§ Order for Second Reading read.
§ 4.3 p.m.
§ The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley)
I beg to move, That the Bill be now read a Second time.
I begin by congratulating the hon. Member for Rushcliffe (Mr. Clarke) and the hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight) on what I think is their first appearance at the Dispatch Box. We have never faced each other across the Floor of the House from the Front Benches but we have met on television on at least one occasion. I congratulate both hon. Members on their elevation, if that is the right word, to the Front Bench and express the hope that for a long time to come they will fulfil to the satisfaction of the Conservative Party their rôle as Opposition spokesmen.
As from April 1975, the majority of men and women in employment will pay reduced national insurance contributions. That is the principal significance of the Bill to employees. In addition, retirement pensioners will welcome the Bill since it will bring enough money into the National Insurance Fund after April 1975 to pay for the new higher levels of retirement pensions—that is £16 and £10—and widowhood and other benefits which came into operation on 22nd July of this year and the further increases in line with national average earnings envisaged in the legislation. These increases were not envisaged in the Conservative Social Security Act 1973, and that is why we have brought forward this Bill.
Clause 2 is clearly the most important clause of the Bill, and it is to that that I turn first. The House will note that the contributions of employees, that is Class I contributors, are to be at 5.5 per cent. of reckonable earnings, as my right hon. Friend the Secretary of State announced on 7th May, instead of at 5.25 per cent. as set out in the Social Security Act 1973.
The implication of this change, which will make possible the payment of the substantially increased pensions brought 40 in by the present Government, is that as from April 1975, compared with contributions that will be payable before that date, employed men who are currently not contracted out of the scheme will make a reduced contribution up to the level of income of £62 a week.
A man on £11 a week will pay 25p less, a man on £46 will pay 27p less, and even the man on £62 will pay 24p less. Only at the ceiling of £69 reckonable earnings will male employees not contracted out of the current scheme have to pay an increase—13p as from April 1975. The broad picture is that male employees not contracted out of the full graduated payments into the State scheme will have substantial reductions in their contributions as from 6th April next year.
There will be a similar result for men who are contracted out of the existing arrangements. For those at the bottom on £11 a week, the contribution will drop by 28p, and even the man on £62 a week will pay only 2p more in contributions. The man at the ceiling on £69 a week will pay 39p more than he will be paying immediately before 6th April. The purpose of this is to pay for the increased pensions brought in by the present Government. That figure of 39p represents an increase of 17p over what would have been paid under the Social Security Act 1973 had that been left in operation.
The situation is similar for women. For non-contracted-out women on between £11 and £62 a week—and that includes the vast majority of women in employment who are not contracted out—the contribution will decrease by between 12 and 14p a week, but again there will be an increase at the ceiling. For women who are contracted out, at the bottom end there will be a reduction of 11p a week, although throughout the rest of the range there will be some increase. However, that increase will not be substantially different from the increase that was inherent in the earnings-related formula upon which both sides of the House agreed during the proceedings on the 1973 Social Security Bill.
The Bill leaves the share of the burden between employers and other contributors in very nearly the same ratio as it will be from August 1974. The House will 41 recollect that on 7th May my right hon. Friend said that she estimated that an employer's contribution of about 8.75 per cent. would be required. The House will notice that the contribution rate in the Bill is not 8.75 per cent. but 8.5 per cent., but there will still be sufficient income coming into the fund.
The broad pattern of employer contributions will be that for male workers there will be reductions, and often substantial reductions for lower-paid workers, although there will be increases, and in some cases quite large increases, for employees at the ceiling. A similar pattern emerges for women employees.
Employers' contributions are between 12p and 69p higher a week than would have been levied under the terms of the Social Security Act 1973. When the Government's decision on the £10 and £16 pensions was discussed in the uprating Bill—it is now the National Insurance Act 1974—there were no objections from either side at the increases in contributions which were necessary to pay higher pensions.
Part of the increases by both employers and employees at the top of the scale—that is at £69 a week—is an inevitable concomitant of using the pattern of earnings-related contributions in a range between a quarter and one and a half times national average earnings, on which both sides have agreed in the past, and which was specifically referred to in the White Paper "Strategy for Pensions", and was translated later into the Social Security Act 1973. The House will have noted that Clause 2(1)(a) brings the upper and lower earnings limits from £8 and £48, as set down in the previous Act, to £11 and £69. This represents the average movement in earnings since the Act was introduced. The £8 and £48 figures were the current figures during the period 1971–72. The House will wish to know that although the earnings floor is £11, those earnings below £11, although paying no contributions, will remain covered for industrial injury purposes.
Clause 2(2) brings a small measure of relief to retirement pensioners with some employment, to those over pensionable age who are not retired but who cannot meet the contribution conditions for a category A pension on retirement, and also to women over pensionable age who 42 are not retired and are subject to the half test under Section 24(2) of the Social Security Act 1973. I spell that out in some detail because I realise that Clause 2(2) is at first sight difficult to understand. Under the terms of the Social Security Act 1973 the contribution of those categories of persons to the National Insurance Scheme was set at 0.6 per cent. As from April 1975 there will be no liability at all for contributions.
The reasons for this are twofold. First, the House will have noticed that the contribution rate exercised under the married woman's option is raised in the Bill from 0.6 per cent. to 2 per cent. I strongly took the view—indeed the Government did—that it would be wrong to levy two rates of contribution, that is 2 per cent. for one group and 0.6 per cent. for other groups; nor did I feel that it would have been right to levy 2 per cent. on those categories of elderly people who are often among the poorer section of the community and who sometimes feel particularly aggrieved at the operation of the National Insurance Scheme. I refer to the operation of the half test which has been the subject sometimes of protracted debates in Committee on successive up-rating Bills.
Clause 2(2) brings relief, albeit small, to those three categories of national insurance contributors and will represent a saving to those groups as a whole of something less than £1 million a year. Married women and widows who exercise the option would have been paying 0.6 per cent. under the Social Security Act 1973 and the Bill proposes that this figure should move to 2 per cent.
I wish to refer to a Press report of what was said by the principal Opposition spokesman on this subject, the right hon. and learned Member for Surrey, East (Sir G. Howe). Judging from the report, I think that he has been under some misapprehension about the results of this upward movement from 0.6 per cent. to 2 per cent. I am not speaking harshly of him or blaming him for this because I think the national insurance system as it exists is. as the right hon. Member for Leeds, North-East (Sir K. Joseph) has said, a "vast Gothic edifice" and it is easy to get things wrong and to make mistakes on the different operations and interactions of the system. Comments by the right hon. and learned Member for 43 Surrey, East are reported in the Daily Telegraph of 17th June:Three out of four working wives"—judging from a later part of the article that is a reference to working wives who exercise the married woman's option—are in for a ' nasty shock ' by way of a sharp increase in the national insurance deduction from their pay, according to Sir Geoffrey Howe, Conservative Front Bench spokesman on social services.Later in the report an example is given of a woman on £40 a week paying £21 extra per year.For one who earns £3,500 the annual deduction will increase by more than £40.The situation is that the vast majority of married women paying at the reduced rate will pay less, in most cases substantially less, than previously. If we look first at the total collection of revenue during the first full year of a contribution at 2 per cent., the yield to the national insurance fund will be £30 million a year less than previously.
I wish to give an example in this connection. The right hon. and learned Gentleman estimated that a woman on £40 a week would pay an extra £21 a year as from 6th April 1975. The position is, however, that she would pay not £21 a year more but £50 a year less if she has been contracted into the State scheme and £30 a year less if she has been contracted out. I appreciate—and the right hon. and learned Gentleman has obviously misunderstood the proposals—that I am not asking him to withdraw anything at the moment, but I know that he will bear in mind what I have said and acknowledge the facts of the situation.
I shall give the reasons for our decision to raise the figure from 0.6 per cent. to 2 per cent. We are asking employers and better-off employees to pay sometimes substantially higher contributions in order to be able to finance better pensions. The working population is at present growing at a much smaller rate than the pensioner population, and this will continue for the rest of this decade. In 1948, for example, for every one pensioner there were 5½ people, in statistical terms, working. But now the ratio is down to just over one in three. In those circumstances it seemed wrong to ask employers, employees and single women with reasonable incomes to pay 44 increased contributions to finance the better pensions which we all want to pay and at the same time for a married woman in the work force—they are in the work force in increasing numbers and have been for the last decade—to pay vastly reduced contributions.
I wish to give some examples of what will happen under the arrangements we are proposing. The non-contracted-out woman at the earnings ceiling will pay £1.57—that is with the 2 per cent. contribution—a week less next April than she will pay from 6th August 1974. At £62 earnings the figure will be £1.71 less, at £46 earnings £1.18 less and at £23 earnings 38p less. The picture is similar to that throughout the higher ranges, if currently they are contracted out of the existing arrangements.
So, even at 2 per cent. they will pay substantially reduced contributions in most cases. The question which the House has fairly to face is whether, when we are asking employers and the rest of the work force—that is, males, both married and single, and single women—to pay for these increased pensions, it is not appropriate, even within the contributory system, to ask married women in employment to make a little bigger contribution than would have been the case under the 1973 Act for the present generation of retirement pensioners.
§ Mr. A. P. Costain (Folkestone and Hythe)
Could the Minister give us a little more detail? If a married woman is working part time, what option will she have under this scheme?
§ Mr. O'Malley
First of all, if a married woman who works part time earns under £11 a week after 6th April 1975, she will not be required to contribute to the scheme at all. If she earns over £11 the situation remains as it is now, and married women and widows generally will have the right to exercise the married women's option. Under the Social Security Act 1973, the level of contribution payable under that option was set at 0.6 per cent. The Bill is setting it at 2 per cent.
The difference in the two—there is no question of changing the categories here—is that, at 0.6 per cent., they would have had substantial reductions in the contributions that they would have had to pay as from April 1975. At 2 per cent. they have reductions—they are quite 45 big reductions, of over £1 at the top—but they are not quite as big as they would have been at 0.6 per cent. I have explained frankly why we decided to adopt that course.
The self-employed will be paying, with the implementation of the basic scheme set out in the 1973 Act, Class 2 contributions plus the new Class 4 contributions which were first provided for in that Act. The Class 2 contributions remain at £2.41—the figure set as from 5th August 1974. If we had raised those flat-rate contributions in line with the change in Class 1 contributions—that is, both the employers' contributions and the employees' contributions—it would have been necessary to raise that figure to about £2.70. In order to help to ease the burden for the self-employed on lower incomes we decided not to raise it.
§ Sir Brandon Rhys Williams (Kensington)
Would it not help the situation even more to introduce graduated contributions for the self-employed?
§ Mr. O'Malley
The hon. Member and I have discussed this matter in previous debates and we know that no party political point is involved. He knows the difficulties at present in having fully graduated contributions for the self-employed, involving the Inland Revenue and so on. At the moment we are in the position arrived at by his administration with the Class 2 and Class 4 arrangements. It seemed sensible to keep those flat-rate contributions at £2.41 instead of raising them to £2.70, which, with Treasury supplement, would have brought in about £25 million a year.
The Inland Revenue estimates that, of 1.9 million people with some income falling within Cases I and II of Schedule D, about 1 million—over 50 per cent. of those who will be paying self-employed contributions—had profits or gains below £1,600 a year. So, for that 50 per cent. and particularly for the people at the bottom, it is helpful that the flat-rate Class 2 contribution has not been raised.
However, in equity to other classes of contributors, it was decided that while moving up the scale of income on which payments under Class 4 had to be made from £1,150 to £2,500, as set down in the 1974 Act, to £1,600 to £3,500, instead of a 5 per cent. levy there should be an 8 per cent. levy. That would bring in pre 46 cisely the amount of money which has been lost to the National Insurance Fund—about £25 million—through not raising the £2.41 rate. It seemed to the Government that this was an equitable way of distributing the load on the self-employed, rather than raising the flat rate once again.
