NATIONAL INSURANCE (GRADUATED CONTRIBUTIONS) (Hansard, 25 July 1960)

§ Mr. William Ross (Kilmarnock)
I beg to move, That an humble Address be presented to Her Majesty, praying that the National Insurance (Assessment of Graduated Contributions) Regulations, 1960 (S.I., 1960, No. 921), dated 25th May, 1960, a copy of which was laid before this House on 1st June, be annulled.

§ Mr. Speaker
It may be for the general convenience of the House if we extend this discussion to include the second Prayer: That an humble Address be presented to Her Majesty, praying that the National Insurance (Collection of Graduated Contributions) Regulations, 1960 (S.I., 1960, No. 922), dated 25th May, 1960, a copy of which was laid before this House on 1st June, be annulled.

§ Mr. Ross
We are here dealing with two Statutory Instruments, two of a considerable batch which have come from the Ministry since the passing of the National Insurance Act, 1959. I am sorry that the Minister himself is not present, as I intended to remind him of a phrase which I well recollect his using abut ten years ago when he spoke of a vast flow of delegated legislation descending upon the bewildered people of this country. I am sure that the employers of this country are fairly well bewildered, for not a week passes without a leaflet, a pamphlet, a Regulation, a guide to a Regulation, a guide book, to see them through this veritable network which has been thrust upon them.
Although the Regulations are necessarily intricate—the two Instruments with which we are now dealing particularly so—they are very important and the House would do well to study them carefully, because it is by these Regulations that tremendous sums of money will be collected. What is involved is the annual collection of £250 million by 1966, £295 million by 1971, £350 million by 1976, and £390 million by 1981. Against those sums collected there will be paid out £15 million, £16 million, £35 million and £63 million respectively, so that one begins to see why there is a certain measure of controversy about the Act and the Regulations.
1222 We now have only eight months to go before these provisions come into force and last week the Minister named the appointed day. He might well have called it the day of reckoning, with all that has to be done about assessments. The background is that, from the week of 6th April, 1961, all employees between the ages of 18 and 70–65 in the case of women who are not in receipt of retirement pension—who have not contracted out will be required to make graduated contributions.
The Act lays down that a contribution—a rather euphemistic description for something which cannot be withheld—of 4¼ per cent. each by employer and employee is to be paid on that part of an employee's remuneration which lies between £9 and £15 in any Income Tax week, although there are arrangements defined in the Regulations under which the graduation can be for not only a week but a multiple of a week, a month or a multiple of a month, or some such period.
The graduated contributions are to be collected—and we find this in other Regulations—through the P.A.Y.E. system in association with Income Tax, but whereas the tax is to be dealt with on an annual and cumulative basis, the graduated contribution is to be calculated on each regular pay, be it weekly, monthly, or what one will, taken separately. The basis of assessment and calculation is gross pay before deductions and irrespective of when that pay or emolument is given. The deduction is to be made in respect of the time it was paid.
Many of these Regulations spring from that basis. I am sure that many of the difficulties and the inevitable anomalies spring from that. No doubt the Minister will justify this on the basis of administrative simplicity and practicability, but that can be carried too far.
Whereas the Act lays down that there will be a graduated assessment of 4¼ per cent. of the emolument, Regulation 3. dealing with the calculation of graduated contributions, departs from that in the matter of calculation and it is only 4¼ per cent. broadly. There is no precision here. For administrative purposes, and convenience, the Minister departs straight away from the 4¼ per cent.
1223 In a proviso, the Minister returns—for administrative convenience in respect of certain firms and the way in which they calculate their pay bills by computer—to precise calculations. It is strange that in a realm where arithmetical purity might have been expected, lauded and demanded, we have this insistence on the imprecise, enforcement of the inexact, and a limit on precision.
All through the Regulations a decision is constantly being taken between administrative convenience and the fundamental basis of the scheme—which to my mind is that contributions should be a fixed percentage of earnings—and administrative convenience always wins. There is no doubt that this is a tremendous task in view of the variety of trades, the traditions within these trades, the method of payment of wages, and so on. I admit that, but here we are suiting our Regulations, bending them to particular trades, bending them to varying methods of payment, and fitting them in to suit the fundamental basis of collection, the P.A.Y.E. system, with the result that we have Regulations and provisos immediately allowing for departures from those Regulations. It shows that the Minister is conscious of the possibility of unfairness.
The overall effect of Regulations 3, 6, 7, 8, 9 and 10 is to render a scheme already suspect, because of its limited and discriminating nature, liable to anomalies and injustices which will perplex those who have to administer the scheme, not least the employers and the Inland Revenue. It will anger those who are called contributors, and will vitiate the fundamental principles of having a wage-related pension.
I feel that most of the injustices follow from accepting the P.A.Y.E. machinery and rejecting the P.A.Y.E. principle; and the limited application of a graduated principle to the narrow range of £9 to £15. If we take two people—we have the tables by which the calculations are to be made—who in four weeks earn the same amount, say £60, and one of those people earns £15 a week, at the maximum, that person will pay 5s. 1d. giving a total aggregated contribution of 20s. 4d. Suppose the other person, who may well be in the same firm, earns in the same four weeks first £16; then £14; 1224 then £12 and then £18. His graduated contribution according to the total amount in aggregate, is not 20s. 4d. but 17s. 2d. When the employer's contribution is taken into account there is, in the first place, a total contribution of 40s. 8d. and in the second case 34s. 44., a difference of 6s. 4d. in the aggregate of contributions for the same emoluments.
The Minister may say that that is not much but this would happen week after week, month after month and year after year, in the lifetime of a man for thirty-seven years, and the accumulated effect is to create an injustice and an anomaly for an individual which to my mind cannot be defended solely on the basis of—

