SOCIAL SECURITY AMENDMENT BILL (Hansard, 26 November 1974)

§ Sir G. Howe
We have spent the whole of today debating the Bill. I want to make only a few concluding observations about it.
Throughout our proceedings, the Opposition have always made clear their welcome for the improvement in benefits which the Bill is designed to produce. We have always made it clear that our concern was in no way designed to jeopardise the National Insurance Fund or the financing of these increased pensions. But we have been expressing two matters of deep concern where we still believe that the Government have made serious mistakes in terms of human justice and of political judgment.
The Government's decision to use the Bill as a means of whittling away the married women's option by increasing the percentage contribution payable by married women from 0.6 per cent. to 2 378 per cent. is from our point of view a mistake that will work gravely to the disadvantage of those 5 million married women who go out to work and who have currently taken advantage of this position.
We do not think that this is a fair deal for them. We shall continue to argue the case against it and to press it as hard as we can. We shall continue to resist the Government's intention to abolish the married women's option, because we think it will be bad for the women and bad for the economy of this country.
The second point of our concern is the matter that we have just finished debating—the increase in the burden on the self-employed. This too, we believe, represents an error of judgment at a time when the Government ought to have been striving to respond to representations of the kind that have been made on behalf of one group in the community. We regard it as a matter of great regret that although these arguments have been canvassed since the Bill was first published and debated in the House in July, the Government have not been able to move one inch towards meeting the arguments. These are arguments which deserve more sympathetic consideration than they have received. It is a matter of great regret that the Government have sought to deal with them in this way.
It has also been a matter of some regret that the Government went ahead, before the Bill had passed through the House, in distributing up and down the 379 country leaflets and literature describing the way in which this legislative scheme would work even before they had parliamentary approval for the scheme. I know that they included the cautionary phrase, "subject to parliamentary approval". In relation to the changes affecting the self-employed we believe that that was a regrettable thing for them to do.
However, that action was characteristic of the Government's attitude throughout. They have not responded to the reasonable representations of the House of Commons. We shall hops that on any future occasion when we are able to discuss social security matters the Government will be more forthcoming than they have been on this occasion. Outside the House not many weeks ago they appealed for a co-operative approach to the second pension when legislation for that comes forward. It is not a good omen for co-operation on that that the Government have shown themselves so unwilling to co-operate in the debates on this Bill. We ourselves will do our best to respond more co-operatively, but we cannot but deplore the way in which the Government have handled these proceedings.

§ Mr. Raphael Tuck
On the last amendment, on Report, I raised two points which perhaps I should not have raised then as they did not strictly apply to the amendment. Accordingly, I raise them now.
First, I asked the Minister to do his best in the ensuing year or two to evolve a system whereby we have earnings-related contributions and earnings-related benefits.
The second is a point on which the Bill runs absolutely riot. The level of earnings below which a person liable for class II contributions may seek exemption from liability is set at £675 a year. That means that the contribution of £2.41, which is about £125 a year, is not payable by a person earning £674 a year or under. The minute one earns £675 one must pay £2.41, so for that extra £1 one must pay £125 a year. That means that a person earning between £675 and £800 is less well off after this deduction than if he had been earning only £674. I hope that my hon. Friend will try to resolve this difficulty.

§ Mr. O'Malley
The purpose of the Bill was to establish a level of contribution which would finance the payment of the higher levels of pensions implemented by the Government. The first increase, which was one of 29 per cent., came in July of this year. My right hon. Friend the Chancellor of the Exchequer has already announced—indeed, we have had the Second Reading of the Bill which brings forward—further increases in April and an increase which is promised for December 1975.
Had we left the contribution levels of the Social Security Act 1973 unamended, we would have been able to pay in real terms pensions only at about the £6.75 level which was the then level of pensions operative during the passage of the 1973 Act.
Therefore, the Government make no apologies to the House or to the country for the new higher levels of contribution. We believe that as a matter of high priority pensioners needed, as indeed they have got, substantial benefits within the first five months of the accession to power of the Labour Government in 1974.
I understand the strong feelings which have been evident throughout the country regarding the new system or class 2 and class 4 contributions for the self-employed. I stress now, as I did in the debate on the last amendment, that in this Bill we are updating a structure that we inherited from the previous Tory Government and changing it in only one respect. We were not prepared to increase the class 2 contributions to any higher rate than that set out in the Bill, because we felt it to be important to have regard for those self-employed persons, who probably number between one-third and one-half of the total, who have incomes, on the best information available to us, of under £1,600 a year.
The Opposition have felt strongly on the question of the level of contributions of 2 per cent. set for married women. However, it remains the fact that as from April next the generality of married women in employment will pay contributions much below the total level of contribution they are now paying.
The Government took the view that at a time when the number of pensioners had risen to 8. million, while the working population was not rising at anything like 381 that rate, married women should be asked to pay a level of contributions higher than the 0.6 per cent. in the Social Security Act. We therefore set the figure at 2 per cent. Had we not decided to raise the £47 million that we are raising from that source the burden on employed men, married and single, and on single employed women would have been higher.
The right hon. and learned Member for Surrey, East (Sir G. Howe) complained that the Government put out literature on the Bill before it received parliamentary approval. But, as he acknowledged, the literature pointed out that the proposals were subject to parliamentary approval. I make two points on this. First, there was a precedent set by the previous Conservative administration, which acted in a similar manner before legislation had passed through the House. Secondly, it has not been a usual situation in this country to have had biannual General Elections, and I hope that this will not become a regular pattern. In this case there were special circumstances. Arising from the legislation of the previous administration we were moving into a completely new system of contributions, namely fully earnings-related contributions in respect of class 1 contributors, involving both primary and secondary contributions.
I shall now try to deal with questions asked by my hon. Friend the Member for Watford (Mr. Tuck). First, he queried the base level of £675 a year, below which there is exemption from payment of national insurance contributions. I accept the point—a hypothetical point— which my hon. Friend made, but nevertheless it could arise in some circumstances. There is always a difficulty that wherever a level is set there must be a threshold below which there is no obliga- 382 tion to pay national insurance contributions. There is a threshold in respect of class 1 contributors. Wherever the line is placed there must be a section that falls below the threshold.
Of course my hon. Friend is right in believing that it would be far more satisfactory if we were to have a fully earnings-related system of contributions, and I am sure that all Governments would want to keep this under continual consideration. But so far, as is reflected in the terms of the Bill, it has been impossible to do what my hon. Friend suggests.
In conclusion, I wish to thank my hon. Friends and right hon. and hon. Gentlemen on the Opposition Front Bench and back benches who have spent time discussing the Bill and its proposals in detail during the Committee stage. The time is now short before the start of the new system of contributions. Leaflets have been distributed giving information about the system and we are anxious that employers go ahead with their preparations so that there is a smooth start to the new earnings-related contributions, as from April 1975.
I hope that employers with queries or difficulties will consult local offices of the Department, which will deal with any points that arise.
The Bill makes possible the payment of the better pensions to which this Government are firmly committed, and I am therefore pleased to have reached the stage at which I hope in a few moments there will be a Third Reading for a Bill with such beneficial purposes.