HC Deb 26 February 1968 vol 759 cc954-1043

4.0 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

I beg to move Amendment No. 2, in page 1, line 7, to leave out ' (in place of ' and insert: ' for increased employers' contributions (in addition to'.

The Chairman

It would be convenient if at the same time we discussed Amendment No. 12, Schedule 1, page 6, leave out lines 1 to 40;

Amendment No. 31, Schedule 1, page 7, leave out lines 33 to 46;

Amendment No. 32, Schedule 1, page 8, leave out lines 1 to 11;

Amendment No. 15, Schedule 1, page 6, line 22, column 2, leave out 12 8' and insert 12 2 ';

Amendment No. 18, Schedule 1, page 6, line 22, column 3, leave out 15 1 ' and insert 14 7 ';

Amendment No. 22, Schedule 1, page 6, line 29, column 2, leave out 11 0 ' and insert 10 6 ';

Amendment No. 23, Schedule 1, page 6, line 29, column 3, leave out 12 6 ' and insert 12 0 ';

Amendment No. 25, Schedule 1, page 7, line 16, column 2, leave out 14 1 ' and insert 14 7 ';

Amendment No. 28, Schedule 1, page 7, line 16, column 3, leave out 16 6 ' and insert 17 0 ';

Amendment No. 71, Schedule 1, page 7, columns 2 and 3, leave out line 19 and insert:

| 1 0 2 | 1 3 9

Amendment No. 29, Schedule 1, page 7, line 23, column 2, leave out 19 4 ' and insert 1 0 2 ';

Amendment No. 30, Schedule 1, page 7, line 23, column 3, leave out 1 2 11 ' and insert 1 3 9 ';

Amendment No. 16, Schedule 1, page 6, columns 2 and 3, leave out lines 22 to 31 and insert:

£ s. d. £ s. d.
0 12 5½ 0 14 10½
0 7 3½ 0 8 5½
0 10 9½ 0 12 3½
0 6 1 0 6 11

Amendment No. 26, Schedule 1, page 7, columns 2 and 3, leave out lines 16 to 26 and insert:

£ s. d. £ s. d.
0 14 9 0 17 2
0 19 6 1 3 6
0 12 11 0 14 5
0 17 8 0 19 9½

Amendment No 17, Schedule 1, page 6, columns 2 and 3, leave out lines 22 to 33 and insert:

£ s. d. £ s. d.
0 12 1½ 0 14 6½
0 7 0½ 0 8 3½
0 10 6½ 0 12 0½
0 6 0½ 0 6 9½
0 8 3½ —
0 6 9½ —
and Amendment No. 27, Schedule 1, page 7, columns 2 and 3, leave out lines 16 to 28 and insert:
£ s. d. £ s. d.
0 15 1 0 17 6
1 0 2 1 3 9
0 13 2 0 14 8
0 17 10 1 0 1
0 10 1 —
0 8 4 —

As I have indicated, it will be possible, if desired, for there to be separate divisions, not only on Amendment No. 2, but on Amendments Nos. 15, 16 and 17.

Mr. Heffer

I wish to direct my remarks particularly to Amendments Nos. 2, 17 and 27. It is possible that some of the points which I make in support of the Amendments will overlap. I therefore ask your indulgence, Sir Eric, if I should move from one Amendment to another. It is, however, the principle with which we are concerned.

The object of the Amendments is basically to place the additional contributions on the shoulders of employers and not of employees. The Bill makes a combined contribution of 1s. a week for the employee and 6d. for the employer. My hon. Friends and I who have put down our Amendments take the view that that is wrong because it places a totally unnecessary and intolerable burden upon the lower income groups. In addition, it reverses the trend which we have seen operating since the Labour Government came into office in 1964.

Therefore, we believe that if it is essential to raise £50 million a year to overcome the deficit—and incidentally, on reading the Report of the Government Actuary, we find that six months ago the view was expressed that sufficient money would be coming in to meet the increased benefit, whereas six months afterwards we find that there will be a deficit of £75 million. It appears that someone cannot add up the figures.

Nevertheless, we are told that we must raise £50 million a year. We say that if we have to raise that amount in extra contributions, the extra money should come totally or almost totally from employers and not from workers, and certainly not from the lower income groups. That is what we seek to provide in our Amendments.

Unless it is amended, the Bill will reverse the trend which has started during the period of office of the Labour Government. We find, for example, that on 3rd June, 1963, the employee's contribution was 11s. 8d. per week and that of the employer 9s. 8d. In other words, the worker paid 2s. a week more contribution than the employer. On 29th March, 1965, however, after the Labour Government had come into office, the gap was beginning to be narrowed; the contribution of the employee was 13s. 8d. but the employer's contribution rose to 12s. 11d.

Again, on 30th October, 1967, the contribution from the employee was 15s. 8d. and the contribution from the employer was 15s. 2d. a week. The gap was, therefore, narrowing and we had reached the position that the employee was paying only 6d. a week more than the employer. Unfortunately, the stage was never reached where the employer was paying more than the employee. Nevertheless, the gap was narrowing.

In the Government's proposals which are now before the House, we find that the gap is reverting to what it was before. The contribution of the employee is to be 16s. 8d. and that of the employer 15s. 8d., an increase of from 6d. to 1s. in the gap to the disadvantage of the employee. We believe that this is wrong. In present conditions, with increased rents, increased prices of many commodities, increased local bus fares and the like, this is an intolerable burden which should not be placed upon the working people.

Mr. Frank Allaun (Salford, East)

I agree with the point which my hon. Friend is making, but has he not overlooked something which strengthens his case: that there has been a 5s. increase on the stamp for all workers, including low-paid workers such as engineering, railway and building labourers, who take home about £11 a week?

Mr. Heffer

Since when?

Mr. Allaun

Since 1964.

Mr. Heffer

I was coming to that. In the case of the two previous extra contributions which had to be paid by the workers, extra benefits were given. On this occasion, no extra benefit is being paid out. As far as I can ascertain from searching the history of contributions, this is the first time that there have been extra contributions without any extra benefit accruing to those who pay the contributions. This, therefore, is fundamentally wrong. In putting forward our Amendments we wish that position to be changed.

By our Amendment No. 17, we suggest that the Schedule 1 contribution for an employed person should be reduced from 12s. 8d. to 12s. 1½d. and from 15s. 1d. to 14s. 6½d. with corresponding reductions throughout for other employed persons. We are not suggesting that the self-employed should have a reduction. That category covers us as Members of Parliament. We would be paying the increased contribution, as would be the employer, although, incidentally, this might unfortunately have a bad effect on certain self-employed persons who were not earning very much money. In the main, however, this will not hit most people who are self-employed, and the object is to reduce the contribution of the employed person.

Amendment No. 27 would increase the employer's rate of contribution from 14s. 1d. to 15s. 1d. and from 16s. 6d. to 17s. 6d., with increased contributions throughout. I need not detail them all.

That is the object of the Amendments. We have worked them out as far as possible to make certain that the full contribution is placed where it should be placed: on the shoulders of the employer. I know that the argument will be used that if we put the full contribution upon the employer, that will increase the costs of goods and put up our export prices and that this would be a terrible burden for employers to bear. I would like to tell the Committee from experience what happens in other countries about these sorts of contributions. One has only to look at agreements which are reached between trade unions and employers in most—indeed, I would say, nowadays, probably in all—of the basic industries in the United States of America to find that the contributions for meeting insurance, health, pensions benefits come totally from the employers. For the workers these are non-contributory. So it is no good saying, "This is a terrible burden for our employers", because other employers in other counntries, the United States and many countries in Europe, bear the full brunt of the contributions for these benefits.

Really the answer to this is that if the employers feel it such a burden, if we place this extra burden on to their shoulders, they should start doing something about modernising their industries in order to get greater productivity so that they can meet these extra costs. In the United States, in particular, when there are increased wages and increased contributions for the various social benefits, the employer usually reacts by increasing productivity by introducing new machines, new methods of production, and so on. These increases are a spur to productivity. I suggest that this is something we could also do in this country.

Sir Cyril Osborne (Louth)

If this argument is taken to the extreme and employers are made to rationalise to that degree there could be mergers, as between G.E.C. and A.E.I., and there could be factories closed, so creating other social problems. The price for efficiency can be too high in social terms.

Mr. Heffer

Well, the hon. Gentleman is extending the argument a little far, and on to policy. I am quite certain, on the basis of experience in other countries, that we can have much greater efficiency, and that this can act as a spur to efficiency. I base myself on experience in the United States particularly, and personal experience I had in visiting the United States and seeing the position there.

I want to conclude by saying that I hope whoever of my hon. and right hon. Friends replies to the debate on this Amendment will say that the Government will accept these Amendments in their entirety. If they are not prepared to accept the Amendments I personally would certainly do my best to persuade as many as I can of my hon. Friends to go through the Lobby in order to vote that the extra contributions should be met by the employers and not by the employees as proposed in the Bill at present.

Mr. J. J. Mendelson (Penistone)

In supporting this Amendment I wish to confine myself to three points only, because this debate would not be served by being lengthened by repetition, and my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) has already made the main case for this set of Amendments. My three points are these.

4.15 p.m.

First of all there is the question of policy behind the arrangements the Government have put into the Bill. This was referred to very sharply and very clearly by my right hon. Friend's predecessor in her office as Minister of Social Security. My right hon. Friend the Member for Lanarkshire, North (Miss Herbison), in the debate on Second Reading, interrupted my right hon. Friend the First Secretary when he replied to the debate and after he had made the point that he accepted a great deal of the criticism which had been made of the way these contributions were arranged. I quote what he said, because it gives meaning to the intervention of my right hon. Friend the Member for Lanarkshire, North. He said: A major part of the argument about Clause 1 was the suggestion that this was a poll tax. I do not dispute that. I do not dispute that that is a serious objection. One can consider the alternative of making increases in the graduated rather than the flat-rate contribution. Referring to that point my right hon. Friend the Member for Lanarkshire, North, said: Before that point is left, I understand that my right hon. Friend says that there would be a great many complaints if there were a graduated contribution, but what consideration has been given to putting the heavier part of it, if not the whole 1s. 6d., on the employers of this country, rather than another Is. on the workers? "—[OFFICIAL REPORT, 20th February, 1968; Vol. 759, c. 356.] That intervention had the full weight and responsibility of my right hon. Friend who had given such distinguished service in the office of Minister of Social Security. The question therefore arises whether this is not the key to the present dispute. Given the fact that the Government were not ready at this moment—I will leave that on one side for the present moment—the Government were not ready, for whatever reasons, to introduce our major new scheme which we put to the country in the General Election, and which we all hope the Government will put to Parliament one day, and the sooner the better—given that that is not being done at the present moment by the Government—what was the reply which the First Secretary, on behalf of the Government, gave to my right hon. Friend? This was his reply: I accept that. Sharing was considered, but we have to weigh up the effects of such a measure on industrial costs, when the increase of our exports is a major matter of policy. I shall take up this point about low-paid workers a little later on, if my hon. Friends will be patient."—[OFFICIAL REPORT, 20th February, 1968; Vol. 759, c. 356.] I do not believe that my right hon. Friend the former Minister of Social Security was not aware, when she made her point in that intervention, that that was one of the factors to be considered. I suspect she must have been aware of it on previous occasions when this matter was considered in advance in the Government when she was still in office; she was not unaware that this point about costs was one of the factors; but she obviously was not persuaded that this was a sufficient reason for putting this additional considerable burden on the workers and not on the employers. I think, therefore, that it will be of considerable interest to members of the trade union movement and members of the Labour Party in the country that my right hon. Friend, who is a member of the National Executive, and has been one of the trusted leaders of the movement over many years, found it impossible to accept that point and, as a result, found it quite impossible to support the Government in the Lobby at the end of the Second Reading debate. I find it strange that others of my hon. and right hon. Friends in the Government with the same antecedents find acceptable what my right hon. Friend the Member for Lanarkshire, North does not find acceptable.

My second point concerns the argument used by my right hon. Friend the First Secretary in reply to that intervention. It is a traditional argument which we heard many times from the previous Administration when we were sitting on the other side of the Committee. Nothing is easier than for the Financial Times or the C.B.I. to produce the blanket argument that nothing extra can be put on the employers' contribution because it would increase costs. I think that my hon. Friend the Member for Walton dealt excellently with that point.

In addition, we are now in a situation where burdens are being concentrated on the shoulders of the lower-paid workers in a number of different ways, and the first matter which many of us raised when the Prime Minister announced the measures that he envisaged after devaluation was our concern for the eight million lower-paid workers. That is felt by all hon. Members on this side of the Committee, and those of us who are particularly interested in these Amendments have no monopoly of concern in this matter.

When it comes to the test of Government policy, it is obvious that many measures will flow from the Letter of Intent and from the policy which the Government are pursuing, and they will hit the lower-paid worker specially hard. Prescription charges will be of no great consequence to people at higher income levels, and the argument which has been heard whenever the subject has come up is that there will be exemptions. However, unless the Government produce an entirely new category it will not be possible to exempt lower-paid workers, since they are in full employment.

This is a point of capital importance. Those people cannot be exempted, and, even if the Government were to introduce a new category which exempted several million workers in full employment, it is hard to see who would be left to pay prescription charges. I would welcome such a move, but it would be a new departure, and I do not expect that the Government will do it.

This is an additional shilling on the poll tax. With his usual fairness in debate, my right hon. Friend the First Secretary admitted that it is a poll tax, and he repeated the criticism of the poll tax which we had made when we were in Opposition. However, it means that the burden will be particularly heavy again on the lower-paid workers whom we on this side of the Committee are here to protect.

I turn now to my third and last point, which concerns the position that will arise after many of these measures have been accepted and brought into operation. There are more apprehensions about the course of Government policy in these areas than the Government have been prepared to admit so far. When a major Government policy is first announced, many people do not get down to all the details of how it will affect them. Who can blame them? It is the task of Members of Parliament to do that. In view of that, I have never accepted the argument often advanced by implication from the Government Front Bench that we are agitated about these matters, that they are agitating matters for people who are active in the Labour Party and not for the general public. That is a completely fallacious argument. When these measures come to be introduced and people begin to see how they and their families are affected, there will be a spate of criticism which will outdistance anything experienced by the Government so far.

I urge my right hon. Friends not to proceed with this imposition of the new burden, but, instead, to listen to what my hon. Friend the Member for Walton said in the Second Reading debate. The representatives of those who will be particularly hard hit by this new increase in the poll tax have the right to be heard. While no one claims to feel any more deeply than my right hon. and hon. Friends on the Treasury Bench about these matters, they have made a mistake and allowed themselves to be panicked into accepting the traditional case of the business community. They ought now to desist from that policy by accepting this set of Amendments.

Sir C. Osborne

I want to say at once that, if an extra £50 million was imposed on British industry, I do not believe that it would break it or sink the export drive. That is sheer nonsense. It would have a marginal effect, but it would not break the backs of banking and industry.

However, having listened to the speech of the hon. Member for Penistone (Mr. Mendelson), which he made with his usual aggressive persuasiveness, I wonder what sort of speech the right hon. Lady would have made if she had been sitting on this side of the Committee and a Conservative Government had introduced a measure of this kind. She would have played merry hell to an extent which very few hon. Members could equal. That is her dilemma, and, with your permission, Sir Eric, later in my speech I will refresh her memory about past events, because she is in the same position as that in which Philip Snowden was placed by Ramsay Macdonald in 1931. I feel sorry for the right hon. Lady—

The Minister of Social Security (Mrs. Judith Hart)

The hon. Gentleman need not.

Sir C. Osborne

I was hoping that she had some sense of political honesty. If she has not, let her have it her way.

The hon. Member for Liverpool, Walton (Mr. Heffer) said that the extra shilling places an intolerable burden on the lower-paid worker. Although that is an exaggeration, it is partly true. It is a criticism which has been made many times by hon. Gentlemen opposite when they have sat on these benches.

The hon. Gentleman pleaded that if the extra shilling were all put on industry and employers were compelled to bear it, they could do so quite easily. I think that there is more truth in that than the hon. Gentleman realises. After all, 42½ per cent. of industry's profits go straight back to the Chancellor, and that means that 42½ per cent. of the extra £50 million placed on industry would have to be paid by the taxpayer. The whole burden would not fall purely on private profits, because nearly half of them go straight to the Chancellor. He would have to bear his share.

The hon. Gentleman went on to reason that this would do what similar actions have done in America, driving employers to greater and more ruthless efficiency. I beg him to think of the social price that that might involve. The Government are striving for greater efficiency, and it is they who have caused the two great electrical firms of A.E.I. and G.E.C. to come together. It was a Government Agency which encouraged it. What does the hon. Member for Woolwich, West (Mr. Hamling) think about that? He thinks that efficiency has been bought at too high a social price, and, having spent my life in industry, I agree with him. There is a point beyond which I would not buy efficiency at the cost of social consequences.

The logic of the argument of the hon. Member for Liverpool, Walton is that he would urge us ruthlessly to fill our factories with the latest and finest labour-saving machines. Consequently we would swell the ranks of the unemployed even more than they are today. Does the hon. Gentleman want that?

4.30 p.m.

Mr. Mendelson

Whatever some of my right hon. and hon. Friends might have said were we in opposition, the hon. Gentleman has always been consistent. He was always in favour of putting the burden on the workers; not on the employers.

Sir C. Osborne

That is a damn lie—[Interruption.]

The Chairman

Order. That is un-parliamentary language and the hon. Member must withdraw it.

Sir C. Osborne

I withdraw the words, but the truth remains. The hon. Gentleman knows it. It is quite untrue.

Mr. John Hynd (Sheffield, Attercliffe)

On a point of order. Is it in order for an hon. Member who is asked to withdraw an un-parliamentary expression to do so with such a qualification?

The Chairman

I would prefer it if the hon. Member gave an unqualified withdrawal.

Sir C. Osborne

I will do it willingly at your bidding, Sir Eric. But I still have my ideas as to what is true. Therefore, through you, I appeal to the hon. Gentleman the Member for Walton, who is at least a reasonable person and knows something about industry from the union side. If his argument were taken to its logical conclusion, the price we would have to pay in social consequences would be enormous, and hon. Gentlemen opposite know what I mean. If the right hon. Lady were this side, she would say that the Government were buying efficiency too dearly in the lives and working conditions of the poorest people. This is what she is asking us to do and this is what the Government are doing. That is why I think that the whole concept of the Bill is wrong, not only this Clause.