§ Sir Spencer Summers (Aylesbury)
On a point of order Mr. Deputy-Speaker. Unless I am mistaken, the points to which the hon. Gentleman is addressing himself now are inherent in the Act. We are here dealing with the Regulations giving effect to the principles laid down in the Act. If we are to debate the merits or otherwise of the principles inherent in the Act, we may go very much wider than I thought the debate was likely to go. May we have your guidance?

§ Mr. Deputy-Speaker (Major Sir William Anstruther-Gray)
I was listening with attention to what the hon. Member was saying and I thought it was germane to the discussion.

§ Mr. Ross
Thank you, Mr. Deputy-Speaker.
I hope that the hon. Member for Aylesbury (Sir S. Summers) will pay attention to this. It is no wonder that the National Insurance Advisory Committee which was consulted in relation to these Regulations warned the Minister about limiting strictly the alternative methods that are in the Regulations. For instance, let us look at Regulation No. 7 which is in relation—it would be difficult to tell by reading it, were one able to understand it at all—to the change-over of graduation period where a man has been paid weekly and suddenly there is a change-over to being paid monthly. The Advisory Committee suggests that, as well as calculating this on a weekly basis in relation to a particular employer, the alternative method of calculating on a monthly basis should be promoted and 1225 the Minister has agreed. What did the Committee say about that? Adoption of the alternative method should, however, be limited, as with the 'precise' method of calculating the graduated contributions in Regulation No. 3 (3), to cases where the employer's pay arrangements are such that the standard method would be unduly difficult or inconvenient for him. This would prevent an employer from being able to choose between the two methods according to any difference in the contribution liability under them. This is the very difference to which I have been addressing myself and this difference of contribution is there in Regulation 3 and Regulation 7. I am perfectly sure the Joint Parliamentary Secretary will appreciate that.
Here we have the ironic position that the fairest way of taking the longest period and evening out the bumps—to which the hon. Member for Aylesbury referred to in Committee and pleaded with the Ministers to look into when the regulations were framed—is strictly limited, because it might pay the employer and the employee to have it calculated in this way.
This leads right on to Regulation 11 and the possibility of manipulating the pay procedures, which is recognised by the Minister. He takes power to prevent that. It is a very wide power to give a Minister and, in the language which is used here, it is one which I find myself, of necessity, asking how he is to use it. The Minister accepts abnormality and variation between one industry and another, but he will not accept it within an industry. The Minister will need to recollect that abnormality starts somewhere. Everything that is normal in any industry was abnormal when first introduced but it has come to be accepted. Does he think that there will be a freezing of methods of payment inside an industry, or that he will close his eyes to the introduction of any new forms of, say, bonus or anything else?
The difficulty is that the Regulation is an arbitrary one. The Minister will decide, but it does not say whether he will refer the matter of any abnormality to any committee. There is nothing in the Act nor in the Regulations which gives anyone a right of appeal against such a decision. When we remember that the Minister takes power to go right back to the Income Tax year before this was decided, we see that there is the 1226 retrospective claim. I should have thought that it would have interested hon. Members opposite, who are interested in retrospective legislation. How that is to be done has to be answered.
Regulation 5 must be a great disappointment to the hon. Member for Aylesbury. That Regulation deals with something which troubled the Standing Committee for a considerable length of time. I had not the privilege of being a member of the Committee, but I have taken the trouble to read the OFFICIAL REPORT and the comments of everyone concerned about the treatment of bonuses. In Committee, the Minister was urged to take steps by regulation or somehow to spread irregular payments over a longer period than the nay period. The hon. Member for Aylesbury, the hon. Member for Basingstoke (Mr. Freeth), my hon. Friend the Member for Islington, North (Mr. Reynolds) and my hon. Friend the Member for East Ham, North (Mr. Prentice) joined in the request to the Minister to remember the fundamental basis, that if we wanted a graduated pension scheme properly wage-related we must try to ensure a proper spread-over in relation to the emoluments. That pressure was considerable and bipartisan. It had sympathetic support from the Advisory Committee.
I hope that the hon. Member for Aylesbury does not think that in this discussion we are going too wide. This is the importance of what he thought could be done and might have been achieved in part but which has not been achieved. The Advisory Committee sympathised with the point of view that the remuneration should be spread over the whole period in which it was earned but, as usual, found a practical difficulty being raised. But this practice of paying a bonus is widespread throughout industry, as I have found from discussions with people in industry. Special bonuses are paid at a certain time of the year in the cotton industry in Ayrshire. There are production bonuses. The hon. Member for Basingstoke said that clerks in the City received special bonuses at certain times.
If this calculation is to be made on the period in which the bonus is paid, be it monthly or weekly, then it means in many cases no addition to the build-up of graduated pension for these 1227 people if they are already at or near the maximum of £15 a week, whereas if the calculation were spread over the year or over the two or three months in which the bonus was earned, they might be enabled to earn a maximum pension over that period.
The Advisory Committee said, We greatly regret that the proposed treatment of bonuses and similar payments may result in lower contributions being paid than would otherwise be the case, with a corresponding adverse effect on the employee's eventual pension". The hon. Lady the Member for Edgbaston (Miss Pitt), then Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance, put off the insistent pleas of hon. Members by saying, "We have two years to think about it. We will see what can be done." Nothing has been done.