We all know the arguments, which have been accepted on both sides of the House, about the inequities of the flat rate system and about how the flat rate, once it is pushed up too high, becomes an intolerable burden for lower-paid earners, whether self-employed or Class 1 contributors.
The Secretary of State, who has power under the Social Security Act to prescribe lower Class 2 rates for self-employed women for a transitional period rather than putting them up in one jump, has decided to use those powers to prescribe a rate of £2.10 for the year 1975–76.
Apart from these changes, the voluntary contribution, the Class 3 contribution, remains at £1.90, or about 80 per cent. of the Class 2 contribution. The small earnings exemption is raised to £675. The National Health Service contribution from Class 4 remains at about 8 per cent. of the total contributions under that category.
The remainder of the Bill is confined to bringing existing legislation into line with the 1973 Social Security Act and to minor or technical amendments to the basic scheme, which are adjustments that have been thought necessary in the course of preparation. Clause 1 and the Schedule ensure that the benefit provisions of the 1974 National Insurance Act can continue to apply with the repeal of the 1965 Act and that the earnings rule easements can continue.
This is a short Bill but an important one. There is a short time left before April 1975 to continue preparations for an earnings-related contributory system. It is vital that it starts efficiently and smoothly. The Bill contains the main outstanding information needed. Naturally, details will need to be discussed in Committee, but I hope that we can press ahead quickly now.
We shall be making arrangements to ensure that the staff in local and regional offices will visit as many employers as possible to help them with advice and to reply to any queries. I hope that 47 employers will get in touch if they are in any difficulty. A full and detailed Employers' Guide to the new arrangements will be published in the autumn and distributed to all employers to supplement the leaflets of guidance already given.
§ 4.28 p.m.
§ Mr. Kenneth Clarke (Rushcliffe)
I should like to thank the Minister for the pleasant way in which he welcomed me to the Front Bench. I have, of course, been in touch with him on this subject for two years or so in my then silent capacity as a Government Whip who followed these matters. I hope that the fact that I have now refound my voice will not damage our relationship, and that we shall remain reasonable and reasoned antagonists.
I should like to start with one conciliatory gesture. It is not our intention to force an official division on the Bill. We accept that these proposals are necessary to prevent the National Insurance Fund from going into the red after the recent uprating of benefits announced by the Government.
But we certainly wish to draw attention to the fact that the Bill will substantially increase the financial cost of paying the national insurance benefits for significant sections of the population. I marvelled at the Minister's ability to weave his way through the Bill and persuade the House that on the whole it constituted a great reduction of the burden of national insurance for what seemed an even wider section of the population. The national insurance system may be a Gothic edifice, but the hon. Gentleman certainly should not hide behind the corners in that sort of way. If he intends to sell the Bill along those lines to, for instance, married women in employment and the self-employed, he will find that they regard it as not, on the whole, the most straightforward form of salesmanship.
I would hesitate to call in the Secretary of State for Prices and Consumer Protection or the Director General of Fair Trading, but there were some assumptions lying behind the figures which the hon. Gentleman used which made the way in which he put matters somewhat misleading—although "misleading" is too 48 strong a word. Certainly, however, the hon. Gentleman was putting a very favourable gloss on the effects of his proposals.
For instance, the hon. Gentleman was taking as his base, as I understand it, the August level of national insurance contributions, which no one is yet paying, and which is an increase introduced by his administration, and he was not making a comparison with the level of contributions as we left it. But, even more important, he was claiming that people would be paying reduced contributions by making comparisons with the contributions paid at present by those who are not contracted out of the Boyd-Carpenter scheme. It is true that, as the Boyd-Carpenter scheme is being wound up next year, people will not be paying Boyd-Carpenter-type graduated contributions. But that is hardly amazing. If a commodity is being withdrawn from the market, one does not expect customers to carry on paying for it after next April. One does not take that saving which they have, on the one hand, as some argument for making them happier about the fact that they are paying a very increased contribution for other benefits.
§ Mr. O'Malley
If the hon. Gentleman wants comparisons between present contributions and contributions as they will be from April 1975, may I tell him that it is also true, for example, that for the majority of male employees there will be reductions in contributions next April, compared with the contributions which are currently being paid.
§ Mr. Clarke
That is taking part of the third point that I was about to acknowledge that the hon. Gentleman had used.
In structure this scheme is basically the scheme introduced by the previous Government in the 1973 Act. The then Government were able to anticipate increased benefits without increasing the burden significantly on the lower paid. Therefore, it is possible that the majority of working men are not too badly dealt with. But for those who are paying the new graduated contributions, when they would not have been paying even the Conservative level until April next year, the hon. Gentleman is putting up the bill before it has even been presented to them.
49 From April next year, certain groups—particularly married women who exercise the option not to pay national insurance contributions at present, and the self-employed with any reasonable level of earnings from their professions—will be heavily penalised. The House should be informed of that fact, should be aware of it and should judge this measure bearing in mind also that the Government, putting up another post-election bill in this way, have also increased the levels of personal taxation and are in the process of increasing the basic national insurance contributions from August this year.
Before I come to the very difficult position in which it places the majority of married women and the self-employed, perhaps I should begin with a little of the good news contained in the Bill. The Opposition are amazed, but rather delighted, to see that the Labour Party, now that it is in Government, has at last entirely accepted the structure of the basic National Insurance Scheme which the previous Government introduced in Part I of the 1973 Act. For instance, there has been an extremely welcome conversion to the whole principle of graduated contributions for flat-rate benefits, which my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) introduced, faced with strong Labour opposition, in the Act of 1973. This is essential, in our opinion, if one is to have a solvent and successful National Insurance Scheme for the future.
For some peculiar reason, the Labour Party has always been fiercely opposed to the principle of graduated contributions for flat-rate benefits. We found ourselves urging upon the Labour Party the redistributive effects of this form of contribution for the basic pension scheme. At long last the light has dawned; but perhaps there will be later legislation in which the light will be extinguished again. For the time being, however, that part of the structure of the 1973 Act is being accepted. It gets the scheme away from the basic difficulty faced in the past that it could not be adequately financed out of flat-rate contributions because of the grave embarrassment that that caused to the lower paid when one wanted to raise the contribution revenue.
As the Government Actuary's report shows, this important change in structure, which the previous Government intro 50 duced, gives more buoyancy to the scheme and offers a prospect for the future of increases in the National Insurance Fund, which the actuary says could mean a reduction in contributions, which I am sure we all hope will mean better and perhaps new benefits, if lobbies will only wait until the fund is in a condition to allow that to happen.
If the Government have been converted to the principle of graduated contributions for flat-rate benefits does this also mean that they have given up at last their constant pressure when in Opposition, that the Exchequer contribution should be raised from the 18 per cent. level, where they appear to be leaving it? It would be somewhat irresponsible, with the inflationary dangers which face the country, to start raising the Exchequer contribution to the National Insurance Fund. The Government urged us to do this when we were in Government and discussing the basic Act. I trust that we are now at last to be told that they have seen the folly off their ways when in Opposition and accept that as well.
If that is so, we welcome the total conversion to the structure of the 1973 Act. The basic National Insurance Scheme, a very valuable Conservative reform, has been adopted by the present Government, and offers some hope for the future.
I wish that I could say the same for the Government's attitude towards Part II of the 1973 Act, which relates to the funded second pension that we were about to introduce. But that is the subject of the second debate today, in which we shall deal with the disgraceful way in which the Government have suspended that while they think of something else to put in its place.
As I have said, there are details of the practice in the Bill which show considerable prejudice on the part of the Government in their treatment of some groups in raising the new higher level of contributions, particularly married women in work and the self-employed, who are disgracefully singled out to pay more than their fair share of increase, above the Conservative proposed levels, in graduated contributions that the Minister is now introducing.
The cost of Socialism, as my right hon. Friend said in the article to which the 51 Minister referred, will be particularly heavy for those groups. Dealing first, with married women in employment—
§ Mr. O'Malley
In view of what the hon. Gentleman has said, is he, or is his right hon. and learned Friend, prepared now to admit that he was wrong in what he has said, as his right hon. and learned Friend is reported in the article? If the right hon. and learned Gentleman is not prepared to withdraw something which is blatantly untrue, I hope that the hon. Gentleman will have the decency to do so.
§ Mr. Clarke
It is not untrue, as the Minister is inferring. The things that were said are untrue only if one takes the basis of comparison which the hon. Gentleman ingeniously took in his speech. In particular, he must not compare the difference between contributions of those contracted out—
§ Mr. Clarke
I think that the Minister understands what I am saying. But he drew just that comparison in his speech. He cannot draw any comparison which, in the case of married women, means that a change from 0.6 per cent. of earnings, under our proposals, to 2 per cent. of earnings under the Government's proposals, entitles one to precisely the same limited national insurance benefits, and say that that is not a swingeing increase. The hon. Gentleman is more than trebling the contribution which married women in employment will have to make. In the comparisons that the hon. Gentleman made between married women and, for instance, single or married men and others contributing to the fund, he missed out the fact that other contributors have a whole range of benefits and pension entitlement which they are getting in return. The married woman, whose contributions the hon. Gentleman is more than trebling compared with our proposals, will continue to receive simply the benefits of the National Health Service and industrial injury benefits in return for her contributions. The hon. Gentleman is more than trebling the bill, or the price of the same commodity as was being offered. In the light of that, how can he expect my right hon. and learned Friend to withdraw the suggestions that he made in the article in the Daily Telegraph?
52 We all know that there is more to this than just the finance, because the Labour Party has been committed to the total abolition of the married women's option. By exercising this option married women have, for a very long time, paid a very reduced level of national insurance contribution for reduced benefits. The reality in the Bill is, as the hon. Gentleman knows, that, although the Government have not had the nerve to abolish that option, they are seeking to move towards it by making it very much more unattractive for women who opt.
I want to examine just what lies behind the Labour Party's desire to make the option that much less attractive and to move in this way. The matter was not wholly argued by the hon. Gentleman today. He did not get on to all the arguments that we had in the past about the married women's option; nor did we hear what lies behind his and the Secretary of State's thinking today. We accept that they are committed to the emancipation of women and to equality of treatment, as I hope that they accept that we are. However, we believe that their views on the married women's option show that their views on equality of treatment would be improved if they were combined with some common sense and regard for the realities of the position of the bulk of married women in employment.
The position is that in the real world of employment and national insurance three out of four married women in employment—that is, 4 million married women in all—opt to pay a very reduced rate of national insurance contribution and, in return, receive a very reduced level of benefit. That is a choice which they have. It is a choice which the Minister disapproves of. It is a choice lie is seeking to make much more expensive in the Bill.
Women at work in factories, manning machines and doing assembly work, make this choice for very practical and common sense financial reasons. Many married women who do industrial work take the job for immediate additional cash to supplement the family income when the family is in difficulties. They may be in and out of employment during their working lives and be in no position to acquire any pensions entitlement on a contributions record.
53 Often, women in employment work for only the first few years of marriage so as to save some money before having a family. Those women are, for practical reasons, content to rely on their husband's contribution to give them their pension benefits in later life. Indeed, it would be a very bad bargain for most married women in employment if they chose to pay the full level of national insurance contribution.
There are only limited categories of married women whom it would pay. Women who are substantially older than their husbands, for instance, would get their pension rights much earlier if they had their own contribution records. Most women have practical, commonsense reasons for opting out of paying the full contribution and relying on their husband's contribution to provide for their retirement and other things, and this position will continue. It is not an old-fashioned notion of dependence on their part. It is practical common sense, bearing in mind the finances of their husbands.