I will remind the Committee of the conditions under which this extra 1s. is being imposed. I think it is agreed on both sides that, towards the end of the coming year, the cost of living will go through the roof and the Government will not be able to stop it. But the Government are saying to the lower-paid workers, "We are very sorry for you about this. You will have to tighten your belts and bear the burden to help the Government out of their financial difficulties. We are going to impose a rigid wage freeze on you, too, to help you so to do."

These are the conditions under which the extra 1s. is to be imposed. It is no use hon. Gentleman screwing their faces. They know that it is true. This is what makes it so iniquitous from my point of view.

In addition, Government policy, as stated by the Prime Minister in his famous speech in July, 1966, is to change industry by squeezing out men here and putting them there. It is easier to squeeze men out of one set of jobs than to put them into another set. It is much easier to create unemployment than to find new jobs. This is what the Government have set themselves to do: create more unemployment, impose a wage freeze, and then put added burdens on the poorest workers and tell them not to squeal. I wish hon. Gentlemen opposite were sitting on this side and attacking the Government for so doing—[Interruption.] Come over to this side and do it now—[Interruption.] Tonight hon. Gentlemen opposite will have a chance of giving real evidence about where their consciences lie when they go into the Lobbies.

There is another point about the general conditions. I come from the Mid- lands. We are supposed to be immensely prosperous, but only last weekend it was stated that there are more men unemployed in Birmingham today than at any time over the last 20 years. That is because of the Government's policies. These are the conditions under which the right hon. Lady, in her new guise, is prepared to impose a greater burden on the poorer and the lower-paid workers. I would never have believed that she could bring herself to do it.

With your permission, Sir Eric, I remind the Committee what a predecessor of the right hon. Lady—another famous member of the Labour Party—said when he was placed in the same unhappy, intolerable position. I am sure the right hon. Lady could use these words. He said: I rise to discharge one of the most disagreeable tasks that has ever fallen to my lot. I think she will agree that is true. It is no pleasure to call upon people to make sacrifices or to bear additional burdens "— I think that is true of the right hon. Lady, too— and only a consciousness that those sacrifices and those burdens are necessary to avert far greater sacrifices and burdens makes my task this afternoon tolerable. Philip Snowden was forced by Ramsay MacDonald to say that on 10th September, 1931. She occupies this position and I should have thought she would never have accepted it. To my mind this is 1931 all over again.

Mr. Mendelson

Now, now, now!

Sir C. Osborne

The hon. Gentleman says, "Now, now, now!". You were good enough to say, Sir Eric, that we could deal with this problem in its widest aspects.

Mr. Mendelson

The hon. Gentleman is certainly taking advantage of that.

Sir C. Osborne

I am. That is what I am here to do. It is my job to oppose what I think is not good, and this is not good. That is why I am opposing it.

In the same speech the spokesman for the then Labour-inspired Government said: While I am no more enamoured of this tax than in the past "— that is again what the right hon. Lady will say— I feel that in the present circumstances it is a ready instrument for affording all sections of the community an opportunity to make a contribution to our needs "—[OFFICIAL REPORT, 10th September, 1931; Vol. 256, c. 297, 309.] The right hon. Lady will surely follow exactly the words and actions of Philip Snowden when he was reviled, as the hon. Member for Ebbw Vale (Mr. Michael Foot) knows full well, by the Left Wing, who, if they had the courage today, would give the same treatment to their Government this evening.

I should like to make one more quotation. I have many more if I am challenged. One of the mildest of the Labour Leaders in those days was Jimmy Clynes. I would like the right hon. Lady to bear in mind what he said and to withdraw the whole of this beastly Bill. I am glad that the Treasury is represented, because I would like to pass this on to the Treasury, too. On 11th September, 1931, Jimmy Clynes said: We cannot have real economy "— this is what the Bill is about— by reducing the buying power of the people". That is what this will do to the lower paid worker. If we make him pay more in tax he has less to give his wife to buy food. I am interested to know whether hon. Members below the Gangway will support the right hon. Lady.

Mr. Mendelson

The hon. Gentleman is supporting her.

Sir C. Osborne

I am not. The hon. Gentleman is making a great mistake.

Jimmy Clynes went on, and we shall find very shortly these substantial reductions reflecting themselves in an increase of unemployment as well as in deepening distress among the more needy sections of the population."—0[OFFICIAL REPORT, 11th September, 1931; Vol. 256, c. 440.] Surely this is what hon. Gentlemen below the Gangway are saying, and this was said in 1931. Yet they are following the same stupid policy, which was usual in those days when we were in a financial jam. The way to get out of a jam is not by cutting and cutting, but by expanding. The whole concept of the Bill is wrong. The whole idea is wrong. The Govern- ment have gone made. The way to get out of our difficulties is to produce more wealth and let everybody share it. The Government have gone crazy.

The Chairman

Order. I must remind the hon. Member that we are not discussing the whole Bill, but only this series of Amendments.

Sir C. Osborne

I understood from you, Sir Eric, that you would allow the debate to go fairly wide.

The Chairman

I did not say anything of the kind. I said that this series of Amendments could be considered together, but the debate must be confined to them. We are not discussing the Bill as a whole.

Sir C. Osborne

Then I shall come back to the question of the imposition of this Is. tax, which is germane. Are the workers of this country, compared with those of other countries, in a good position to bear this extra burden? That is a fair question, and I commend to the House an article by the City Editor in last Thursday's Evening News. The headline was: British worker the poor man of Europe". It is true that he is less able than most of the industrial workers of Europe to stand the extra burdens which the Government are imposing on him. It is no good hon. Gentlemen opposite trying to run away from that. This is an extra burden on the shoulders of the poorest paid workers. The article said: The British worker is now among the worse off in Europe."— This is under a Labour Government.— Compared with the average European worker, he gets much less from his employer in the shape of social security, holidays, pension, sickness aid and bonus and is not even particularly well paid. This is the British worker, on whom the right hon. Lady intends to impose an extra burden. In the early 1950s British workers were the best paid in Europe, Switzerland and Sweden excepted. Today we are at the bottom of the league, and yet the right hon. Lady proposes to impose this extra burden on them.

Hon. Members

We have had 13 years of Tory misrule.

Sir C. Osborne

Hon. Gentlemen opposite have had three years in which to do something about it, but all they have succeeded in doing is deepening the gloom. It is no good them running away from the economic facts.

In obedience to you, Sir Eric, I shall not go on although I have many good quotations which I could give the House. I suggest that hon. Gentlemen opposite who are keenly interested in the social consequences of economic cuts should go to the Library and read the debates of 1931. I have been reading them over the weekend.

On 19th November, 1967 the Prime Minister made a broadcast, during which he made this promise: It is the duty of the Government to ensure by special measures that when burdens have to be borne, those who are liable to be hardest hit are protected, and your Government will fulfil that duty. They are failing to do that. That is another promise which the Prime Minister has broken, and I regret that the right hon. Lady has allowed herself to sponsor this Measure.

Mr. Ian Mikardo (Poplar)

I never listen to the hon. Member for Louth (Sir C. Osbcrne) without agreeing with some of the things that he says. This is not surprising, because invariably in the course of his speeches he says a dozen different things which conflict with each other, and the simple laws of mathematics establish that one of them at least is bound to be right.

I agree with much that the hon. Gentleman said. Above all, I agree with what was implied in a large part of what he said, that the real division between hon. Members is not between Labour and Conservative or Liberal, between those who are brilliant and those who are mediocre, between those who are great orators and those who are less articulate, but that the real division is between those who say the same thing on whichever side of the House they sit, and those who say different things according to the side of the House on which they sit.

4.45 p.m.

I think it is broadly true of the hon. Gentleman that he has not changed his ideas much in moving across the Floor. Indeed I hope I am not being unkind if I say that I detect no evidence that he has ever added to his ideas at any time. I hope that I might say of myself that it would be difficult to detect any notable difference between the views which I hold today on matters such as those before us, and those which I held when I was sitting on the other side of the House.

During the Second Reading debate last week there was considerable discussion of the point which has been referred to shortly this afternoon, namely, the extent to which this poll tax, as everybody agrees it is, is a regressive tax, and therefore ought to be deplored. No one wants to use today's occasion to enter into any repetition, whether tedious or fascinating, if repetition can ever be fascinating, and I do not want unduly to labour the point; but it is a fact, and it ought to be re-stated, that this extra bit of burden, not a great deal of money in absolute terms, but added to many other things, is one more straw on the backs of the already overloaded working class, and especially the lower paid workers. This weighs far more heavily on the lowest paid than those who are not so low paid.

Mr. Frank Allaun

Is my hon. Friend aware that there is a great deal of resentment among the workers about whom he is talking against people whom they describe as layabouts? I think that they are mistaken, because these form a tiny minority, but one can, nevertheless, understand the perturbations of these people who are to be made to bear the extra burden of 5s. a week since 1964, when the so-called layabouts will escape payment of this poll tax.

Mr. Mikardo

That is a point, but, as my hon. Friend said, one is talking about so few people, that it is not a major point. The real point is that this 5s. cumulative is a considerable burden on the lowest paid people who can meet it only by cutting down expenditure on essentials. This is why this tax is wickedly regressive.

Better off people meet it by cutting down on marginal things, on smoking, or on drinking, or they have a less expensive holiday, or they take it out of savings, or out of the weekly football pool, but the lowest paid workers have no such margins. They can meet this extra 5s. only by spending less on essentials. This is a tax on private expenditure which affects the basic standard of living of only the poorest people.

It is true that until today every one of the additions was mitigated by substantial increases in benefits, but I put it to the House that that fact is irrevelant to the regressive nature of the tax, because these substantial increases in benefits could have been financed in ways which were not regressive. The fact that there were benefits does not alter the regressive nature of the tax. It is this which makes it so objectionable to us all. The First Secretary saw this point clearly in his speech last week. If I may be allowed a small personal statement, I must say that on re-reading the Report of the debate and of my right hon. Friend's speech I very much regret—I offer my apologies for the fact—that during it I did not conduct myself with my normal restraint. He saw this point clearly, and we all saw it and we cannot get away from it. It is this above all which makes this Part of the Bill so objectionable to so many of us, and makes us so angry—perhaps angrier than we should ever allow ourselves to be within this Chamber.

It will be objected, of course, that, if we tried to put the extra on to the employer, this would add to labour costs and reduce our competitiveness. On this, I would make three points. The first is the point of the hon. Member for Louth who fairly said, out of his experience as a businessman, that it would be nonsense to suggest that £50 million would put us on our knees. Let us bear in mind that the Government are subsidising private industry to the tune of £700 million. The only effect of the Amendment therefore would be to "claw back"—as the Treasury phrase has it about 7 per cent., and only 7 per cent., of the subsidies which private industry already gets from the taxpayer.

The second point is that of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer). If it is said that these increases in labour costs will make us uncompetitive in export markets, the question arises, uncompetitive with whom? With the West Germans, the French, the Belgians? I invite the House to compare—probably I do not need to, because every hon. Member knows these facts as well as I do, and most of them better—what is laid upon the employer as a contribution towards social services for workers in this country with the similar obligation in, for example, all six countries of the European Economic Community. They will find that, without exception, our employers are let off far more lightly than any of their competitors. Therefore, it cannot be true that it is the social service burden on the employers which makes them uncompetitive.

Third, how much is this burden? It is hard to strike averages and they can be a little misleading, but, if we are talking of workers earning about £15 or £20 a week, this extra shilling for which my right hon. Friend is asking represents between a quarter and a third of 1 per cent. on the pay roll. But, of course, the final cost of the product is not labour cost alone. That is only a percentage, which varies considerably from industry to industry and even from factory to factory and from product to product. Broadly speaking, however, throughout the engineering industries, labour costs are about 30 per cent. of final costs.

If we can take that figure as the average, we can see that the increase in labour costs of between a quarter and a third of 1 per cent. will mean an increase in the cost of the product of about a twelfth to a tenth of 1 per cent. Will anyone in his right mind say that that will make the difference between our being competitive in export markets and not being competitive? It is chicken feed compared with the export rebates which industry has at times had, with S.E.T. payments, which industry has had and in some cases still has, with investment allowances, the increased competitiveness resulting from devaluation and all the rest of it.

It is absolute chickenfeed, and therefore it will not stand up for a minute for the Front Bench to say—I hope that they will not try to "kid" us but will abandon this rather silly point—that this would put a burden on the employer which would seriously weaken British industry's competitiveness in export markets. On these grounds, I hope that, if the Government do not see the sense of this proposal, there will be a demonstration of opinion in favour of it in the Lobbies.

The hon. Member for Louth invited some of us to go over there to oppose the Bill. But it is no good going over there to oppose it. Last Thursday, the noble Lord the Member for Hertford (Lord Balniel) held forth for half an hour about what a rotten Bill it was, and, at the end, had to fulfil the task, which I fancy was extremely distasteful to him he is, after all, a decent and honourable man—of saying, "This is such a terrible Bill that we ain't going to vote against it." So I am going to stay over here to carry out opposition which really is opposition. I beg my right hon. Friends to have second thoughts; if they do, they will see that there is virtue in the Amendment.

Mr. John Peyton (Yeovil)

It was the hon. Member for Poplar (Mr. Mikardo) who got me to my feet, and I wish him well in his determination to provide a real opposition to the Bill. I know of no one who produces a more able blend of modesty and confidence with which to fortify his contributions. I say this without any irony, but I say also that it enables him to get away with murder and worse. He has been talking about the monstrous subsidies which are "given" to industry by a generous, openhanded Government, who open the horn of plenty for an industry which does not deserve it. But where on earth do the Government get this plenty before they so kindly bestow it on industry?

I hope that the hon. Member for Poplar will concede that I have said some very similar things on both sides of the House. Wherever I have sat, I have objected to the endless meddling by Governments, of whatever colour, in things of which they are very inadequate masters. I greatly object to the perpetual practice of robbing Peter to pay Paul, of taking money from one pocket to put it in another. The height and depth of farce was reached and passed when the Government introduced the Selective Employment Tax. It is this constant desire to meddle to which I object.

However, the hon. Member has always been reasonably consistent, and I only hope that he and his hon. Friends will make something of their opposition and make it bite and hurt, because there are one or two people on the Government Front Bench, known better to him than to me, who are suitable, ready-made victims for it.

I am sorry that the right hon. Lady is no longer there, because, although I do not wish to throw the Bill out neck and crop, as did my hon. Friend the Member for Louth (Sir C. Osborne), I would say that this is a mess into which the Government have got themselves. It has nothing to do with us. My attitude is perfectly simple: the Government have brought this on themselves and must find their own way out without either my support or my rather reserved condemnation of and pity for the inadequacies which they always show in facing the nation's problems.

5.0 p.m.

I am sorry that the right hon. Lady is not here. I can envisage the speech that she would have made from these benches. Vitriol would have been made to look like milk by the side of what the right hon. Lady would have delivered. I am sorry that she is not sitting by the side of the hon. Member for Poplar at the moment.

Mr. Mikardo

The hon. Member is not nearly as sorry as I am that I do not have my right hon. Friend next to me.

Mr. Peyton

The hon. Member is a very modest man. He would be the first to say that anything that he could contribute in his most fighting mood would be mild compared with what the right hon. Lady would say if she were to go on a crusade. It is for that reason that, merely as a student of oratory, I am sorry that we shall not be treated to an opposition speech from the right hon. Lady this afternoon.

It was the hon. Member for Poplar who tempted me to my feet. He said that he and his colleagues were more angry than any man had a right to be within the walls of this Chamber. I must point out that hon. Members opposite do not always show the most convincing signs of that anger. There is a good deal of blank fire. The real missiles are not always obvious, at least to me. I very much hope that we shall see some of these weighty words carried into action.

If hon. Members opposite are really talking in the same vein as some of the founders of their Party, and are burning with a righteous and almost holy anger, surely they will not confine themselves to speeches; when they come to a point such as this, on which they obviously feel strongly, they will surely take effective action and not be content with a mere charade of words.

I trust that some of them will still be seething with—if nothing worse—at least a nasty form of indigestion at the memory of the Prime Minister's unforgettable broadcast following devaluation—the most dishonest statement that was ever made.

The Chairman

Order. The hon. Member must address himself to the Amendment that we are discussing, namely, whether the incidence of the increased contribution should fall upon the employer or the employee.

Mr. Peyton

That is just the point that I am pursuing Sir Eric. In his broadcast the Prime Minister said that it was his purpose to protect the most vulnerable sections of the community—just the people to whom we are now applying our minds. It is that promise that has been broken. Here I interrupt myself to welcome the right hon. Lady back. I have been paying a tribute to her oratory, and expressing my great regrets—in which I was joined by the hon. Member for Poplar—that she was not in a position to make an opposition speech this afternoon. I ventured to express, with restrained modesty, the feeling that had she been in a position to do so the words which would have come from her mouth would have made milk seem like vitriol. I am sorry that we are going to have a real tergiversation on the part of the right hon. Lady, and that she will be defending these proposals instead of opposing them. However, such is my admiration of her that I have no doubt she will make a very good job of it.

Remembering the Prime Minister's promise to give special protection for the most vulnerable sections of the community, and bearing in mind that, as the Committee must realise, those words meant nothing—as the Prime Minister's words always mean nothing I was expressing the hope that those hon. Members opposite who feel that the Government have brought the country and their party to this low ebb, and forced the Prime Minister to swallow his words, will not be content merely with words but will convert what has hitherto been a charade of words, in which no bones were broken, into a programme of action which will put this Government where they should be.

Mr. Michael Foot (Ebbw Vale)

I do not propose to follow the hon. Member for Yeovil (Mr. Peyton) in any great detail. My hon. Friends and I do not need any instructions about our conduct or consciences from the hon. Gentleman or from the hon. Member for Louth (Sir C. Osborne).

The hon. Member said that he had been tempted to his feet. We did not know that he was so bashful. We do not rate his political chastity so high as that. It was interesting to note what tempted the hon. Member to his feet. It was not the considerations that we have been putting to the Committee about the difficulties of the lower-paid workers. It was not the question of the imposition of the stamp. That did not bring the hon. Member to his feet. It was when my hon. Friend the Member for Poplar (Mr. Mikardo) referred to the huge subsidies paid to private enterprise that the hon. Member thought that a faint, distant slur had been cast on some employers. That brought him to his feet. So we do not pay much attention to him.

The hon. Member for Louth was not much nearer the mark. He described my right hon. Friend as a Philip Snowden. I must say that I have never seen the likeness. Philip Snowden was one described as a cantankerous spinster whose virtue no one dared or cared to assail. I have never looked upon my right hon. Friend in that way. The hon. Member's comparison was not very apposite.

