HC Deb 07 June 1972 vol 838 cc669-76

2.10 a.m.

Mr. Peter Doig (Dundee, West)

This morning I wish to raise the cases of a constituent of mine who was self-employed for 44½ years as a hairdresser. He ceased to trade on 6th May of this year because his premises formed part of the subject matter of a compulsory purchase order made by the local authority. Because he was unable to acquire suitable alternative premises, he registered for work at the employment exchange.

Naturally my constituent received no unemployment benefit. In fact, he receives no benefit of any kind. The exchange retained his National Insurance card for consideration of franking. On 10th May the National Insurance card was returned along with a form CR6 stating that he was not entitled to have his card franked during his period of unemployment, and he was advised to buy National Insurance stamps at £1.20 each to protect his pension rights.

My constituent inquired about this at the Department of Health and Social Security. He was given leaflet NI41 which was thoroughly explained to him by the interviewer, but the interviewer himself could find no reference to a self-employed person becoming unemployed in relation to either the value of the stamp he should buy or as to whether the card should be franked.

Following this I wrote to the local office of the Department of Employment, and I received a reply the relevants parts of which are as follows: I have made some enquiries into his case and find that within the regulations he is not entitled to credit of Class I contributions. …His contribution record for the contribution year which runs from 1st June. 1970, to 6th June, 1971, and which governs his title to unemployment benefit during the period 1st November. 1971. to 5th November. 1972, showed a total of 53 Class II (self-employed contributions). To be entitled to unemployment benefit he would have required among other things, to have paid at least 26 contributions as an employed person (Class I) during that period. Since he did not in fact satisfy this condition, his claim was disallowed from 8th May, 1972, and he was notified to this effect. At the same time, he was notified that Class I contributions could not be credited because he did not saetisfy any of the three revelant conditions. These conditions are as follows:

  1. "1. At least 26 contributions as an employed person must have been paid by or credited to you in the contribution year ended 6.6.71; or
  2. "2. At least 10 contributions as an employed person must have been paid by or credited to you in the 13 weeks immediately before your period of unemployment began; or
  3. "3. You must have been employed in an employed contributors employment (Class I employment under the National Insurance Acts), before the period of unemployment began and must normally rely on such employment for your livelihood."
What I would like to know, and have failed to find up to now—and I have been into the Library, and they could not tell me—is what requirements are referred to which contain these three conditions. Secondly, has the Minister power to waive these regulations or to change them?

Thirdly, does the Minister recognise that these people will never qualify if these regulations are applicable as long as they are unable to obtain employment? It will go on right up until retirement age when they will get no benefit of any kind. Moreover, without any income of any kind to protect their pension, they are expected to pay out £l.20p every week until the time they are due for retirement.

Does the Minister recognise the injustice of this to the self-employed person who, very often through no fault of his own as in this case, becomes unemployed? Will he please answer this question: what regulations are referred to? If he has power, will he use it to waive or to change these regulations in cases of this kind because of the injustice which people in this situation suffer?

2.18 a.m.

Mr. R. C. Mitchell (Southampton, Itchen)

One of my own constituents who was self-employed became unemployed in June, 1970, and for a period of three months was unemployed. He then went to the employment exchange and registered, not expecting to get unemployment benefit, because he knew that a self-employed person was not entitled to that; but he thought that he would have his insurance stamps credited for a period of three months.

To his amazement—and perhaps the constituent should have known better—he found that he was not so entitled, for the reasons which my hon Friend the Member for Dundee, West (Mr. Doig) has pointed out. He still finds that he owes about 20 stamps. At that time the cost of the unemployment stamp was 19s. 10d. I am sure that if he pays them he will have to pay them at the new rate.

The constituent is myself, who, as a Member of Parliament, is a self-employed person. Obviously in my case, because I got employment again in September, it does not involve a great deal of hardship. I know of a number of my constituents who have found themselves in the identical position to that which my hon. Friend pointed out, when their chances of obtaining employment are fairly limited. They may go on for a fairly long period of unemployment and the whole time they are still supposedly having to buy stamps at the non-employed rate, which involves considerable hardship.

I should have thought—the Minister may be able to give me some hope—that it would be feasible to arrange, perhaps through the Ministry of Social Security, when a person applies for supplementary benefit for the stamp to be credited, because if it goes on for a long time—I still owe the Minister's Department some money, and I shall probably get a letter about it on Monday—it makes a considerable difference to the pension.

2.19 a.m.

The Under-Secretary for Health and Social Security (Mr. Paul Dean)

I am grateful to the hon. Member for Dundee, West (Mr. Doig) for raising this point. I know that he has a particular case of a constituent in mind, to which he referred, and I fully understand the difficult position, and indeed sympathise with the position, of someone who loses his self-employment, in this case through no fault of his own but owing to the place in which he does his work being taken over for some other purpose.

I will try to explain what the position is and to answer the questions which he has put to me, and also the additional points which the hon. Member for Southampton, Itchen (Mr. R. C. Mitchell) put to me.

First, the regulations governing both the payment of unemployment benefit and also the credits are of very long standing in the insurance scheme. They are in the regulations made under the main National Insurance Acts. I cannot remember the precise Section, but I will give the precise chapter and verse to the hon. Gentleman afterwards, if I may, as soon as I have had the opportunity to look it up. I assure him that there is a long-standing legal basis for these arrangements in the Acts and in the regulations made under them. Further, there is no power to waive these regulations in any particular case, but what I think I can say is that there is a flexibility within the arrangements to try to deal with the two types of case which have been raised tonight.

