§ Question proposed, That the clause stand part of the Bill.
§ Mr. Brynmor John (Pontypridd)We are opposed to the clause standing part of the Bill. We had all sorts of dire 486 forecasts from the Secretary of State about what would happen if clause 1 did not stand part of the Bill. The Economic Secretary to the Treasury will correct me if am wrong, but I understand that the only effect of deleting clause 2 would be to keep the Treasury contribution at 14½ per cent.
When we debated the matter on Tuesday, in opening the debate the Secretary of State said that there were no hard and fast rules about the amount of the supplement. We tried to make it as hard and fast as possible with sovereign legislature, and in 1975 we enshrined it at 18 per cent., where it remained until the present Government took office. During the past three years the Treasury supplement has moved down from 18 to 14½ per cent. and it is now proposed to move it down to 13 per cent.
The Secretary of State for Social Services was wrong when he said that there was no hard and fast rule. In the Government's view there is, and it is that the supplement should always go down and that employed persons' contributions should always go up. We object to clause 1, which states that whereas an employed person must pay a higher contribution, every other contribution is either frozen or, as in the case of the Treasury supplement, diminished.
In opening the debate on Tuesday the Secretary of State said that the cost of benefits to the taxpayer had increased. That is true for two reasons—the new non-contributory pension concept, and because many more people are receiving benefits because of the Government's failure to ensure that they are gainfully employed. However, the Secretary of State rather spoilt his case, because he entered into an argument, which I hope the Economic Secretary to the Treasury will make clearer, about how much extra it is reasonable to expect the general taxpayer to find.
It ought to be made clear to the House that the employed person and taxpayer are often the same person. 'When saying that the amount that the general taxpayer has to find must be reasonable, we predicate the case of a taxpayer who is not employed, within the meaning of the National Insurance Act, and not contributing to the fund.
There is a case argued about contributory benefits, particularly among the self-employed—although I do not argue it—that there could be an element of unfairness in paying for extra contributory benefits, because the contributor does not always get benefit from that class of payments. There can be no such argument about non-contributory benefits, because the taxpayer is entitled to non-contributory benefits in the same way as every member of the community. Therefore, we must consider whether the regressive nature of the national insurance contribution is any fairer than expecting the general taxpayer to meet the burden of the fund.
If it is argued that the burden is being placed on the taxpayer because of the non-contributory pension—as the Chief Secretary to the 'Treasury said in Tuesday's debate—that is not unreasonable. The cost of non-contributory pensions is increasing and, therefore, the Treasury supplement ought to remain the same. Fairness is an elastic concept, and I doubt whether the Economic Secretary and I would often agree about what is fair arid what is not. However, it might be possible to move towards resolving whether the Government's proposals in the Bill are fairer or less fair than maintaining the Treasury contribution.
The Chief Secretary to the Treasury repeated on Tuesday figures that the Secretary of State gave, and hon. 487 Members who attended the debate will remember that they both made considerable play of them. They repeated the figure that from 1975–76 to 1981–82 the burden on the general taxpayer in respect of social security benefits had risen by 8 per cent., from 37 per cent. to 45 per cent. When rounded up, that rise of 8 per cent. over five years is a small proportion—it has increased relatively slowly at less than 2 per cent. a year—of the total fund.
On the other hand, one must take the two concepts as being equally open to examination if one is fairer than the other. I said on Tuesday that an employed person's contribution had increased in the three years that the Government had been in office by ¼ per cent., 1 per cent. and now a further 1 per cent. Therefore, we are talking about a 2¼ per cent. rise. According to my admittedly shaky mathematics—no doubt the Economic Secretary to the Treasury will correct me if I am wrong—that is a rise of 34½ per cent. in three years—an annual rate of 11½ per cent.
6 pm
Whereas the taxpayer's burden has risen by about 1.6 per cent. a year over the past five years, the employed person's contribution has risen by 11½ per cent. a year over the past three years. Coupled with the regressive nature of that tax—once a person goes over the threshold of liability for national insurance contributions they are paid not merely on the balance of income over the threshold, but on the whole income—the way that the burden of the employed person has increased, with a 2¼ per cent. rise in his weekly contribution, has made the unfairness comparison bear more heavily on employed persons.
The results of the Government's action and way that they contemplate acting in future will bear ever harder on the employed person. The Government will try inexorably to cut the Treasury contribution. We know that if the clause remains in the Bill the Treasury contribution will be the lowest percentage in the history of the scheme. Of course, there was no contribution bank when the scheme started in 1949 and the initial contributions from the Treasury were high—36 per cent. in 1949, 37.6 per cent. in 1950, 38.7 per cent. in 1951 and 27.7 per cent. in 1952.
Thereafter, in the 1950s, the balance between claims on the fund and contributions meant that the contributions could be maintained at a steady rate because they brought in an income that did not need a big supplement, but in none of those years did the supplement fall as low as 13 per cent. The previous lowest supplement that I can find was that in 1955, when the Treasury contribution was 15.8 per cent. After that it varied between 17 per cent. and over 20 per cent. and has settled since 1975 at a steady 18 per cent.