What we are concerned about is a measure designed to raise cash. It is a measure to help the Chancellor of the Exchequer.

Mrs. Hart indicated dissent.

Mr. Foot

My right hon. Friend shakes her head. I know that part of the Bill is designed to help cover up or make good the deficiency in the Insurance Fund, but other parts are designed to assist in carrying through the economic measures which the Government announced in January. We might have had a Bill merely increasing the insurance stamp by 6d. or 1s. to make good the deficiency as revealed in the Actuary's Report, but then the other parts of this Bill would not have been incorporated. I would not put it past the Government's ingenuity to have postponed the introduction of this Bill if it had not been for the other considerations.

Therefore, my right hon. Friend was not quite correct in saying that this Bill had nothing to do with economic measures. It helps the Government and the Exchequer in the sense that if the economic difficulties of the country were not as the Government seek to describe them—or if the Government did not think that they were as they seek to describe them—when the Government discovered a deficiency in the Insurance Fund it would have been possible for the Exchequer to make it good. It should have been especially possible for a Labour Government because we all remember the powerful criticisms made by the Labour Party in Opposition about the way in which Exchequer contributions to the Insurance Fund had been diminished over the years.

This was one of our major criticisms of the Tory Administration's graduated pensions swindle, with its attempt to conceal—it was not concealed particularly well—these contributions into the General Fund. Thus, when the Labour Government discovered, as they did only recently apparently, that there was a deficiency in the Fund that had to be made good, the most natural response of Labour Minister should have been, "Let the Exchequer make this good. We have been arguing for years that too much Exchequer money has been kept out of the Fund."

The Chairman

Order. No Exchequer contributions arise on this Amendment. We are discussing the relevant contributions between the employer and employee.

Mr. Foot

I had intended to adapt my argument to this point, Sir Eric. When I began, I explained the purpose of the Bill—

The Chairman

Order. I have explained to the hon. Gentleman what is relevant in discussing the Amendment.

Mr. Foot

I have your point, Sir Eric. I am not sure that you have mine. I said at the beginning that the purpose of the Bill was to raise cash for the Exchequer. When I said that, my right hon. Friend contested it. I was, therefore, seeking to remove her apparent mis- understanding of the situation and it was necessary for me to remove that to come to the question of how the money should be raised.

This whole question must affect the argument of where the money will go, and I am saying that it will go partly to recoup the Exchequer. I follow that by saying that this money could have been provided by the Exchequer, particularly since many of my hon. Friends say, "If the Exchequer was not prepared to provide it, it was wrong for the Government to go to the workers and put such a heavy proportionate burden on them, and in particular the lower-paid workers". Thus, that alternative could have been adopted by the Government.

Having excluded that alternative, the Government decided not to ask the Exchequer to make up this deficiency but to consider the question of dividing it between the employer and worker. The Amendment says plainly that we believe that that division has been wrongly made. It is true that later we will discuss the 6d. on the National Health contribution—which, naturally, raises extra and different points—and while we may say that it is possible to differentiate between the two, the worker who must pay the contribution does not try to differentiate between the health 6d. and the other 6d. They both come out of the same pocket. It does not make much difference to the worker which section is involved in the production of this money and, in considering whether it is right to impose this 6d., we must remember that later we will discuss the provision of another 6d., which is a further addition to the argument.

Why did not the Government decide to make this choice? I will not rehearse the arguments adduced by my hon. Friend the Member for Poplar and others about the reply of the First Secretary, who said that it would add so much to industrial costs that it could not be contemplated as an alternative. However, the other answer was partially given in the debate, when it was pointed out that if one tries to equate the burdens which will be put on the employer as distinct from the employee, one gets into the inherent difficulty of accepting that this is unjust. Indeed, any way of raising extra money under the present Insurance Scheme is unjust, and that has been the central charge of the Labour Party.

5.15 p.m.

The Labour Party's official policy has for years been against the present Insurance Scheme. No argument which the Labour Party has presented to the country over the past 10 years has been more consistent than this one. It is simply that any money raised under the Insurance Scheme on the old basis is unfair. That has been, and still is, our view—and the view of hon. Gentlemen opposite in this matter is not important in this context because they are in favour of a totally different scheme which involves a perpetuation of the injustice. Our argument is in favour of removing this injustice. We therefore cannot understand why the Government have not been prepared to adopt the Labour Party's own remedy for solving this injustice.

The First Secretary's answer is that a new scheme is not yet complete. If that is the argument for persisting with this balance between employer and worker in the matter of contributions, I must assure the Government that it is an argument which we find impossible to accept. I have no doubt that a new scheme is complicated and difficult to work out. However, I have not the slightest doubt, knowing those who do this work in the Ministry and who, since October 1964, have been working in this sphere—and knowing the diligence and energy of my right hon. Friend—that a scheme could exist or does exist. I believe that if the Cabinet said to my right hon. Friend. "You can have the money and the Parliamentary time to introduce the Labour Party's own pension scheme, with the abolition of the poll tax", she would immediately reply, "Done.", and it would be introduced immediately and would be law within a matter of weeks.

This being so, we are faced with the situation—that is, if my argument is correct—that some other Members of the Cabinet are trying to stop this from being introduced. We must discover why—[HON. MEMBERS: "And whom."]—an obstacle has been placed in the way. I will not bother with trying to discover who is involved because I am not concerned with personalities. I leave hon. Gentleman opposite to draw their own conclusions. I suggest that the Chan- cellor will not allow it to happen, and while I do not wish to be personal, I suggest that while acting with the best motives, the Chancellor—

The Temporary Chairman (Mr. Gorden)

Order. Whatever the motives, they do not come within the terms of the Amendment.

Mr. Foot

I was aware that my words were out of order the moment I had uttered them. However, that is the situation. The Bill which we had every right to expect has not been presented to us and I hope that my right hon. Friend will not reply to this discussion by attempting to justify what is being done in this measure. Indeed, I hope that no attempt will be made to justify it because this is an intolerable situation, especially at a time when so many other impositions are being placed on the lower paid worker. I hope, therefore, that my right hon. Friend will say that this is unjust—as unjust as it always was—and that this measure has been introduced as a result of general political factors which we must try to help remedy. Whatever she says, I trust that she will announce that it is the intention of the Government, because of the injustice of this and similar measures, to speed up the process of the plan for the abolition of the poll tax.

I do not see why the Government should not announce immediately that such a scheme will be introduced this Session. It could make a considerable difference to our whole approach to this and many other affairs. I wish to help the Chancellor out of a hole and I assure him that such an announcement would help with his Budget. I urge the Government to consider the possibility, because of the unfair burdens being placed on particularly the lower paid workers by this and other measures, of completing their plans for the introduction of the Labour Party's own pension scheme so that it may come into operation early and be passed through Parliament this Session.

If my right hon. Friend will say that she has Government sanction for achieving that, then that will be of great help. In the meantime, if she wants the support of her hon. Friends and the country, she will get it easily by merely agreeing to the Amendment. If it were to be made clear that henceforth there would be no increases in the poll tax on the workers but that every time a deficiency occurred in the Insurance Fund the burden would be placed on the employer, thus bringing the proportionate burden nearer to that obtaining in many other European countries, there would be quite a lot of pressure from employers as well for us to go ahead with our plan.

I am serious in my proposal. The Government should take note of our case and should accept one of the Amendments. The clearest Amendment would be No. 17. If the Government were to say that they would accept it, there would have to be some consequential alterations in other Clauses. We have had difficulty in working out the exact wording. I therefore hope that my right hon. Friend will not say that the detailed form of our Amendment is not acceptable. She knows full well what our case is.

We suggest that the whole of the extra amount which the Government say they must raise in cash under the Bill should be raised from employers and that nothing should be raised by poll tax on workers. If the Government agreed to our suggestion, it would cause widespread satisfaction on this side of the Committee and in the country. It would awaken the country to the burden inherent in this form of insurance scheme. It would bring nearer the day when we get the full pension plan which the Labour Party promised that it would introduce.

Therefore, our proposal is a serious one. We shall vote upon it, unless we get satisfactory assurances from the Government. When we vote upon it, the more people who vote for it the sooner we shall ensure the introduction of Labour's pension plan with no poll tax.

Mr. John Pardoe (Cornwall, North)

I shall confine my remarks now to the narrow point at issue. I hope to expand on the general issue on the Question, That the Clause stand part of the Bill.

The narrow point at issue is whether employers should bear the whole of the increase. Whether or not hon. Members opposite intend to divide on this issue, I certainly intend to do so and shall vote for the Amendment. I was amazed to hear the hon. Member for Poplar (Mr. Mikardo) ask who had provided the opposition to the Bill. On past history it can be said that the opposition in the matter of votes has come from the Liberals.

Mr. Stanley Orme (Salford, West)

Is not the hon. Gentleman saying that he will divide the Committee on an Amendment which is not his?

Mr. Pardoe

I understand that under the rules of the House of Commons I am entitled to vote on any Amendment, whether or not I have put my name to it.

Mr. Orme

We will do the dividing.

Mr. Pardoe

Unfortunately, an Amendment standing in my name, which would provide a rather radical alternative, has not been selected. Even if hon. Members opposite do not intend to keep the Government's word for them, I shall attempt to do so. It seems rather hard that the burden of keeping people's word for them should fall on the Liberals. Later this week we shall attempt to keep the word of the right hon. Member for Streatham (Mr. Sandys).

I agree with the Amendment—not with the detailed mathematics which have been expressed, but because, as I said on Second Reading, I believe that a social security tax—this is in no sense that—should fall as to two-thirds on the employer and as to one-third on the employee. The Amendments do not go as far in that direction as my suggestion undoubtedly would. However, they go some way towards it. I believe that that is the right division for the future burden of social security.

No doubt the Government will say that this proposal would increase the cost of labour to the employer. Labour costs in Britain are not all that high compared with those of our major competitors. In the Common Market countries—we are always being told that this is the standard by which we should operate—employers bear a much higher proportion of the cost of social security—rightly so. If I have to choose between increasing employers' costs and increasing the cost of living of lower-paid workers, I know where my priority is and I know that I shall always choose to increase the labour costs of employers.

Whether this proposal would add to employers' costs or not, raising the employee's contribution by 1s. will undoubtedly raise costs and create an inflationary situation. Whichever way it is done, it will add pressure to inflation. I am amazed that the Government seem to think that an extra 1s. each week will not make any difference. An extra 1s. will not disturb any right hon. or hon. Member, but the Government are perhaps getting out of touch with people on the sorts of income where 1s. a week extra really makes a difference.

I represent an area in Cornwall which has the lowest average income per head of any county. I know only too well that many of my constituents have to budget to the nearest 1s. It is easy for right hon. and hon. Members, especially those on the Government Front Bench, perhaps, to get out of touch with the facts of life of ordinary housekeeping and to forget the row of tins on the mantlepeice. There are such rows in many houses in my constituency, because my constituents have to budget very tightly.

This is why, if I have to choose between the Amendment and the Government's proposal, I shall certainly choose the Amendment. Although hon. Members opposite did not force a Division on Second Reading, I hope that they will divide on the Amendment. Then we shall have an opportunity of voting for it.

Mr. Orme

The debate seems to have centred round the question of the effect that the poll tax has on the lower-paid worker. I want to consider how the Government's proposal will affect the incomes policy and the desired redistribution of income.

When the Labour Government first came to office in 1964, they started the process of redistributing income, taking into account the fact that the poll tax still existed, by imposing the greater part of any increases on employers. That was an interim measure leading up to the abolition of the whole scheme. The regrettable thing about the Bill is that this process is now being reversed and the largest part of the increase is being placed on employees.

Further, this time there is to be no increase in benefit. My hon. Friend the Member for Penistone (Mr. Mendelson) very cogently pointed out that, although there was an increase of over 4s. 6d. in the contribution, benefits such as redundancy payments and unemployment pay were also increased. The regressive nature of the step being taken under the Bill concerns us greatly.

References have been made to my right hon. Friend the Minister of Social Security and to statements made by her predecessor in office. We shall await with interest what she has to say about the poll tax and the introduction of this Government measure. I want to hear the defence. I hope it is better than what we had from Government speakers in the debate last week. They begged the question and did not face up to the arguments. It was said that the matter would be dealt with later in a speech, but it was never reached. This measure will have a direct bearing on the Government's economic policy because it is one of many measures in this package deal which will hit the lowest-paid workers.

5.30 p.m.

I have here the T.U.C.'s Economic Review, the grey book which will be discussed on Wednesday. It deals mainly with the question of the lower-paid worker. It states in paragraph 10 on page 7 that there should be a basic redistribution of income within our society. It says in another paragraph that preferential treatment should continue to be given to lower-paid workers.

In the section dealing with the social services the T.U.C. states that since the war a general argument has been advanced that the costs of the social services have consistently been outstripping productive costs and have been far in excess of what the country can afford to pay. We know that this is entirely wrong. In paragraph 12 the document says that these myths have now been thoroughly exposed and that reports about housing, schools, lower-income families and urban transport, to name only a few, have shown how great is the need for a further reallocation of resources. It states that this requires a transfer of income and wealth to the worse-off sections of the community. That is what the T.U.C. states in its document, and I am very pleased to read it into our record because we are concerned about that very section of the community.

Are not prices going up? Will not all sorts of burdens fall on the lower-paid workers? What about the arguments we had in the House on the prices and incomes policy? What was the Government's defence of that policy and the retrogressive legislation that was introduced? They said that it would benefit the lower-paid workers. Yet, on the other hand, the Government take direct measures completely to oppose that policy.

I am not sure whether the Government are aware of the resentment that is felt about the insurance stamp among the working people. These people are not opposed to paying for something when they see that it is a direct contribution to the wellbeing of the country. But they have not been asked to pay and they have no chance of not paying. The money is deducted from their wages every week; they pay Income Tax by P.A.Y.E. In fact, the Government collect every halfpenny from them in the form of the stamp and the taxation. These people then see avoidance and all sorts of other things going on in the higher income groups, and there is a deep resentment because of this action. I do not believe that the Government appreciate what they are bringing upon themselves by these measures if these people feel that, it is not in the interests of justice as they see it and that there will not be a reallocation of resources and expenditure.

I do not think that the Government realise the anger that will be felt against them when the full effect of the stamp, prescription charges and school milk measures are added up and the burden is placed upon the people who can least afford it. Those of us on this side who are opposing these measures are not doing it because we like it or because we think it is pleasurable to criticise. We are doing it because we feel that the Government are fundamentally wrong and going against everything that we stand for in relation to the abolition of the poll tax, school milk provisions and prescription charges—things on which we fought the General Election.

This is why we feel so disturbed. This is why we reply to some of our hon. Friends who ask "Why are these issues raised?" that in a democracy it would be fatal not to raise them. It would be wrong if the feelings of the people were not expressed. I have consulted many of my constituents and many people in my party and discussed this fully and frankly with them. They cannot understand why the Labour Government have taken such measures as these.

I urge my right hon. Friend to look at this matter very seriously. We shall force this issue to a division; we shall vote for it. We shall do that because we feel that we ought to record our opposition to this measure. If this is not done in a Parliamentary democracy, the validity of Parliament, about which we hear so much criticism, begins to take a very sinister form. Therefore, we believe that this is a matter of paramount importance. This represents, at any rate to the Labour Party, a measure of basic importance. Consequently, I urge my right hon. Friend to accept the Amendment. Otherwise, I am afraid that we shall have to push it to a vote.

Mr. John Hall (Wycombe)

I intervene briefly in order to join the coalition of backbenchers that is arising, mostly in opposition to a poll tax. I am in considerable agreement with the speeches made from both sides on this issue. It occurs to me that if the backbenchers got together they could form a much better Government than the one now in office. Perhaps we might suggest to the present Government that they should stand down in favour of a coalition of backbenchers.

Sir C. Osborne

It could not be worse.

Mr. Hall

That is true.

I come back to the points made with considerable eloquence about the effect of the growing cost of the insurance stamp, whether National Health or the total insurance stamp, on workers, whether lowly paid or not though it certainly imposes the greatest burden on the lowly paid. I think that one might find a definition for this, though so far it is not forthcoming.

I have always been opposed to the increasing cost of the National Insurance stamp. I dislike poll taxes. I should like to see a change in our method of taxation so that we did away with stupid things like S.E.T. and the constant rise in the cost of Insurance stamps and had one tax, a payroll tax, which would cover the social security needs of the country.

Like my hon. Friends, I do not think that the cost of this would impose an intolerable burden on industry. I believe that if industry had to carry a high proportion of the cost of the social welfare of the country it would be a great stimulation to avoid the hoarding of unnecessary labour, a great stimulation to increasing the efficiency of production and a great stimulation to making industry basically far more efficient than perhaps it is now to meet the cost. I hope that the Government—I am sure that my own party will do so when it succeeds to office in the fairly near future—will give attention to this point.

The arguments put from both sides of the Committee against the increase in the insurance stamp contribution on the ground of increasing hardship for workers who have to pay it without regard to their incomes are unanswerable. I say that they are unanswerable, but I am sure that the right hon. Lady will try to find a way of answering them. Hon. Members on both sides will listen with the greatest interest to hear how she explains away something which is fundamentally a contradiction of everything for which the Labour Party stands. Over the past three years, we have witnessed Ministers eating their own words to such an extent that they must all have had indigestion. One wonders what will happen today. How will the meal be made palatable to the right hon. Lady and to the Committee as a whole?

I beg the right hon. Lady, if it is not too late and she is not speaking to a prepared brief, to consider carefully what has been said. I hope that, when we come to the point, hon. Members opposite who have tabled the Amendment will not be put off and induced to withdraw it by the thought, as it seemed at one time they might be, that they would have support from the Liberal Party. So often—I am sure that they will forgive me for saying this—we have heard wounding words directed at their own Front Bench which have not been supported in the end by a move into the Lobby.

Mr. Mendelson

The hon. Gentleman should direct his advice at his noble Friend the Member for Hertford (Lord Balniel).

Mr. Hall

I am not giving advice. I am making a comment on past history. I hope that hon. Members opposite will make history today by voting for their own Amendment and showing their displeasure.

Mr. James Dickens (Lewisham, South)

Despite its somewhat unlikely source, the speech made today by the hon. Member for Louth (Sir C. Osborne) contained more than an atom of truth. He gave the Committee a series of quotations from a debate in the House on 8th-10th September, 1931. That debate was concerned with the National Economy Bill introduced at the direct instigation of the Federal Reserve Bank of New York.