This problem applies the other way round, too. What of the employee in a shop, earning perhaps £6 a week? He does not come within the £9 to £15-a-week range, but at Christmas he may receive a special payment of £6 which immediately brings his pay for the week up to £12; and immediately he and the employer have to pay a contribution, probably the only contribution in the year. His contribution is 2s. 8d., and with the employer's contribution it totals 5s. 4d. That will go through the administrative machine, be entered on a tax deduction card, be recorded by the Inland Revenue Department and be taken in one of the pantechnicons, about which my hon. Friend the Member for Sowerby (Mr. Houghton) knows, to the Ministry. A specially punched card will be fed into the new and expensive Emid computer which the Ministry of Pensions and National Insurance has just purchased. It will remain recorded there for time immemorial, but nothing from it will ever descend by way of benefit to the person who paid it—all because of this failure to spread the emoluments properly. The whole operation is fantastic from that point of view, too. Instead of being lost in the limbo of the Ministry of Pensions and National Insurance, this contribution should have been wiped out.
Regulation 6 deals with the aggregation of payments in separate employ 1228 ments under the same employer. It states that, Payments in any employment shall not be aggregated with payments in any other employment under the same employer if (a) such aggregation is not reasonably practicable because— (i) any of the employments is of a casual nature…". Who will decide whether it is reasonably practicable? The Inland Revenue? The Ministry of Pensions and National Insurance? The Minister? If they cannot do that, what about people in casual employment? This is vague.
Then I come to Regulation 7, which is of incredible complexity. Here those masters of Parliamentary mystification, the Parliamentary draftsmen, have surpassed themselves. Have they ever read the strictures on the Ministry by a young Tory M.P. when in opposition about ten years ago? He was addicted to Parliamentary intercession night after night, and it then rendered him a critical authority—not a very loved one—on Statutory Instruments and Regulations. He said that in making regulations the Ministry must realise that, under powers delegated from this House, it was making the law of the land, and it brought that law into contempt when it made it incomprehensible.
That M.P. is now the Minister of Pensions and National Insurance, and yet he was responsible for inflicting Regulation 7 upon this House. It is so complicated that I think that perhaps he drafted it himself. Yet it is an important Regulation, for it deals with the question of the change-over from weekly to monthly payments. But for length, complexity and obscurity, it is an absolute model of what should be avoided.
In Regulation 9 there is a point which I should like cleared up. It deals with the annual maximum in relation to those who have two employments. They have to be assessed on each, but in aggregate they must not pay more than £13 10s. and anything above that, according to the Act, has to be treated as having been paid in error. That is what the Act says, but it is not what the Regulation says. The Regulation says that it will be treated as paid in error only if it is over £14. I do not know where the Minister gets the power to do that. I am not a 1229 lawyer, but I have sufficient experience of Acts of Parliament and Regulations to want to know where the Minister gets the power to lay down that he will not pay back the excess of the prescribed amount, which is £13 10s.
This applies not only to the person who is ordinarily in two employments and paying through both, but also to a person one of whose employments is contracted-out employment and who is net allowed, or is not supposed, to pay more than a maximum—in other words it must be refunded to him. But it will be refunded to him in excess of £14 only—not in excess of the maximum with which he is credited. The Minister should have a look at the legality of what he is doing here.
Another complexity is disregarded payments. What do we get here in relation to holiday schemes? We find that some are in the scheme and some out. Some profit-sharing bonuses are in, and some are out. Some are out only if two payments are made. Why only two? Perhaps we can have an explanation.
Finally, there is the Minister's power in connection with abnormal payments, and I have already referred to that. Why is there no refund to the employer? Refunds are to be made only to the employee. If they are not made to the employer, are they credited to the benefit of the employee? It would be interesting to know.
Statutory Instrument No. 922 deals with, and builds up the gigantic piece of machinery for the collection of the contributions. There is a dual liability in regard to the contributions—that of the employer and that of the employee—but for the whole administration of collection, or handing over, of accounting or reporting, of recovering and everything else, there is one single liability, and that liability is on the employers—a million of them. They must be wondering what on earth they did to deserve this—and the answer is simple; they voted Tory. This Measure was on the Statute Book at the last election.
F or every single employer this tremendous build up means additional work every week—and not only in relation to those who are in the scheme. It will be seen from the Regulations 1230 that it applies to people outside the scheme as well. Regulation 5 asks for returns of those in non-participating employment, and the Minister takes powers to require an employer at any time to furnish information about those people. There is a comprehensive power to ask for returns and all the rest of it in relation to about 24 million people.
How can it be justified? I was reading an article in a business periodical just the other day, headed: "Is It Worth It?" It is little wonder that they speak of Joe Bloggs, in order to meet whose graduated contributions they have to undertake all this work every week. Then there are these payments to the Inland Revenue, trouble about recovery—and unless they act quickly, if they leave it until time has run into the next year, they will not get any over-payment recovery.
There are the troubles about the pay accounting system. For many people, it means new machinery, for others, the adaptation of their present machinery—a fantastic business. And for those with the more expensive types of pay accounting, it means supplying their own forms—and supplying them in duplicate. That means 5 million extra pieces of paper. There is all this gigantic build up for this miserable pension provision under which Joe Bloggs, aged 40 next year, with a present wage of £12 a week but who, when he is 50, will be earning £15 a week, will get, at age 65, an extra 17s. 6d. on his £2 10s.—less than he would get today under the supplement to National Assistance.
These Regulations and all this work have to be justified. The one thing by which it cannot be justified is the eventual return in the form of pension. It can be justified, and this is the truth, only in relation to the figures I quoted at the start. In collecting £250 million by a discriminatory tax and paying out £15 million, the beneficiary is not the employer and it is not the employee; the beneficiary is the Treasury.

