HC Deb 25 March 1975 vol 889 cc234-6
4. Mr. Lawrence

asked the Secretary of State for Social Services what are the present financial reserves of the National Insurance Fund.

Mr. O'Malley

The combined market value of the National Insurance Fund and the National Insurance (Reserve) Fund is about £1,500 million. From next month these funds will be merged with the Industrial Injuries Fund, which has a market value of about £300 million, to form a single National Insurance Fund.

Mr. Lawrence

Is not that a substantial sum to have in reserve? Does not the right hon. Gentleman think that some of it might be put to good use by relieving some of the iniquitous surcharge levied upon the self-employed?

Mr. O'Malley

The balance is not as large as the hon. Gentleman suggests. He might have examined the situation more closely before asking his Question. It represents only about three months' expenditure within the National Insurance Fund. Therefore, it is strictly a working balance.

Mr. Powell

Will the right hon. Gentleman explain to the House that these are not, and cannot be in any natural sense of the term, "reserves"? They can exist only as an account on paper.

Mr. O'Malley

Of course they are an account on paper, but they are more than that in that if at any time the National Insurance Fund runs into deficit, as it did in successive years during the 1960s, the reserve can be immediately mobilised.

Mr. Ward

Does my right hon. Friend accept that the majority of employed people would greatly regret any suggestion that there should be even further subsidy to the self-employed? Is he aware that we congratulate him on the measures he has taken?

Mr. O'Malley

The House will be aware of the arrangement embodied in the Tory Social Security Act 1973 which brought in Class 4 contributions. Under that Act and now the self-employed remain in receipt of a substantial subsidy from the contributions of employers and employees. They also pay their money into the National Insurance Fund.

Mr. Kenneth Clarke

Does not the Minister accept that there is at present a substantial notional surplus in the fund and that the introduction of earnings-related contributions from April of this year will mean that the surplus is likely to increase in the foreseeable future given the present levels of wage inflation? In the light of that, does not the right hon. Gentleman consider that at least some temporary relief for the self-employed is justified by reducing their contributions until such time as he has completed his studies on the prospect of bringing in earnings-related benefits for them? Does he realise that we would interpret his refusal to do so as merely prejudice on his part which would not be supported by any factual problems of financing the National Insurance Scheme?

Mr. O'Malley

The hon. Gentleman should not seek cheap short-term popularity with the self-employed by that kind of question. The ratio between the contributions of Class 1 and Class 2 contributors is exactly as it was set down within the Social Security Act 1973. The hon. Gentleman knows that, and he should begin to behave in a more respon- sible manner than he has displayed so far. After all, he speaks from the Opposition Front Bench on this subject.

Before he starts talking about running down the reserves in the National Insurance Fund, the hon. Gentleman should take into account the additional calls that will arise from the transfer from the present stamp system to a fully earnings-related system of contributions. That will cost the fund on a short-term basis at least £300 million. There will be additional expenditure arising from the second uprating of retirement pensions, which the Government have said they will bring into operation later this year, and for each additional 100,000 unemployed substantial additional sums are needed. The hon. Gentleman should have considered all those matters as a Front Bench spokesman before he started making that kind of comment to me.

Mr. Deputy Speaker (Mr. George Thomas)

Order. I hope we shall have shorter questions and shorter answers, otherwise we shall not get very far.