HC Deb 06 February 1963 vol 671 cc485-94
Sir Spencer Summers (Aylesbury)

I beg to move, in page 8, line 28, column 3, to leave out "8s. 8½d." and insert "8s. 2½d.".

The Temporary Chairman (Mr. F. Blackburn)

It will be convenient to discuss with this Amendment the Amendments in page 8, line 30, column 3, to leave out "4s. 8½d." and insert "4s. 5½d.", in page 9, line 21, column 3, to leave out "8s. 8½d." and insert "8s. 2½d.", and in page 9, line 24, column 3, to leave out "12s. 8½d." and insert "11s. 11½d.".

Sir S. Summers

I hope that the extent to which my right hon. Friend the Minister has shown good will to the previous proposed new Clause does not mean that he has exhausted the supply that he has brought with him for today when he replies to this Amendment.

The Amendment is designed to reduce the contribution from women who are contracted out of the graduated pension scheme. If my right hon Friend does not feel justified in varying the figures in the Bill for women only, I for one have no objection if he says that he will do something for the men in addition. I should perhaps explain why I have sought to vary only the figures relating to women.

I am sure that hon. Members will be familiar with the reason why the contributions of those who are contracted out exceed the contributions of those in the scheme. We are told that the amount of excess paid by those contracted out is a measure of the loss to the Fund of that contribution which exceeds the contribution necessary to provide the graduated benefit. When the former figures were established under the 1961 Act, there was an increase for men of 1s. 7d. a week and an increase for women of 10d. a week over and above the contribution paid by the flat rate contributors in the scheme.

5.45 p.m.

We had quoted yesterday the extent to which men's earnings have gone up since former days. I use that phrase advisedly because the Minister chooses to take the period of three years, when the growth was about£3 a week, and I have chosen to take the period of two years, when it was about£1 a week. But even if we take the period which the Minister considers is more reasonable, the increase in respect of women, far from being£3 a week, is only£1 7s.

It has been confirmed that not only are the earnings of women about half of those of men, but that the rate of growth has kept pace more or less in the same fashion and is also about half. That means that if the same addition over and above the flat rate contributions demanded from women is the same as that demanded from men, women would find it very much more difficult to meet it because their earnings have not increased at the same rate as those of men.

Under the figures in the Bill, a man who is contracted out is required to pay an additional 10d. and a woman who is contracted out is required to pay an additional 8d. My reason therefore for seeking to reduce the additional burden placed by the Bill on contracted-out women is to get a little closer to fairness as between one and the other. The effect of amending the figures in the Schedule on the lines suggested in the Amendment would be to reduce the increase in the contribution paid by contracted-out women from 8d. to 2d. They would, therefore, still acknowledge the principle that they are contributing something over above flat-rate contributions because they are contracted out. However, the relief would be significant, and, keeping the principle of producing like contributions from employee and employer, I have sought to adjust the figures in such a way that 1s. a side extra will be paid instead of 1s. 6d. a side, as is proposed in the Bill.

The other figures in the Amendment are consequential, and I do not think I need detain the Committee by elaborating them. Very few people understand these additional burdens, and they cause a certain amount of resentment, particularly when it is thought that the benefits of the scheme from which they have been contracted out will not improve just because we make changes in the House of Commons. They tend to say, "Why should I pay more when the scheme from which I hope one day to draw benefits does not improve? Just because other people choose to alter their circumstances, why should I contribute more since my circumstances have not altered?" It is with that in mind that I have sought to minimise the impact of the Bill on women, and I hope that I have said enough to indicate—

Mr. John McKay (Wallsend)

Is the hon. Gentleman speaking on behalf of women who earn more than£9? If so, he is speaking of a very small percentage of women. What he proposes will not affect the general situation very much. When one analyses the position as it affects women, the hon. Gentleman must agree that, although they may get a little extra in benefits, they are not getting more than half the wages of men.

Sir S. Summers

It does not at all follow that the women who are now being asked to pay an additional 8d. will get something like half wages. If there are a very few concerned, as the hon. Gentleman seemed to indicate, it will make it very much easier for the Minister to accept the Amendment because the effect on the Treasury will be correspondingly small. To that extent I am grateful for the intervention.

I do not wish to delay the Committee unreasonably. I think I have expressed myself fairly clearly on this point, and I look forward to hearing that the Minister can do something to alleviate the concern of the people who are affected by the scheme.

Mr. N. Macpherson

The case put forward by my hon. Friend the Member for Aylesbury (Sir S. Summers) certainly sounds persuasive in the way in which he has put it forward, but there are one or two factors which ought to be borne in mind and which I feel I should put forward from a rather different point of view.