§ The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Miss Patricia Hornsby-Smith)
I welcome the opportunity that the hon. Member for Kilmarnock (Mr. Ross) has given us to discuss these Regulations, but I must confess that during 1231 the course of his speech I could not make up my mind whether he was complaining about their complexity or endeavouring, by his various suggestions, to make them even more complicated than they are in their present form. I accept that they are complicated at first sight, but the hon. Member knows that any pension scheme, with the great variety of methods of payment that are operative in this country, is bound to have its complications.
The two Statutory Instruments, the National Insurance (Assessment of Graduated Contributions) Regulations, 1960, and the National Insurance (Collection of Graduated Contributions) Regulations, 1960, were, as the hon. Gentleman said, laid before Parliament on 1st June and they stem from the National Insurance Act, 1959. I agree with him about the very great importance of these Regulations, which are really the spine of the whole graduated contributions scheme.
These Regulations were referred to the National Insurance Advisory Committee, which includes representatives of employers and employees. As is the normal practice, the Committee made public the broad effect of the Regulations through national and provincial newspapers, through insurance and trade union journals, and to many trade and voluntary organisations. It sent copies of the draft Regulations, with the Press notice, to various interested organisations, including the British Employers' Confederation and the Trades Union Congress. It received and considered the various representations made.
These Regulations have been considered and approved by the National Insurance Advisory Committee, which recommended certain amendments that my right hon. Friend has accepted. In their legal terms I do not dispute the hon. Gentleman's point that the Regulations are complicated. But there will be an explanatory guide for the benefit of employers and others interested, and I hope that tonight's debate will perhaps clear up some of the objections and reservations that have been made. The guide will be available well before the operation of the scheme in April.
First, may I deal with the Assessment Regulations. As the hon. Gentleman 1232 said, in general the scheme applies to employees over the age of 18 who are insured in Class I. Graduated contributions will not, however, be paid for employees over 70–65 for women—or those between 65 and 70 60 and 65 for women—who have retired from regular employment. Employees within the liable age range may, as the hon. Gentleman mentioned, be contracted out as members of an approved occupational scheme.
The rate of 4¼ per cent. as the graduated contribution is laid down in the Act. It is payable on such part of the employee's remuneration paid in any Income Tax week, regardless of when it was earned, as lies between £9 and £15, or between the equivalent amounts for remuneration not paid weekly—in the case of monthly payments, the limits are £39 and £65. The hon. Member appears to want to make it even more complicated.
To make the operation more simple, and to make the scheme tie up with the P.A.Y.E. scheme, graduated contributions will be calculated on pay received when it is received and taken at that point on its own. No adjustment has subsequently to be made.
The hon. Gentleman protested somewhat vigorously about the table of bands of pay on which these contributions are to be assessed. The Regulations provide a scale of graduated contributions payable at different levels of pay at 5s. intervals between £9 and £15. As the hon. Member rightly said, there is provision for employers using pay machinery who cannot apply the contribution tables to permit them to use the alternative method of calculating the exact percentage to the nearest 1d.
In one breath the hon. Member says that the Regulations are too complicated, and in the next breath he complains that there are not enough bands, and that every 1d. or 6d. or 1s. should be taken into account. Does he really suggest that, instead of there being 25 bands of pay which the computers or bookkeepers doing the P.A.Y.E. and the graduated contributions each week will have to deal with, they should do it penny by penny? That would mean 1,440 bands of payment, if my arithmetic is correct. If he really means what he suggested a few minutes ago—a precise calculation down to the last decimal point or farthing— 1233 he is asking for 1,440 bands for the unfortunate computers or bookkeepers to deal with, not 25 5s. bands, as in the scheme for weekly payment.

§ Mr. E. G. Willis (Edinburgh, East)
It is no more difficult if one has the tables.

§ Miss Hornsby-Smith
I suggest that the hon. Member for Kilmarnock was trying to make the Regulations more diffcult rather than less.

§ Mr. Ross
Not at all.

§ Miss Hornsby-Smith
The Regulations provide also, of course, for calculating the graduated contributions on remuneration paid at other than regular weekly intervals, and they enable refunds to be made to employers with more than one employment if their graduated contributions in a tax year amount to £14 or more.

