INCREASE IN FLAT-RATE CONTRIBUTIONS (Hansard, 19 October 1973)

§ Mr. O'Malley
When the £10 Christmas bonus was paid under last year's legislation, all the money came from the Consolidated Fund. The Secretary of State explained that that was preferable to imposing a further burden on contributors to the National Insurance system. A different decision has been taken this year. It has now been decided that the bulk of the money shall come 605 from contributions, and those sums are set out in the clause.
Perhaps the Minister can tell the Committee what the CBIs reaction was to these proposals. The Opposition have no objection to industry and commerce making contributions of this kind, but, in the light of the apparent poor relations between the CBI and the Government, and the strain and tension that seems to exist in some quarters, perhaps the hon. Gentleman will tell us his side of the story of any discussions which have taken place with the CBI on the proposal to increase employers' contributions.
Self-employed persons are to be charged an extra 6p, which is more than Is. in old money, while non-employed persons are to be charged an extra 4p. Non-employed persons are, in large measure, people of limited income. They are people who try to maintain their contribution record for the purpose of earning a retirement pension. Both in the House and in Committee upstairs we have on many occasions discussed the problem of the single woman who gives up her job to look after aged relatives and attempts to maintain a contribution record. We are all in favour of the Christmas bonus being paid, but to ask non-employed persons, which include people with restricted incomes, to pay this extra sum seems on the face of it to be rather surprising.
If I were asked whether an employee earning one and a half times or twice the national average earnings could better afford to pay 4p in order to provide the £10 bonus than a non-employed person—if that were the choice, and I am putting forward the argument on the basis that that is the choice, but it is not necessarily so—I should hesitate before saying that the non-employed person should provide the extra 4p unless the Minister has statistics to show that the non-employed form a different section of the community from that which I believe them to form. I believe that section to include a very large number of people with limited incomes, and often tiny incomes.
I turn next to self-employed persons. During the proceedings on the Social Security Act 1973 we had an interesting discussion on the problems of self-employed persons. In the blue books one sees that there are very large numbers of 606 self-employed persons whose disposable incomes are small and, in some cases, even tiny. One is bound to ask whether this provision will hit, for example, the lady who runs a corner ship open to all the competition from supermarkets, and so on, and whether it is right that these categories should be asked to make this kind of contribution.
I can only conclude that the Government have decided to levy these contributions on non-employed and self-employed persons without throughly considering the income levels of many people who will be expected to pay them. One effect of it could be, in some households on a very tight budget, that whereas some people would have been able to continue paying their non-employed contributions in order to maintain a contribution record, this kind of increase is precisely the thing that could tip the balance towards stopping such payments.
Therefore, I hope that the Under-Secretary will explain why the Government have included these categories for this payment. Secondly, if the hon. Gentleman believes that there is anything in the propositions that I have advanced, I hope that he will be prepared to look at them again before the Bill goes to another place.

§ Mr. Dean
As the hon. Gentleman said, what is now being done in raising contributions to meet this payment is the normal practice. As he knows, it is the normal practice when benefits rise in any form for contributions to be increased also. That is the broad explanation for the Clause.
I should like to take this opportunity of giving the Committee a little information. Payments falling on the National Insurance Fund will be financed by the higher flat rate contributions from employers, employees and the non-employed, which are set out in the Clause, payable, we propose, from 21st January 1974, which is the earliest date by which the necessary administrative arrangements can be made. The increase in the contributions will yield about £14 million in the current financial year and about £90 million in a full year. The extra Exchequer supplement automatically payable into the National Insurance Fund in respect of this increase in flat-rate contributions will amount to about 607 £4 million in 1973–74 and would be about £23 million in a full year. The yield of the higher contributions and Exchequer supplement will approximately equal the special payments out of the fund by next autumn, but the levels will be reviewed at the next annual review of benefits.
What we have done with regard to the self-employed and the non-employed is broadly to maintain the ratios. As the hon. Gentleman said, all the increase for the employee is put on to the employer. This is a move to the contribution arrangements which are due to come into operation under the Social Security Act 1973. But we felt that under the existing arrangements it would be wrong to depart from the pattern under those arrangements whereby the self-employed and the non-employed should themselves bear a modest share of the increase in the cost of these benefits.
There are special arrangements to exempt those who are unable to pay, and it is possible for the people concerned to have exemption for a certain period without that eventually prejudicing their qualification for the long-term benefits.

§ Mr. O'Malley
I understand what the hon. Gentleman said. I should merely like to ask him one question. Before the Bill goes to another place will he look at the question of the level of contributions by non-employed persons particularly, and by self-employed persons. I understand the hon. Gentleman's position. I am not asking for a commitment. but I should be grateful if before the Bill goes to another place, he would consider the representations which I have made.

§ Mr. Dean
I gladly respond to what the hon. Gentleman said, but it must be without commitment. It seems entirely right under the contribution system, which is very soon to be replaced by a new contribution system, that we should not depart from the traditional pattern. That is why the self-employed and the non-employed have been included and, I believe, should be included.