The trend amongst married women in work is not to cease exercising this option. A Written Answer by the Under-Secretary on 20th June showed that over the 10 years 1963 to 1972 the proportion varied by not more than 3 per cent.—from 73 per cent. to 76 per cent.—and in 1972 it was 74 per cent., 1 per cent. more than it had been 10 years earlier.
Those women will find that, instead of paying what they now pay or would pay—4p a week if they were opted out of the national insurance system, plus the 0.6 per cent. that we were proposing—the graduated contributions they will have to pay will be more than trebled to 2 per cent. I accept that my mathematics are certainly fallible compared with those of the Department and those of my hon. Friends, but they are not fallible when it comes to working out that increasing 0.6 per cent. to 2 per cent. is more than treble the contribution.
Certainly better-paid women will find a very great difference. If they earn £40 a week, 64p a week more will be paid by women compared with what they would have paid under our Conservative proposals, which is the proper comparison to make—that is, increasing the 0.6 per cent. to 2 per cent. will result in their paying £21 a year more. If they earn £3,500 a year—this illustrates the kind 54 of leap—they will be paying £1.16 a week, or £40 a year more, than under the Conservative proposals. That is the effect of more than trebling the graduated contribution from 0.6 per cent to 2 per cent.
Even if the Minister feels that a change should be made at all, it is unfair to make a change of such dimensions so quickly in the financial contribution made by any group. We on this side believe that if ever there was a case for changing the position of the married women's option, there is no case for making it on this scale in the present hyper-inflationary times. The Minister will damage the budget of some households where both partners go out to work when this increase comes in in April next year.
That takes me on to the other category which, for reasons best known to the Minister but of which he has not yet persuaded me, is singled out for heavy adverse treatment in the Bill. I refer to the self-employed. Again, the figures in the Bill speak for themselves. The graduated contribution to be paid by the self-employed is raised by an amount greater than for any category of employed persons—from 5 per cent. to 8 per cent. of their graduated earnings—and the upper limit of the earnings on which that is paid is being raised as well.
The maximum extra graduated contribution which someone at the top of the scale could pay—again on my mathematics—has been raised from about £70 to £158. That is for someone who is earning an adequate amount from his self-employed occupation. That is more than doubling the maximum liability for graduated contributions under this Bill compared with the position that would have prevailed had our Bill been allowed to go forward unamended. It is not an increase which is in line with that paid by other employed persons. The self-employed have been singled out, together with married women exercising the option, to pay much more than their fair share of the extra burden of paying for increased benefits next year.
We on this side would like to know why the self-employed are singled out for this especially punitive treatment. We suspect that their independence is envied by some hon. Members opposite. We realise that they are more vulnerable than most because, by definition, the self-employed do not belong to a trade union 55 and so find no special place in the favour of this Government.
We can find no possible justification for deciding, in a Bill amending the 1973 Act, that the penalty to be placed on the self-employed should be so great and that their share of the increased burden of paying for higher benefits should be raised so substantially.
§ Mr. O'Malley
If the hon. Member accepts, as he has implicitly accepted in his speech, that there must be equity between one section of contributors and another, is he saying that we should have brought the Class 2 contribution up in line with the movement of the Class 1 contribution—both employer and employee? Would he have preferred to put the Class 2 contribution up to £2.70 and left the Class 4 contribution at 5 per cent? Is he saying that he has so little regard for about 1 million self-employed people with incomes under £1,600 a year that he would have preferred the £2.70 figure?
§ Mr. Clarke
Again, my understanding was that in his speech the Minister constantly used his own increased August figure as the basis for the self-employed contribution. It is going up to £2.41 as a result of what he has already done. There is no great reduction there for anybody. What he has done is to have a fresh look at the self-employed position compared with our Bill.
It is true that, this line having been adopted, those at the very lower level of self-employed incomes were not adversely affected across the great range of incomes envisaged in the Bill. However, one does not go very far up the scale to find that the increase is substantial. It is very substantial, so that at the top of the scale which the Minister now proposes he has more than doubled the bill to be paid by the self-employed man. That self-employed man is not earning a king's ransom; he is earning £3,600. A punitive increase in contribution is being paid at that level.
The self-employed will find a sudden and dramatic leap in the contributions they have to make. It is not only that. If the House disregards, as it should, the fact that people are not going to have to pay for a commodity that they will no longer receive—that is, the Boyd-Carpen 56 ter benefit—a wide range of the population will notice a material difference next April when the new contributions come into effect.
The House should bear in mind when considering the effects of this what the Government have already done to the categories of people we are talking about—married women in employment, the self-employed and some of those in the professions towards the higher range of earnings who are paying graduated contributions.
The raising of personal taxation in the Budget and the increase in national insurance contributions which will come into effect in one month's time will reduce the take-home pay of significant groups of the population. The combination of the Budget and the August increase will reduce the take-home pay of every man who earns more than £19.50 per week. That same combination of factors will reduce the take-home pay of every childless married couple earning £35 or more per week; it will reduce the take-home pay of every married couple with two children who earn £54 or more per week. Now, lurking beyond an election and hidden away are possible increases in electricity and gas charges and in other matters which the Government would like to postpone payment of for the moment. Next April there will be a further stiff increase in the graduated contributions of national insurance by most sections of the population, and a particularly swingeing increase for two groups unfairly singled out—the married women and the self-employed.
It is no good the Government saying that there are some categories who are still quite well treated. The whole structure of the Conservative Bill was designed to take account of the lower paid, and they have gained advantage from what we did in the 1973 Bill, but for some sizeable sections of the population the increase next April will be dramatic, especially taken with all the other increases the Government have introduced, and that will happen after a highly inflationary winter. It is no good the House legislating so that some months from now the public will be hit unawares. Most people are unaware that national insurance stamps will go next April and that graduated contributions will be collected with PAYE. They will sud 57 denly become aware that they face large increases in some cases, and the anger that will be felt by some of the worst affected groups might mean a repetition of what happened with the increase in rates, which many of those in the know knew was coming but which most of the public did not wake up to until the bill came in.
Many of the adverse effects are stored up in the Bill, and these people will not be persuaded by the Minister's assurance that there are limited categories of people who are not so adversely affected lower down the income scale. Those who are hard-pressed would not want a modification in pensions and benefits to relieve them of their particular obligations. They are entitled to want a much fairer spread of the burden to pay for those pensions and benefits, however. The House must realise that simply passing an apparently innocuous-sounding Bill, when it makes such marked increases in some contributions for some sections of the population, is not enough. It must be considered against the background of the increase in personal taxation, made to provide hundreds of millions of pounds to finance useless food subsidies, to abolish prescription charges and, presumably, at some stage to pay for the nationalisation of some sections of industry.
We must bear in mind the effect all this will have on white collar and blue collar and the middle income groups, and the better-off individual who is already facing problems and will be hard hit over the next year. These people feel that, however much they appreciate the increase in pensions and benefits, they will be hard pressed to find this sort of money at the end of a highly inflationary period.
In that sense we are critical of the Bill and we shall be pressing the Government strongly on its detail in Committee. I hope that the House is aware that the Government have singled out some categories of people for very unfair treatment and that hon. Members will express their views on the matter in the course of the debate.
§ 4.55 p.m.
§ Mr. William Hamilton (Fife, Central)
If that is the kind of opposition we are to get between now and the election we do not have to be afraid of what the election result will be. We are discussing this 58 afternoon substantial increases—across the board almost—in benefits. We are now arguing how we should pay.
The hon. Member for Rushcliffe (Mr. Clarke) has sought to create discontent among certain sections of the community, notably the middle classes and the married women who are at work. I propose to say a word about each of those. The hon. Member and his party have a nerve talking about this Government postponing increased charges for gas, electricity and other things until after the election. The Tories left enormous deficts in those same nationalised industries and we have had to pick up the bills. The British public are not stupid. They know very well that the bills they will have to pay, whether for gas, electricity or the post, are the fault of the Conservative Government of 1970–74, not of this Government.
That, however, has little to do with the Bill. The hon. Member spoke about the self-employed being heavily penalised. Certainly they will pay substantially higher contributions, but I guess that given the other side of the coin, given that people are deriving benefit from the Bill, and that those people are far more deserving than most other sections of the community, and knowing, as they do, that it is a form of redistribution of the national wealth, very few of these self-employed would be reluctant to pay.
I suppose that Members of Parliament will be paying substantially more. I do not object. On the contrary, I take the point of the hon. Member for Rushcliffe, and I have criticised my Government for their view about the sanctity of the Exchequer contribution. I have never accepted that there is anything sacred about 18 per cent. I do not know how the figure was originally arrived at, but there has been a good case for gradually increasing the Exchequer contribution over the years. With a progressive system of taxation, it is a form of wealth redistribution, and that is one of the primary purposes, if not the primary one, of social security. The best way of redistributing wealth from those who are reasonably well off and comfortable to those who are less well off and less fortunate is by a progressive form of taxation and an increase in the Exchequer contribution. That is not, apparently, the view of my party or of the Conservatives.
59 I think that the Liberal Party has long advocated the complete abolition of contributions and stamps and so on, and the introduction of a social security tax. There may be something in that, although it would have to be a fairly colossal tax. But we are talking of fairly colossal weekly contributions. The British public must be educated to understand that if we are to give fair shares, reasonable pensions and allowances to widows and other people in those categories, the rest of us will have to pay much more.
It is an idle exercise, a bad exercise, for the hon. Gentleman to single out the middle-class self-employed or the married women at work and to say that those two categories are being unfairly penalised. I do not accept that as regards the self-employed, and I am not sure that I accept it as regards the working married women. We are talking about contributions from April 1975. The Equal Pay Act should be operative by about that date, and married women should then be in a much stronger position to pay the increased contributions. However, there are ominous signs that the intentions of the Act are being thwarted, and that married women are not catching up with their male counterparts in industry. I am not sure whether that is the employers' fault or the trade unions' fault, or whether it is a conspiracy of both. I suspect that it is a conspiracy of both.
The hon. Gentleman made an absurd charge that the Government were trying to penalise—he did not use the word, but that was the implication—the self-employed, because the Government were envious. He said that it was a combination of envy and the fact that, by definition, the self-employed were not in trade unions. The hon. Gentleman must know that that is a complete nonsense. No one on this side of the House is inspired by that kind of consideration. Envy does not enter into it. If we are to give increased benefits to all the groups we are now considering, we must decide how those increases are to be paid for. I have made my position clear. I believe that an increased contribution must be paid by those with high incomes, and particularly through the taxation system rather than through contributions in the existing National Insurance Scheme.
§ Mr. R. A. McCrindle (Brentwood and Ongar)
In talking about the self-employed, does not the hon. Gentleman also fall into something of a trap? He and his party continue to imply that the average self-employed man is infinitely capable of continuing to pay the increases. Is it not a fact that there are a whole host of self-employed men, including, I suspect, many in the hon. Gentleman's constituency, who run small shops and the like and who should not be the milch cow which his party keeps tending to make them?
§ Mr. Hamilton
My party does not believe that, but we all know that there are men running small businesses who are self-employed and who do not have big incomes—indeed, they have much less than many of the miners in my constituency—and from that point of view the criticism is valid.
I am not very much concerned with the fellow earning more than £5,000 a year who is called upon to pay the increased contributions. That strengthens my argument, that the benefits should be financed increasingly from the Exchequer, and that we should take more from the £5,000-plus man in the form of taxation rather than through the National Insurance Scheme. That is the whole point.
I was just criticising the arguments of the hon. Member for Rushcliffe, that we were inspired in our treatment of the self-employed by envy and the fact that they do not belong to trade unions. We are not the prisoners of trade unions. We certainly work in co-operation with them, which is more than the Tory Party can ever say. It will never get the co-operation of the trade unions. It does not deserve it; it does not represent them. The Tory Party has always been the enemy of trade unions, and therefore has no right to expect co-operation from the trade union movement. But we get that co-operation.