The Public Expenditure and Receipts Bill is but the first instalment of a broadly equivalent measure introduced by this Government to placate the International Monetary Fund and the Bank of International Settlements. Let no one misunderstand it. It means that, throughout this year, the British people will be subjected to a continuing stream of measures designed to hold public expenditure and, where possible, to reduce it.

The Temporary Chairman

Order. The hon. Gentleman must address himself to the Amendment.

Mr. Dickens

I shall come to it very quickly, Mr. Gurden. I am first pointing out that the decision to increase the National Insurance contribution, the decision imposed under this Bill which we seek to amend, is part of a general policy of trying to placate the I.M.F. and other outside financial interests.

There is much opposition to this Bill in the House and in the country. For example, the T.U.C. is to meet at Croydon on Wednesday to debate the vitally important Economic Review, 1968. My hon. Friend the Member for Salford, West (Mr. Orme) made one quotation from that document. I shall make another, which has a direct bearing on the incidence of the National Insurance contribution on the employee.

In paragraph 255, dealing with our tax system, the T.U.C. comes to this conclusion: Many recent examinations, including those made by the Government, have shown that the British tax system, broadly defined, is not in practice highly progressive and is certainly not getting more progressive. It gives three principal reasons for this. I shall not discuss the first and second, but the T.U.C. notes: Thirdly, and perhaps most important, social security contributions constitute a flat-rate poll tax and are thus highly regressive. It has been estimated that people with less than £12 a week pay well over one-third of their incomes in indirect taxes and National Insurance. The overall effect of these three broad categories of taxation is that the total tax system is, if anything, more regressive at the lower levels of income. A survey published recently in the Government publication 'Economic Trends' showed that, for example, a household of two adults and two children earning £12 a week in 1964 paid in total 28 per cent. of their income in taxation, where a similar family on £2,000 a year paid only 25 per cent. of their income in taxation. That brings out clearly the highly regressive nature of the National Insurance contribution as it affects the lower-paid worker. Moreover, the incidence of this contribution is increasing in its severity on the lower-paid worker.

5.45 p.m.

In 1964, taking an average weekly wage of £12 a week, the proportion then devoted to National Insurance contribution plus National Health and Industrial Injuries contributions came to 4.9 per cent. In 1968, at £15 a week, the equivalent proportion is 5.5 per cent. So the regressive nature of the poll tax is increasing in intensity.

Several hon. Members have drawn attention to the disparity between contributions made by employers in this country and employers abroad in respect of social welfare expenditure. It might be useful to examine what the average contributions are in this respect. In manufacturing industry, the Ministry of Labour found in 1964 that 3.6 per cent. of total labour costs were paid then by British employers in the statutory National Insurance contributions, with, in addition, a further 3.1 per cent. paid on private social welfare payments, making a grand total of 6.7 per cent. The Ministry of Social Security, in a more recent survey of countries in the European Economic Community, as at 1st January, 1967, drew up the following information on the employer's contribution which shows that it is markedly higher in every respect than it is in the United Kingdom. For example, in France the employer is paying 32.1 per cent. of the employee's total earnings in respect of his contributions to the employee's pension, sickness, unemployment, industrial injuries and family allowances. The figures for other Western European countries also are much higher than they are here, ranging from 14.1 per cent. in the Federal Republic of Germany and the Netherlands to just over 50 per cent. in Italy.

It can scarcely be argued, therefore, that the British employer is heavily burdened by social insurance costs. Neither can it seriously be argued, as my hon. Friend the Member for Poplar (Mr. Mikardo) pointed out, that the additional cost of this contribution levied on the employer would make it difficult for him to be more competitive in export markets. I do not remember that, when the 25s. per week of the Selective Employment Tax in respect of men aged 18 and over was debated in 1966, this was a cogent argument advanced in this House then.

My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) reminded us that during and since the 1950s there has been a tendency in this country to move away from the old Beveridge principle which, in 1942, set out to establish that in future British social insurance would be based upon a tripartite payment—one-third from employees, one-third from employers and one-third from general taxation. In this connection, it might be useful to refer to the Report of the Actuary, Cmnd. 3532. In Appendix 2, the Actuary makes the assumption that Exchequer supplements to flat-rate insurance contributions will, henceforth, be one-quarter of the flat-rate contribution in respect of employed persons. In effect, this means that we are now working to the principle, broadly, of 80 per cent. of the cost of National Insurance being contributed by employers and employees and 20 per cent. coming from the Exchequer. I want the Government to move away from that in the interim period before the production of a national superannuation scheme.

My hon. Friend the Member for Ebbw Vale made a passionate appeal for the Government to introduce a national superannuation Bill in this Session. I fully support that appeal, but I think that we are both being somewhat optimistic in making such a request for there can be no doubt that there will be no further improvements in British social welfare so long as we are at the mercy of I.M.F. economists. So, in echoing my hon. Friend's appeal, I believe that the Government can make a start tonight by withdrawing the imposition of the additional 6d. on the employee's contribution, and making a stand here on this first measure they are introducing to obey the dictates of international finance. This Government must stop running away; it must stand up and fight. I can think of no better occasion than that provided this evening to make a start to fight back in support of our principles.

Mr. Albert Booth (Barrow-in-Furness)

I beg to move Amendments No. 16 and No. 26.

The Temporary Chairman

Order. The time has not come to move those Amendments. The hon. Member may speak on them, but we must first dispose of Amendment No. 2.

Mr. Booth

I beg your pardon, Mr. Gurden. The purpose of those Amendments is to reduce the proportion of the increase to be borne by the employee, and to increase the proportion to be borne by the employer. Although this may appear to be an attempt to water down the proposal of Amendment No. 1 in the name of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), that is not the case. I have added my name to his Amendment.

My Amendments are designed to give an opportunity to the right hon. Lady to indicate that the Government are prepared to agree that there is a serious case to be made on the issue of the ratio of insurance contributions to be borne by the worker and the employer and to concede that in some small measure this would be a means of meeting the problem. I make clear at the outset that if the Government do not do this I shall vote in the Lobby for Amendment No. 17. I shall do so because that will be the only way to show clearly how repugnant I find it as a Labour Member, representing a constituency with a great many low-paid workers, to pass this abhorrent sort of measure.

It would be serious at any time for the Government to introduce such increases in a flat rate poll tax, but it is more serious at a time when there is such restriction on wage increases which could be obtained by lower-paid workers. No responsible trade union leader representing workers on low rates of pay could say that he could not press for an increase on their behalf at a time when they can refer him to the recent big increases in rent they have suffered. Some workers in my constituency have had their rents increased by 50 per cent. in the last six months.

Such increases are analogous to the social insurance increases. In both cases there is an increase in payment for exactly the same amount of benefit, not an increase to bring about an improvement but for exactly the same service. Workers who are paying increased rents are living in the same houses as before. Workers who will have to pay increased social insurance contributions will receive exactly the same benefits. I should expect a Labour Government, when considering a measure such as this, to give very serious consideration to the limit at which a worker starts to pay the maximum contribution. That limit has been changed in previous legislation, but this legislation leaves it at £6. Any worker earning over £6 a week will have to pay the maximum weekly rate of contribution. A large proportion of lower paid workers will be faced with the necessity of finding the extra contribution. On these grounds alone this Measure is unacceptable.

As a Parliament, we have to decide whether social insurance contributions should be a charge upon industry, a poll tax, a form of payroll tax, or to be met by a profits tax. All these are ways of dealing with the problem, but at present we meet the cost of social benefits partly from taxes and partly from contributions. We have to concern ourselves primarily with the proportion of the contribution that comes directly from employee and employer in relation to the benefit received. I agree with hon. Members who have made comparisons between this country and other countries in Europe. I shall make some comparisons, but not on the same basis. I shall not compare the percentage of the total cost of the benefits borne by the employee and by the employer.

It is more appropriate to consider the relationship between the amount paid by the employer and the amount paid by the employee in other European countries. In France, the employer pays five times as much as the employee. In the German Federal Republic the employer pays one-sixth more, in Belgium two and a half times a; much, and in Italy—which has staged a remarkable economic recovery—the employer pays eight times as much. In Luxembourg the employer is paying 60 per cent. more than the employee.

The effect in those countries has not been to stop improvements in social benefits; in fact, they have been quite considerable. The effect has not been to price them out of the market, because of the cost of their goods. Most of those countries have rates of economic growth which compare favourably with our own. The only conclusion one can draw is that this is beneficial to industry and beneficial to social insurance benefits. Therefore, it is a course which should commend itself to the right hon. Lady.

If we continue to finance social benefits by a poll tax, falling equally on all workers, we will arrive at the situation where we will be unable to improve social benefits because the financing of those benefits will be circumscribed by the level which the lower-paid worker can afford. That would be an unreasonable thing to expect and we should reject this Clause in its present form and support the Amendment.

6.0 p.m.

Mr. Emrys Hughes (South Ayrshire)

I notice that the names on this Amendment are of Members representing English constituencies. It would be a mistake to think that the points of view and the arguments contained in the Amendment are not widely shared in Scotland. In my constituency there is considerable discontent about the increases in different payments that have to be paid by the low paid workers. A great many speeches have been made since the noble Lord the Member for Hertford (Lord Balniel), who leads for the Opposition, was instancing various categories of exemptions and referred to the lower-paid worker. I asked him what a lower-paid worker was. Like Pilate, when he was asked about truth he did not stay to answer but referred it to the Government Bench. We have had frequent references to the lower-paid worker. What income does one need in society today? I remember the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) arguing that anyone below £5,000 a year was in poverty. There must be a very large percentage of the population who are lower paid workers.

Mr. Peter Tapsell (Horncastle)

The hon. Gentleman is slightly distorting what was said a good many years ago. What was said was that someone on £5,000 a year could no longer, as in the past, be regarded as very rich. This is a very different thing.

Mr. Hughes

There is a subtle ideological difference which should not be allowed to get into this argument. There are all kinds of ideas on what constitutes a lower-paid worker. Members of Parliament sometimes argue that, compared with directors of nationalised industries, they are poorly paid workers. I travel down from Scotland on a plane with executives who would regard Members as low-paid workers. There is a question of relativity in all this.

These arguments do not enter into the considerations of those of us who live in areas like mine and the right hon. Lady, who is my next-door neighbour, where there are a good many people having to face the fact that as a result of pit closures they must look for other occupations. Some of them have to take up employment in industries where wages are lower than in mining. They consider that the lower-paid worker is someone who does not earn the average wages earned in the coal-mining industry. In that industry a considerable proportion of people would be classed as lower paid workers because, after they have the stamps deducted, about which we are talking, and all the other impositions, their income is very low indeed.

This especially applies to women workers. I recently visited a new factory where girls working on machines were producing shoes for export. Some earned £7 or £8 a week. That is not a magnificent income these days, but it was a higher income than that of the girl who had to travel a long distance to work. Because of the changes in industrial conditions, people are having to look for jobs in other parts of the county, travelling long distances from their homes. Young girls are having to travel 20 miles, from isolated mining towns to factories, and at the end of the week, when they have deducted their bus fares from their wages, they are definitely poorly paid workers.

All these impositions have an effect on the income of a family and are relevant to this Amendment. To some who think in terms of the high wages earned in the prosperous parts of England, a 1s. or 2s. 6d. increase in milk or an increase in the prescription charges may be a trifle, but it mounts up in such a way as to bring a family below the poverty line.

An hon. Friend talked of the incidence of taxation and how a low-paid worker was having to meet the country's taxation in increased food prices. I put a Question to the Minister of Defence the other day asking him how much per head per family defence was costing. I was told it was 16s. per head. For a man and wife 32s. has to be found in taxation for so-called defence. With a man, wife and three children that is £4 a week, to be found in one way or another, for so-called defence. I know that there is some alleviation of this through Family Allowances and so on, but the fact remains that a large percentage of the working class comes into the category—however one defines it—of lower paid workers. It is this class of workers whom we are trying to defend and protect in this Amendment, for which I will vote.

Mr. Cyril Bence (Dunbartonshire, East)

While not entirely supporting the Amendment, I want to put some very serious considerations to my right hon. Friend upon the implications for the lower-paid workers. Most of us on these benches have spent our lives on the factory floor and know that just above the labourer—semi-skilled level—nearly every worker in an industrial enterprise can improve his earnings. This can be done either for domestic reasons, or through factory negotiations and increases in piece-work rates. However, for the lowest-income group, there is no way of increasing earnings. He is there—a labourer, a general handmaiden who runs around the factory, unable to improve his earnings.

There are labourers in Glasgow coming out of factories with under £11 a week. This is so bad that my right hon. Friend's Ministry went so far as to mitigate the wage stop when these men became unemployed, because that level was too low in the incomes scale. How can we reconcile mitigating the wage stop when they are unemployed and putting on another 1s. a week when they are employed? This is about the first time, with the exception of the introduction of the Selective Employment Tax, that I have tendered any criticism of the Government in four years. However, as a former toolmaker in industry, I must express serious criticism of a measure such as this.

I do not agree with the point in the Amendment that the cost should be put as an industrial charge on industry. I do not know who are employers and who are not. They are huge institutions. Different industries have different wage contents in their product. It would be wrong to make this a charge on industry—and this is where I disagree with the Continental system—especially on the shipbuilding industry in which there is a high wage content and where the burden would be far in excess of the burden on the electronics industry and other industries where the low-paid worker is badly paid.

My right hon. Friend should examine the possibility—and this has ben suggested before—of dealing with this matter through a social security tax. Let us have a social security tax with graduated contributions based on income. We cannot go on levying this poll tax which falls on a large group of workers—perhaps two million workers—who cannot do a thing to improve their earnings. They rely entirely on the trade unions to take action with their employers to raise their wages, and then there is a large section of trade unionists who insist on maintaining the differential. It is difficult for shop stewards to raise the level of those in the lower income bracket because there are people who will fight for maintaining the differential. This is unfortunate, but it is a fact of industrial life.

I beg my right hon. Friend to give an assurance that this is only a temporary measure. We are self-employed. We could pay more, especially the self-employed people here who have fat incomes outside. We should be prepared to pay a lot more for the lower income groups who cannot reach the level of skilled workers for various reasons, possibly because of a lack of opportunity, and who are on the bottom run of the ladder. They should be excluded entirely from this wretched poll tax, this flat contribution, which we have opposed for 15 years.

My right hon. Friend's predecessor introduced a measure to mitigate the wage stop which the previous Administration applied rigorously. It was applied in my constituency, and other hon. Members and myself raised cases concerning it time and again. I ask my right hon. Friend to maintain that mitigation when people are in work by doing something about this heavy poll tax.

Mr. W. A. Wilkins (Bristol, South)

I should like to say a few words before the Minister replies, for two reasons. First, I have been strongly provoked by the hon. Member for Louth (Sir C. Osborne), who treated us to one of the most astonishing contributions of humbug which I have heard in this Chamber in all the years that I have been a Member. Secondly, I want to have a word with one or two of my hon. Friends below the Gangway and offer them a bit of counsel and assure them that I am 100 per cent. in sympathy with their views.

6.15 p.m.

This proposal is a poll tax; there is no doubt about that. Rightly or wrongly, from the time when my right hon. Friend the Member for Llanelly (Mr. James Griffiths) was Minister, it has been so characterised in the House of Commons. There have been those who have denied it. But for the Opposition to try to present a case in the way that they have done today, particularly by the hon. Member for Louth, is ridiculous. I interrupted him once or twice from a seated position telling him that I could produce headlines to counter all the headlines which he was producing—unfortunately, I could not find the prize one, but I found one or two others—which show that this situation has been with us ever since the Conservative Party came to power in 1951.

The attack has been mainly twofold—on the social services and principally on the National Heath Service. These have always been the "targets for tonight". I have served on three Committees upstairs when the right hon. Member for Wolverhampton, South-West (Mr. Powell) has attacked in the most violent manner almost all the charges under the National Health Insurance Act, and I have tried to prevent him from doing so. The last time that the Conservative Party won an election before it was defeated in 1964—

The Deputy Chairman (Mr. Sidney Irving)

Order. The hon. Gentleman is straying far from the Amendment, which is concerned with the division of the contribution under the National Insurance Act between the employer and the employee.

Mr. Wilkins

I am coming to the point. I am challenging the Opposition on talking as though this was the first time that this has happened when, in fact, it has been happening since 1951. In 1961, they were responsible, through their Chancellor of the Exchequer, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd)—the man dubbed "See-saw Selwyn "—for doing these things. On 2nd February, 1961, the right hon. and learned Gentleman proposed to do exactly what we propose to do now—put 1s. on contributions, is. on cod liver oil and 1s. on prescription charges. The hon. Member for Louth, who provoked me into saying these things, did not remind the Committee of that. He indicated that this was the first time that it had happened.

Sir C. Osborne

On a point of order. The burden of my speech was that this had happened in 1931, and I made quotations to support that. Therefore, it is wrong to say that I said that this was the first time that it had happened.

The Deputy Chairman

That is not a point of order.

Mr. Wilkins

I was referring, when the hon. Member interrupted, to the fact that this has been with us literally since the system was invoked.

What my hon. Friends below the Gangway have been saying is absolutely true. This is the case which we were presenting when we sat on the benches opposite. I took part in the debates and said these things and meant these things. Therefore, my hon. Friends have a right to say, "Why are we doing it in this way?".

I remember the winding-up speech during one of the debates on proposals of this kind for additional charges in the National Health Service. I remember—that is why I have looked it up—what the Minister's right hon. Friend the present Secretary of State for Scotland said as he come to the conclusion of his speech for the then Opposition. I commend this to my right hon. Friend for her consideration. This was what he said—

Mr. Emrys Hughes

What was this?

Mr. Wilkins

This was Willie Ross. I said before that it was the present Secretary of State for Scotland. He said: I hope that the Chancellor "— that was the right hon. and learned Member for Wirral— is feeling proud of himself and his achievements. So far as we are concerned, we have opposed this with logic as well as with passion, because we feel that we have got justice upon our side. I sincerely hope that my hon. Friends who have not yet spoken will use Parliamentary time "—

The Deputy Chairman

Order. The hon. Member really is out of order. He is discussing the raising of the contribution, but the Amendments are concerned with the distribution of the contribution between employer and employee. I hope that he will come back to order.

Mr. Emrys Hughes

I am sure, Mr. Irving, that most of us are interested in what my hon. Friend is leading up to. The argument, I understand, deals with the lower-paid worker. If I remember the peroration exactly, by the time that my hon. Friend comes to it, you will find that it is in order.

