National Insurance Regulations

HC Deb 24 July 1979 vol 971 cc328-30

4. Mr. George Robertson

asked the Secretary of State for Social Services if he is satisfied with the way in which national insurance regulations affect the pay of those in the hotel and catering industry.

The Minister for Social Security (Mr. Reg Prentice)

Yes, Sir. Employees in the industry are treated no differently from those in other industries who receive gratuities as well as wages. Their earnings are liable for class 1 national insurance contributions but gratuities distributed independently of the employer do not count as earnings for this purpose.

Mr. Robertson

Is it not ironic and scandalous that by not applying the national insurance levy to gratuities earned by workers in the hotel and catering industry not only does the Exchequer lose many millions of pounds that would normally be contributed to it but some of the lowest paid workers in the community lose in the short term through a lack of entitlement to earnings related benefits in sickness and unemployment and lose at the end of their poorly paid working lives by a reduction in the occupational pension that they will have earned?

Mr. Prentice

There is some merit in that argument. These are real problems. The practical difficulty is how to measure payments that the employer does not handle and does not distribute. I should have thought that if employees in these industries wanted a change their unions might want to negotiate a different method of payment that would make it easier for the national insurance system to accommodate the problem that has been mentioned.

Sir Bernard Braine

Has my right hon. Friend's attention been drawn to the appalling story in today's Evening Standard about Italian drop-outs in London who are drawing full social security benefits but have no intention of working in the hotel, catering or any other industry, and who are openly boasting that they are permitted to cheat the system? What is my right hon. Friend doing to stop an abuse that is undermining the interests of genuine, legitimate workers in these industries?

Mr. Prentice

I have noticed that report. The question before the House concerns contributory benefits, which would not be available to newcomers to this country. It is the intention of the Government to be much tougher in dealing with abuses of the system than has been the case in the past.

Dr. McDonald

Since the Minister has expressed concern about abuse, what action will he take about the abuse perpetrated by employers in the hotel and catering industry, and in the construction industry, who either fail to pay national insurance contributions on behalf of their employees or do not pay enough?

Mr. Prentice

It is an offence not to pay contributions, and the Department is constantly chasing up cases of people who fail to do so.

Mr. Rooker

Is the Minister not aware that at least one worker in London—a former employee of Simpsons in the Strand—is losing unemployment benefit because that company, contrary to what it told the Inland Revenue, was not paying proper national insurance contributions and has told untruths to his Department, which is now investigating the matter. Is the right hon. Gentleman not aware of the consequences of what em- ployers are doing in these rip-off industries, namely, depriving workers of future pension rights, unemployment rights and redundancy payment rights? He must be more positive about this problem.

Mr. Prentice

I am aware of the case that the hon. Gentleman mentions. The matter is before the Secretary of State for what is in effect a quasi-judicial decision under the original legislation, and I cannot therefore comment on the matter in detail. If our consideration of that case and our decision on it help to point to a solution to some of the genuine problems that have been raised in questions today, we ought to reconsider this matter.