§ Mr. Ross
The hon. Lady said "employers". I think that she meant "employees".

§ Miss Hornsby-Smith
I am obliged. I should have said "employees". The contributions of employers are not refunded.

§ Mr. Ross
Why not?

§ Miss Hornsby-Smith
For the contributions from employers, the position is very similar, if I may say so, to that where, if a person no longer qualifies to pay contributions if he is over 70 and in employment, the contributions still fall to be paid by the employer.

§ Mr. George Lawson (Motherwell)
This is very different. We are dealing there with a basic pension where the Government themselves make a substantial contribution. There is no Government contribution whatever in this case towards the graduated pension. In fact, the Government are taking this money to pay the basic pension. It seems to me to be very unfair that, whereas an employee has his excess contribution returned to him, the employer has no such return. Is that not very unfair?

§ Miss Hornsby-Smith
I accept that this is a difficult point. The fact remains that, since this will, in the main, apply wt ere a man has two separate employers, one would have to decide between them. Where a man has two separate 1234 employers, the result would be that one employer would be making his contribution to the graduated scheme and the other would escape. It would be extremely difficult to adjudicate between two separate employers, but it is right that the employee should pay only the required sum and should be due for a refund if he pays over the £14. It certainly is not justifiable, on the other hand, that one employer should escape his liability for an employee—

§ Mr. Lawson
If a person has two employers, he will be treated, and the employers will be treated, as if that person were working solely with each. If, in fact, the money he is receiving from both employers brings him within the category of those having to pay, then both employers will have to pay their share towards his contribution. Subsequently, the employee can recover what has been paid in excess, but the employers will not recover anything. Is that fair?

§ Miss Hornsby-Smith
This point was debated at length on the Bill, I think. There is the further difficulty which, I am sure, the hon. Member appreciates, that in many cases one employer will not know that the other exists and employs his employee. It is not beyond the knowledge of hon. Members that many people take an alternative job which they do not disclose to their basic or general employer.

§ Mr. G. W. Reynolds (Islington, North)
This is an important point and we should get it clear. In the majority of cases, despite what the right hon. Lady has said, it is known that an employee is employed also by somebody else. At present, with the ordinary flat-rate contribution, an employer knows that somebody else is employing one of his employees because he is paying a lower rate of contribution. In cases where the employer is putting a lower-priced stamp on a man's card because he is not making a deduction from the employee, and particularly in cases where an employee is in a contracted-out scheme in which he is fully covered and the employer with the contracted-out scheme does not have to make a payment every week on behalf of that employee to the State scheme, that employer will make only a flat-rate payment. Why should we penalise the other employer by making 1235 him pay the full amount when the employer with the contracted-out scheme can get away with not doing so?

§ Miss Hornsby-Smith
The employer with the contracted-out scheme will hardly be getting away with anything, because if this scheme is such that permission has been given by the Registrar for it to be contracted out, he will be making contributions comparable to those of the graduated scheme.
These Regulations, however, have been fully considered by N.I.A.C. The difficulties of assessing, as between one employer and another, any such rebate as might arise under the proposal of the hon. Member for Kilmarnock are such that it was considered that where refund would lie to the employee, it would not be returnable to the employer, who would be paying his normal contributions on the wages or salary paid to the employee at the given time, thus placing him in no worse position than any other employer employing any similarly-placed employee.

§ Mr. Ross
Leaving that point aside, can the hon. Lady say to whose benefit the unrefunded portion will go?

§ Miss Hornsby-Smith
It goes into the general fund, the National Insurance Fund, in exactly the same way as the contributions from employers for people in employment over the age of 70 go, equally, into the Insurance Fund.
I quite agree that the Assessment Regulations, by virtue of the fact that they have to cover varying types of remuneration and payments at varying intervals, are somewhat complicated. In criticising, however, the details, which provide for the unusual few—many of the points raised by the hon. Member related to provisions which have been made to meet special, and certainly not universal, cases—we should not overlook the value of the basic provision for the many, which is quite straightforward if the hon. Member resists the temptation to make it sound far more complicated than it is.
If the wage or salary comes under P.A.Y.E., it counts for graduated contribution. In the vast majority of weekly and monthly payments, it will be simply that basic fact that if the wage or salary comes under P.A.Y.E., it counts for graduated contribution and it will be 1236 easily calculated. Experienced trade union Members opposite will not need me to tell them of the many and varied complications of wage structures, with their overtime rates, bonuses, special allowances and the like.
We have gone as far as we thought practicable in making special provision for different types and intervals of payment. Some hon. Members complain that the Regulations are too complicated, but had we included every point of refinement, including some of those for which the hon. Member for Kilmarnock asked, we would have made them still more complicated. That would have led to a system that was unworkable or, at best, haphazard in its operation.
A good deal of the complexity of the Regulations is due to the provision of alternatives to fit employers' pay practices. Holiday pay is an example of this point. People who, perhaps, go from a big contract to another, and who have a stamp system, gradually build up over the period holiday pay drawn at the time. They have several employers, and it would not be possible to draw back from past employers the contributions which would have been paid on that holiday pay. Therefore, in the Regulations, as the hon. Member quite rightly says, an arrangement has been made to meet those rather complicated and individual holiday payment schemes.

