New Clause.—(CREDITED CONTRIBUTIONS FOR SELF-EMPLOYED PERSONS.) (Hansard, 19 November 1957)

§ Mr. Bowen
I beg to move, That the Clause be read a Second time.
This Clause is directed at dealing with one of the difficulties experienced by self-employed persons in the lower or, indeed, the lowest income group. They are a limited and a quite clearly defined and ascertainable group of people.
I think that it would be true to say that the self-employed persons have benefited generally by the operation of the 1946 Act. It would be also true to say, again speaking quite generally, that they have been dealt with very fairly under the provisions of that Act, particularly in regard to Exchequer supplementations. There is undoubtedly a large number of examples in the last ten years where the position of the self-employed person is unsatisfactory, and it is with one of those matters that this new Clause deals this evening.
It deals with that class of person who has an income which does not exceed £156 a year and who, therefore, is entitled 296 to claim exemption from stamping his cards, and who, in fact, is encouraged to claim exemption from stamping his cards. Quite apart from persons who have an income which does not exceed £156 a year, all those self-employed persons whose incomes, for the sake of argument, ranges between £3 and £8 or £9 a week are already making very great sacrifices by paying at present 9s. 3d. a week and, ultimately, 11s. 6d. a week in order to keep themselves under the insurance umbrella.
8.0 p.m.
I want to deal with those persons whose incomes do not exceed £156 a year. As I understand the position—and I speak subject to correction in this respect—the employed person who is in receipt of sickness benefit is credited with a contribution during the period in which he is in receipt of that benefit. It is true that the self-employed person is in precisely the same position; he is credited with a contribution during the time that he is in receipt of sickness benefit. I make no complaint about that. The employed person who is in receipt of unemployment benefit is also credited with a contribution for each week in which he is in receipt of that unemployment benefit. Certainly I do not quarrel with that.
When we consider the position of the man who has claimed exemption from stamping his card because his income does not exceed £156, however, we find that it is different. He is sorely tempted to claim exemption because of the burden of having to pay this very substantial amount out of his income. Indeed, he is encouraged to claim exemption. If he does so, however, he may well jeopardise his claim to a pension or his widow's claim to a pension. In addition, he may well jeopardise his entitlement to sickness benefit.
I do not want to go into the details, but he may find that he is not entitled to sickness benefit at all. At the best, he will be in a position where he is entitled to sickness benefit at the top rate at the beginning but then is entitled to it at a lower rate and finally is removed from entitlement altogether. Thus, by claiming exemption the self-employed person penalises himself and jeopardises his insurance position.
I should like to explain my experience to the Committee in this matter, and I 297 hope the Parliamentary Secretary will tell us whether it is in accordance with her experience. Self-employed persons who could claim exemption often submit themselves to great personal hardship in order to remain in insurance because they very naturally and properly fear the consequences of putting themselves outside entitlement to insurance benefits, both for pensions and for sickness. Many of them make sacrifices in their difficult circumstances to continue to pay the insurance contribution rather than claim exemption.
The position is aggravated by the fact that many of these people are entitled to and are in receipt of National Assistance. If they are in receipt of National Assistance the amount which they receive in National Assistance is not affected by the fact that they have stamped their cards. In other words, if they decide to safeguard their position in relation to pensions and sickness benefit and to continue to stamp their cards, that is not taken into account by the National Assistance Board in deciding what to pay them; they are in exactly the same position as if they had not stamped their cards.
The only possible qualification is that if they are self-employed persons in only part-time work, then 10s. is not taken into account by the National Assistance Board. Subject to that qualification, if it is a qualification, they are not helped in any way by the National Assistance Board to keep within insurance entitlement.
All the new Clause asks is that these self-employed persons with £3 or less a week total income should be treated, from the point of view of being credited with contributions, in the same way in which unemployed persons are treated; they should be credited with their contributions for the period of their entitlement to claim exemption. In that way a large number of people would no longer have to turn to the National Assistance Board for assistance.
I feel that it is very much in the interests not only of self-employed persons in that category but also of the country to keep them within the entitlement for insurance benefits. For those reasons, I hope that the Minister will look sympathetically at the new Clause. It may well be that it is rather too wide in its scope and needs to be qualified in some 298 way, but I am sure that the whole Committee will agree that in this respect the problem of self-employed persons needs to be looked into again.

