(NATIONAL HEALTH SERVICE CONTRIBUTIONS.) (Hansard, 26 February 1968)

§ The Chairman
The Question is, That the Clause—

Mr. Macmillan
I agree with the implication from right hon. and hon. Members opposite that the main debate on the Clause could be taken on Schedule 2, but there are one or two points which I should like to raise at this stage.
Naturally, we accept the Minister's view that all lower-paid workers deserve consideration but, as the right hon. Lady said, some are poorer than others; and we accept her corollary that priority should be given to the poorest. That was the burden of the Prime Minister's pledge when he was speaking of the result of devaluation on the people: that the poorest and those least able to help themselves would be protected. All I can say is that the Clause seems as odd a way of carrying out that pledge as Clause 1.
There are one or two things that we would like to know from the Chief Secretary or whoever replies to this debate. If the purpose of this increase in the National Health Service contribution is to replace the prescription charge exemption, why are the Government exempting one lot of people whom they have designated as poor and retrieving the results of that exemption by means which will 1044 have the biggest impact on the lowest paid workpeople?
Even if some of those people, as the Minister indicated, share in the exemption from the prescription charge, nevertheless the Clause cancels out that benefit by the increase in the National Health Service contribution unless they are exempted from this also. Of course, as has already been said in previous debates, there is really no method by which the Government could carry out the Prime Minister's pledge and the policy set out by the right hon. Lady earlier this evening without some form of graduated charge for the National Health Service stamp. It cannot be, I hope, that we are to be told that this will be a very significant increase in terms of the total cost. I do not think the same sort of argument can be held to apply as was applied to the insurance stamp, that the money was needed to reimburse the Fund, because the stamp itself produces only some 12½ per cent. of the total cost of the Health Service, and this increase will not be very significant marginally—except, of course, to those who pay it.
Perhaps whoever is to reply to the debate, if any, on this Clause will also say what is the significance of the various increases. Why are employers paying only 8⁓ per cent. more, and employed men 17 per cent. more, employed women 22 per cent. more, and employed boys and girls 15 per cent. more? Presumably there is something behind this type of increase and there is some sort of theory which has gone to make these differences, other, perhaps, than raising them to the nearest convenient ½d.—which it may well be, for all I know.
There is one other point. In the Second Reading debate the First Secretary, having been asked for details about 1045 the preparation of the exemption scheme, said: I do not propose to give them here. These discussions are proceeding, but they are confidential. I am confident that we shall be able to produce an exemption scheme, as was said in the original statement. I was asked if the increase in the National Health stamp and the exemptions would be simultaneous. I cannot pledge that they will be simultaneous to the day, but there will be no substantial gap in time between the two things."—[OFFICIAL REPORT, 20th February, 1968; Vol. 759, c. 357.] I think the Committee would be grateful if the Chief Secretary could at this stage be a little more precise as to the progress of the discussions on exemptions, bearing in mind that, till the exemptions are made, those whom hon. and right hon. Members have designated as being the least able to bear the burden will have to pay the prescription charge.
Perhaps he could further say precisely what is the relationship in the timing of Clauses 1 and 2 coming into force and the exemptions being fully operative in connection with the prescription charge.
Those are the few points which we on this side would like to raise at this stage, without prejudice to any further contribution which we may feel inclined to make on more detailed aspects of Schedule 2, when the time comes to discuss that.

