ESTIMATES (VOTE ON ACCOUNT) (Hansard, 18 February 1958)

The Chancellor of the Exchequer (Mr. Derick Heathcoat Amory)
With permission, Mr. Speaker, I should like to make a short statement about the Estimates for the coming financial year.
The Vote on Account will be published today, and will show the totals of the Civil Estimates and the Estimates for the Revenue Departments. The estimated expenditure on the defence programme has already been published in the White Paper on Defence Statistics.
The total net Estimates—excluding the Post Office Estimate, which covers self-balancing expenditure—amount to £4,260 million. They give effect to the determination of the Government to insist on the greatest economy practicable in public expenditure. The two largest elements in Government expenditure are defence and the social services. The White Papers on Defence have been published and we shall be debating them in the near future. Substantial economies have been obtained in this field.
As regards the social services, the Government intend to continue their policy of maintaining the standards of the services at the highest level commensurate with a sound economy. But the cost to the Exchequer of the social services as a whole has steadily increased year by year. The Estimates for the coming year show further material increases, in particular for education, for the health services and for National Insurance. Unless the increasing cost to the Exchequer of the social services is kept within bounds, their whole structure will undoubtedly be imperilled.
As the House will be aware, the National Insurance Fund will go into deficit for the first time in 1958–59. In that year, at any rate, we have decided that this deficit of about £14 million must be borne by the Exchequer. But, as the House will also be aware from the Gracious Speech, the Government are giving consideration to the whole question of the provision for old age. The 1038 annual deficit under the present National Insurance Scheme is bound to increase. Figures already before the House show an estimated deficit of £235 million in 1964–65, only six years from now, as compared with £14 million next year. In the face of this, one of our objectives must clearly be to place the scheme on a sounder financial footing.
The increasing cost over the years of the health services has also caused the Government particular concern. When the National Health Service was instituted, the gross cost was expected to be £175 million, and the share borne by the Exchequer £126 million. This expectation was immediately falsified and the cost has risen greatly from the start. As a result, next financial year the gross cost is estimated at £740 million. On present arrangements the Exchequer's share of this would be £555 million. This is over four times as much in money terms, and nearly three times as much in real terms, as was originally contemplated, and represents a higher proportion of the total than was envisaged at the outset of the service.
The Government have decided that the whole of this vastly increased charge cannot be borne on the Exchequer. Accordingly, they propose that, with effect from the beginning of July next, the National Health Service contribution, which is a separate contribution collected with the insurance stamp, should be increased. The increase will be 6d. for men, 4d. for women, and 2d. for juveniles, with, in each case, an additional 2d. from the employer in the case of employed persons.

§ Mr. Harold Davies
A General Election!

Mr. Amory
A Ways and Means Resolution, on which the necessary Bill will be founded, is being tabled tonight. The additional yield from these increased contributions will be about £24 million next year and £32 million in a full year. On this basis the individual, and his employer, will still only be paying in stamp or charges just under 20 per cent. of the gross cost of the service, that being the figure which it was originally proposed that he should bear.

§ Mr. Gaitskell
Is the Chancellor aware that the news of this further increase in the weekly contribution will be received 1039 with dismay everywhere, and that, coming as it does on top of substantial earlier increases, it will bring the total weekly payment by the individual employee to, I think, about 10s. a week? Is he aware that, by their very nature, these weekly contributions must fall most heavily on those least able to bear them? In the circumstances, and in view of the fact that last year, following a somewhat similar increase, there was a concession to Surtax payers of almost exactly the same amount in total yield, will he give us an assurance that he will not repeat that position in his Budget this year?

Mr. Amory
When this additional stamp has been allowed for, the proportion paid by the contributor, by his contribution and the charges together, will not exceed 20 per cent. and is not more that the percentage envisaged at the beginning of the scheme. In 1951, the right hon. Gentleman himself decided that a ceiling ought, in fairness, to be imposed, and he put one on the proportion of the gross cost to be met by the Exchequer. The total on which he decided was £400 million. The comparable total we are proposing here for next year is about £530 million. The proportion which the right hon. Gentleman thought fit for the Exchequer to bear represented 11 per cent. of the total cost; the proportion we are proposing for the next two years is 12½ per cent.

§ Mr. Bellenger
On a point of order, Mr. Speaker. Is it necessary that the Chancellor of the Exchequer should make what appears to be a pre-Budget speech today? Is this matter so urgent that a statement must be made today? I take it, Sir, that you will restrict questions to the Chancellor on this occasion because there is no Question before the House? Is not this an unusual practice?

§ Mr. Speaker
That is a question of opinion rather than a point of order. A Minister is entitled to make a statement if he deems it to be in the public interest to do so.

§ Dr. Summerskill
Before the right hon. Gentleman made his decision, the effect of which will fall most heavily on the poor, and will mean a weekly contribution of 10s. 1d. from every man in the country, did he scrutinise the nation's 1040 drug bill, which is costing £50 million a year, and which many experienced people agree is composed in great part of expensive proprietary drugs? Will the right hon. Gentleman give an undertaking to examine that before he goes forward with these increases?
Can the right hon. Gentleman also say that this will mean that there will be no increase in the prescription charge or the charge for any treatment in a doctor's surgery, as forecast by a Sunday newspaper?