The first point is surely this. There are also the women earning more than£9 a week who are not contracted out. They make a contribution proportionate to their earnings. Those who are contracted out pay a flat-rate contribution, and the general idea of the flat-rate contribution is that it should make the same overall contribution to the flat-rate benefits as the contribution that is made by those who are not contracted out—those who are in the graduated scheme.

One of the fallacies in my hon. Friend's argument is that he has quoted the average earnings of women, but it does not by any means follow that the average earnings of women who are contracted out have only moved by the same amount as the average earnings of all women have moved. One expects that those who are contracted out would tend to be in the higher brackets. I know that that is not invariably so, but even if that were not so there is another consideration to be borne in mind.

According to my hon. Friend, these women say, "I am receiving nothing more in benefits. Why should I make an additional contribution?". That, of course, applies to all contracted-out people. But it is not true, because they are all receiving additional benefits. They are all receiving the additional flat-rate benefits. As the House well knows, the additional flat-rate contributions do not pay for the additional flat-rate benefits. There has to be supplementation from elsewhere, and that supplementation comes from the contracted-out scheme and from the graduated pension scheme.

I do not think it is unreasonable to expect that women should make an appropriate contribution as well as men. As my hon. Friend said, when the scheme was first devised women were called upon to make a much smaller contracted-out contribution than men—10d. as against Is. 7d. Under the proposals now before the Committee, their total National Insurance contributions will go up from 7s. 1½d. to 8s. 8½d., whereas the totals for men go up from 8s. 10½d. to 10s. 8½d.—by 1s. 10d. It is proposed that the women's total should go up by only 1s. 7d., so they are still in a favoured position in comparison with men. I do not think they ought to be placed in a more favoured position than that.

After all, everybody contributes under the graduated pension scheme in accordance with their earnings—men as well as women. While it may be true that proportionately to the total working force of men, there are more earning, say, over£18 and more earning over£9 than there are among women, nevertheless there should be a reasonable balance between the contracted-out contributions for men and for women. I do not think this is an unreasonable balance that has now been decided upon, and I am afraid that I cannot see my way to accepting my hon. Friend's Amendment.

I hope my hon. Friend will agree with me that, on the one hand, in principle it is not right to exempt those who are contracted out from making a reasonable contribution to the general flat-rate benefits, and, on the other hand, that when we are dealing with a graduated scheme of this sort it is not unreasonable that everybody's contribution should be much the same, irrespective of their sex.

Mr. Houghton

What the hon. Member for Aylesbury (Sir S. Summers) is doing, as I am sure he well knows, is to reopen the box of tricks which contains the complicated finances of the National Insurance Scheme, and in particular the relationship between the graduated scheme and the flat-rate scheme.

One of the most difficult things to explain to people who have been contracted out is why they have to pay more in flat-rate contribution than those who have not been contracted out. Under the proposals in this Bill the man who has been contracted out will, I think, pay 2s. 5d. a week more in flat-rate contributions than the man who is within the graduated scheme, and a woman will have to pay Is. 6d. more if she has contracted out than a woman who is within the graduated scheme.

Scores of people in this position have written to me saying, "Why is this? Why do we have to pay more for the same benefits than those who are within the graduated scheme?" Some time ago I asked the right hon. Gentleman's predecessor to make a statement which might be used for the enlightenment of those who are anxious to solve this mystery. It only made confusion worse confounded, and I was thrown back once more on to my own amateur attempts to explain how this comes about.

I put it this way: since the graduated contribution is raided by the Minister to help him finance the flat-rate scheme, it follows that if one does not pay graduated contributions one cannot be raided. Therefore, to make sure that people do not get off scot free, he imposes this extra tax on them. That seems to me to be the simple explanation of the matter. The 2s. 5d. more and the 1s. 6d. more in fiat-rate contributions respectively for men and for women who have been contracted out is the measure of tribute which the Minister exacts from them because he cannot lay his hands on their graduated contributions. There it is in a nutshell.

As for the Amendment, this financial arrangement is really nothing to do with the relative earnings of men and women or the comparative rate at which the earnings of men and women have gone up. It has to do with the balance of finance in the contributions as related to the flat-rate benefits.

I therefore hope that the hon. Member, who is very sophisticated in these matters, may like to join with me at this moment in closing the lid on the box of tricks. Perhaps one day we will open it again and have a real good go.

Amendment negatived.

Question proposed, That this be the First Schedule to the Bill.

6.0 p.m.

Mr. Houghton

I should like to make a very brief comment on this Schedule. It so happens that the Schedule dealing with the contributions comes before the Schedule dealing with the benefits. I mention that because shortly I shall be moving some Amendments for the improvement of benefits. I cannot help it that we are putting the cart before the horse. I enter a caveat against anyone saying, "Ah, we have passed the First Schedule, which deals with contributions, so what is the good of coming along now with proposals for improving the benefits? You should have said something about it when dealing with the contributions." I hope that I have silenced that critic if he is present in the Committee.