The trade unions are far from being our masters. They are certainly not my masters. I say what I like to the trade unions, and I hope that they say what they like about me and about us.
We accept in the Bill that, if we are to achieve a better deal for the under-paid and the under-privileged, the better-off and the more highly privileged must pay. How the burdens are shared is a matter 61 for political decision. Subject to the reservations I have made, I wholeheartedly support what the Government are doing.
§ 5.6 p.m.
§ Mr. Nick Budgen (Wolverhampton, South-West)
I support what my hon. Friend the Member for Rushcliffe (Mr. Clarke) said about the position of the self-employed under the Bill. In doing so, I have to declare an interest since, as a barrister, I am self-employed.
The Bill makes a considerable attack upon the position of the self-employed person, particularly the self-employed person earning about £3,600 per year. I suspect that the reason for that attack is that it is another part of the large price that the country and all of us are having to pay for the social contract.
It is obvious why the unions so hate the self-employed. It is because the self-employed obtain their increases in earnings, and find better ways of earning their wages or earnings, by individual bargaining and not by collective bargaining. Moreover, they do it in a way that damages the nation less than the unions do by their collective and monopolistic bargaining, and the self-employed are far less inclined to be party to restrictive practices. That is why a swipe at those who are self-employed is extremely attractive to those who pay and govern the Labour Party.
I believe that there is only one legitimate criticism of those who are self-employed. It is that in certain instances they use their self-employed status to avoid and evade tax. But that can easily be dealt with by stopping the loopholes, by proper administrative action to make sure that people—on "the lump", for example—do not avoid or evade tax.
§ Mr. William Hamilton
Does the hon. Gentleman recall that the Labour Government had a Bill to deal with "the lump", but the Tory Party jettisoned it? That is why we still have "the lump".
§ Mr. Budgen
I am not defending the excesses of "the lump". I believe that in certain instances it is right to examine the way in which some people avoid or evade tax, but the Bill tries to put at risk the very existence of the self-employed.
I suspect that another reason for the attack is the realisation that many self- 62 employed people have a great strength in relation to the State, for they are independent of the State, of the unions and of the vast corporations. I believe that this status of self-employment has an important role in preserving the liberty of the individual in a free society. It may be for that very reason that the Government look with such disfavour on the self-employed in our society.
The self-employed person is also ingenious and responsive to market forces. The man who is self-employed is the living denial of the customary and fashionable view in Whitehall that bigger is better. Throughout the past decade, and during the white heat of the technological revolution, with the theory that there could be growth at any price, there has been far too much encouragement given to the big corporations. It is the little man, the self-employed man, who stands alone. It is he who wishes to work out his own destiny, who is able to respond to the vagaries of the market and who is able to take his opportunity when a new situation arises. It is he who is so disliked by so many of the mandarins in Whitehall and by so many hon. Members—
§ Mr. Budgen
—on the Government benches.
I give an example of the ingenuity of those who are self-employed. On Saturday night in Wolverhampton I met a hairdresser in a pub. As I fingered my rather long and greasy locks, which would have been such an affront to my sergeant major 15 years ago, I said to the hairdresser "I expect you are having a difficult time." I imagined that he would be reporting to the Neddy for hairdressers and that hairdressers would be asking it to work out a system of redundancy for hairdressers. I thought that it would be reporting to the Minister or junior Minister, that we would be hearing that there was going to be grave trouble in the hairdressing industry and that there was a need for a massive Government subsidy. I thought "Oh Lord, here is another good Tory who is saying that he dislikes subsidies in general but that he would like a subsidy for his industry."
63 Not a bit of it. My hairdresser friend assured me that, although most people do not have their hair cut more than once or twice in the course of a winter, he had responded to the market in that he had found a great new market for toupes. He had to lay off one hairdresser but he had the good fortune to lay on another five men who were making toupees at great profit to himself and to the tremendous satisfaction of the public.
§ Mr. Budgen
I though that my hairdresser friend was a fine example of the ingenuity and responsiveness of the self-employed man, but I suspect that the Government will not be responsive to the argument that the self-employed show independence and ingenuity in responding to the market economy.
Is this the right moment to take a doctrinaire swipe at the self-employed? Let us consider for a moment the typical self-employed person. Let us recognise that he is middle class and that in the past he has perhaps supported the Tory Party. He has in the past perhaps demonstrated the qualities of independence and integrity which are so offensive to some people in our society. That person is being hit today as he has never been hit before both by hyper-inflation and by the risk of considerable unemployment in the course of next winter. We see that person being hit by increased taxes, higher prices and, most of all, increased rates.
The present rate situation is a lesson from which all of us should learn. We all talk about the social discontent which is an inevitable consequence of a high rate of inflation. We are seeing that discontent in respect of the rates and we are seeing it come to light in the most unexpected directions. For example, the sort of person who is in the Tory Party, the retired bank manager or the retired Army officer, is now saying what none of us ever believed he would be saying. Many of my hon. Friends have been embarrassed by the enthusiasm with which people of that sort have spoken of law and order. Many of us have believed that in speaking about law and order they have been overkeen on the punishment side. What do we find now?
64 Those same people are now saying that they will break the law. They are threatening not to pay their rates. They have been driven into a desperate corner by the inflation over which the present Government are presiding.
More and worse is yet to come for the people to whom I have referred, because next winter we can anticipate a great increase in the rate of unemployment. I accept that in the 1930s and in other periods it has been the working class, on the whole, which has had to bear the terrible burden of a high level of unemployment. But let us make no mistake that next winter, when we have a 25 per cent. rate of inflation and perhaps 1½ million unemployed, it will not be the working class alone which will have to bear the weight of unemployment. It will be the middle class, which does not have the support of the unions, which will tend to bear the weight of unemployment just as much as those who historically belong to the working class.
There may be just one safety valve or escape route for the middle class. It may possibly be able to escape into self-employment. It may be able to retain some sort of dignity. It may, by its ingenuity and responsiveness to market forces, be able to join the great body of the new service industries. It may therefore cease to be a charge upon the State. That escape route is perhaps not being closed but it is being narrowed by the Bill.
I say to the Government that the people to whom I have referred—they represent a surprising body in our society—will be more and more frustrated as the weeks go by until April 1975. If their escape route is blocked by the Bill, by the time April 1975 comes along the middle class and self-employed will feel so frightened and so frustrated that the one thing that all of us in the House fear may come about—namely, they may be the breeding ground for a Right-wing Fascist dictatorship which some have predicted as we have seen the rate of inflation continuing apace.
§ 5.18 p.m.
§ Dr. Michael Winstanley (Hazel Grove)
I should like to respond to the invitation of the hon. Member for Fife, Central (Mr. Hamilton) and comment on a number of points he made with which I agree. In the interest of brevity, I shall not do so 65 save to confirm that the Liberal Party looks forward to a time when we can abolish "the stamp" and substitute a social services tax. My party would like to look at pensions not so much as something that somebody purchases but as a right. It looks forward to the time when those who are now working accept that they are paying the pensions of those who have retired. We must see to it that those pensions relate not to what they earned in the past but to what we earn now. I agree with the hon. Gentleman on general principle.
It seems that we are embarked upon a curious course. We shall have a Second Reading debate until seven o'clock. That debate will then be followed by a motion on precisely the same topic until ten o'clock. We shall thus be discussing exactly the same topic from half-past three until ten o'clock. At that stage the proceedings will be arbitrarily interrupted for a vote, which will be a virtual formality. As a result, it seems that we shall be entertained to eight Front Bench speeches instead of the more usual four. Whether that proves to be an advantage, time alone will show.
I said that the vote will be a formality because the Bill deals only with the basic pension and the increases in contributions and benefits which come into effect later this month. To that extent the Bill is non-controversial and I am sure that we shall not oppose its Second Reading.
There is, however, scope for comment on two fronts. First, what does the Bill say and does it go far enough? Second, what is left out of the Bill in relation to the 1973 Act and occupational pensions? The Bill contains the increased basic pension rates, which are, of course, crucial. The Government have made a vague commitment to ensure that basic pensions keep pace not with increases in the cost of living as the Conservatives sought to achieve, but with increases in average earnings.
That means an increase of anything between 8 per cent. and 15 per cent. annually, or half that every six months on the basis of the biannual review to which the Government have committed themselves. But this would only maintain the level of the single pension at 22.6 per cent. of average earnings and the married couple's pension at 36.2 per cent., as at present.
66 The Government have talked blandly about targets for the basic pension but they have still to fix them. We in the Liberal Party favour targets of 33⅓ per cent. and 50 per cent. of average earnings respectively for single persons and married couples. If that were implemented at once, it would mean pensions of £14.66 for a single person and £22 for a married couple, assuming that average earnings reach £44 this year. This would cost about £1,000 million, or £1,500 million if supplementary benefits were increased proportionately. If we look at the target for the next 10 years, it would require a 1 per cent. addition each year on top of the increase required to keep pace with the increase in average earnings.
I turn now to the question of the earnings rule relating to men under the age of 70 and women under the age of 65. The right hon. Lady is raising the exemption limit from £9.50 to £13. We would like to see the rule completely abolished. The argument has been advanced that it would cost too much, but there is a good deal of misunderstanding about the cost and, indeed, about the rule, not only among pensioners but among hon. Members. When we say "You can earn so much without deduction", people often think that we mean without deduction of tax when we mean without deduction from pension. This causes misunderstanding. To do the sums properly, we should look at the complete picture, in terms not only of the cost of the pensions but of what we would gain in additional tax derived from the additional income. We also have to look at the additional total contribution to our economy made by elderly people remaining in work.
If it is not possible fully to abolish the earnings rule now, we should at least raise the exemption level to a more reasonable figure, perhaps even two-thirds of average earnings. We should not go on discouraging elderly people from continuing in work or from retiring gradually, as it were. We are too fond of regarding retirement as a sudden, sharp shock rather than as a gradual process, as it would be for many people if there were more incentive, or less disincentive, to remain in work part time.
What does the Bill omit? One of the right hon. Lady's major criticisms of the 1973 Act was that it discriminated in 67 occupational pension arrangements against women. What is her attitude towards the discrimination contained in the different retirement ages for men and women? Although it might not be possible to reduce the retirement age for men now, it might well be possible to follow the example of Jersey and raise the retirement age for women on an optional basis with a raised pension level, while ultimately reducing the retirement ages of men and women concurrently in stages until it is 60 in both cases.
The right hon. Lady announced her commitment to scrapping those parts of the 1973 Act dealing with occupational pensions and introducing her own scheme. This volte-face is the third change of policy in seven years. First we had the late Mr. Richard Crossman's proposals, then we had the years of the right hon. Member for Leeds, North-East (Sir K. Joseph) and now we have the right hon. Lady's reign. This latest change of policy will cause the utmost confusion and uncertainty in occupational pension schemes. Indeed, it has caused confusion and uncertainty and has done great damage already.
Many firms will be pressing on with their recommended pension schemes, evolved as a result of the 1973 Act but which may end in further confusion when the proposals in the White Paper are published, when they may find that they have pressed on to no purpose. The right hon. Lady says that many firms were apathetic to the previous scheme and that not one recognition certificate had been applied for. That does not match the information we have been getting from pensions firms. The industry believes that a massive impetus was building up following the heavy advertising campaign earlier this year. In any case, approval did not have to be sought until much later, and there is already considerable evidence of many of these schemes coming into being.
There is no indication of what is to be the rôle of occupational pension schemes. Is the first priority to be an adequate State pension with occupational schemes as a fall-back? If not, how much pressure is to be exerted on employers to institute their own schemes rather than fall back on the State reserve scheme?