Let me deal first with the crediting of contributions for unemployment. There are three main conditions for getting a credit. For a week of unemployment a person has to justify one of the following conditions. The first is that he had at least 26 employed person's contributions paid or credited in the last contribution year before the benefit year in which the week falls. Secondly, that he has at least 10 employed person's contributions paid or credited in the last 13 weeks. Thirdly, that he became unemployed following employment by an employer, as distinct from being self-employed, and that he will normally rely on such employment for his livelihood. I shall say more about those three conditions in a moment because some of them are relevant to the condition of the hon. Gentleman's constituent.

Those are the main conditions. There are other conditions, namely, that the person concerned has to sign on at the employment exchange and be available for employment. He must not be disqualified because of leaving his employment voluntarily without just cause or losing it through misconduct.

That is the position with regard to credits.

Perhaps I may now say something about the principle which underlies these regulations before coming to some of the flexible features which I mentioned. The principle underlying the arrangement here is that contributions are credited to persons who are experiencing a contingency against which they are insured. Employed persons are insured against unemployment, and if they satisfy the contribution conditions they can get unemployment benefit. I mentioned the conditions under which they are entitled to credits.

It has not been found practicable to cover people, other than those employed, against unemployment. Self-employed people are their own masters and therefore they have greater freedom and control over their own activities than is the case with people employed by somebody else. They are usually able to decide when not to work. In other words, they have a measure of control over their unemployment.

It is well recognised that there are some difficult cases, but it has not been found possible up to now to find a way which would not be open to abuse to cover the self-employed man against the contingency of unemployment, for the reasons which I have mentioned. None the less, there are various ways in which people who have come out of self-employment can be helped and in which they are not left without cover. There are special arrangements and special rules which can assist people in this kind of situation.

First, they can, as the hon. Gentleman said, pay contributions at the non-employed rate, assuming that they can afford them, and by doing that they preserve their entitlement to the long-term benefits—the retirement pension, and the widow's benefits in particular. That is the first thing they can do.

The second thing they can do, if their income is small, is to ask for what is called a small income exception. A person whose income is calculated as not being more than £468 a year can claim exception from liability to pay contributions as a self-employed or non-employed person. It is open to people whose circumstances have changed and have resulted in their income being cut off, or reduced to £9 week or less, for an indefinite period to apply for such exception. In determining income for this purpose the amount of the contribution which would otherwise be payable—£1.50 for a self-employed man, £1.20 for a non-employed man—is deducted from the person's declared income. Exception does not give credits, but non-employed person's contributions can be paid voluntarily over a period of exception of up to at least six years after they become payable and still count for pension.

In other words, if someone has a gap in his self-employment and then gets back into self-employment he has this fairly long period in which he can make up the loss in his contribution record. In addition to that, if exception is obtained and contributions are not paid, the rate of retirement pension may not be reduced, largely depending on the contribution record as a whole. The reason for this is that a yearly average of 50 contributions paid or credited is required for a full contribution record. The fact is that most years have either 52 or 53 contribution weeks, so anyone who has been given exception for, say, between two and three years during his working life can still have a full record of contributions when he retires and, therefore, his right to pension and his widow's right to pension can be preserved. That is one way in which people in this position can be helped.

A third—and this is a special rule to assist them—is that if a person coming out of self-employment and going into employment pays 26 contributions as an employed person following a previous full record of contributions either as self-employed or non-employed, he then gets full cover for unemployment benefit. In other words, what happens is that he can count his previous contributions paid as self-employed or non-employed as employee's contributions and so value upwards his previous contribution record and therefore get himself in full benefit earlier than would otherwise be the case. One of the reasons this was introduced was to assist the transitional period from self-employment to employment in the event of someone having to move to employment and then becoming unemployed.

The fourth method, which will assist some people, is that if they have paid 10 contributions as employed persons, or either paid them or had them credited in the last 13 weeks, they then become entitled to credits. This was one of the points which I mentioned earlier.

The fifth provision, which, again, can help in some cases, is, if they have a short period in employment—and it can be as little as one week—they can then be entitled to credits as long as they can show they are seeking in future employment and not self-employment.

I mention these five methods by which people moving from self-employment or going out of self-employment and having a period of no employment can be assisted. I recognise that they might not help the hon. Gentleman's constituent, but some of them would, or might in certain circumstances, help others.

For those reasons, the various methods of assisting people have been drawn up. It is intensely difficult, in a vast scheme like the National Insurance Scheme, to have regulations which fit all the wide variety of types of employment and needs. One cannot have, unfortunately, a scheme which will be absolutely tailor-made to meet the varying circumstances of over 20 million people who are in the working population. But I hope that the methods which I have outlined show that considerable efforts have been made over the years to make the arrangements as flexible as possible.

I come to the position of Members of of Parliament who lose their seats following a General Election. We in the Department are considering the position of Members of Parliament and of all office holders in the light of the Boyle Report. There is reference to the position of office holders in our White Paper "Strategy for Pensions", published last September. We are considering this aspect. We have not yet reached a conclusion but we hope that we shall be able, following the suggestions in the Boyle Report, if the House finds it acceptable, to give a wider range of cover than is now available to office holders.

Mr. R. C. Mitchell

Take a person like the constituent of my hon. Friend the Member for Dundee, West (Mr. Doig) who has been self-employed, becomes unemployed, has no income and therefore presumably goes on supplementary benefit. Is it possible for the Supplementary Benefits Commission to pay, in addition to the normal scale rate, the equivalent of the non-employed stamp?

Mr. Dean

Unless there are very unusual circumstances, broadly speaking, the answer is "No". If his resources were such that he required supplementary benefit, he would usually be entitled to small income exception, and it is possible to obtain that for a period of perhaps two or three years without undermining the insurance position of the person concerned provided he has had a full record and is likely to have a full record afterwards.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes to Three o'clock a.m