The second point is this, that these new flat-rate contributions are, I think, a convincing warning that the Minister is really reaching the limits of the use of the flat-rate contribution for financing this scheme. He must realise, I am sure, that he has become the captive of the flat-rate contribution. I shall not enlarge on this point; it may emerge in the course of my remarks later; but it is quite obvious that so long as we retain the flat-rate contribution there will be limits to what the Minister can do in improving benefits—so long as he continues this method of financing them.

I do not say that, with the rise in incomes, in wages and earnings, we have reached the absolute limit. I have heard it said a number of times before that flat-rate contribution has gone as high as it can. Well, we have found it has not gone as high as it can. It has gone up several times since then, and here we are again, and I do not deny that the Minister may find it possible still to raise the flat- rate contribution, but he will not be able to use it to the extent necessary to provide the finance which the modern concept of social security demands and that will be the inhibiting factor in the Minister's thinking out the future of the National Insurance Scheme.

Later, I shall probably ask him, "Which did he think of first, the benefits or contributions?" Did he say, "You have to cut your coat according to your cloth and you cannot put up contributions beyond this point"? Or did he think of the benefits and include them in the Bill, and say, "Now how do we pay for them?" I do not know which he did. Probably he will say he thought of both together and brought them nicely into balance, symmetrically and scientifically and all the rest of it.

But there must be a starting point in these matters. When we are thinking about National Insurance we must think of something before we think of something else, and on the whole it is the benefits we think of first. I would, at any rate.

Sir S. Summers

I should like the hon. Gentleman to make clear, apropos his opening remarks, whether he is now seeking to open the door for the flat-rate contribution to enable the Minister to meet all the demands or whether he regards the door as slammed so that some other method must be advanced to finance the benefits he seeks to increase.

Mr. Houghton

No. I am being absolutely neutral on the Schedule at the moment.

It is not how we would do it. I am just giving a warning, just drawing the attention of the Committee and of all concerned to the fact that fiat-rate contributions are going up once again and that that raises once more the whole question whether the flat-rate principle shall be retained at least for the purpose of contributions.

I made sonic remarks yesterday about this being a form of taxation. The Minister said, "Yes," but with this qualification, that this is a form of taxation directly related to benefits of citizenship. He said that there is a strict relationship between contributions and benefits, which, of course, is true, but what I am saying is that I think that this Schedule points obviously to the limits on the use of the flat-rate contribution for the purpose of improving the benefits. That, in fact, is proved even in the Bill, because this Schedule alone does not give the Minister what he wants. He has had to extend the span of income to be brought within the graduated scheme from£15 to£18 in order to give him another£48 million to throw into the general funds to finance graduated benefits and the rates of benefits provided in the Second Schedule.

Mr. B. Taylor

I do not want to argue the merits or demerits of a flat-mate contribution at this stage, but while we are on the question of contributions as set out in this Schedule I Should like to draw the attention of the Minister to the size of the contribution for self-employed people. I know that compared with the total number of contributors they are a small group—1 million or 2 million; I do not know the figure exactly now. However, in addition to the smallness of their number they are, so to speak, a mixed bag. They embrace Members of Parliament, for instance, ministers of religion, shopkeepers.

It is towards this section of the community that I want to draw the attention of the Minister. When he is thinking in terms of contributions I hope that he will pay some attention to this section. There are many shopkeepers who have very small businesses in the side streets of some of our towns and cities, and their turnover may be very small and their profits may be accordingly small. It is the fact that by these proposals we are levying a contribution from upon the self-employed, of whom those people form a part, of 16s. 2d. a week. I think that is the correct figure.

I just want to draw the Minister's attention to that and to put in a plea for them, since this wild fall very heavily on the people in the self-employed class.

Mr. N. Macpherson

In response to the hon. Gentleman the Member for Mansfield (Mr. B. Taylor), I should like to make it quite clear that we did give very careful consideration to the contribution of the self-employed person. We do very fully appreciate that among the self-employed are many people whose profits or earnings are rather low, and that is why the contribution is as low as it is. After all, the self-employed person has got to do duty both for employer and employee, and he receives full insurance cover except in respect of unemployment benefit; and unemployment benefit does not absorb a very great proportion—I think a matter of about 5 per cent. in the normal way—of the total expenditure of the National Insurance Fund.

When we take that into account I really do not think that the contribution of the self-employed is unduly high. For the smaller income people, of course, the benefits which are gained by their contributions are all-important, and compared with the benefits which are gained I do not think that it can be said that this contribution is too high. I can assure the hon. Member that we did give the most careful consideration to that aspect of the matter.

Question put and agreed to.

Schedule agreed to.