know that in many quarters our proposal has been greeted as a sensible measure.

I am still anxious to know what alternative the Opposition propose. We have had one or two suggestions today. The hon. Lady said that she would increase taxation on those best able to afford it. That is easy to say, but not so easy to put into practice. The hon. Lady did not go on to say whether she would remove the existing contribution, because that would need an additional tax of some kind of £80 million a year.

Miss Herbison

I was dealing only with what the Government expect to get from the increased contribution. I did not use the word "regressive". I said that this proposal was a burden on the smallest wage earners. many of whom bear far too great burdens already.

Mr. Vosper

I take note of that, but it does not seem logical to oppose this increase in the contribution and to let the original contribution of 10d. remain. Indeed, the hon. Member for Newcastle-upon-Tyne, East spoke as though he was in favour of the existing contribution but not of an increase. I understand the logic of saying that there should be no contribution towards the National Health Service. I do not quite understand the logic of saying that 10d. is a fair contribution but that anything above that amount is unreasonable and unfair.

Mr. Blenkinsop

Does the right hon. Gentleman, therefore, in logic, propose, what I suggest he may be intending to propose, that the whole of the finances of the Health Service should be met by a flat rate contribution.

Mr. Vosper

If the hon. Gentleman will study this Motion and the Bill which is to be introduced he will find nothing there to enable that to be done. I am certainly myself not advocating that in the Committee today.

Mr. Blenkinsop

Is not that logical?

Mr. Vosper

The Opposition must also face up to the fact that, if they are not prepared to increase taxation to a considerable extent to finance the whole of the National Health Service, they may have to do what they had to do on previous occasions, and that is to increase the charges to patients. It would be possible for the Opposition to propose a hospital boarding charge. Is that in their minds? Today, we have not heard the answer. Perhaps when we reach the Second Reading we may receive some elucidation of what is their real policy, not only as to the increased contribution but also as to the existing contribution which some hon. Members opposite seem to favour and some to oppose.

For our part, the Government's policy is quite clear. It is that the Health Service should be financed in part, but in part only, by direct contributions paid by those who are fit and at work, and we believe that that is something which commends itself to the great mass of opinion of this country. Therefore, I ask the House to accept the Motion.

Question put and agreed to.

Resolution to be reported.

Report to be received Tomorrow;

Committee to sit again Tomorrow.