§ Mr. Douglas Houghton (Sowerby)
I thank the right hon. Lady for giving way. She has been most obliging through numerous interruptions. Would she leave the complexity of the matter for a moment and deal with the question of this spread of the remuneration to which my hon. Friend referred?

§ Miss Hornsby-Smith
I hope that I shall cover all the points the hon. Member raised.
I have now got to the bonus question, the point of the spread. I think that the hon. Member did less than justice to the National Advisory Committee's comments on bonuses. I am sure that he would agree with me that N.I.A.C. is a very high-powered body. Its chairman and its members go very thoroughly into these matters. While he read out their expression of regret that bonuses could not be spread I noticed that he finished his quotation at the word 1237 "pension." He quoted their regret that the proposed treatment of bonuses and similar payments may result in low contributions, but he left out this very telling sentence: But we recognise the practical difficulties, and in the absence of a workable alternative we are unable to recommend any alteration in the Regulations on this point. That, I think, is a comment which hon. Members on both sides of the House must treat with respect, coming from the source from which it does. I accept that bonus is a very difficult point.
Graduated contribution will be payable on bonus in the week or month in which it is paid. We accept that in some cases this method will mean that the: contributor will pay less in graduated contributions than if his bonus were spread over several wage periods. I ask hon. Members to consider the alternative. Let us suppose, as the hon. Member did, that bonus is paid at the end of the year. We cannot revise the contributions backwards over the 52 weeks in which that bonus was earned, and to spread it over a future employment period would immensely complicate the collection and completely destroy the simplicity of the straight 4¼ per cent. deduction from gross pay as received.
Further, if a man changed his job, he might not want details of his past bonuses to be passed on to ibis present employer, and certainly, if he changed his job, the next employer could not be made liable for the contributions on bonus which had been earned in another employment. I beg hon. Members to consider the very real complications. Sometimes bonus is paid at the end of a particular contract job. If a man goes to another employer and we are to spread all that bonus in order to provide for higher graduated contributions, we are penalising the employer who did not pay that bonus for the contributions in parallel for which he would be liable.
The hon. Member said that he has read the reports on this matter—I am sure he has—of the N.I.A.C., which has gone into it thoroughly. It came to the conclusion that, despite its reservations, there was no workable scheme under which bonuses could be operated other than payment of contributions at the tine the money was received in that 1238 week or month. In general, therefore, the calculations are straightforward based on the pay period and the amount received. I assure the hon. Member there has been a considerable amount of common sense in dealing with these matters, for example, the stamp holiday scheme, and, also, that provision is made for occasional irregularity, the irregular pattern when a man going for a fortnight's holiday receives a three weeks' pay packet on the Friday when he goes.
The Regulations provide that deductions can be made for the three weeks separately, or they can be made under a three-weekly table so that it is balanced out as if he were receiving payment every Friday. There is the problem of Maundy Thursday payment where, technically, there may be two weeks' pay in one tax week, because the payment is made on the Thursday before Good Friday. Here again, common sense comes in and the contribution will be charged on each of the pay packets separately as if they were, in fact, paid in two separate tax weeks.
I hope that I have made these matters clearer than they are in the regulations. Taking the advice that we have received from the N.I.A.C. we have endeavoured to deal with practical problems in a sensible manner. At the same time, we have considered some things which may give rise to anomalies but where, nevertheless, if the anomalies were straightened out, matters would be made so complicated and unworkable that we have thought it desirable to stick to the normal arrangements for contribution in each week or month in which payment is received.
The hon. Member referred to Section 2 (3) of the Act, under which a yearly maximum figure may be prescribed. He raised the question of the sum of £13 10s. as against £14. The £14 is the limit, but he assessed the normal payment as £13 10s. and asked Why there was this discrepancy. There is a 10s gap, but to avoid a refund so unduly small in relation to the expense of arranging it, while, at the same time, ensuring that contributions retained count for benefit, the maximum in the Regulations has been fixed at £14. Therefore, any refundable excess over £13 10s. will always be at least 10s., while amounts between £13 10s. and £14 1239 will be left as they stand in the contribution record and will count for benefit.

§ Mr. Ross
With due respect, that is not the point. There is nothing in the subsection which relates at all to a maximum. It merely states that …where the graduated contributions paid by a person in respect of his remuneration from two or more employments in any income tax year exceed a prescribed amount the excess shall, for certain purposes be treated as contributions of the wrong class paid in error… The prescribed amount is £13 10s. I do not say that what is being done is not common sense, but where is the legislative authority for doing it?