The Deputy Chairman

The hon. Member for South Ayrshire (Mr. Emrys Hughes) was given considerable latitude in his speech. So has the hon. Member for Bristol, South (Mr. Wilkins), but I think that he has now exhausted the tolerance of the Chair.

Mr. Wilkins

I did not need rescuing, Mr. Irving, because I was coming to the point. I am saying to my right hon. Friend the Minister that we should be consistent. We are now the Government instead of the Opposition, but because we are the Government we should be consistent with what we said when we were the Opposition. I am trying to ask my right hon. Friend to look again at this matter and at the method whereby we raise the additional money which is needed for the Health Service.

I agree that Parliament should take a further look at the way we raise the sums of money that we require for our health services. I am—

Mr. Emrys Hughes

On a point of order. If my hon. Friend is not allowed to finish his quotation, Mr. Irving, may he be allowed to give us the date of it?

The Deputy Chairman

This is an important matter. I hope that hon. Members will not waste the time of the Committee.

Mr. Wilkins

I have been thinking seriously about this matter. I do not like this method of gradually increasing the contributions for the National Health Service every fourth or fifth year.

The Deputy Chairman

Order. In the Amendments we are discussing another aspect of the problem and not the one that the hon. Member is addressing to the Committee. He must come to the Amendments.

Mr. Wilkins

I am sorry if I am out of order, Mr. Irving, but I should have thought that it was in order to suggest ways and means of raising the money which the Minister is asking Parliament to vote for the purposes of the Health Service. I should have thought that that was in order on the whole batch of Amendments. The Lord only knows what some of them mean. Nevertheless, I thought that the debate was wide and that we could suggest that the Government should consider other ways of raising the money.

The Deputy Chairman

The hon. Member has made that point although it is out of order. I hope that he will not dwell on it.

Mr. Wilkins

I was coming to the end of my peroration, Mr. Irving.

I said at the beginning that I had risen for two reasons. The first was that I was provoked by the humbug of the hon. Member for Louth.

Sir C. Osborne

Who's talking?

Mr. Wilkins

The second was that I wished to say a word to my hon. Friends behind me and whom I am supporting in their protest about these charges. The only thing I want to say to them about this is that the Conservative Opposition, who have been encouraging them in this by their plaudits as they have gone on and on urging them to belabour the Government on this issue, did exactly the same thing in the past but not one of them went into the Lobby with us on that occasion. Therefore, we have a lesson to learn from the disciplines of the party opposite, who are delighted to see that we are both Government and Opposition. It saves them doing their job.

From the point of view of the Government, I hope that now that my colleagues have made their protest, they will not carry it to the extremes that they have suggested.

Mrs. Hart

I am sorry that one or two of my hon. Friends have made it clear that, no matter what I say, unless I concede their point they will vote in the Lobby for their Amendment, because that rather restricts the effect that I can hope to have on their thoughts on these matters. I can, however, at least hope to convince some of my hon. Friends who have not expressed such a clear determination that our proposals are by no means as unpleasant as they consider them to be and that there are good reasons why the proposals in the Bill should be accepted.

At the cost of being a shade tedious for a few moments, I wish to go into the question of the necessity for an increase in contributions to make up an emerging deficit in the National Insurance Fund. It is necessary that I should do this because none of my hon. Friends or hon. Members opposite who have spoken on the Amendments has commented on the reason why it has been necessary to increase the contributions.

Mr. Tapsell

On a point of order. I apologise for interrupting the right hon. Lady, but in view of your Ruling, Mr. Irving, is it in order for the Minister to make a speech on the lines which she has just indicated?

The Deputy Chairman

The right hon. Lady, as all hon. Members, must speak to the Amendments. The more general argument is appropriate to the Question, That the Clause stand part of the Bill.

Mrs. Hart

Indeed, Mr. Irving, but to indicate why it is necessary to increase the contributions in the proportions which the Bill proposes to increase them, I suggest that it is first necessary to establish why the amount of the contribution is necessary.

The Deputy Chairman

If the right hon. Lady is developing an argument which is essential and relevant to the Amendments, that is perfectly in order.

Mrs. Hart

Thank you, Mr. Irving.

I felt that one or two of my hon. Friends suspected that the need to increase the contributions, however they were divided between employer and employee, had emanated solely from the International Monetary Fund and from sources which they did not regard with approval and that the Government Actuary's Report was not to be taken as seriously as I am bound to take it.

The Government Actuary's Report, which accompanies the Bill, makes it clear that the trends which have become apparent in the last month or so were not so apparent at the time when, for the last increase in contributions which took place in October, the legislation went through the House last July. The reasons why that is so emerge clearly from the Government Actuary's Report.

6.30 p.m.

It emerges very clearly, and I would just underline one particular point here, that the Government Actuary, of course, is continually getting a stream of statistical information from my Ministry and from other Government Departments relating to the income of the Fund, the expected income of the Fund, and the expected outgoings from the Fund, and that the information which the Government Actuary gets is related to things like the expected trend in mortality, the expected trend in employment, the expected trend in retirements, and even a variation of 1 per cent. in income or outgoings, which in normal forecasting might be thought to be a negligible variation, makes a difference of about £20 million to the Fund.

What happened on this occasion was that the trends have gone further than at the time of the legislation last July when they would not have provided a good enough ground for specifying what might be the emerging deficit in the Fund. The trend has now become quite clearly established, and there will be a deficit to meet, as indicated in the Actuary's Report, unless contributions are raised by the total amount which is specified in the Bill. It is necessary to be clear about the total amount of contributions before we discuss their distribution between employers and employees. This amount is absolutely necessary as a result, in particular, of the trend towards more retirements, and the trend towards more people requiring sickness benefits. Those are the two major trends which have affected the intake of the Fund. They have a double effect, because if more people retire earlier more people are drawing out of the Fund and there are fewer people remaining in the working population to contribute to the Fund.

I wanted to make that clear, and I should also make it clear that the date on which contributions will be raised will be 6th May.

I now come to the arguments which have been put forward by my hon. Friends about the ratio between the employers' and the employees' contributions, and the very strong arguments, with which I have a great deal of sympathy, about the particular problems of the lower-paid workers, and the arguments about the unfairness of any poll tax such as this. I turn to what my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) said on this matter. I think that what he said in the Committee this evening was an amplification of remarks he made in the Sun newspaper last week when he suggested, as he did today, that there was some, perhaps sinister, reason why the Government had not yet presented their wage-related scheme. It must be ready, he said; it is the Cabinet which is stopping me from producing it, it is my right hon. Friend the Chancellor of the Exchequer who is saying that I may not produce the new wage-related scheme, which is sitting waiting ready in the cupboard.

I cannot say strongly enough that this is totally unfounded, that there are extremely good reasons why the wage-related scheme has not yet emerged in its White Paper stage, but why it will, I hope, within the next year—before the end of this year.

I think I should remind my hon. Friend that the new wage-related scheme, in which we shall no longer have to be concerned about the inequities of a poll tax to raise insurance contributions but in which there will be earnings-related contributions, is a considerably bigger scheme than was the Beveridge scheme, and that the Beveridge scheme took seven years from the setting up of the Beveridge Committee to the appointed day following the legislation. We have now got to the point, to the mid-stream point, of some extremely complex issues. I want to mention what some of those issues are, so that my hon. Friend can understand that this is not the kind of scheme one can translate from—

Lord Balniel (Hertford)

On a point of order. Is the right hon. Lady in order? Certainly some of us would like to debate this matter later on, but is it in order to discuss the whole of the earnings-related scheme now, as is, apparently, the intention of the right hon. Lady?

Mrs. Hart

Further to that point of order. I was specifically asked by two or three of my hon. Friends, though not, of course, by hon. Gentlemen opposite, who do not share the same interest of my hon. Friends in the Labour Party's wage-related scheme—when the wage-related scheme was likely to be forthcoming, what was holding it up, and I think that this has a very strong bearing on why it is not possible to have a wage-related contribution in this case.

The Deputy Chairman

Order. The Chair has given a little latitude in the debate. On the other hand, I am afraid that we cannot have the whole of that issue debated on this Amendment. I think that the right hon. Lady must come very quickly to the Amendment.

Mrs. Hart

With respect, Mr. Irving, I am addressing myself to the arguments adduced by my hon. Friends in favour of their Amendments, and I am answering questions which were put to me, which they regarded as relevant to their arguments, and which I regard as relevant to their arguments, and which, with respect, I think the Committee has to accept as relevant to the argument about the distribution of the flat-rate contributions as between employer and employee and about the need to have instead wage-related contributions. All these arguments were adduced by my hon. Friends, and, with the greatest respect, they were right to make their arguments, and were not stopped in their arguments as being out of order.

The Deputy Chairman

The Chair has allowed a little latitude in this debate, and I think I have already given latitude to the right hon. Lady. I hope that the right hon. Lady will help the Chair maintain order by coming to the substance of the Amendment; that she will conclude her present argument as soon as she possibly can and come quickly to the Amendment.

Mrs. Hart

Indeed, I am not proposing to go into the merits or demerits of an earnings-related scheme. I wanted to indicate the problems on which my officials are working extremely hard to cover the matters—just about every matter—contained in our present social insurance scheme. Therefore one has to look at the long term and the short term, sickness, widows, married women pensions—every single aspect of a social insurance scheme; each one has to be caught up and worked out.

I can assure my hon. Friend the Member for Ebbw Vale—this is the particular assurance which, I think, he wanted from me—that the new earnings-related scheme is not in the slightest degree being held up, and the moment the work is completed a White Paper will be published, and it will then be available for full discussion by the House and by my hon. Friends. There is no kind of truth in the suggestion that there is some financial reason, some policy reason, why it is not forthcoming at the moment.

It is because the flat-rate contribution represents a regressive poll tax that we regard the production of the new earnings-related scheme as so important and urgent; because I agree with my hon. Friend—of course I do—that throughout the years we have complained of the flat-rate insurance contribution as bearing altogether too heavily on the lower-paid workers. We have regarded it, and still regard it, as a regressive form of contribution, and we want to get rid of it as soon as we can. If, indeed, I could find a technique whereby I could introduce an earnings-related scheme, a system of wage-related contributions, before—

The Deputy Chairman

Order. The right hon. Lady must come to the Amendments.

Mrs. Hart

Mr. Irving, I apologise on this occasion, but my difficulty is, as the Committee will realise, I think—though hon. Members opposite are not particularly anxious to realise it—that there is a very close relationship between wage-related contributions and the argument about the contributions to be borne by the employer and the employee—

Mr. Tapsell rose—

The Deputy Chairman

Order. The right hon. Lady is perfectly correct—there is a relationship; but, so far, she has not made it.

Mr. Tapsell

Will the right hon. Lady accept that some of us are extremely interested in the points which she is making and are waiting to make similar points ourselves when we come to the Question, That the Clause stand part of the Bill?

Mrs. Hart

Hon. Gentlemen opposite fail to realise the motive behind my hon. Friend's Amendment. My hon. Friends are concerned that, since we still have flat-rate poll tax contributions, the distribution of those contributions should be as they have suggested in their Amendment rather than as I propose in the Bill. Their concern arises from the fact that we have not yet got earnings-related contributions.

Mr. Mikardo

With respect to my right hon. Friend, she is confusing the issue. I should love to hear what she has to say about earnings-related contributions, but she has forgotten that we shall be coming to the Question, That the Clause stand part of the Bill, and it can be dealt with then. Accepting for the moment that there is a fixed contribution, we are saying that it should be borne by the employer. That has nothing to do with earnings-related contributions.

Mrs. Hart

I take my hon. Friend's point. I was about to move on and to say that, since we do not have a system of wage-related contributions, the argument about the proportion to be borne by the employer and that to be borne by the employee is a matter which concerns my hon. Friends in their Amendment.

I must distinguish at once, as the debate has tended not to distinguish, between that part of the increase which is related to the National Insurance contribution, dealt with in this Clause, and the National Health Service contribution, which arises in a later Clause. Some of my hon. Friends tended to wrap them up into one. As regards the National Health Service contribution, there has always been a certain relationship between the employers' and the employees' contributions which is of a different order compared with the relationship within the National Insurance contribution. It is the National Insurance contribution that we are discussing now.

Taking the immediate impact on the man with average earnings, the effect of the contribution which he is now asked to pay will be an increase of ½d. in the £. The fact is that, under the 1967 uprating, the contribution paid by employees with average earnings represented 6 per cent. of their earnings.

Sir C. Osborne

Can the right hon. Lady give the figures?

Mrs. Hart

I am about to give them. In October, 1966, the figure of average earnings was £20 6s. 1d. The October, 1967, figure of average earnings shows it to have increased to £21 7s. 6d. That means that the extra contribution payable under the Bill leaves the percentage of an average worker's income paid in contributions unchanged. That is very relevant.

Sir C. Osborne

The right hon. Lady is using the correct figure from the Ministry of Labour of £21 odd as being the average earnings of an industrial worker over 21 years of age. However, our complaint is about the man who is getting less than that, because the burden falls on the poorer-paid man.

6.45 p.m.

Mrs. Hart

The hon. Gentleman has a natural temptation to go to the point which I am about to cover next. However, before I come to the specific problem of the lower-paid worker, I want to take up a point which was made by my hon. Friend the Member for Lewisham, West (Mr. Dickens) and one or two others of my hon. Friends. They made great play of the ratio between employers' contributions and employees' contributions here compared with contributions in E.E.C. countries. With the best will in the world, and at whatever aspect of the social services one looks, it is not possible to draw real comparisons between this country and the E.E.C. countries because of the different way in which a number of our social services are financed and the degree to which the employers' contribution in a number of E.E.C. countries supports services which are paid for by taxation here. Without wanting to knock down my hon. Friends' points, one cannot make meaningful comparisons between social service expenditure and the contribution paid by taxation on the one hand and what employers and employees pay on the other.

Mr. Pardoe

I find it extraordinary that just such a table of comparisons should have been included in a Labour Party publication when right hon. and hon. Members opposite were in opposition, called "The Twelve Wasted Tory Years".

Mrs. Hart

If the hon. Gentleman likes to refer to the documentation on this matter published by the Government in the last year or two, he will find that this point is made. One cannot make a true comparison between them.

I turn now to another of the points made by my hon. Friends. I will come specifically to the lower-paid worker in a moment. I was asked why the Government had not followed the line adopted in 1965 and in the last uprating in 1967, when there had been a different distribution of the proportions of the contributions to be paid. I have already said that, taking account of the increase in average incomes, the percentage is the same as it was after the 1967 uprating. In addition, last October, for the 1967 uprating, the disparity between the employer's and the employee's extra contribution was only 3d. out of a 4s. 1d. increase under the main National Insurance Scheme. If one takes 3d. out of 4s. 1d., one can see how infinitesimal would have been the difference in pence if one tried to relate that same proportion to this increase. In fact, what my hon. Friends are arguing about is a penny, on the basis of the 1967 up-rating—[HON. MEMBERS: "No."] Those of my hon. Friends who say that we ought to preserve the relationship created by the last uprating are arguing about a penny.

Mr. Orme

I do not think that my right hon. Friend does it deliberately, but she is misinterpreting the point of view that was advanced. The comparison that we made was that, on the previous occasion, the employer paid more and the employee paid less. We were not arguing about whether comparative increases should be made this time, but that the employer should pay more. That was the point which my hon. Friends and I made about the redistribution of income. My right hon. Friend is misinterpreting the point.

Mrs. Hart

With respect, I do not think that I am. Others of my hon. Friends said that the whole increase should be met by the employer. At the moment, I am dealing with the point raised by my hon. Friend, which is by how much one would have had to increase the employers' contribution and reduce the employees' contribution if one wished to retain the same ratio. However, it is an infinitesimal amount in this increase because it would have the same ratio as 3d. bore to 4s. 1d.

There were those who argued that the whole increase should be borne by the employer because of the problem of the lower-paid worker. My hon. Friends are quite right when they point out that, fundamentally, to change the relative position of the lower-paid worker, we are not talking just about poverty programmes but about programmes for equality. Those hon. Members opposite who lured my hon. Friends with siren voices to vote against the Government this evening would not agree with my hon. Friends or with me about the extent to which a programme for the redistribution of wealth is necessary before we can solve the problems of the lower-paid worker. But let me—[Interruption.] I am sorry to make hon. Gentlemen opposite so furious. I would expect it to be my hon. Friends who were furious.

Mr. Mikardo

Perhaps my right hon. Friend will allow me to intervene. If she is trying to tell the Committee that the only reason we shall vote for the Amendment is because we have been dragged into it by hon. Gentlemen opposite, she will make me furious.

Mrs. Hart

I assure my hon. Friend the Member for Poplar (Mr. Mikardo) that I would never dream of suggesting that he could ever be lured by hon. Gentlemen opposite anywhere. I am suggesting that hon. Gentlemen opposite are doing their best to see if he will succomb to their temptations, which is a different matter.

I am making the point that behind the discussion this evening are fundamentals on which my hon. Friends are a good deal more likely to agree with me than with hon. Gentlemen opposite.

Mike Miller, who runs the Ford Foundation poverty programme in New York, recently said that poverty is a matter of relativities, that it is relative deprivation, that it ushers in the whole question of the discussion of equality. Accepting that this is so, I turn to consider how the Government are assisting lower paid workers to withstand the penny in the E increase represented by this contribution. My hon. Friend the Member for Liverpool, Walton (Mr. Heffer)—I could be wrong—indicated that on prescription charges we were doing nothing to protect the lower-paid workers. In fact, as my hon. Friends know, people in full-time work living below supplementary benefit level are one of the groups we will protect from prescription charges whether by refund or, as I hope, by exemption. This was mentioned—[Interruption.] I am surely entitled to answer the points which have been put to me by my hon. Friends. If the hon. Gentleman the Member for Shipley (Mr. Hirst) was not in the Committee to hear them he should at least not interrupt when I seek to answer them—[Interruption.]

The Deputy Chairman

Order. I hope that hon. Members will leave matters of order for the Chair. It is a difficult enough job as it is.

Mrs. Hart

This was one of the points mentioned in the debate.

Another point on the protection of the most vulnerable section of the community is that, one month before the National Insurance contribution increase comes into operation, which will be on 6th May, all the families of lower-paid workers will have begun to draw, if they are not already drawing some part of it, a 7s. increase in family allowances. Since poverty arises from the maladjustment of family responsibilities to a low wage and not only from the low wage itself, this will mean that an average family with two children will have 7s. extra coming into the house against the extra cost of this Bill and other measures involved. That is one part of it.