§ Mr. Timothy Raison (Aylesbury)
The hon. Gentleman said that he could not 68 understand why we were having two separate debates today. We are talking about two quite separate things. The first debate is about the need to up-rate the present scheme and about various matters concerned with Part 1 of the Social Security Act. The second debate is to be about Parts 2 and 3 of the Act. These are quite separate subjects. The hon. Gentleman is making strong points on the second subject, which has nothing to do with the matter now in hand.
§ Dr. Winstanley
I know what this debate and the next are about. They are on the same subject. The motion to be debated later and this Second Reading debate deal precisely with the situation we are in. Presently the Bill will get its Second Reading and then we shall debate the motion, which is nothing but posturing and will achieve nothing. All we can do is wait for the White Paper, although some of us in the Liberal Party feel that we might be better employed with my hon. Friend the Member for Rochdale (Mr. Smith) travelling on a coach around the country. Everything that can be said on the motion to be debated later could be said in this debate.
Would it not be useful to arrange tax concessions to companies which institute their own approved schemes? Could we not do something to encourage such schemes? Our position is clear. We are in favour of adequate basic pensions without the need to apply for supplementary benefits by those who have no other source of income. That is the first priority. We are in favour of the abolition of the earnings rule as an interim measure before our basic pension targets are reached. We support the equalisation of the retirement age for men and women and a gradual reduction in the age to 60.
Once the basic pension is adequate the case for a compulsory occupational pension is weakened, but we favour the encouragement of occupational schemes plus the opportunity for employees who wish to contribute but whose firms do not run such schemes to join a central account, supervised but not run by the Government and funded jointly by the employers and the firms without schemes of their own.
§ Mr. O'Malley
The hon. Gentleman has said that the Liberal Party 69 is in favour of occupational pension schemes. The Government are in favour of the continuance and development of good occupational pension schemes. However, the Government have decided that they are not in favour of, and find inadequate, the reserve pension scheme for a number of reasons which we shall deploy later. In the Liberal Party manifesto a similar attitude was taken. That manifesto thought it wrong that people should be compelled to join a reserve scheme. Is that still the attitude of the Liberal Party?
§ Dr. Winstanley
We accept what the Government have said about the inadequacy of the previous State reserve scheme. We nevertheless also accept that there is great merit in occupational schemes and we believe that where possible they should be encouraged, given the current basic pension rates and the chaos in the occupational pension sphere—caused by successive changes of policy and also perhaps in the hope of achieving what is referred to in the motion on the Order Paper, an all-party kind of attitude,an agreed foundation for pension policy.Might it not be better to accept the idea of compulsory and universal commitments to occupational schemes and some kind of State-run reserve scheme? That is a possibility. We have expressed our preference.
We shall examine in Committee such points as that and the anomalous position of the self-employed. For the moment we are content to give the Bill a Second Reading. To save the House from having to listen to any further Liberal speeches later in the evening, may I say a word about the subsequent motion? We will support the motion because it asserts that the 1973 Act should not have been jettisoned. We will reject the Government amendment which claims that it would have been impossible to retain those provisions and build on them. The Government have never produced any evidence to that effect whatever.
§ Mr. Deputy Speaker (Mr. Oscar Murton)
Order. I was about to interrupt the hon. Gentleman. It is perfectly in 70 order for him to relate matters dealing with the Second Reading of the Bill to certain matters referred to in the motion. He should not, however refer to the motion as such.
§ Dr. Winstanley
If you would prefer us to seek to catch your eye later, Mr. Deputy Speaker, so that we may indicate how we will vote, we will do that. Since the subject matter is the same I thought that we would follow the customary practice during a Second Reading debate and that the rules of order would be given a fairly wide interpretation.
§ Mr. Deputy Speaker
Order. It is perfectly true that the Chair allows a fairly wide-ranging debate on Second Reading. Although there may be some similarity between the motion and the Bill, it would not be proper to refer specifically to the motion.
§ Dr. Winstanley
I am grateful, Mr. Deputy Speaker, and I shall try to tread a little more carefully so as to incur neither your displeasure nor that of the hon. Member for Lancaster (Mrs. Kellett-Bowman).
The Secretary of State has said that we have lost nothing by abandoning the State reserve scheme set out in the 1973 Social Security Act. She says that because she believes that the scheme was no good anyway. But have we lost nothing? Have we not, by abandoning that scheme, deprived many workers of a better scheme? I say "workers" advisedly because we are not here dealing with managerial people in the main. Those people already have occupational schemes. We are referring to those lower down in the occupational strata, who would have had occupational schemes if the previous provisions had not been abandoned.
Have we not also deprived many widows of any scheme at all, women not now provided for, who would have benefited from occupational schemes? I accept that we are not talking about huge numbers.
Many firms will continue with these schemes because they have passed the point of no return. They have entered into agreements with the unions. We should have no quarrel with that. There is no doubt that improved pension provisions can possibly be used as a way of withstanding potentially inflationary wage 71 claims. We should encourage that. There is, however, evidence that some firms which were about to introduce schemes are drawing back because they do not need to do so.
Many workers will suffer as a result. Many widows will suffer because they will not get the kind of protection that those occupational schemes would have given them. What will occur later tonight in the debate on the motion will be a sterile kind of exercise because by then the Second Reading will have finished and we will have to wait for the White Paper. Then we can argue again about what is to happen.
Perhaps I can make it clear that my hon. Friends and I will vote for the Opposition motion and against the Government amendment because the Government claim that it would be impossible to retain the State-reserve scheme as it was under the 1973 Act and build on that. We have been given no evidence to justify that view. We maintain that we could have avoided all the confusion and uncertainty by carrying on with the other Act, inadequate though it was, and building on it. Since no evidence has been produced to convince us that this would have been impossible, we cannot support the Government's attitude.
§ 5.36 p.m.
§ Mr. Robert Boscawen (Wells)
The hon. Member for Hazel Grove (Dr. Winstanley) has betrayed how incredibly ill-thought-out are the policies of the Liberal Party with respect to occupational pensions and the State basic scheme. If he thinks that he could have a State basic scheme for everyone which would eliminate the need for supplementary benefit, which would allow a retirement pension on the State basic scheme of something of the order of one-third or even one-half of the national average wage, and if at the same time he imagines that there could be a thriving occupational pensions industry, he needs to have his head examined. The contributions for the basic scheme would be enormous. I do not think that the hon. Member has thought this out at all.
§ Mr. Boscawen
The hon. Gentleman has had his opportunity to have his say. I will continue.
72 The Minister of State opened the debate in his customary, polite, charming and innocent way, as we have come to expect. He sought to hide, with his usual skill, just what the Bill is all about. I thought it was incredibly skilful of him never to mention that the change-over in the contributions payable by employed married women and widows will yield another £47 million for the National Insurance Fund. Yet he sought at the beginning of the debate to persuade us that there would be very little change, and for most people a considerable reduction, in what they would have to contribute next year.
§ Mr. O'Malley
I quoted a figure. I thought the hon. Gentleman had heard it. I said that under the terms proposed the rate of contributions into the National Insurance Fund for the married women's and widows' options would bring in about £30 million per year less than under current arrangements.
§ Mr. Boscawen
I am quoting from the Government Actuary's report, which says that the extra contributions will total £47 million. The hon. Gentleman sought to persuade the House that this could be done painlessly.
I am the first to accept that the Bill contains some useful points. I am glad to see the continuation of a relaxation in the earnings rule. I am glad that there are small groups of people who will get more relief on their contributions. I think that the hon. Member is trying to get away with murder in the Bill, as I know he can do.
There are certain groups of people who will face a substantial increase in their contributions as from next April. These include married women at work who exercise the married women's option and who have above-average earnings. They will find themselves facing a considerable extra impost for which they will get nothing more than they would have received under the Social Security Act 1973. I believe that they will be very angry about this. As the hon. Member for Fife, Central (Mr. Hamilton) has said, this is a redistributive form of tax which will affect these women.
The main argument against allowing the married women's option to continue was that it failed to treat women on an equal 73 basis with men. It treated them as second-class citizens. It provided lower unemployment, sickness and other short-term benefits. Therefore, so the argument goes, it should come to an end. Under the Bill, however, although married women are paying more, they will not get better benefits.
The basic scheme is now so expensive to the National Insurance Fund that we can no longer afford to exempt those married women from paying a higher rate. The Government should say so and make clear that they are increasing the contributions for married women whose earnings are above a certain level, so that married women will know in advance what is being done and the reason for it.
§ Mr. O'Malley
Of course we admit it; it is in the Bill. We are putting up the level of contributions from 0.6 per cent. to 2 per cent. for the reasons I gave. The hon. Gentleman is wrong. As a result of the Bill, next April married women, whether or not contracted out of the existing system, will overwhelmingly be paying less and in significant numbers much less than at present.
The hon. Gentleman referred to married women at the top of the earnings scale. Next April a married woman will pay 1.57p a week less if she is not contracted out and 1.19p less if she is contracted out than she paid on 5th August 1974, or, on the present position, 91p and 53p less respectively. Married women under the option will be paying less next April than they are at present and less than they will be paying from the beginning of August.
§ Mr. Boscawen
With respect, they will be paying more and will not be getting correspondingly increased benefits. I return to the Government Actuary's report, which states that there will be a yield of £47 million more from that group of people. Someone will be paying more to yield that amount of money.
§ Mr. O'Malley
There will be a £30 million decrease compared with the pre-April 1975 position. The £47 million increase is compared with the 1973 Social Security Act figures—that is the change from 0.6 per cent. to 2 per cent.
§ Mr. Boscawen
That is exactly what I am saying. I have not misunderstood 74 that. Next April people will have to pay considerably more.
Married women go out to work not because they want to but because they need to increase the family income. That is made necessary in most cases by the increase in mortgage interest rates. If married women did not go out to work, a mortgage would probably be out of the reach of many hundreds of families. Married women's ability to help to pay off the mortgage will be reduced by the Bill, and that is deplorable.
Matters may be different as we move towards equal pay, but we have not yet gone far along that road. Conditions do not yet obtain throughout the country for achieving equal pay. That married women get good cover from their husbands' insurance contributions is demonstrated by the fact that three out of four married women in work opt for that method.
A well-loved late Member of the House, Mr. Tom Price, who probably knew as much about national insurance as anyone in the House, said in one of his last speeches—if not his last speech—that a large proportion of women's contributions never achieved the purpose for which they were made, before these women married. Only one-third of the contributions made by married women are repaid to them in benefits. In other words, the contributions of married women are a bonanza to the National Insurance Fund. That is no reason for putting an impost on married women, however high their earnings. I am completely against married women with above average earnings being treated in this way. I hope that in Committee we shall vote to throw out this proposal. Married women who go out to work want their independence and they should be allowed to choose to opt out and to get benefit under the 1973 Act.
Again, £25 million is to be taken from the self-employed in increased contributions. I do not know how many are involved—it might be 100,000 or 150,000—but they are to be milked of £25 million in Class 4 contributions. The self-employed have been hit all round the clock by the Government for increased rates and increased taxes. They have been hit far harder than anyone else and, naturally, they are beginning to object. Larger shopkeepers, professional 75 people and farmers in my constituency who are self-employed will be angry next April at the swingeing increase that is being made in their contributions.
One reason why those people will be so angry is that the increase comes all at once, not gradually. The increase at the highest rate—a figure of £82 a year extra on an income of £3,500—is an enormous impost all at once, whereas if it had been spread over a number of years it would not have affected the individual quite as much. Exactly the same happened in respect of some rates increases which rose 100 per cent. in one year. That is why people are so angry, because the impost has not been phased over a number of years and they have been unable to adjust to such a large jump all at once.
When all these things are added together, it will be found that more and more people in these middle-income groups have become disillusioned with the aims and purposes of the Labour Government. Those people will be right to come to the conclusion that the Labour Government aim at ending the independent spirit which is so manifest in those who undertake self-employment.