§ Miss Hornsby-Smith
The qualification about refunds is imposed by virtue of Section 75 of the 1946 Act, which enable regulations to make provision for refunds, subject to conditions, or in relation to some but not all cases. The effect, therefore, is that there is no prescribed maximum for those who pay more than £13 10s, but less than £14. The excess in such cases stands as a valid graduated contribution and is not refundable. Had this provision not been made, refunds as low as 1d. would have had to be paid out year by year to people who might have paid a few coppers over the maximum contribution. I assure the hon. Member for Kilmarnock that this matter was studied in great detail and is covered, and I believe that he was kind enough just now to suggest that it was a practical suggestion.
Similarly, there are arrangements, on a commonsense basis, for gratuities and tips, with which we could not otherwise cope, which are not channelled through the employer, who, obviously, cannot be expected to be responsible for contributions on amounts which he has no means of knowing.
There is special provision for certain types of profit-sharing schemes. Representations were made by the Industrial Co-Partnership Association to the Ministry and to the National Insurance Advisory Committee, which recommended a certain adjustment in the draft Regulations, which the Minister accepted. Virtually, it means that special provision has been made for certain types of profit-sharing scheme where disbursements are made through trustees, and such payments are excluded from graduated pay- 1240 ment liability provided, and only provided, that not more than two payments a year are ordinarily made to any one employee in a single tax year.
The hon. Member for Kilmarnock also challenged Regulation 11 and spoke of possible abuses. He suggested that there was no right of appeal against the Minister's decision. I am happy to be able to correct him because there is a right of appeal to the High Court on points of law under the general Insurance Act.

§ Mr. Ross
Only on points of law?

§ Miss Hornsby-Smith
I am sorry, on points of law about contribution questions. I thank the hon. Member for his interjection which gave me an opportunity to correct a slip of the tongue.
The whole intention of the scheme is that the additional work involved in collection should be kept to a minimum. That is why it has been arranged through the machinery of P.A.Y.E. It has been made easier by the fact that all employees over 18 years of age will be assessed on the same graduated tables and there is no variation for age, or sex, or for those under or over 21. Therefore, it is a straightforward collection from all those between the ages of 18 and 70, or 65 for those who have retired.
The arrangements are such that the additional work for employers is kept to a minimum. There is only one extra column on the P.A.Y.E. deduction card, a column for recording the employee's share of the graduated contribution. The employer's share is precisely the same figure and the employer will pay over the money monthly to the collector of taxes, along with the tax deducted from the employee's pay, and show graduated contributions on the same end-of-year returns as the tax.
The graduated contribution entered on the P.A.Y.E. card, together with the employer's equivalent contribution, will be sent to the Inland Revenue, who will act as the Ministry's agent. The contribution so entered on the card will be recorded by the Ministry at Newcastle.
Because there has been some criticism about the expense involved, I should like briefly to refer to the manner in which the computer for this vast scheme will operate, and to the vast amount of information with which it will deal. The largest, and I think a unique, type of 1241 computer is being installed at Newcastle. It will be capable of recording the contributions made by every contributor during the year. For the scientifically minded, it consists of about 130 miles of magnetic tape. Its capacity is such that it will be able to search through these 130 miles of tape to discover the contributions made by any person during the year.

§ Mr. Lawson
It is very interesting to hear about this machine, but some of us have points to raise to which we would like answers. If the right hon. Lady speaks until half-past eleven about the type of machinery being installed at Newcastle, we shall be denied the opportunity of putting those points.

§ Miss Hornsby-Smith
I should have thought that if the hon. Gentleman wanted me to answer questions he would have jumped at the long opportunity I gave hon. Members before I started speaking, because I was anxious that all the questions should be asked before I rose to reply. There has been criticism of the mountains of work that this will entail, and I think that it is only fair to point out that we will be using the most modern machinery to carry out the work. This up-to-date machinery will enable us to cut down the number of people required to carry out the scheme.
The hon. Gentleman was critical about the graduated scheme generally, the vast amount of money to be collected, and the benefit to be drawn from it. The point he ignored was that the graduated pension scheme cannot be looked at in isolation. Concentration of the Exchequer supplement on the lower level of earnings makes it possible to reduce the minimum contributions for standard benefits, a policy with which I do not think any hon. Gentleman will disagree.
As a corollary of this process, there will be a gradual withdrawal of Exchequer supplement as earnings increase, so that for the individual contributor with earnings above £9 a week the return on the graduated contributions in isolation cannot be as good as the return on the minimum. I do not think that we must ignore the total contribution paid, and the total benefit received, by the combination of the flat rate scheme and the graduated scheme.
What is important—and certainly no one would have recognised it from the 1242 speech made by the hon. Member for Kilmarnock—is that for his own personal contributions, excluding those of his employer, every contributor, of whatever age, will get an excellent return. That is a fact which no hon. Gentleman can produce evidence to refute. In any case, the concept of an actuarial contribution for a young entrant of 16 or 18, paid through life until 65 to give him a specified and static rate of benefit, is hardly relevant in relation to a State scheme with improving standards. Rates of benefit do not remain static, and all existing contributors, and all pensioners, automatically gain by the fact that the pension rates do not remain static.

§ Mr. Reynolds
On a point of order, Mr. Speaker. I can find nothing about benefits in the Regulations. Is it in order, on this Prayer, to discuss the benefits in the scheme?

§ Mr. Speaker
I was listening to the right hon. Lady because I did not know if she was answering some points which had been made in my absence. I confess to a doubt at the moment. No doubt the right hon. Lady will bear the matter in mind.

§ Mr. Lawson
Further to that point of order, Mr. Speaker. As the Act from which these Regulations arise specifically makes no provision for raising benefits, although it makes provision for raising contributions, is the right hon. Lady not misleading the House by talking of benefits not being static when, in fact, they are static and require a new Act of Parliament to raise them?

§ Mr. Speaker
Time is short. I think that hon. Members should be careful not to raise points of order which are not points of order.