§ The Chief Secretary to the Treasury (Mr. John Diamond)
The hon. Gentleman the Member for Farnham (Mr. Maurice Macmillan) has indicated that he does not think a long debate is necessary on this Question, but has asked me certain questions which I shall do my best to answer. First, to the question he latterly asked, the answer is, quite shortly, that I have nothing to add to what was said on Second Reading; the distance in time is not sufficient to make it worth while to make a further statement to the Committee just yet.
On the rates, the hon. Gentleman asked whether there was any question of rounding off the halfpenny. As I explained fully on Second Reading, the answer is yes.
8.45 p.m.
I want to spend more time on what he termed "helping the poorest". Helping the poorest is enabling those who would otherwise have to pay prescription charges to be exempt. As my right hon. Friends the Prime Minister and the Chan- 1046 cellor explained, if all categories of exemption are to be carried through, the proposal would cost some £25 million, and the way to recoup the £25 million is by the increase in the National Health Stamp. If we recouped it in the way in which the Bill proposes, there would still be a proportionate burden on the employee contributor which is interesting in its incidence. The proportion would he 0.72 per cent. of the average weekly earnings. The existing rate came into force in 1961, at which time, the hon. Member for Farnham supported the Government, when the proportion was 0.90 per cent. In 1964, when the present Government came into office, it was 0.77 per cent. The contribution we suggest, therefore, will result in a percentage proportionate burden which is lower than it was in 1964 and considerably lower than it was in 1961. I emphasise that it is necessary to have the contribution to provide help for the poorer sections of the community and those in greatest need in terms of health.
I want now to draw attention to a further point which has not been sufficiently taken into account. This debate will have its impact on the debate on the Schedule, as the hon. Gentleman says, but I think that it is convenient to make the point now. The argument is put forward frequently about a flat-rate tax of this kind being a regressive burden, as it is, I have indicated what the proportions are, but that is not the whole story because people naturally will ask why those at the bottom of the scale should bear a comparatively high burden. I do not think that sufficient attention is paid to the net effect on families of direct and indirect taxes and subsidies in cash and in kind. If those are taken into account in terms of egalitarian effect, the position in 1966 was that a married man with two children earning just over £17 a week received as much in benefit as he paid in taxes. The break-even point was a little above £17 a week for a man with two children. For a man with three children, the break-even point was £23 a week. It has to be borne in mind that average wages then were substantially below what they are now, yet, even in 1966, a man with a wife and three children was receiving more in subsidies in cash and in kind than he paid in direct and indirect taxes on a wage of £23 a week. Therefore, it is wholly inaccurate to allege that we are 1047 unaware of the needs of those at the bottom of the scale in terms of living standards and incomes. We are fully aware of them, and the Government's policy has been such as to introduce that kind of situation, and, although I cannot give precise figures, my latest information is that the break-even point, as one would expect, is rising.
In those circumstances, without going into too much detail on the Clause, I hope the House will be willing to allow it to stand part.

§ Mr. Pardoe
I intend to divide the Committee against the Clause. Therefore, it behoves me to explain why, and I shall do so briefly.
I do not wish to go into the arguments against a poll tax again. These are still as valid on Clause 2 as they were on Clause 1. I am against any attempt to finance our social security or our Health Service out of a poll tax. That is one reason why I shall certainly vote against the Clause tonight.
There are many other methods by which we raise finance for the Health Service. The National Health Service contribution gives us about 11 per cent. of the total cost of the Service. Therefore, a very small increase indeed on other methods of taxation could produce the same result.
I shall vote against the Clause because in so doing it will be a vote for certainty. The Chief Secretary has said—and it is implicit in the Financial Memorandum—that the purpose of the increase in the National Health contribution is to pay for the £25 million worth of exemptions which are to be made in prescription charges. I totally deny that the Government have any idea whether that £25 million is an accurate figure. They cannot say that it is an accurate figure, because they have not done the necessary negotiations which could lead them to a firm assessment. The right hon. Gentleman in his speech on Second Reading said that the Government had now entered into negotiations with the doctors and were about to enter into negotiations with the other interested parties—presumably the chemists and various other assorted categories. I hope that the "about to" is now in the past 1048 rather than the future, a few days having elapsed.
It is impossible for the Government to put a firm figure of £25 million. Until the Government can tell us how they intend to administer these exemptions and give us a better indication than that given by the right hon. Gentleman—I understand he is not able to give a firm indication—it would not be right for us to vote a sum of money which is a totally uncertain figure.
We know very little about the administrative costs of making these exemptions. I hasten to say that I am wholeheartedly in favour of exemptions because I am totally against prescription charges. But I oppose the Clause for what it does not do in the sense of reforming the whole basis of financing our National Health Service. Unfortunately, this is another small piece of patchwork legislation which will put off the day when the reform of the financial structure of the Health Service can be put through the House.
Because I am against prescription charges and because these increases in the National Health contributions are to pay for those charges, it follows that I would be totally against the raising of these charges. I say to hon. Members on either side who are against prescription charges that logically they must be against this increase since it is designed to pay for them. Therefore, I shall follow logic in that part as well.