Lord Balniel

Was the figure of 7s. family allowance fixed on the assumption that there would be an increase in the National Insurance contribution?

Mrs. Hart

Of course not. As the noble Lord will have seen from the Actuary's Report, the trends that made the increase necessary in the National Insurance contribution emerged only within the last two or three months.

Another thing the Government have done—and this is terribly relevant to the problem of the lower paid and their families—is that, by establishing the family allowance increase in April on a give-and-take basis, we have created a foundation on which in future we can give more help to lower-paid families without at the same time wasting a great deal of money by giving family allowances—or allowing families to retain the full value of their family allowances—when they are in middle income groups and do not need the help so much. Therefore, it cannot be said that the Government, in introducing this Bill, are failing to introduce at the same time measures that give positive, practical and substantial help to the very people about whom my hon. Friends are concerned.

I do not know how far I carry my hon. Friends with me, but, given that it is absolutely essential to raise contributions to put the National Insurance Fund into a reasonable position again, given that we agree that the flat rate is an iniquitous poll tax to be replaced by our new scheme as soon as we can bring it in, given that the new scheme will end the iniquities of the flat-rate poll tax, given that until we can do that there is no technique so far available to me whereby I can end those iniquities, given that the proportion of a worker's income represented by these increased contributions, bearing in mind the increase in average wages, remains the same as it was at the time of the last up-rating—

Mr. Mendelson

Will my right hon. Friend please answer the question which I and my right hon. Friend the Member for Lanarkshire, North (Miss Herbison) put in the main debate: why, in considering these matters, did not the Government put the whole of the increase on the employer? My right hon. Friend has not yet answered this question.

Mrs. Hart

I have not done so, because I would have to argue a matter which has been ruled out of order by the Chair, namely, the question of the increase in Exchequer contributions to substitute for the lack of employees' contributions. That is what would be required. The reason that this is not done, and the reason I would be opposed to it, is because, as I have explained on a recent occasion, our social insurance system—

Mr. Heffer

On a point of order. This is a relevant point, because the whole argument up to now has been about the increase in the contributions of the employer. My right hon. Friend has made the point that she cannot deal with this because she would have to discuss the question of Exchequer contributions. I should like to know what precisely is the Chair's Ruling. It makes the whole of this debate a lot of utter nonsense unless we know the answer from the Government.

Mr. Mendelson

Further to this point of order. Previously in the debate hon. Members have referred to the Exchequer contribution and have been completely in order. Therefore, I do not think my right hon. Friend should have any fear on this.

The Deputy Chairman

The Chair has not ruled anything out of order which is relevant to the Amendments on the Order Paper. We cannot have a full debate on the National Insurance Act, but if the right hon. Lady is able to relate it to the Amendments, she will be in order.

Mrs. Hart

I do not see why I should be interrupted on points of order to say that something is relevant which I am in the middle of saying.

The Exchequer contribution, in its relation to the National Insurance Fund generally, stands at the moment at about 15 to 16 per cent. I explained on a recent occasion in the House—and it was this I was saying when my hon. Friend made his point—that our National Insurance Fund guarantees benefits as of right on the basis that people have contributed to the Fund and draw benefits from it. Our Fund is a pay-as-you-go one. Today's benefits are financed in the main by today's contributions; tomorrow's benefits are financed by tomorrow's contributions. If one were seriously to start a trend of disturbing the ratio between total contributions and Exchequer contributions, one would be distorting the basis of the National Insurance Scheme and paving the way, as I explained to hon. Gentlemen opposite about ten days ago, for a totally different system in which benefits were financed primarily out of taxation, in which they were therefore exposed to the whims of political and economic fortune, and in which there was no longer the guarantee that pensions were paid as of right, which is what the Labour Party values.

7.0 p.m.

That is why I would not want seriously to disturb the present ratio which the Exchequer contribution bears to the other contributions made to the Fund. That is why it is not an answer to the problems about which my hon. Friends are concerned. I have explained why an answer cannot be found, either, in changing the proportion between the employer and the employee, namely, that I maintain that the proportion as represented by a percentage of wages is unchanged.

My hon. Friends are quite wrong, and so are hon. Gentlemen opposite, if they seek to make the case that the Government are not protecting the lower-paid workers, and the most vulnerable. I believe that my case is made, and I must honestly say to my hon. Friends that, although recognise how deeply their case springs from concern about this problem of poverty, a concern which I share totally, their case is not made out. I appreciate that their concern arises from the effect of low paid employment, but I believe that their anxiety that the Amendment should take the place of the provisions of the Bill is a misplaced emphasis, and does not follow logically or rationally from the concern which I share with them.

>Amendment negatived.

The Deputy Chairman

The Question is, "That the Clause stand part…".

Mr. Mikardo

On a point of order. Mr. Irving, your predecessor made it clear that although a large number of Amendments were being debated together, they could all be voted on separately.

The Deputy Chairman

I have not departed from the Ruling given by the Chair. The Amendments must be voted on in the order in which they appear on the Notice Paper. This Motion has to be put before we come to the Amendments on which the hon. Gentleman wishes to vote. His right as conceded by the Chair will be preserved.

Question proposed, That the Clause stand part of the Bill.

Mr. Marcus Worsley (Chelsea)

I hope that the right hon. Lady will accept from me that the interventions in her speech on the Amendment did not, as she appeared to be suggesting, indicate a lack of interest by this side of the Committee in what she was saying. We were concerned lest she took a broader view of the rules of order than was taken by other speakers. I have risen to urge the right hon. Lady to expound in greater detail—and I assure her on behalf of my hon. Friends that it will be without interruption—on those matters which she sought to raise, we thought by stretching the rules of order, on a relatively detailed Amendment.

One of the difficulties of this type of Bill, including as it does so many different matters, is that when it is given a Second Reading it is very difficult for the Minister proposing it to cover all the points that are raised. There are a number of matters which we would like to discuss, and to have what I might call Second Reading explanations from the right hon. Lady.

I start with subsection (2). The right hon. Lady is here seeking an extension of the powers of her Department. I have no particular criticism of this extension as such, but, when a Minister seeks an extension of powers, it should be justified, and I hope that the right hon. Lady will be kind enough to say what case there is for this broad extension of powers in her Ministry.

The two main matters which fall to be debated under this Clause are, first, the impact of the Clause on the vulnerable sections of our community. We discussed this in some detail on the first Amendment, but I would like the right hon. Lady to give us a little more information on just what impact the Clause will have on these people. Research carried out by her Ministry has shown that under the previous arrangements, after she had raised Family Allowances by 7s., there were likely to be 250,000 children below the poverty level. How many more children will be brought into this category by these new legislative enactments? The Government have said that they will protect the most vulnerable orders of society, but the Clause will increase the burden on those who are most vulnerable.

The main burden of the debate on the Clause must be on the extraordinary fact that in the few months between June of last year and February of this year the Government Actuary produced reports which were so different that they upset all the Government's financial calculations. I think we must be told the reason for these extraordinary diversities of judgment. When Mr. Harold Macmillan was Chancellor of the Exchequer, he described running the Treasury as being akin to calculating the trains on last year's Bradshaw. It seems that the Government are operating on last year's Old Moore's Almanac. It is astonishing that two completely different reports could be produced in such a short interval of time. As I said during the Second Reading debate, this is clearly not the fault of the Actuary. It must be due to faulty information being fed to him, and I would like the Minister to tell us just how such extraordinary diversities of judgment can come about in such a short time.

There are two matters on which I would like an answer. The Government apparently assumed—and I would like some indication of why they did so—that the lighter mortality rate among pen- sioners was "only temporary". Why did they make that assumption? Surely it shows a remarkable lack of perception, and a lack of research in the Department, if the right hon. Lady cannot give accurate information on such matters. Why was the fall in the working population not anticipated? These two facts, which could have been anticipated if the right hon. Lady had adequate research facilities in her Department, have upset the Government's calculations on this important matter. Surely there should now be an infinitely more effective and sophisticated research element in the right hon. Lady's Department to give the necessary information.

There is an amazing difference between these two Reports. In the June Report, the Actuary was talking complacently about the picture up to 1970, which he was convinced was in order, except for a little deficit in the last year, and was looking ahead into the sunny uplands of surplus in the 1980s. Yet this month's Report has shown a complete difference. It makes no mention of the period beyond 1970. The First Secretary said on Second Reading: I accept that, looking beyond the 1970s a continued reliance on the flat rate would not stand the strain."—[OFFICIAL REPORT, 20th February, 1967; Vol. 759, c. 356.] What an astonishing change that, last June, the Actuaries Report should calmly look ahead into the 1970s, 1980s and even 1990s on the flat rate basis and that the responsible Minister should say in February that it would not stand the strain.

How are such extraordinary variations of judgment possible in so short a time? They do not bring any cause for confidence in the administration of the right hon. Lady's department. The Government owe the House and the country a much fuller explanation of how the Minister sees the finances of the scheme working in future. We are more than anxious to debate any proposition relating to a future pensions policy. The right hon. Lady will have heard in this debate and others many of my hon. Friends criticise the present flat rate poll tax and she will find many, in the House and the country, with her in an attempt to find a fairer system without these disadvantages for the low wage earner and part-time worker.

But she and her hon. Friends must not pretend that this poll was created by Tory Governments; they should remember that it was introduced under the 1946 Act and came into operation in 1948 under a Labour Government. This should surely not be a matter of party controversy. The flat rate system was devised during the war and introduced after the war by a Labour Government. It served its purpose well over a period, but we all now agree that it should be replaced. So we should get away from the foolish and quibbling attitude of pretending that the Tories introduced this.

What we all would like to do is find a more equitable system of financing social services which does not have this impact, but I must remind the right hon. Lady that this Government through S.E.T., have vastly increased many of the system's ill-effects. I realise that it falls only on the employer, but it has a disincentive effect, which we must criticise, of discouraging the employment of vulnerable people. I hope, therefore, that the Minister will state more clearly her ideas of something to replace the flat rate system. She will have all our attention in this matter.

7.15 p.m.

Dr. David Owen (Plymouth, Sutton)

The Committee faces a considerable problem. In answering the Amendments, my right hon. Friend in effect made a "Clause stand part" speech, which was difficult to avoid. The core of the argument is whether we continue the present financing of the National Insurance Fund. This is causing the greatest concern on both sides. I say to the Minister and the Chancellor of the Exchequer that, if the Government Actuary can produce a report in June, 1967, which is shown seven months later to be based on totally inadequate information, they have a duty to explain why.

The explanation in Command Paper 3532 is nowhere near accurate. It would be a reasonable Government Actuary's Report if it were considering the situation for a normal year during which it had been estimated that the Fund would be in deficit. If we were debating this Report in 1970 following the previous argument in 1967, its information would be reasonable, but it covers up a total incompetence in estimating trends.

We will all expect, considering how we collect statistics and the appalling imbalance between regions, a considerable margin of error, but we are asked by the Report to accept a margin of at least 4 per cent. My right hon. Friend said that a 1 per cent. error could cost the Fund £20 million. We are asked to accept that, by March, 1968, the Fund will show a deficit of £75 million, when we already knew that the Fund was estimated to make a surplus this year of £1 million.

This is not something which we are just arguing about now. It was argued in July, 1967. Average wages have slightly increased, so the Fund has earned more, but I am concerned because this country must take a severe cut in personal living standards over the next two years to make devaluation work. I advocated devaluation in the House for many months before it came, so I have a responsibility to make it work, which makes me look critically at any flat-rate tax on lower-paid workers when I am asking them to accept voluntary restraint.

What I will not accept is the old principle that the National Insurance Fund had to be self-balancing and could not run into deficit. The actuarial basis of the Fund is fraudulent. We all know it, and it is time that it was said and the Minister was not in the invidious position of having to defend a system which is reputed to be actuarial but which is not. We must get away from this principle and she should ask for money on the basis of need and not some spurious claim that it is running into deficit.

I asked the Chancellor of the Exchequer for a statistical estimate of how soon the Fund would run into deficit, in view of the previous estimates over the past 20 years, but I received no reply. The reply might have been frightening. Seven months later, the Fund is running into deficit. In seven months' time, will my right hon. Friend come back again and apologise? I know that it hurts her as much as anyone on this side to increase this poll tax: she has admitted it herself.

The basic thing which must be changed is the financial structure of the National Insurance Fund. As long as we continue to impose upon my right hon. Friend, through the House, this millstone, consisting of a statutory duty to balance the Fund, she will have to ask the House for further contributions. We can still argue about the balance, and how the contribution should be made up, but the basic problem arises from the fact that we have inherited a financial system which is a nonsense, and which is not based on need, and it is particularly necessary to change it now.

I want to make a few detailed points about the Actuary's Report, which is grossly inadequate. It talks about trends. If the trends were wrong in June, 1967, how are we to know that they are right in February, 1968? We should have a detailed actuarial report showing the basis of these trends. I thought that some of the trends were extremely worrying, and merited a debate in themselves. For instance, we are told that The rise in sickness which has occurred during the past four or five years has continued and claims during the nine months ended in December last were about 2 per cent. above the level assumed in June, 1967. Most of us would be prepared to accept a 2 per cent. increase in sickness claims, although we would all regret it and want to know the reasons for it. Looking back to June, 1967, we find that there was also an increasing trend in sickness then. It said It is difficult to judge whether the trend had been halted, but to allow for the increase an addition of 3 per cent. has been made to the previous estimates of the cost of sickness benefit. So the Committee is now accepting an increase of 5 per cent. in the cost of sickness benefit. Why is sickness increasing? This is something about which the Committee has the right to ask the Government. We want a full and detailed breakdown.

The Temporary Chairman (Mr. Victor Yates)

Order. The hon. Member cannot raise that point on the Clause.

Dr. Owen

The basis of the Clause is the Actuary's estimates contained in Cmnd. 3321 and Cmnd. 3532, Mr. Yates. The Reports are interrelated. I hesitate to question your Ruling, Mr. Yates, but if we are not able to discuss the financial basis for the National Insurance Fund the whole debate will break down.

The Temporary Chairman

I thought that the hon. Member was going on to the question of general health, which does not arise under the Clause. To the extent that his remarks relate to the Clause he is in order.

Dr. Owen

I am grateful, Mr. Yates. I do not intend to follow that line of questioning, but it reveals something which might cause us considerable concern.

The other question that concerns me is unemployment. We have had a fast-rising rate of unemployment for some time. The basis on which I believed that devaluation was the right choice—and the last month's uemployment figures show this—was that there would be a falling trend in unemployment. One of the major reasons why we should accept devaluation as a coherent strategy is that it allows the Government to increase industrial productivity and to expand, while unemployment progressively decreases.

We are now told that the long-term rate of unemployment of 2 per cent. is again to be adopted. I wonder what the result would be if we could ensure that unemployment in 1968–69 dropped to 11 per cent. I should have thought that that would be a reasonable target figure, even given the financial constraint and all the policies that the Government are asking us to accept, and which I am prepared to accept. My hon. Friends and I may differ on that point. But I would expect devaluation to result in a rapid fall in unemployment.

What do the Actuary's figures reveal? The Report shows that if unemployment falls to 1½per cent. in the year 1968–69 we can expect a saving of £60 million on the National Insurance Fund. Reference has already been made to the fact that wages are bound to increase, even if we have a nil norm. This means a saving in the National Insurance Fund. These arguments were put forward in the previous debate in July. We heard from the Ministry at that time that if there was a 5 per cent. increase in wages in the years 1967–68 and 1968–69 there would be an increase in the National Insurance Fund of £2 million in the first year and £20 million the next year.

However we look at the parameters on which the Actuary's figures are based we are forced to conclude that they are a nonsense. The record of the Minister of Social Security stands for anyone to see. She is extremely concerned about the situation but she is forced, by the financial structure within which she must work, to impose an increasingly savage poll tax—and at a time when the Government are asking for wage restraint in order to make devaluation work but we have not yet tackled the problem of a national minimum wage.

I accept the principle of wage restraint and, if necessary, legislation to ensure it, but I will not continue to support a savage poll tax on lower-paid workers or a situation in which nothing is done about those lower-paid workers. We now have a situation in which millions of people, for a full week's work, earn less than the supplementary benefit. It is an impossible situation. When we consider the wage stop figures—and it is particularly brought home to us when we have high unemployment—we realise that this is just the tip of the iceberg.

This is the real social problem about which I know my right hon. Friend is concerned. She must tell the Chancellor of the Exchequer that the financial system on which the National Insurance Fund is based is a nonsense. She must ask for the removal of the limitation on her freedom to allow for need, so that she can administer her Department humanely. Until that is done we shall continue to have these absurd debates, which try to justify the unjustifiable.

Mr. Tapsell

There would seem to be three main aspects to the further increase in the weekly stamp for National Insurance proposed in the Clause. First, there is the financial justification; secondly, there is the question of its immediate social effect and, thirdly, there is the long-term implications that it holds for the future.

To me, and presumably to many hon. Members opposite who have spoken to previous Amendments, one of the most depressing aspects of the debate is the fact that we have been told by the right hon. Lady—as we are told in the Actuary's Report—Cmnd. 3532—that the proposed increase in the employee's stamp has nothing to do with the grave economic situation which the Government's folly has brought about.

Apparently, the Clause has not been inserted op the basis of the policy advocated by the hon. Member for Plymouth, Sutton (Dr. David Owen) or the I.M.F. It is not part of the policy of deliberately lowering the standard of living of the British people to make devaluation work. On the contrary, we are told that the increase is simply the result of the necessity to keep the national Fund in balance—to keep the pay-as-you-go arrangements in balance—because of three changing social characteristics among our people which have nothing to do with the economic situation; first, the fact that pensioners are living longer, secondly that people are retiring earlier and, thirdly, that the working population is decreasing.

7.30 p.m.

We are told that if the stamp is not increased, the Fund will go into deficit. It is depressing to think that we have no guarantee that there will not be a further increase in the stamp on 19th March, when the Chancellor belatedly tackles the problem of private purchasing power and expenditure. This is a depressing possibility because it gives added point to the second aspect of the increase; its immediate social effects.

As hon. Gentlemen opposite have pointed out, this is the third increase in the employee's contribution to be made by the Labour Government since October, 1964. It constitutes a total rise of 5s. a week payable by every employed man, putting the personal contribution of the employee up from 11s. 8d. to 16s. 8d. a week. It is the first time that anyone can remember that such an increase has not been accompanied by an increase in benefits; and, of course, it must be viewed against the background of sharply rising taxes and prices.