§ Mr. Arthur Holt (Bolton, West)
I beg formally to second the Motion.

§ Miss Pitt
The new Clause would give all benefits, except unemployment benefit, to self-employed people with small incomes for no contribution. That is the first point I want to make.
Regulations made under the main Act allow self-employed or the non-employed to claim small income exception if their incomes do not exceed £156 a year, as the hon. and learned Member for Cardigan (Mr. Bowen) rightly said, but credits are not awarded. The principle behind this is that credits are given only in circumstances where contributions would be payable but for the contingencies—for example, sickness or unemployment—against which the contributor insures himself.
At the moment, about 20,000 self-employed persons are excepted from paying contributions. In addition, about 180,000 non-employed persons also have small income exception. No provision is made in the new Clause to deal with the non-employed, but I think it would be difficult to resist the claims of these people if it were decided to grant the proposals of the new Clause to the self-employed.
The difficulty about the proposal is, very simply, that it is not insurance. It would give right to benefits for which no contributions had been paid, and I think it would be unfair to the other contributors to the National Insurance Scheme, and to taxpayers, who would have to pay for benefits which would go to these people who, as self-employed, had claimed exemption.
In support of the view which I have expressed, may I add that the National Insurance Advisory Committee examined this question and reported on it in 1956. The question was the subject of a Private Member's Bill in 1954, if I remember correctly, hence the reference to the National Insurance Advisory Committee. In its Report in 1956 the Committee made it quite clear that it thought it was not practicable to give credits either to self-employed or non-employed persons 299 who came within the excepted group because it would be unfair to present contributors.
I feel that the new Clause must be rejected. May I, however, answer one or two points which the hon. and learned Member made in his speech? He admitted that the self-employed person was dealt with very fairly under the 1948 Act, but then said, if I understood him correctly, that those who came within the low income group were encouraged to claim exemption from paying contributions and from stamping their cards. I should not have thought that this was correct, because it is certainly not in the interests of these people in the low income groups to claim exemption if they can afford to pay. I should not think that my Department, any officer in it or anybody connected with social welfare would encourage them to discontinue their contributions.

§ Mr. Bowen
The hon. Lady refers to whether people can afford to pay. We are dealing with people who have £3 a week or less and who are being asked to pay 9s. 3d. a week out of that £3. I should have thought it was quite clear that all these people find it extremely difficult to pay.

§ Miss Pitt
I am not minimising the fact that they may find it difficult to pay the contribution.
May I add one other point? They can have an income slightly above £156, because it can be £3 plus what they would have to pay for a stamp on their card. That would raise it to rather more than £3.
I now come back to the point I was endeavouring to make. It is not in the best interests of those people that they should be encouraged to claim exemption, because they would then deny themselves benefits later on and have to have recourse to National Assistance should they need help during sickness or when they reach retirement age.
The hon. and learned Member for Cardigan also made the point that all others with from £3 up to £7 or £8 are struggling to keep up their payments. When he says that, I assume that he means all other self-employed people with fairly low incomes. Does it not seem unfair that those people who are struggling to keep up their payments 300 should be required, if this Clause were accepted, to make a contribution to the provision for people who had claimed exemption?
The hon. and learned Member quoted his own experience and said that many of those people may have to make a real sacrifice to keep themselves in insurance. He asked whether my experience matched his own. That is not my experience. I quite accept the fact that he has met with these cases. The cases I have met concern people who have claimed exemption because their income was less than £156 and then, when they reach retiring age, would very much like to reverse the option they made because they realise the considerable disadvantage at which they are compared with other retirement pensioners. I hope I have dealt with all the points raised by the hon. and learned Gentleman.
May I now come to the reason why the Minister and myself feel it necessary to reject this Clause. It is a serious breach of the contributory principle. It is unfair to people in Class 1 with small incomes and people in Class 2 with incomes slightly over £156 who are themselves making contributions not without sacrifices. It may lead to a similar demand for those in Class 3. I feel that for these reasons I must advise the Committee tot to accept this particular Clause.