Lastly, I wish to return to my normal theme when taking part in debates on social security matters. I refer to the absence yet again of any mention in the Bill of death grant. Labour Members may laugh about this and say that this is the wrong legislation in which to introduce these matters, but I wish to quote from a social security debate in Standing Committee two years ago:There is an argument for saying that the Bill is not appropriate for insisting on this point. … We do not accept that; but I should accept the argument of urgency, namely, that the Government do not want to wait until 1975 before they take steps to make the death grant far more realistic than it is now. If the Government had asked us to withdraw our amendment on the argument of urgency, we might have been prepared to listen, but instead we have had the exact opposite."—[OFFICIAL REPORT, Standing Committee E, 6th February 1973; c. 381.]That was a quotation from remarks made nearly two years ago by the right hon. Lady who is now Secretary of State for Social Services. She then, when in opposition, regarded this as a matter of extreme urgency and in order to introduce a death grant was prepared to vote against 76 the Conservative Government. Two years later she is now sitting in the hot seat as Secretary of State and has done absolutely nothing about death grant.
I hope in Committee to introduce an amendment on this matter, and perhaps on that occasion I shall have the help of Labour Members as well as my hon. Friends. We might take advantage of this minority Government and win a vote to get the death grant increased. I very much hope that that happens, because it is long overdue.
§ 5.54 p.m.
§ Mr. D. E. Thomas (Merioneth)
My main reaction to this Bill is that as it stands it represents a missed opportunity in terms of social security reform. I want to talk not so much about contributions—I shall not attempt to follow some Conservative Members into a middle-class revolution—but about the vexed question of the adequacy of levels of benefits to be made available through this legislation.
I received some figures from the Department on 18th June which show that in the last 10 years there has been no real increase in the value of pensions and supplementary benefit scales—that is to say, when the social security benefits are expressed as a percentage of the average full-time male manual weekly earnings. If the Minister would give the relevant figure for the other social security benefits which we are discussing in this debate, I have no doubt that the result would be the same. The so-called safety net of supplementary benefit is the lifeline for recipients of other benefits which are inadequate to meet their needs. Although successive Ministers have paid lip service to the principle of lessening the dependence on supplementary benefits, I do not see in the Bill any evidence of positive action in this area. Indeed, the evidence appears to be in the other direction.
By the levels of benefit proposed in the Bill, and because of the way in which the eligibility of benefits is governed by the Social Security Act 1973 and previous legislation, substantial numbers of the groups to be covered by these benefits will have to revert to supplementary benefit. I already have the figures showing the number of retirement pensioners and widows in Wales who receive 77 supplementary pension. These figures regularly over the last five years have stood at about one-third of all recipients of pension. Again, if we had similar figures for the benefits which we are discussing in the Bill I have no doubt that the position would be similar.
I should like to discuss the individual benefits covered by the Bill and to refer to the eligibility regulations under the 1973 legislation and the effect of those regulations on the level of benefit, and also to the gaps which exist in the existing benefit net.
I refer first to unemployment benefit. For the first 28 weeks of payment, sickness benefit and unemployment benefit are paid under similar criteria. However, after 28 weeks the unemployed person can receive no flat-rate benefit and the earnings related supplement comes to an end. There is no equivalent of the invalidity allowance paid to a sick person which can be paid to the long-term unemployed. Can the Minister say in what way the financial needs of a family whose male breadwinner has been out of work for six months are different from the needs of a family in which the male breadwinner has been off sick for six months? Indeed, one could argue that the financial needs of the long-term unemployed are greater than those of the long-term sick since the unemployed person will not have had the benefit of an employer's sick pay scheme.
The fact that unemployment benefit can be claimed only for 52 six-day weeks and that no claim can then be made for 13 weeks again forces the long-term unemployed person to have recourse to supplementary benefit. In addition, the eligibility criteria can mean a disqualification from unemployment benefit for six weeks if the unemployed person left his last job voluntarily, or with what is described as a just cause, or if he was dismissed or, alternatively, if he refused a reasonable offer of work. These eligibility regulations are backed up by an effective form of punishment without trial whereby the insurance officer can suspend payment of unemployment benefit pending an investigation. If these matters are not to be covered by the Bill, I hope that we can be given a clear idea of the Government's intention to implement these other necessary amendments flowing from the 1973 Act.
78 I am concerned about the operation of the regulations governing the payment of unemployment benefit under the 1973 Act. I come from a country where the unemployment rate is regularly twice the United Kingdom average, where the major town in my constituency has an unemployment rate which is never far below 12 per cent. of the male population and where a large percentage of its people consist of the long-term unemployed of whom I have been speaking. These men are as much casualties of our economic system as are the physically sick. They are casualties of an undiversified local economy over which they have no control. Yet they are subjected to regulations designed to prevent them being "work-shy"—as if they had any real choice of employment available to them. I believe that we should look again at the position of the long-term unemployed and the present eligibility regulations.
I turn to the question of invalidity benefits, in terms of both pensions and allowances. The invalidity pension is set at the same level as is the retirement pension in the recently-enacted National Insurance Act. The reservations I have expressed about supplementary benefits in respect of widows and retirement pensioners apply equally to the invalidity pension. I am also concerned about the position of the single person who is in receipt of invalidity pension and who under the present level of benefits is totally dependent on relatives for income support as well as for any other physical and welfare support he may need. Although the level of rates for dependants is increased under the provisions of the Bill, in a family where the father is in receipt of invalidity benefit the mother will still have to go out to work in order to supplement the family income.
I am concerned also with the position, under the 1973 Act and the Bill, of the invalidity allowance—the higher rate, the medium rate and the lower rate increased under the Bill. I fail to understand why no invalidity allowance was paid to people within five years of retirement under the 1973 Act and why the anomaly is not being put right in this Bill, so that anyone becoming long-term sick within five years of retirement might receive invalidity allowance.
79 I shall also be interested to hear whether the Government plan to look at a further aspect of eligibility for invalidity benefit. Since these benefits replaced sickness benefit after 28 weeks, eligibility under the 1973 Act was related to contributions. In these contribution conditions, no invalidity benefit is paid to those who are not able to work and pay contributions. I have in mind disabled persons who have been incapacitated from an early age. For those who do not qualify for an attendance allowance—and they are the less severely disabled—again there is only supplementary benefit. This Bill brings us no nearer closing the gap for the disabled between the attendance allowance and supplementary benefit, and no nearer a disablement income, which we feel strongly should be introduced as soon as possible. Neither the sickness benefit nor the invalidity benefit provides cover for additional expenses resulting from disablement, and I look forward to either an extension of the attendance allowance or the introduction of a disablement allowance to ensure an adequate level of income for disabled people.
There is also the fact that invalidity benefits are payable only to those who are long-term sick and, by definition incapable of work. This discourages both social and physical rehabilitation procedures, a gradual return to work or even the taking up of part-time work.
I am concerned too about the relationship between invalidity benefits and supplementary benefit. If an attendance allowance is awarded to a disabled person receiving supplementary benefit, an equivalent amount is added to the supplementary benefit scale when the person's needs are assessed. This does not happen with invalidity benefits. I should like an explanation of the position.
I shall be interested to hear why the provisions in Part I of the schedule do not include any reference to an increased level of maternity grant. I am especially concerned about the contributory basis of the grant and about the need for it to be reviewed. A substantial number of young unmarried mothers who have not been able to work and so qualify for the required number of contributions have to fall back on the exceptional needs grants of the Supplementry Benefits Commission. They are receiving those 80 grants in lieu of maternity grants, yet the level of exceptional needs grants is always far below even the £25 level of maternity grant.
I hope that some of these matters will be considered when the Bill goes into Committee. Amendments along the lines that I suggest are essential to the more equitable working of the 1973 Act. If they cannot be incorporated in the Bill, I hope we shall have some assurance from the Government that proposals of this kind will be embodied in further amendments to the Act.
§ 6.4 p.m.
§ Mr. Bob Cryer (Keighley)
I want first to give a general welcome to the Bill since it embodies many of the promises contained in the Labour Party's election manifesto. It is worth emphasising to the world outside that the increase in the earnings rule is another instance where the Labour Government have carried out an election pledge. At the moment there are many voices calling upon the Labour Government to abandon their election pledges—for example, not to hold a referendum on the Common Market—but I am pleased to see in this Bill that the Government are adhering to the programme put before the electorate.
Although I welcome the increase from £9.50 to £13 to men under 70 and to women under 65, I hope that the final stage will be the abolition of the earnings rule. This has been mentioned once or twice already. We hope that the Government will move rapidly towards that end. However, we recognise the difficult economic circumstances inherited by my right hon. and hon. Friends and that we must move slowly. Nevertheless, there are a number of anomalies to which I wish to draw attention.
I understand, for example, that councillors who are pensioners are subject to the earnings rule and, as a result, find that their pensions are cut by the extent to which they claim an earnings allowance. Although this is a matter which naturally concerns my right hon. Friend the Secretary of State for the Environment, I suggest that my hon. Friend the Minister of State, Department of Health and Social Security might approach his right hon. Friend to suggest that this anomaly can be eradicated if, instead of an actual payment being made 81 to a councillor in this position, we introduce a system whereby earnings are made up with employers. In this way, the effect of the earnings rule in creating a separate class of councillors, who serve the country as well as any person earning wages, can be eradicated. I look forward to an assurance from my hon. Friend that this possibility will be investigated. This anomaly has been brought to my attention by a constituent of mine, who, incidentally, does not share my political allegiance. He points out to me that it results in a certain number of absurdities.
A considerable amount of capital has been made about the increase in contributions from the self-employed—the Class 2 contribution from £1.68 to £2.41 and the Class 4 contribution from a levy of 5 per cent. to one of 8 per cent. A number of hon. Members opposite have talked about the sturdy independence of those who are self-employed. These marginal increases in contributions will not affect stable businesses which are well organised and which are serving the public, such as small shops. But if the increase in charges has the effect of putting out of business those who are working on "the lump" it is to be welcomed.
We have heard from Opposition supporters eulogies suggesting that self-employed people working on "the lump" system show a spirit of initiative. However, in the opinion of my right hon. and hon. Friends, they show an avarice which results in an enormous loss of life and limb on the building sites where many many of them are engaged.
I wish to make it emphatically clear from the Government benches that my right hon. and hon. Friends and I do not support "the lump". We intend to put an end to it and all that it means in terms of shoddy work, long hours, a lack of safety regulations and the atavistic jungle which "self-employed" generally means. If these increases in charges help to do that, so much the better. They might offset some of the tax avoidance for which those working on "the lump" are well known.
One Opposition supporter suggested in a somewhat bizarre contribution that if self-employed people find these increases enormously burdensome many of them may slide into Fascism. It does not say much for their political attitudes if that 82 is likely to happen as a result of increased insurance contributions.
There are one or two other matters affecting the invalidity allowance on which I should like to touch. There are some anomalies. The general increase in allowances is to be welcomed. However, there are people in receipt of invalidity allowances who, though not retired, are in virtually the same category as pensioners who receive the increased allowances from 22nd July but do not get the £10 Christmas bonus. They feel that they are in an identical position but are unable to receive the extra bonus at Christmas. I realise that this is not within the scope of the Bill. However, I ask my right hon. Friend to review the £10 Christmas bonus so that those who receive only the invalidity allowance may be considered eligible for that bonus.
In general, I welcome the Bill. I ask my right hon. Friend to examine the earnings rule to see whether anomalies in certain situations where local government money is involved can be eradicated. I welcome the general increase in the level of benefits. I re-emphasise that these are election promises being carried out by a Labour Government looking carefully at the election manifesto drawn up by the rank and file of the Labour Party. I recognise the characteristic criticisms made by hon. Gentlemen opposite about those working on "the lump". They seek to support the kind of activity which we wish to diminish. I give the Bill that qualified welcome.