§ Miss Hornsby-Smith
I should be le-lighted to answer the hon. Member for Motherwell (Mr. Lawson), but, Mr. Speaker, I think that you were perfectly right in the advice you gave. We are going wide of the calculation of the assessment. I was led into the comments I made by the downright denunciation by the hon. Member for Kilmarnock of the benefits accruing from the scheme. It was to his comments that I was endeavouring to reply.
As I have no desire to prevent hon. Members from making other points, as now, apparently, they are proposing to do 1243 —though I waited after the hon. Member for Kilmarnock had spoken in order to give them an opportunity to do so then—I will conclude by saying that I believe that these Regulations have been fully and thoroughly considered by the N.I.A.C. They were certainly carefully thought out before they were laid before the House. I believe that in their application they have been so planned as to provide for the anomalies inherent in our wage structure and, at the same time they are tempered with basic common sense. We believe that we have made the scheme as simple as possible, and we have done our best to make the collection as easy as possible for employers by linking it to the P.A.Y.E. scheme. I hope, therefore, that the House will not divide on this issue.

§ Mr. George Lawson (Motherwell)
Hon. Members on this side of the House are in the difficulty, in dealing with these Regulations, that they desire to see a good P.A.Y.E. or graduated pension scheme, which is something we brought forward a number of years ago. The good thing—it seems to me the only good thing—about the Regulations and the scheme of which they are part is that they lay down a basis on which something worth while may be built in the future. It might be said that some of the difficulties of developing a properly graduated pension scheme may be overcome on the basis of these Regulations, and in that sense we support them. But they are part of a scheme which is unfair and does not produce a graduated pension scheme which would be worth while for the contributor. Its primary purpose is the transferring from the Exchequer to the contributor the burden of the emerging deficit on the old-age pensions.
The right hon. Lady cannot, therefore, expect us to welcome the Regulations. We want to see regulations work out fairly so that on these things can be built something which is worth while. But we cannot look at what is behind the existing Regulations as other than an unfair scheme. Wherever there are difficulties the Government seem to have acted on the basis of unfairness. There was the difficulty about dealing with holiday payments, for example, where a person has a holiday payment in the 1244 sense that in one week his wages from a single employer are doubled. That double amount is treated as the earnings for a week and he is charged on that basis. If his wages amount to £7, for example, and in a holiday week he is paid £14, he is treated as having earned £14 in that week.

§ Miss Hornsby-Smith
I went to great pains to explain to the hon. Member that provision was made in the Regulations for holiday payments, and I gave an example on a three-week basis. If someone drew three weeks' pay for his holidays that amount would be staggered over the three weeks as general holiday payments.

§ Mr. Lawson
There is a difficulty where a man is employed by several employers over the year. These holiday payments are then left out altogether.

§ Sir S. Summers
I am sorry that I missed the early part of the hon. Member's speech. I hope that he will excuse me, but I had other discussions to attend. If an employee asks his employer to provide him with three weeks' money to enable him to live during his holiday, when he has no pay packets to collect, that is treated as if it had been paid over the three weeks. The illustration which the hon. Member gave was surely contrary to the facts.

§ Mr. Lawson
But it does not work in other cases, where there are difficulties. The hon. Member for Aylesbury (Sir S. Summers), in Committee, drew attention to these difficulties. They are overcome by leaving the payment out altogether. In some cases, in which we want contributions to be paid to enable a man to build up his benefits, the scheme is so drawn that he does not pay them; or alternatively, he pays through the nose for benefits which are not commensurate with the contribution. In some cases we are seeking means by which a man can escape from paying a contribution.
There is also the treatment of bonus shares and other shares. For example, I.C.I. gives its employees, over a period, shares in the business. It is a common practice for many people to sell them and to treat them as income, but under the scheme they are not treated as income and they are left out altogether. 1245 There is unfairness to many people under the scheme.
A vast machine is being built up when in some cases the benefits to be paid art triflng. The whole of this business is fantastic. For example, a person earning between £9 0s. 1d. and £9 5s. will pay 1d. a week and on this basis will take thirty-four years' steady contributions to earn a 6d. addition to his pension.

§ Miss Hornsby-Smith
Does the hon. Member suggest that anybody will have his wages static at £9 a week for thirty-four years?

§ Mr. Lawson
There will be people just above the £9 rate, sometimes in the scheme and sometimes out of it. Sometimes they will have to pay a contribution and sometimes they will not. Many people are earning less than £9 a week. Sometimes, because of a bonus, they will receive more than £9 and will have to contribute. Provision is made to take 1d a week. If a person earns £9 5s. a week, he will have to pay for eight and a half years to earn an additional 6d. for his pension. Moreover, there is provision in the Bill for raising the price of a 6d. addition to the pension. It will be increased by 23 per cent. These figures will, therefore, be out of date in a short time.
Wherever there is a difficulty, equity suffers in the scheme, in the interests of simplicity, although the procedure is nevertheless so complicated that even the right hon. Lady found it difficult to explain what these Regulations would do.

§ Mr. G. W. Reynolds (Islington, North)
We were told in the White Paper presenting the Act What the contributions were to be, but in some cases the Regulations provide for a contribution of 20per cent. in excess of what we were told. I presume that the income which is to go into the scheme will be considerably greater than was estimated at the time.