Mr. Amory
The figure should, I think, be 9s. 11d. and not 10s. 1d., as the total of the contribution.

§ Dr. Summerskill
I beg pardon; 9s. 11d.

Mr. Amory
That is right.
As regards the question of the drug bill, my right hon. Friend the Minister of Health is keeping a very close watch on it in the National Health Service. In this case, we have had to decide. There were several alternatives. We could have cut standards, we could have cut the service and we could have increased the charges to those who are ill and in trouble. But we decided that on this occasion the right thing to do—and I believe that the House generally will approve of this—would be that the extra burden should be carried by the fit and able-bodied rather than by those who are in trouble.
As regards the other part of the right hon. Lady's question, the present proposal is as I have described it today.

§ Mr. Turton
What proportion does the proposed contribution of 9s. 11d. bear to the average weekly earnings, and how does that proportion compare with the proportion in the Federal German Republic, in France and in Italy?

Mr. Amory
I could not give that information to my right hon. Friend without notice. If he will put down the question, and the information is available to me, I will let him have it.

§ Mrs. Braddock
Will the Chancellor find out how much additionally it will cost local authorities for the employees' own contributions and how much difference it will make to them in the rates 1041 they will have to charge and in supplementation, during the course of the financial year? As the Government have requested local authorities to cut their expenditure as low as they possibly can, may I ask whether the Chancellor is entitled to put this added burden on to the ratepayers and the local authorities to meet the additional contribution that he is expecting?

Mr. Amory
That is rather an indirect question for information which I cannot give today. If the hon. Lady will put the question down I will give her the best answer I can as to the proportion of cost falling on local authorities. I do believe that the proportion of 20 per cent. of the gross cost falling on the contributor himself is not an unfair proportion.

§ Sir K. Joseph
If the expanding services and the cost of the National Health Service make necessary a further financial contribution, will not most people judge that it is far fairer that those who are of working age and well should bear the burden rather than those who are ill or retired?

Mr. Amory
I am very grateful to my hon. Friend for that question.

§ Mr. J. Griffiths
In approving these new charges, has the right hon. Gentleman considered this aspect of the matter? The fiat rate contribution goes up to 9s. 11d., which is the contribution for every worker of 18 years of age and over, and the only person who now pays the contribution in full is the person who does not earn enough to pay Income Tax? Is it not, therefore, clear that this increase will mean a substantial reduction in the standard of living of all the lower-paid workers? Does the right hon. Gentleman realise that because of this reduction in the standard of living, compared with others who get a part of the contribution counted against Income Tax, it is a very big extra burden put upon the lower-paid people?

Mr. Amory
I suggest that the right hon. Gentleman should keep the matter in perspective. He talks about this being a very substantial burden; it is 6d. a week.

§ Mr. Gower
Can my right hon. Friend say how the proportion between the contribution and the average wage compares 1042 with the proportion at the time the scheme was initiated?

Mr. Amory
I cannot give that information without notice.

§ Mr. Blenkinsop
Does the right hon. Gentleman's statement mean that the Government are still considering further charges in the Health Service? If the right hon. Gentleman does not know the answer, can the Minister of Health, for once, answer for himself in the matter? Secondly, can the right hon. Gentleman give the figures of proportion of the national income taken by expenditure on the National Health Service, as compared with the last couple of years?

Mr. Amory
I thought I had explained that we chose this method of increasing the personal contribution as an alternative in preference to the other alternatives I mentioned; and in mentioning those other alternatives I did include increasing the charges, so that at present we have no proposal for increasing the charges.

§ Mr. Jay
Does the right hon. Gentleman realise that, after these new increases in taxation, the lowest-paid wage earner will be paying in Income Tax and National Insurance contribution together a higher proportion of his income than many people with higher incomes? How can he justify that position?

Mr. Amory
I cannot anticipate my Budget statement.

§ Dame Irene Ward
When this increased charge comes into operation can the Newcastle Regional Hospital Board look for a better standard of service, in view of the fact that in some ways we are still much below the national average? If there is to be a payment over the whole community, is it not fair that if we bear our share of the burden we should have an equally good service?

Mr. Amory
I am sure that I can leave that matter with confidence in the hands of my right hon. Friend the Minister of Health.

§ Mr. Bellenger
On a point of order. May I follow up the point which I raised with you a little while ago, Mr. Speaker? In many ways, hon. Members put Questions to the Chancellor of the Exchequer in anticipation of his Budget statement and he always refuses to 1043 answer and says that he must not anticipate his Budget. What the right hon. Gentleman is doing today is something by way of imposing increased taxation in advance of his Budget, although you have ruled that it is in order for him to make a statement like this. Is there anything you can do to discourage the Chancellor of the Exchequer from making a statement like this today, which is quite out of perspective in relation to his Budget statement?

§ Mr. Speaker
I understand from the right hon. Gentleman's statement that this is to be the subject of a separate Bill and not a matter for the Budget, and that a Ways and Means Resolution is being tabled for tonight. That is what he said. There will, therefore, be an opportunity of debating the matter as a separate issue when the Ways and Means Resolution comes before the Committee of Ways and Means, and also on the Bill, which will no doubt be founded on the Financial Resolution, if the House accepts it.