§ 6.12 p.m.
§ Mrs. Elaine Kellett-Bowman (Lancaster)
The hon. Member for Fife, Central (Mr. Hamilton), who is no longer in his place, accused my hon. Friend the Member for Rushcliffe (Mr. Clarke) of trying to create discontent among working married women. If the hon. Gentleman were here I could assure him that the Bill will create among working married women not discontent, but sheer unabated fury because they will be the most serious casualties of its provisions. They will be paying another £47 million and getting nothing whatever extra for it. In case the Minister does not believe me, I suggest that he reads the reference to the Government Actuary's report on page iii of the Bill.
83 At present a married woman can opt to be covered by her husband's contributions and pay only at the Class 2 rate. As three out of every four women opt to do that, it shows how highly they regard this option. They do not want to build up a contribution record. They want cash in their hands now when their families are expensive to bring up. With children staying on longer at school and younger children just beginning school, they go out to earn money for extra school uniforms, food or the treats that they want for them. They do not want to build up contributions for 20 or 30 years on. They will bitterly resent having to pay treble the contributions that they now pay under the reduced rate.
There is one aspect, to which no one so far has alluded, which I regard as infinitely more insidious than anything else. My hon. Friend the Member for Rushcliffe pointed out that the trebling of the married woman's contribution under Class 2 would make the married woman's option more unattractive. In addition, the Bill contains the seeds of the Government's ability to abolish the married woman's option altogether.
§ Mrs. Kellett-Bowman
That is contained in Clause 2(4)(a). Section 42(2) of the Social Security Act 1973 states:Regulations under this section shall provide for enabling a married woman or widow to elect".That is, to pay at the reduced rate. If the amendment contained in Clause 2 were made, the subsection would read:Regulations under this section shall provide, subject to any prescribed conditions and exceptions, for enabling a married woman or widow to elect".That means that the Minister could bring in such "prescribed conditions and exceptions" as would abolish the married woman's option altogether. For example, to carry the matter to absurdity, the Minister could say that this would apply to all women earning over £5,000, £6,000 or £7,000 a year. I believe that women want to retain this option. If I have the honour to serve on the Committee I shall strive to see that the option is retained.
The Bill is not all bad. I welcome the relaxation of the earnings rule, for which 84 I and some of my hon. Friends have been working for some time, when the Conservative Government were in office, and on which we had made some progress.
But I regard as absolutely crucial the married woman's option. I should like an assurance from the Minister in winding up that the Government have no intention of using this small and apparently innocuous amendment to destroy an option which is greatly valued by the women of this country.
§ 6.15 p.m.
§ Mrs. Jill Knight (Birmingham, Edgbaston)
The Minister of State in opening the debate in a gracious and charming way sprayed my hon. Friend the Member for Rushcliffe (Mr. Clarke) and me with some extremely kind words. It would be churlish of me not to follow his example.
The hon. Gentleman said that he hoped that my hon. Friend and I would continue to speak from the Opposition Front Bench. Having listened to his speech, I should like to see him at the Palladium, because he has undoubtedly missed his vocation. I see him as the Tommy Cooper of Rotherham. I should like to see him do the three-card trick. Indeed, he reminded me of the small boy who, when asked to define "Now you see it, now you do not", said "A black dog running over a zebra crossing."
The Minister talked about reduced contributions as if everyone would pay far less under the Bill. In fact, he talked about a substantially reduced contribution and of a reduction of 11 p per week for married women. I think that some of us us soon saw clearly which cup held the dried pea. The fact is that the hon. Gentleman was using the August figures as though they were the present figures and was talking about the Boyd-Carpenter scheme which is to be wound up in April.
Let us get it absolutely clear. Women, who, after all, are the more practical of the two sexes, have no objection whatsoever to paying more money provided that they are to get more benefits in return. A mother, who in most cases is the chancellor of the exchequer in the ordinary home, does not object to paying weekly sums so that little Johnny will get a new coat at the end. But she objects root and branch to paying out contributions when there is no new coat for little 85 Johnny, no increased pension entitlement, nothing, at the end of it for her.
If a married woman continued to pay under the Boyd-Carpenter scheme she would get more for her money. She would get a pension entitlement which she will not now get. That was where the Minister, even using great dexterity, failed to hide the pea in the cup.
My hon. Friend the Member for Rushcliffe bowled the Minister middle wicket. Although some attempts were made to argue against what he said, they got feebler as time went on.
The Opposition applaud several things in the Bill, We applaud the graduated contribution theory having been accepted by the Government. We are pleased that the structure of the 1973 Conservative Act has been adopted. We are pleased about the easement of the earnings rule, and we are pleased, too, about the increase in the invalidity allowance.
Having tried as hard as I can to say kind things about the Bill, I must now come to some criticism of it, because criticism is needed, and it is well deserved. At a time when the Chancellor of the Exchequer's actions have greatly added to the burdens of everyone in Britain, at a time when prices in the shops are soaring and when electricity, postal and gas charges are rising rapidly, we now have this innocuous little Bill that will add one more burden to several backs.
Married women will find the Bill unreasonable, widows will find it outrageous, the self-employed will find it unfair, and employers will find it worrying because it will add to the price of their goods.
§ Mr. George Cunningham
May we take it that, in view of her comments, the hon. Lady will vote against the Bill?
§ Mrs. Knight
Perhaps the hon. Gentleman will wait until the Bill gets into Committee, when I hope to have an opportunity to vote against parts of it and to move amendments to it.
The Opposition do not object to paying for pensions and to putting the whole of the pensions system on to a solid basis. We want extra pensions to be paid out, and we want them to be paid for, but we want them to be paid for fairly. At present, a married women who exercises the option not to pay the full contribution but pays only 4p a week knows that she 86 will be covered by the payment of that sum for industrial injuries and National Health Service purposes. It has been said by several of my hon. Friends that the fact that so many women choose not to pay the full contribution indicates that they do not want this choice forced upon them. Three out of four married women do not pay the full contribution.
My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) was right to draw attention to the fact that Clause 2(4) raises a nasty little cloud on the horizon and suggests to some of us that the married woman's option is to go. I heard the hon. Member for Islington, South and Finsbury (Mr. Cunningham) say "Hear, hear" when my hon. Friend referred to that possibility. There are grounds for considerable concern about the Government's long-term intentions with regard to the married woman's option.
Under the 1973 Social Security Act we made plans for the contribution to be 0.6 per cent. of salaries between £8 and £48 per week. My hon. Friend the Member for Rushcliffe worked out how much more the married woman who has hitherto exercised her option will have to pay under the Bill. The sum involved will be between 64p and £1.16 a week, according to how much she is earning. If the Minister thinks that there will not be an outcry from married women when that provision comes into force, I assure him that he is wrong.
The Opposition want to know exactly what extra benefit the married woman will get for her contribution, for the fact that she will have to pay 2 per cent. instead of 0.6 per cent. The effects of the Bill will seem unreasonable to the married woman because she will have to pay a lot more money but she will get no more than she gets now. What is more, the married woman is worried about what may happen to her option in the future.
The Boyd-Carpenter scheme, which is to be wound up next April, made it plain that the married woman had to pay, but she paid for something concrete. As my hon. Friend the Member for Wells (Mr. Boscawen) said, married women do not work for fun. They work because they have to. In many cases, they work because the money brought home by their husbands is not sufficient to pay the bills.
87 I assure hon. Members on the Government benches that it is not very funny for a married woman to have to work, because all too often when she arrives home after a day at the factory—or in a shop, office, or wherever it may be—she has to turn to and prepare a meal for the family. It is fine for many husbands, because when they arrive home they sit down and put their feet up. I repeat that married women do not go out to work for fun. Most of them do a full-time job, and when they get back home at the end of the day they have to do another full-time job.
It will be disturbing to married women to be told that they must pay this extra contribution without receiving any extra benefit. What cover will a married woman have for sickness and unemployment that she does not have now? Perhaps that information will be vouchsafed to us. If a divorced or deserted woman pays the contribution under this Bill, will she henceforth have any entitlement to allowances in the way that a married man receives allowances for his children? Will she procure the possibility of a pension of any kind, or any entitlement for any dependants? Many married women have dependants, and not only their children, either.
There is no justification for a married woman having to pay an earnings-related contribution and receive an inadequate scale of benefits in return. What does the Bill entail for a woman who is separated from her husband? Will the Minister consider the plight of the woman who is alone? Can she, at least, be helped? The Opposition know that the Government have no love for the tax credit scheme—we do not know why, because it is a good scheme—but they should bear in mind the plight of the mother who lives alone, and I hope that the Minister will at least consider opting to implement the child credit part of the tax credit scheme.
A deserted woman may be unable to pay the extra money that the Bill demands of her. What about a widow who may be in difficulties? I checked on the position of the widow. A widow, with children, drawing the widowed mother's allowance from the National Insurance Scheme who enters paid employment has the same option as a 88 married woman not to pay the full national insurance contribution, and very often she does not do so because it would not add to her advantage. She would not be able to qualify for sickness or unemployment benefit as well as the widowed mother's allowance, and the allowance would automatically be converted into the retirement pension when she reached the age of 60. But she, too, will have to pay the 2 per cent. rate under the Bill instead of the 0.6 per cent. envisaged by the Conservative Government.
The Opposition would like more information about the Government's long-term proposals. We recognise that this is an interim measure, and we are anxious to know the way in which the Government's mind is working. For instance, how much, in addition to the 2 per cent. contribution under the Bill, will a married woman have to pay under the Government's long-term proposals? Incidentally, when will these long-term proposals be published?
One tries hard to see the other merits in the Bill which have been as well hidden as the Minister's dried pea. Does the Bill mean that a married woman may be able to get a pension at the age of 60 if she is a lot older than her husband and if he is only 50? The Minister hinted at this difficulty, and it is a problem that has plagued many of us, because a woman who marries a man much younger than herself is not entitled to the old-age pension when she reaches pensionable age. If there is a difference of 15 years in their ages, she can be 80 before she receives a pension. Is it envisaged either in the Bill or in long-term proposals that that will be altered?
I spoke a few moments ago of the need to show married women that the contributions that they are being asked to make are fair. There was a recent report of a woman who paid national insurance contributions from 1947 to 1965 and is now getting only 10p a week—after all those years of contributions—because she failed the married women's half test. I have a constituency case of a woman who paid for stamps from the age of 14 to the age of 52 and she is getting nothing because she is 123 contributions short.
The fury of these women over what I consider is most unfair treatment will be 89 nothing to the fury which women will feel next April when they will have to pay more and more money but receive nothing at all for it. Why should a married woman with no dependants, and who may propose to work for only a short period of her married life, insure herself against sickness and unemployment and pay towards a pension when her husband's contributions cover her? Is this the first step to removing the married woman's entitlement through her husband—in these days of women's lib it is perfectly fair that we should probe this point—or is it considered perhaps that the age at which a woman should receive a pension will rise to 65. That may be in the minds of some Ministers who have framed the Bill and who may even now be framing long-term proposals.
I turn now to another person who is heavily penalised under the Bill, the self- employed person, who has been mentioned by a number of my hon. Friends. At present a self-employed man pays £1.99 a week and a self-employed woman £1.66 a week. In August the contribution for a self-employed man will go up to £2.51 and for a woman £2.01. The Social Security Act 1973 suggested, quite rightly—this is a matter which we are glad the Government have accepted—that the self-employed person with profits over a certain limit should pay an additional contribution in proportion to the profits over and above the flat rate. Our Act would have meant a 5 per cent. payment on profits between £1,150 and £2,500, but under this Bill the figure will not be 5 per cent. but 8 per cent. My hon. Friend the Member for Rushcliffe worked out that the contributions will be double and that a self-employed man earning what is today quite a low wage of £50 a week will have to pay £12.50 a year more than under the scheme which we drew up, and it is very doubtful what additional benefit he will receive. As the scale rises he will have to pay more and more.