It is not surprising, therefore, that hon. Gentlemen opposite—and I join them—should have emphasised the fact that this latest increase will again hit hardest the most vulnerable sections of the community. One wonders about the fate of the pledge given by the Prime Minister to the nation on television on 19th November, 1967, when he said that the hardest hit sections of the community would be protected from the effects of devaluation. In recent weeks I have sought to discover the Government's practical intentions for giving effect to that pledge. I have received a number of odd answers to some supplementary questions.

The answers I have received to this simple yet vitally important question have been surprisingly varied and vague. For example, the Leader of the House told me that the most vulnerable sections of the community were not yet sufficiently feeling the ill-effects of devaluation to justify any special measures to protect them. The right hon. Lady the Minister of Social Security, both a few weeks ago and today, said that the hardest hit had already been protected by the latest family allowances legislation—this magical piece of legislation introduced some months before devaluation, though it is not yet in effect. The Prime Minister, with his greater political skill, has given me both answers on different occasions. No doubt feeling that this is an untenable position, even for him, the right hon. Gentleman now refuses to answer any further questions on this subject and simply transfers them to other Ministers.

The proportion of the National Insurance stamp to national average earnings will, in May, when this proposal comes into effect, be higher than it was when the Conservatives left office in 1964. In many parts of the country—certainly in rural areas such as South-East Lincolnshire and in my constituency—it will be a real burden to many. It is all very well for the right hon. Lady to talk about average national earnings being over £21 a week, but my constituency contains a large number of agricultural workers, many of whom, during at least the winter months are on or near the basic agricultural wage and, in addition, large numbers of people on the coastal strip who obtain only part-time seasonal work on quite low wages. In my constituency £21 a week is way above average local earnings.

Consequently, this proposed additional shilling on the stamp will have three immediate and undesirable social effects. The first is that the elderly, the not very fit and the slightly below par performers will find it harder to stay in work. Employers will increasingly find the National Insurance stamp too much to pay for anyone who is not completely on top of his job. This will be particularly the case in industries which pay the full S.E.T.—notably the service industries—and this will apply with severity in my constituency, where the service industries provide a large part of the employment.

I was surprised to hear the arguments used by the hon. Member for Liverpool, Walton (Mr. Heffer)—who I regret is not now in his place—to the effect that if this increase was shifted entirely to the employer, then this would help to increase efficiency. In the comparisons he gave about employers and employees in this and other countries, he omitted to mention the S.E.T. aspect here, a factor which must be taken into account in making such comparisons.

We cannot all be pacemakers. We must concern ourselves with the problem of what is to happen to people when they pass their physical or mental peak. That is one of the great drawbacks to the present system. Thus, the second undesirable social effect of this increase will be that people will find it harder still to get part-time work. This will bear particularly hard on women with dependent relatives, on the elderly and on those who are not completely fit.

The third immediately undesirable social effect will be on the 160,000 large families which, despite the fact that the breadwinner is in employment, contain about 250,000 children living below the subsistence level. I hope that the Minister will give precise answers to the questions asked by my hon. Friend the Member for Chelsea (Mr. Worsley) on this point because, as I understand the position, even when the family allowances increases come into effect later this year, they will still leave about 125,000 children in families below the subsistence level. I hope the Minister will make the position clear. It is evident that the National Insurance contributions problem will not be overcome by the availability of an extra 7s. a week on family allowances, particularly for these "wage-stopped" families.

What are the future implications of the Clause? We are all interested to know whether this country is at the beginning of a substantial increase in the expectation of life for pensioners. Although until recently the chances, at birth, in one's teens or in one's early 20s, of living to be 60 were continually improving, once one reached the mid-sixties one's expectation of life seemed not to be much better than it was 20 or 30 years previously. The latest Government Actuary's Report seems to suggest that, perhaps because of medical advances, a real break-through has been achieved and that the expectation of life for pensioners has now statistically improved.

If this is so, this must have fundamental implications for many of our social services. While it would not be in order for me to discuss these in detail on this Clause stand part, but confining my remarks strictly to the narrow National Insurance point this fact might seem to mark the point where the increasing financial instability of the fund, which even now is being heavily subsidised by the graduated contributions—remembering that practically no graduated pensions are yet being paid—will not be solved by future proposed increases in flat-rate contributions. If pensioners are to live longer this will throw an increasing burden on a decreasing working population to support an increasingly larger retired population. It will cause growing pressures to abandon the flat-rate contribution, the "poll tax" as many hon. Members opposite contemptuously referred to it. When I first came into politics the flat-rate contribution earning a pension paid as of right was one of the things of which the Labour Party was proud. Although it was a Beveridge recommendation it was implemented by the Labour Government. Now it is an extraordinary thing about Socialists that while other people would be silent and blush they shuffle off their guilt on to others and so we are told that this wonderful flat-rate contribution earning a pension as of right which was trumpeted from all the Labour platforms is now to be regarded as a discredited Tory plot.

Dr. David Owen

I wonder whether the Tories would keep silent or blush?

Mr. Tapsell

I think this to be a time when, for the sake of the country, Tories should do neither. I agree with my hon. Friend the Member for Chelsea that a great deal of rather bogus nonsense is talked about the so-called poll tax. The situation has changed largely because of the failure of successive Governments to control inflation and the flat rate contribution is now outliving its usefulness. We should all be thinking along different lines, perhaps of abolition of the flat rate contribution combined with abolition of Selective Employment Tax and moving instead towards a possible personal percentage based social security tax with higher proportionate contributions from employers as in most other Western European countries. To that extent I have considerable sympathy for the speeches of the hon. Member for Poplar (Mr. Mikardo) and others.

The introduction of a new type of National Insurance stamp, even under the present flat-rate arrangements seems urgent at an intermediate rate between the full rate and the industrial injuries element to cater for part-time workers and the elderly who want to ease up, but not to retire altogether, and some other categories who will be particularly hard-hit by this Clause. The present arrangement whereby one has to be out of National Insurance altogether or pay 16s. 8d. is too rigid and, far from helping those categories which it is meant to help, it causes positive harm.

Some sections of the Press—and one assumes some sections of the public—seem to be seized with an almost masochistic fervour for misery at the present time. They can hardly contain their glee as they wait for all the bad news to be announced on 19th March. Perhaps they think it will all happen to the other chap but this particular bell must toll for all of us. I do not share this feeling for the hair shirt, one strand of which is woven for us by this Clause. I look forward with hope and confidence to better times under different leadership.

7.45 p.m.

Mr. Norman Atkinson (Tottenham)

Before referring to two important omissions, perhaps I may comment on the speech of my hon. Friend the Member for Plymouth, Sutton (Dr. David Owen). He said that in order to make devaluation work he was quite willing to see wage earners suffering a reduction in living standards. That is by no means a unanimous view on this side of the Committee. As I am sure many others do, I completely reject the argument behind that thought. The remainder of the hon. Member's speech I thought extremely to the point. It graphically demonstrated the problems facing the Government at the moment.

On Second Reading the Chief Secretary referred to the result of transferring these costs to the employer which, he argued, would increase industrial costs and, therefore, reflect an increase in our export prices and as a result we might suffer a fall in export earnings. I have gone to the trouble of getting some figures from a very reliable source to try to analyse what has happened to export prices as a result of increased industrial costs since 1958. As a result of analysing costs and on-charges since that time, I find that the effect of transferring these costs to the employer would make a difference of .0008 per cent. on export prices. I am sure the Minister would want to answer this.

The Temporary Chairman

Order. The hon. Member seems to be referring to a matter dealt with on a previous Amendment. The Motion is, That the Clause stand part of the Bill. I do not think we can have another discussion on the Amendment.

Mr. Atkinson

I am sorry, Mr. Yates, but I thought this was relevant to the Clause we are discussing. It was referred to by the Minister when discussing this Clause. By an omission the right hon. Lady failed to answer it and, because of that, I am raising it again.

The other matter to which I direct the attention of the Committee is that the whole of the right hon. Lady's argument was about relating contributions to average earnings. When saying that average earnings are £21 7s. 6d. a week, she should also claim that benefits are likewise the same proportion of annual earnings, but they are not. It is bogus to argue that because contributions remain today at the same percentage of earnings this is a justifiable increase while at the same time failing to mention that benefits have slipped far behind what they were in the years quoted. This relates to lower wage earners and it is an argument we have to meet.

The right hon. Lady has not related this argument to the whole question of the wage stop. One of the most obnoxious things about the poll tax is that lower income workers are generally subject to a wage stop and therefore cannot take advantage of the maximum benefits under the scheme. Yet, at the same time it is proposed to impose on them the same increase as that which applies to workers receiving very much more per week who are not subject to a wage stop.

It would have been wrong to have allowed this debate to go by without directing some attention to these two omissions by which the Government spokesmen have not answered points made in the debate and which, for reasons best known to them, they have avoided answering.

Mr. Pardoe

I wish to take up some of the points made by the hon. Member for Plymouth, Sutton (Dr. David Owen) concerning mistakes made by the Government Actuary. I say "mistakes" advisedly. If we relate this Clause to the Report we had from the Government Actuary, we see that certain of these errors could have been avoided. I do not like using the word "Actuary" in connection with a National Insurance system because the actuarial element is very small. We do not have a fund; we have an account: and where one has an account one has accountants and not actuaries. It would probably be better to dismiss these words from the language that we use in our debates on the social security system.

In the Government Actuary's Report it is said that income from contributions has been adversely affected by changes in the contributing population. The Report says that without any clear indication of the underlying causes it was impossible to forecast the extent to which these trends would continue. Obviously, it is sometimes impossible to forecast some of the trends. I agree that mortality figures are extremely difficult and complex.

However, I think that we could have made better attempts at it had we employed the normal techniques that planners and business would have used, such as some kind of market research related to willingness to stay away from work when sick, which is one of the factors which have increased the amount of sickness benefit. There are also the problems which arise, as mentioned in the Report due to the desire to retire earlier. I think it would have been possible by normal businesslike techniques to discover whether there had been an increase in those intending to retire at an earlier age. We could have decided that last June when the last Report was made, or last October when we voted these figures.

When the Government Actuary tells us that in October, 1967, the higher rates of benefit were intended to take care of the period up to March, 1970, and then we are faced with these very significant changes, it negates the whole basis of planning. I do not see how one can plan any thing if one does not have better figures to work on. Perhaps this is a sphere in which we should use business techniques of forecasting and forget a little of the actuarial techniques, which do not seem to be applicable in this case.

I want to take up one or two of the points made by hon. Members opposite. The hon. Member for Poplar (Mr. Mikardo) said on the Amendment that the difference between right hon. Members was between those who say the same thing on whichever side of the House they sit. Perhaps we ought to have a special section in this House where those who remain constant could sit. The hon. Member could use the Liberal benches for this purpose. It is one of the very few places where one can remain consistent.

I have been taken off my guard. I assumed that I could rely on the word of hon. Gentlemen opposite that they would divide on the last Amendment. I have ceased to take the word of certain members of the Government Front Bench, but I took the word of hon. Members on the back benches. So I am sorry that we did not divide. I shall ensure that that does not happen again.

The right hon. Lady tried to answer the point that had been made. It was a much more general point than was applicable to the specific Amendment that had been moved and related to the Clause as a whole. On the point about why the Government had not brought forward the major scheme which would have meant that the Clause need never have been before us, the right hon. Lady said that they had nearly ready a very big scheme, one very much bigger than the Beveridge scheme. I hope that it is not just big. One can say the same thing about the Transport Bill; it does not necessarily mean to say that it is good legislation.

From some of the points that have emerged from speeches from the benches opposite, I should not say that what we are going to get from the Government will have any great relation to the policies which they put forward when in Opposition or to schemes that I should want to see.

Mrs. Hart

The work that we are doing on the wage-related scheme is specifically to translate the Labour Party policy on superannuation into legislative terms.

Mr. Pardoe

I am glad to hear that at last one promise is to be kept. I am only sorry that the Government have not kept the promise that said that the plans were ready to swing into action. "This will he done without delay" was what the Prime Minister said in his election address about this scheme.

I do not want to fight on this issue. There are much more important points in the Bill to discuss. I do not think that anybody should vote against the Clause—I certainly intend to—unless he has an alternative. I am sorry that my Amendment which puts a specific alternative for a social security tax was not called, but I fully understand why. Nevertheless, I believe that I and my hon. Friends have consistently put forward an alternative for a social security tax related to income. It would mean that the whole basis of the poll tax could be swept away. It would be a very much more satisfactory method of financing our social security system. It would be a percentage of pay roll. It is important to realise that under our proposals the lower-paid workers would not be paying more than they are now; many of them, certainly the lowest paid, would be paying substantially less.

I want to take up a point that we were not able to take up on the Amendment, that there are three contributors to the social security system, not two. The hon. Member for Ebbw Vale (Mr. Michael Foot) tried to make this point, and I think that he succeeded in spite of the fact that there seemed to be moments when he was moving out of order. He made the point that the Exchequer was an important contributor. I remember when the Labour Party criticised the Conservative Party for its failure to keep the Exchequer element up to the mark which the Labour Government had set in the 1945–50 period.

The right hon. Lady—I found it extraordinary—used the word "dangerous" in relation to what she called the distorting proportion of the contribution from the Exchequer. I do not think there is anything very dangerous in it. That contribution has already been distorted and distorted considerably. In 1948 the employers and the employees met only 69 per cent. of the total cost of the social security system. In 1933 they were paying 81 per cent. Now, according to the latest figures of the Government Actuary, what the Government are paying is down to 16 per cent. So the Exchequer contribution to this so-called fund has fallen from 31 per cent. in 1948 to 19 per cent. in 1963 and 16 per cent. according to the latest figures in the Actuary's Report.

The tendency under the Conservative Government for this to happen was attacked by right hon. and hon. Gentlemen opposite when they were on this side of the House. It is a pity that the Government have allowed this to get out of hand and let the Exchequer contribution he reduced in this way. But I hasten to add that I do not think that an increased Exchequer contribution would solve the whole problem. It would, however, certainly have been substantially better than the Government's proposal in this Clause. I should have preferred to see an increased Exchequer contribution because at least part of it would have come from taxes related to income and it would not have borne so heavily on the lower-paid workers.

Because I have put forward what I believe is a comprehensive alternative and because I believe that the Government have taken the very worst of all the options open to them, I shall certainly vote against the Clause.

8.0 p.m.

Mr. Mikardo

I am grateful to the hon. Member for Cornwall, North (Mr. Pardoe) for his kind invitation to join him on the Liberal bench, which he put on the ground that that bench is the home of consistency in the House. I beg him to recall that consistency has no virtue in itself. One of the favourite novelists of my youth described consistency as the refuge and consolation of the dull-witted. Consistency is of value only if one is consistent for the right thing. With no great effort, I can resist the hon. Gentleman's invitation to join him there in being consistent on behalf of that strange collec- tion of moonbeams from the larger lunacy which constitute Liberal Party policy.

The point I have risen to make is almost procedural. My hon. Friends and I indicated in the previous debate that we think that what is proposed in the Clause is wrong. We did not divide on Amendment No. 2 because we thought that the point was better raised on Amendment 17. But the quirks of our Parliamentary procedure impose a long gap between the time when we put our arguments a few minutes ago and the time when Schedule 1 will be reached, very late at night. Because of that, one might be misunderstood if one registered one's voice on Amendment No. 17, very late.

Moreover, I have in mind, as I always have, the convenience of those hon. Members who are hanging about the building only for the purpose of supporting the Government in the votes which are to come. I would not want them to have to vote too late. For these reasons, my hon. Friends and I have decided that we shall not divide the Committee on Amendment No. 17 but shall show our view of the situation by voting against the present Question, That the Clause stand part of the Bill.

Mr. Mendelson

On what was, in many ways, the main question, namely, why the Government had not decided to put the additional burden on employers, I was glad to note that, at least, my right hon. Friend the Minister of Social Security did not repeat the statement made by the First Secretary of State, that it would have interfered with the export prospects of business people because of the increase in their costs. That argument was sunk without trace, and of that I am glad.

The points which my right hon. Friend did make, however, did not make a convincing case. She referred to the lower-paid workers, telling the Committee that the Government would do a number of things for them but that, in any case, that section of lower-paid workers who were entitled to draw supplementary benefits would not be affected by some of the charges which would be imposed, for example, prescription and other charges. That is a very poor case.

Mrs. Hart

My hon. Friend has got slightly wrong the passage in my speech to which he is referring. I said that the Government are making provision that people in full-time work below supplementary benefit level—the lower-paid workers about whom my hon. Friend is talking—will be protected also against prescription charges.

Mr. Mendelson

Yes, that is precisely the point to which I was referring. I may not have expressed myself clearly, but I understood the point when my right hon. Friend made it in her speech. I am coming to it now.

If my right hon. Friend confines that protection only to that section of the lower-paid workers who have such a low income that they are entitled to supplementary benefits although fully at work, she underlines the case which my hon. Friends and I have been making all afternoon. It leaves out millions of lower-paid workers who are just above that very low income line. They will not be protected at all. That disposes of the point which my right hon. Friend attempted to make.

Her only other point established what seems to be a new sacred cow. My right hon. Friend referred to a certain percentage of total earnings. She said that the percentage would not be changed, the implication being, without further argument, that this wasipso factoa justification for what the Government are doing. Where is that justification? Where has the Labour Party ever argued that the percentage contribution of total earnings which working people make to this poll tax must remain as high as it has been and must remain the same? I have yet to see any reference to such a doctrine in Labour Party policy. Therefore, the point is without value.

What my hon. Friends have been arguing today, and what my right lion. Friend the Member for Lanarkshire, North (Miss Herbison) argued in the main debate, is this. Why did not the Government, in the circumstances in which they are operating, put this burden on the employers instead? We have had no answer. It is no justification to say that, if one takes average earnings, average take-home wages, the percentage does not go up. My right hon. Friend knows well—I would not presume to teach her—that this means totally different things to people earning £13 a week and people earning £24 a week. It is common ground among all social workers in this field that it is highly dangerous and misleading to deal in averages and percentages when considering this point. I had thought that that was elementary.

My right hon. Friend has made a disappointing reply. It has in no way changed my mind in opposing the Clause.