Self-employed people are today very hard-pressed members of society. My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) pointed out that they were useful and important to society, and indeed they are. In many cases self-employed people are those who are running small businesses, and they have a very difficult time. Reference was made to a self-employed person running a news- 90 agent's shop. There are also many other self-employed persons who work far longer hours than any trade union would support and find themselves hit on every side, with at present massive tax increases and now the thought of the considerable extra contribution which they will have to pay. A self-employed man who is also an employer is hit in all ways. It would be interesting to know what percentage of income it costs him to get the same pension as a self-employed man against what percentage an employee has to pay. Granted a self-employed person has to pay as both an employer and an employee, but there is a definite element of unfairness and I am not sure that the Bill does not widen the gap. The self-employed man gets no unemployment benefit at all.
§ Mr. O'Malley
For identical benefits the total contribution of a self-employed person under the Bill and under previous proposals is about 8 per cent., whereas for Class 1 contributors it is about 12 per cent., and the balance of contributions—that is, those paid as a self-employed person on the one hand and as an employed person on the other—is on a basis which was agreed by successive Governments over most of the post-war period.
§ Mrs. Knight
My point is not that there has never been any agreement from successive Governments on the position of the self-employed man. I am pleading for the case of the self-employed man under the Bill because he has already been hit very hard.
We have debated the Bill against a background of steeply rising prices and taxes. Apart from married women and the self-employed, there are others who will not benefit despite what the Minister says. The single man—bearing in mind increased income tax which he has to face and the higher national insurance contributions—even if low paid will have a take-home pay each week less than it is now. I am thinking of the single man earning less than £20 a week, which is a poor wage. Similarly, for married couples with two children, if the man is earning £54, or just over, a week, he will have less take-home pay under these new proposals. Furthermore, married couples with no children will be worse off if earnings are up to £35 a week. I am not speaking here of wealthy people.
91 In 1965 the Labour Government withdrew arrangements whereby national insurance contribution paid by employed persons could count for tax relief.
I beg the Minister not to look at only one set of figures but to look at the position of all these people I have spoken of, and to take into consideration their income tax increases and higher national insurance contributions. I have been speaking about facts which we shall have to argue further in considering the Bill. In the meantime, there are elements of the Bill which we can welcome and support in Committee, but there is a great deal over which we have the gravest possible reservations.
§ 6.38 p.m.
§ The Under-Secretary of State for Health and Social Security (Mr. Robert C. Brown)
My hon. Friend the Minister of State, who was referred to as the "comedian from Rotherham" by the hon. Member for Birmingham, Edgbaston (Mrs. Knight), made reference to the appearance for the first time on the Opposition Front Bench of the hon. Lady and the hon. Member for Rushcliffe (Mr. Clarke). It would be churlish of me if I did not join my hon. Friend in both congratulating the hon. Members on their first appearance on the Opposition Front Bench and expressing the wish that they will continue to occupy a position on that bench for many years.
Both hon. Members are entitled to be congratulated upon their contributions. The hon. Lady spent some time complaining about my hon. Friend quoting one set of figures, while she was quoting another set of figures—
§ Mr. Brown
It is an easy thing to quote figures and I shall have something to say later about spurious figures. But the figures which my hon. Friend has used have been telling figures. I can understand hon. Members on the Opposition Front Bench not liking figures of that sort. Nevertheless, they are valid figures.
Those hon. Members who mentioned married women tended to overlook the fact that all married women pay some graduated contributions now on earnings 92 over £9 a week, whether or not they have opted out of the flat-rate contribution. Contracted-out people pay less in graduated contributions than participants but they still pay the major part of graduated contributions, and married women are treated no differently from anyone else in this respect. That is a point that hon. Members seem to have missed. Nearly all married women will pay less from April 1975 than they will have been paying before simply because the graduuated scheme will then end. That point, clearly, has been missed.
§ Mr. Kenneth Clarke
Would the Minister not agree that both my hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) and I referred to that? Would he not acknowledge that those contributions are being ended because those benefits are being ended? There is to be no more graduated pension benefit. The Minister cannot possibly rely on the abolition of the contributions and benefits under that scheme to justify trebling the cost of the other benefits, which, as my hon. Friend said, remain quite unchanged.
§ Mr. Brown
Yes, but the fact remains—we are getting perilously close to the subject of the next debate—that the reason why we are abolishing those so-called benefits is that they were derisory benefits. They were not worth a light in the first place, and without dynamism they would have been worth little or nothing in future. No one can deny that.
§ Sir Geoffrey Howe (Surrey, East)
I should be grateful for an explanation on one matter which seems to be the heart of the point raised by my hon. Friends. On either view, on the law as it now stands or on the law as changed by the Bill, those benefits and the graduated scheme will disappear, and the world in that sense will be the same after the Bill is on the statute book as it was before. One change that will be made is that married women who are contracted out, exercising the option, instead of paying 0.6 per cent. of their income will be paying 2 per cent. In other words, the amount they pay will be more than three times what it was. Would the Minister accept that and then tell me what, if any, benefits those women will get for the trebling of their contributions by the Bill?
§ Mr. Brown
I am coming to that. It is true that they will be paying 2 per cent. instead of 0.6 per cent. and that we have abolished the reserve scheme, but the fact remains that the right hon. and learned Member for Surrey, East (Sir G. Howe) is quoted in the Press as saying that the majority of married women will be paying more when, in fact, they will be paying less. If one uses a spurious figure, one can prove any argument. The right hon. and learned Gentleman is quoting post-April 1975 figures which are not yet in effect and have not been in effect and will not come into effect. How is it reasonable or fair to say that married women will pay more on the basis of a figure which the right hon. and learned Gentleman knows will not be enacted?
A woman earning £40 a week on the basis of the rate of 0.6 per cent. of her earnings would be paying £1.53 less; on the 2 per cent. rate she will be paying 97p less. If one argues on a figure which has never been implemented, one can show that she will be paying more, but, in fact, she will be paying less. That is undeniable. If one argues on a 1975 figure which will not be implemented, one can prove that she would be paying more. We have now answered this point. The Minister of State has done so at least six times now.
§ Sir Geoffrey Howe
The Minister must accept and explain one point. What we have on the statute book now is a figure of 0.6 per cent. At the same time, the graduated scheme and all that goes with it are already due to be abolished. As a result of this legislation the percentage of the married woman's income that she will have to pay will go up from 0.6 per cent. to 2 per cent. What I was comparing in my speech—it is this comparison that the debate is all about—is the position before the Bill is enacted and the position after. Would the Minister not agree that the Bill will treble the percentage take from the married woman's income compared with what it is today for no additional benefit? Would he accept that that is so and then explain why it should be so?
§ Mr. Brown
I will accept that the contribution for the married woman is going up from 0.6 per cent. to 2 per cent. We shall have to pursue this point in Com 94 mittee. I now want to go on to some of the other points raised.
There will be no increase in contributions paid by the self-employed man earnings up to £1,600 a year. Such people will continue to pay the same flat-rate Class 2 contribution of £2.41 which will apply from 5th August next. Above that earning level, the effect of the new earnings-related Class 4 contributions is that people earnings £2,000 a year will pay an extra 61p a week, those on £2,500 will pay £1.38 extra, those on £3,000 will pay £2.15 extra and at the upper limit those on £3,600 will pay £3.08 extra. In the upper range, these are admittedly considerable increases, but the object of the new Class 4 contribution is to ensure that the self-employed pay their full share towards the general cost of pensions. The extent of the increase shows the extent to which they have not done that in recent years.
The self-employed have over the years paid progressively less and less towards the cost of the scheme because they have escaped graduated contributions and paid only the flat rate while increasing emphasis has been put on holding down the flat rate and raising the necessary money from graduated contributions. Thus, in 1948 the self-employed person paid 70 per cent. of the Class 1 contribution, employer-employee combined. That has now declined to about 40 per cent. of the combined Class 1 contribution for the male average earner. The 1973 Act and the Bill go some way towards restoring the original relationship because from April 1975 the self-employed person will be paying about 65 per cent. of that combined contribution. All we are doing is putting the situation back to what it was in 1948, or near enough.
The hon. Member for Merioneth (Mr. Thomas) asked several questions about individual benefits. I hope that he will forgive me if I do not attempt to answer them tonight. The Government's proposals for the future of benefits will be published in a White Paper as quickly as possible, and I would ask him to await that White Paper. The Bill is confined to the contribution adjustments necessary to finance the scheme from April next year. The schedule listing benefit rates is simply to ensure that they continue and do not cease in April next year when the existing national insurance legislation is 95 repealed. All the figures are merely a confirmation of the figures in the uprating Bill which the House has already passed.
My hon. Friend the Member for Keighley (Mr. Cryer) raised the question whether the new allowances for local councillors count as earnings for the purpose of the retirement pensions rule. That is not a matter for me or for my right hon. Friend the Secretary of State. It is a matter for the national insurance adjudicating authorities, the independent statutory authorities—the insurance officer, the local appeals tribunal and the National Insurance Commissioners. In any event, the nature of the new allowances is a matter for my right hon. Friend the Secretary of State for the Environment. The allowances came into operation in England and Wales only in April of this year. Nevertheless, my hon. Friend's point will, I am sure, be noted by my right hon. Friend.
The hon. Member for Lancaster (Mrs. Kellett-Bowman) pressed my hon. Friend the Minister of State on the question of the £47 million mentioned in the Government Actuary's report. I can only underline—hoping that I am more successful than was my hon. Friend—the fact that the £30 million decrease is to be compared with the pre-April 1975 situation, whereas the £47 million increase is to be compared with the 1973 Act figure—namely the 0.6 per cent.—which, it is admitted, had to be revalued—that is, on the upper and lower earnings limit—apart from the 0.6 per cent. to 2 per cent. change.
The hon. Lady was clearly pressing her argument on an assumption that the contracted-out paid no graduated contributions. That is not so. Whether they are opted out married men, married women or single women, they pay a certain amount of graduated contributions at present. We shall have to leave the matter there.
What is the hon. Gentleman's answer to the point that raised about Section 42(2) of the 1973 Act, which is of considerable importance to women, and the amendment proposed thereto?
§ Mr. Kenneth Clarke
Surely the hon. Gentleman can give a simple answer. The amendment referred to by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) seems to be giving the Secretary of State power severely to limit the right of married women to opt for lower contributions. What are the Government's long-term aims in regard to the married woman's option? Do they remain committed to taking away entirely from married women the right to pay a low contribution?
§ Mr. Brown
If the hon. Lady can contain herself, I should like to come to the matters raised by the hon. Member for Hazel Grove (Dr. Winstanley), who was speaking for the Liberals. I think that he was speaking for the official Liberal Party. He went very wide in his speech. While I do not want to make any reference to the Chair, I thought that the hon. Gentleman was speaking to the motion that we shall be discussing at the conclusion of this debate. He said that the discussion on that motion will involve taking part in a sterile exercise. He said that, having taken part in that sterile exercise, the Liberal Party, to a man, will trot into the Lobby with the Tories to try to down the Government. I have no intention of straying from the rules of order and trying to reply to a debate to which my hon. Friend the Minister of State will be replying, so I leave the matter there. Nevertheless, it is right to put it on record that the Liberal Party will take part in what it calls a sterile exercise with the Tories and then go into the Lobby to try to down the Government.
§ Mr. Kenneth Clarke
The Minister will be delighted to see that he has five minutes left in this debate. Will he please 97 state whether it is the Government's longterm intention to take away from married women altogether the right to opt for a lower level of contribution?
§ Question put and agreed to.
§ Bill according read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).