Mrs. Hart

First, I take up the point made by the hon. Member for Chelsea (Mr. Worsley) with reference to subsection (2). The hon. Gentleman knows what the purpose is; it is stated in the Clause. It is to give extra powers to the inspectors of the Ministry. What the hon. Gentleman really wants to know is why the extra powers are needed. Essentially, they are needed to make sure that, where employment records are held by an agency, these records are available for inspection in order to ensure that contribution liability is being met. We have introduced the subsection because we have found some difficulty in making sure that there is no evasion of contributions, particularly in parts of the building industry. Parts of the "lump" system operate in such a way that we shall be assisted in ensuring that we can enforce contribution liability by the introduction of this subsection. That is its entire purpose. We think that the Department needs strengthening by the powers which the subsection will give.

Next, I was asked about the Government Actuary's forecast and the basis for requiring that the National Insurance Fund should have more money available to it than had hitherto been thought necessary. These figures appear in the Government Actuary's Report, but I repeat them now in order to set the argument in perspective. Expenditure from the Fund is expected to exceed income by about £75 million in 1967–68. When the 1967 Bill was introduced, imposing the present contribution rates, it was expected that income would exceed expenditure. Hon. Members want to know what are the factors which have led to the change of view about the assumptions regarding the National Insurance Fund.

I say to my hon. Friends who have just announced their intention to vote against the Clause that in so doing they will be challenging and rejecting the view that the National Insurance Fund would be liable to run into deficit and they would, therefore, be risking that there would not be enough money in the Fund to pay benefits to many of the lower-paid workers who become sick or unemployed about whom they are concerned.

Mr. Heffer

Bring in another Bill then.

Mrs. Hart

The fact remains that my hon. Friends are proposing to vote against a provision which will put the National Insurance Fund out of the danger of going into deficit.

Mr. Heffer

Bring in another Bill.

Mrs. Hart

If my hon. Friend would make his interventions in the ordinary way, standing on his feet, I might be better able to hear and deal with them.

Mr. Heffer

I suggest that the answer is that the Government rush a Bill through Parliament, as they intend to rush the Commonwealth Immigrants Bill through, to put the full contribution on to the employer.

Mrs. Hart

If that is my hon. Friend's view, his natural and logical course is of action is to vote against the Schedule, but that is too late at night for him, so he will not do that.

Mr. Heffer

My right hon. Friend has no idea whether I shall be here to vote against the Schedule. She does not know whether I shall be here at that time. I shall decide at that moment what to do.

Mrs. Hart

I apologise to my hon. Friend if I am drawing deductions about his motives from the statement of my hon. Friend the Member for Poplar (Mr. Mikardo).

Mr. Heffer

My hon. Friend the Member for Poplar (Mr. Mikardo) speaks for himself. I speak for myself.

Mrs. Hart

As I said earlier, the first point is that very minor variations in trends, or in what trends turn out to be, make a very substantial difference. It has been stressed that a 1 per cent. difference can make a difference of £20 million to the Fund. I stress that the facts, the information and statistics on which the Government Actuary prepares his assessment, are facts about a changing situation.

There are two elements to consider. One is the situation itself and whether people retire earlier or have a greater tendency to become sick and the reaction to those changed facts in terms of the Fund. It is not easy for the Actuary to have the facts on all the varying trends available to him at a point in time when he needs to make a decision about how far a trend is temporary and how far it is permanent. If the information he gets from the various Departments as to what is happening—from my Department amongst others—indicates that this month more people are retiring from work than retired from work last month, he must make an assessment as to whether this is a monthly or a seasonal aberration or variation, or whether it is part of a long-term trend of which we are seeing just the beginning.

It is not so much in essence a difficulty of making correct judgments about trends. It is much more a question of the facts of the situation themselves changing in an unpredictable way. For example, it would not have been possible for any Government Actuary or any Registrar-General to predict two or three years ago that there was likely to be a slight increase in the birthrate, demographic influences which might have profound effects on the economy. Nor can the Government Actuary, the Registrar-General or the Ministry of Social Security predict that some people will decide to retire at 64 or that people will retire at 65 instead of continuing in work a little longer.

Mr. Pardoe

The right hon. Lady is correct in saying that some of these things could not be predicted, but the Government Actuary could have accurately predicted, by normal market research and motivational research techniques, people's intentions about their retirement age last year.

Mrs. Hart

Of course. We could have had an opinion survey in July of last year and asked people, "When July of next year comes, will it be your intention to retire?" One could not possibly base predictions about the Fund on opinion surveys carried out at a point of time in advance of the point when the decision is to be made. This would lead to far greater defects than anything we could imagine from our present methods.

One seeks to establish one of two things. The first thing is what are the current facts about a situation, which is what we ask, what we know and what we pass on to the Actuary—for example, "So many people retired this month. So many people retired last month". That is fact. Alternatively, one can ask people, "What is your intention next month?" The difficulty here is that by the time next month arrives they may have had a change of mind and they may say, "I shall stay on at work for another month or two". This would be a very unreliable basis on which to conduct National Insurance Fund finance.

8.15 p.m.

Mr. Tim Fortescue (Liverpool, Garston)

Of course this could happen. However, this is done in every business. Due allowance is made for people who may change their minds. This allowance may be a 10 per cent. or a 5 per cent. factor. This is known by market researchers. A much more reliable view is obtained by assuming that the large majority of people will not change their minds than by not taking a survey.

Mrs. Hart

If the hon. Gentleman can prove to me that the predictions of most business firms are always sound and accurate, I will consider the application of that technique. A 1 per cent. variation here produces a very large amount of money. This is one of the problems which we are up against and which the hon. Gentleman and any business firm is not up against. A 1 per cent. variation in their assessments does not normally produce such enormous consequences as a 1 per cent. variation here produces. The margins of error that market research surveys allow for are usually in excess of 1 per cent. Even the 1 per cent. factor here is very significant.

The figures show that there were two major intensifications of the trend that produced the consequence we are considering. One of them was more earlier retirements, together with—they have to be seen together—lighter mortality, with the result that more old people are staying alive, having retired, and need to be paid retirement pensions and other benefits. The second was that there has been more sickness. One of my hon. Friends began to discuss this, because he is very concerned about it, but was ruled to be slightly out of order. I merely state the fact that greater allowance must be made for increased sickness.

The consequence of both these factors produced a third factor, namely, that the flat-rate contributions do not yield as much income, because both of the previous factors lead to the result that fewer people are paying into the Fund. This is why the Fund is in deficit. It is no fault of the Government Actuary's that his predictions or assessments of last July have had to be revised in terms of more recent trends. Nor is it the fault of my Department or of the other Ministries which have been feeding in the information about the new situation as rapidly as the new situation arose. It is simply that new trends are developing and becoming firmer, and they change the situation.

Mr. Worsley

Will the right hon. Lady confirm, in the light of what she has said, that no attempt is made to forecast on the basis of sociological research, and so on, what will happen in the future? It is entirely on existing trends and past facts.

Mrs. Hart

Attempts are made to use current facts to make decisions about probable future short-term trends. If the current facts change, there has to be a revision of the assumptions about future short-term trends. This is inevitable in the course of events.

I turn, finally, to the substance of the Clause in terms of what my hon. Friends have said about the lower-paid workers. I am sorry if my hon. Friends regard me as being arrogant. I think that they are grievously mistaken in taking the attitude that they are taking to the Clause. I say this because I think that the reasons I gave earlier were convincing reasons. I ask them to recognise that the Government are pursuing as rapidly as they can a new scheme which will avoid all the problems of a flat-rate poll tax in National Insurance. I will not go into all the arguments that I adduced on the Amendments.

When we talk about the lower-paid workers, and I say this particularly to my hon. Friend the Member for Penistone (Mr. Mendelson), we are talking of those who earn less than average. In doing so we are bound to talk, on the one hand, of those who are a certain distance below the average, and those who are so far below that they fall into the category which, for convenience, is referred to as being of supplementary benefit level. This is because we have no other standard of reference at present. I doubt if it would be right to seek an absolute measure of poverty, because it is bound to be relative. As our standard of living improves it will be right that the standard we regard as below the level should also rise.

The only convenient point of reference is the supplementary benefit level. We are bound to distinguish, in terms of degree and relativity, between those whose earnings leave them below supplementary benefit level and those whose earnings leave them somewhere between supplementary benefit level and average wage levels.

Given that the purpose of a Socialist Government must essentially be to achieve the degree of redistribution of wealth that can reduce the disparities in society, we are nevertheless faced with the fact that, in terms of resources at our command, our priority objective in relation to those below average wage levels must be those who are the poorest rather than those who are less poor. The Government have given ample evidence of their concern for them, and of their actions to protect them.

Throughout our incomes policy the emphasis has always been on the need and desirability of paying particular attention to the lower-paid workers. In family allowances we have introduced large increases, operating from this April. They are the first all round since 1952 and will operate in such a way, adjusted to taxation, that we can lay the foundation for further advances. We have done things about rent rebates, rate rebates, and safeguarding the position of this particular group when increases in school meals and welfare milk take place in April. The only people who will find that they are less well off will be those on the very fringe. For the rest we have taken tremendous care. My hon. Friend the Joint Parliamentary Secretary spent a great deal of time, together with Ministers from other Departments, working out detailed arrangements to ensure that the increases in family allowances, together with the increased charges in other areas, would not worsen the position of these people.

We do not know how many they are. I cannot tell the hon. Gentleman who asked me that question, because this is a relative concept. Since there have been so many changes since the Family Circumstances Survey, some of which would tend to increase the numbers in the very poor group and some to decrease them, it is not possible to say. There have been rises in rates and wages, operating in different directions, together with rises in family allowances. We can only discover the number by another large survey of this type, or by some process of continuing research, which is the kind of thing at which we ought to aim.

My hon. Friends are very wrong if they think that in these measures the Government have taken there is the slightest tendency to forget the desperate needs of this group of lower-paid workers, whose incomes leave them, in conjunction with their family responsibility, below supplementary benefit level. They are wrong too in believing that one can brush on one side the need to put the National Insurance Fund into a proper condition, because it is the National Insurance Fund which pays the benefits to those who need help in our society. They are therefore quite wrong in believing that their Socialist duty is to oppose this Clause. I believe that the support of this Clause can justifiably be included in my Socialist duty.

Dame Irene Ward (Tynemouth)

The right hon. Lady has given a long and learned dissertation on what has happened within the National Insurance Fund. I wanted to put certain facts on the record. If one has to take account of these changes and trends and all these impossible situations, which one cannot possibly foresee or prepare for, is it not odd, having regard to all these things, that at the time of the General Election, the Government knew nothing about this, and that when the Prime Minister made his famous broadcast at the time of devaluation it never occurred to him? He talked about the protection of those in the lower income groups and said that no one would find their pockets affected by devaluation. He did not know anything about the alterations and the trends about which the right hon. Lady has spent such a long time telling us.

All this goes to prove that nothing was taken into consideration at the time that the pledges were made, either at the General Election or by the Prime Minister in his speech. That is all I wanted to put on the record. I do not know whether the right hon. Lady can

add a further dissertation. It would be very interesting, for the Committee and the country, to know whether the Prime Minister or the party knew at the time of the General Election.

Question put,That the Clause stand part of the Bill:—

The Committee divided: Ayes 205, Noes 29.

Division No. 66.] AYES [8.27 p.m.
Albu, Austen Greenwood, Rt. Hn. Anthony Moyle, Roland
Alldritt, Walter Grey, Charles (Durham) Mulley, Rt. Hn Frederick
Allen, Scholefield Griffiths, Rt. Hn. James (Llanelly) Neal, Harold
Anderson, Donald Hamilton, James (Bothwell) Oakes, Gordon
Atkins, Ronald (Preston, N.) Hannan, William Ogden, Eric
Bacon, Rt. Hn. Alice Harper, Joseph O'Malley, Brian
Bagier, Gordon A. T. Hart,. Mrs. Judith Oswald, Thomas
Barnes, Michael Haseldine, Norman Owen, Dr. David (Plymouth, S'tn)
Beaney, Alan Hattersley, Roy Page, Derek (King's Lynn)
Bence, Cyril Hazell, Bert Pannell, Rt. Hn. Charles
Bennett, James (G'gow, Bridgeton) Henig, Stanley Parker, John (Dagenham)
Binns, John Hilton, W. S. Pavitt, Laurence
Bishop, E. S. Hooley, Frank Pentland, Norman
Blackburn, F. Houghton, Rt. Hn. Douglas Perry, Ernest G. (Battersea, S.)
Blenkinsop, Arthur Howarth, Harry (Wellingborough) Prentice, Rt. Hn. R. E.
Boyden, James Howarth, Robert (Bolton, E.) Price, Christopher (Perry Barr)
Braddock, Mrs. E. M. Howell, Denis (Small Heath) Price, Thomas (Westhoughton)
Bradley, Tom Hoy, James Probert, Arthur
Bray, Dr. Jeremy Huckfield, Leslie Randall, Harry
Brooks, Edwin Hughes, Roy (Newport) Rees, Merlyn
Broughton, Dr. A. D. D. Hunter, Adam Reynolds, G. W.
Brown, Hugh D. (G'gow, Provan) Hynd, John Rhodes, Geoffrey
Brown, Bob (N'c'tle-upon-Tyne, W.) Irvine, A. J. (Edge Hill) Richard, Ivor
Brown, R. W. (Shoreditch & F'bury) Jackson, Colin (B'h'se & Spenb'gh) Roberts, Albert (Normanton)
Buchan, Norman Janner, Sir Barnett Roberts, Goronwy (Caernarvon)
Buchanan, Richard (G'gow, Sp'burn) Jenkins, Rt. Hn. Roy (Stechford) Roberts, Gwilym (Bedfordshire, S)
Butler, Mrs. Joyce (Wood Green) Johnson, James (K'ston-on-Hull, W.) Robertson, John (Paisley)
Cant, R. B. Jones, Dan (Burnley) Robinson,Rt.Hn.Kenneth(St.P'c'as)
Carmichael, Neil Jones, Rt.Hn.SirElwyn(W.Ham,S.) Robinson, W. O. J. (Walth'stow, E)
Carter-Jones, Lewis Jones, J. Idwal (Wrexham) Roebuck, Roy
Castle, Rt. Hn. Barbara Jones, T. Alec (Rhondda, West) Rogers, George (Kensington, N)
Coe, Denis Judd, Frank Rose, Paul
Coleman, Donald Kenyon, Clifford Ross, Rt. Hn. William
Conlan, Bernard Lawson, George Rowlands, E. (Cardiff, N.)
Corbert, Mrs. Freda Lee, Rt. Hn. Frederick (Newton) Sheldon, Robert
Craddock, George (Bradford, S.) Lestor, Miss Joan Shinwell, Rt. Hn. E.
Cronin, John Lever, L. M. (Ardwick) Shore, Peter (Stepney)
Cullen, Mrs. Alice Lewis, Arthur (W. Ham, N.) Silkin, Rt. Hn. John (Deptford)
Dalyell, Tam Lewis, Ron (Carlisle) Silkin, Hn. S. C. (Dulwich)
Davidson, Arthur (Accrington) Lipton, Marcus Skeffington, Arthur
Davies, Dr. Ernest (Stratford) Loughlin, Charles Slater, Joseph
Dempsey, James Lyon, Alexander w. (York) Small, William
Diamond, Rt, Hn. John MacColl, James Snow, Julian
Dobson, Ray MacDermot, Niall Spriggs, Leslie
Doig, Peter Macdonald, A. H. Steele, Thomas (Dunbartonshlre, W.)
Dunwoody, Mrs. Gwyneth (Exeter) McGuire, Michael Stewart, Rt. Hn. Michael
Eadie, Alex McKay, Mrs. Margaret Summerekill, Hn. Dr. Shirley
Edwards, Robert (Bilston) Mackie, John Taverne, Dick
Edwards, William (Merioneth) Mackintosh, John P. Thomas, George (Cardiff, w.)
Ellis, John Maclennan, Robert Thornton, Ernest
English, Michael McMillan, Tom (Glasgow, C.) Tinn, James
Faulds, Andrew McNamara, J. Kevin Urwin, T. W.
Finch, Harold MacPherson, Malcolm Varley, Eric G.
Fitch, Alan (Wigan) Mahon, Peter (Preston, S.) Wainwright, Edwin (Dearne Valley)
Fletcher, Ted (Darlington) Mallalieu,J.P,W.(Huddersfiei[...],E.) Walker, Harold (Doncaster)
Foley, Maurice Mapp, Charles Wallace, George
Ford, Ben Marks, Kenneth Watkins, David (Consett)
Forrester, John Marsh, Rt. Hn. Richard Watkins, Tudor (Brecon & Radnor)
Fowler, Gerry Maxwell, Robert Wellbeloved, James
Fraser, John (Norwood) Mellish, Robert Wells, William (Walsall, N.)
Freeson, Reginald Miller, Dr. M. S. Whitlock, William
Calpern Sir Myer Milne, Edward (Blyth) Wilkins, W. A.
Garrett, W. E. Mitchell R. C. (S'th'pton Test) Willey, Rt. Hn. Frederick
Gordon Walker, Rt. Hn. P. C. Moonman Eric Williams, Alan Lee (Hornchurch)
Gouriay Harry Morgan, Elystan (Cardiganshire) Williams, Clifford (Abertillery)
Gray, Dr. Hugh (Yarmouth) Morrise charies R. (Openshaw) Williams, Mrs. Shirley (Hltchin)
Williams, W. T. (Warrington)
Willis, George (Edinburgh, E.) Woodburn, Rt. Hn. A. TELLERS FOR THE AYES:
Wilson, Rt, Hn. Harold (Huyton) Woof, Robert Mr. Ernest Armstrong and
Wilson, William (Coventry, S.) Mr. Ioan L. Evans.
NOES
Allaun, Frank (Salford, E.) Hughes, Emrys (Ayrshire, S.) Osborne, Sir Cyril (Louth)
Atkinson, Norman (Tottenham) Jackson, Peter M. (High Peak) Pardoe, John
Bessell, Peter Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Perry, George H. (Nottingham, S.)
Bidwell, Sydney Kerr, Mrs. Anne (R'ter & Chatham) Ryan, John
Booth, Albert Kerr, Russell (Feltham) Thorpe, Rt. Hn. Jeremy
Davidson,James(Aberdeenshire, W.) Lee, John (Reading) Wainwright, Richard (Colne Valley)
Davies, S. O. (Merthyr) Lubbock, Eric Winstanley, Dr. M. P.
Dickens, James Mendelson, J. J.
Dunn, James A. Newens, Stan TELLERS FOR THE NOES:
Heffer, Eric S. Norwood, Christopher Mr. Michael Foot and
Hooson, Emlyn Orme, Stanley Mr. Ian Mikardo.
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