At a time of economic depression the Treasury is cutting its contribution and forcing those in employment to pay up to an extra £3.75 a week. The result will be a lowering of people's net incomes, whether they earn the average weekly wage or more. I know that it is an unfashionable doctrine in the Treasury, but that will surely reduce people's spending power and increase the viciousness of the spiral into which the economy has been plunged.
I should like the Economic Secretary to dismiss the half-hearted attempt by the Secretary of State for Social Services—
§ Mr. EnnalsWhy not just dismiss the Secretary of State?
§ Mr. JohnThat is probably beyond the Economic Secretary's competence. He has been known to move mountains, but I do not think that he could move a Cabinet Minister so easily.
I ask the Economic Secretary at least to clarify the situation. The Secretary of State tried to blind us on Second Reading by throwing out figures by the gross. He pretended that the new contribution would result in only £9 million less going into the fund next year, but he said earlier that about £260 million was being taken off the Treasury contribution. I think that that is the agreed figure.
The theme of Government statements in our debates—the Chief Secretary, no doubt because of a shortage of material, seemed to speak of little else—is that the increases are necessary to pay for extra benefits. We are told that the ratio of pensioners to employed persons will rise. That is correct, and the number of claims on the fund will, therefore, also rise.
However, as the ratio worsens and there are more retired people living longer and receiving pensions, the logic of the Government's position is that every time claims go up the whole burden will fall on the employed person's contribution. No other way has been suggested.
Employers are not being touched, except in relation to wage drift, taxpayers are not being clobbered—heaven forbid that the Government should do that—and the whole burden is being heaped on employed persons, many of whom are also taxpayers. They are not particularly happy about the situation.
We do not dispute the fairness of extra benefits. Indeed, we resent the trickery of the rest of the Chancellor's statement in which cuts were made in the real value of benefits. We also resent the fact that the Government expect employed persons alone to be able to bail the Government and the national insurance fund out of the present difficulties. That is hard on employed persons, unreasonable and counter-productive. Therefore, the clause should be struck from the Bill.
The Government are cutting out earnings-related benefit from January. It will pass from our lives, though not, I hope, for ever. I hope that it will soon return. The figures from the DHSS are imprecise, as the Under-Secretary of State for Health and Social Security will admit, but the supposed saving for the Treasury from the ending of that benefit is £385 million. That was stated in an answer to my hon. Friend the Member for Barking (Miss Richardson) on 29 October 1981.
It is true that that figure was an estimate, but I cannot be blamed for quoting an estimate, because the Minister told my hon. Friend the Member for Barking that he would write to her when the latest estimate of the saving was available. To the best of my knowledge, no such estimate has been given and we are, therefore, left with the best guesstimate of the DHSS, which is a likely saving of £385 million.
We are entitled to know the latest position. How much will be saved by not paying earnings-related benefit? The Secretary of State spoke today almost as if a contract was being entered into between the national insurance payer and the Government. The fact is that many of those who will find themselves without earnings-related benefit next January paid their contributions in the expectation that the benefit will be available if misfortune arose.
489 It does not lie in the mouth of the Secretary of State to talk about the contractual, semi-sacred and mystical nature of the bond between the Government and national insurance contributors. As shown when the 12 per cent. uprating was cynically cut to 10 per cent., the Government act arbitrarily. They cut whenever they want to. They cut whenever it suits the economy's need to do so.
There is no link between the contributions paid by the insured person and what he will receive. At the rate things are going, many of those who wish to call upon the fund will find that the benefits they expected have disappeared. It is imperative that the Treasury contribution is maintained at its present rate. Indeed, I regret the fact that the contribution is only at its present rate. I regret, too, the fact that the original contribution was not maintained at the full 18 per cent. inherited in 1979. I believe, nevertheless, that the 1½ per cent. that is supposed to be cut by the exercise that we are discussing should be restored. It should be maintained. That is why the Opposition believe that clause 2 should not stand part of the Bill.
§ Mr. EnnalsI support this amendment, just as I supported the previous one. The main argument that I used—
The First Deputy Chairman of Ways and Means (Mr. Bryant Godman Irvine)Order. I remind the right hon. Gentleman that no amendment has been before the House on either clause.
§ Mr. EnnalsI beg your pardon, Mr. Godman Irvine. I should be referring to the clause standing part of the Bill.
The argument that I used on the previous occasion was that the Government were taking further steps to undermine the contributory principle of the national insurance system, which Governments of successive parties had sought to operate over the last 30 years. I almost stated that both parties had tried to make improvements. In fact, there have been improvements only when the Labour Party has been in power.
It was envisaged at the time of Beveridge that there would be a significant Treasury contribution to the national insurance fund. Beveridge envisaged
a tripartite scheme of contributionunder which the Exchequer would provide one-third of the cost of unemployment benefit, and one-sixth of the cost of pensions, disability and maternity benefits.In practice, the Treasury supplement has fluctuated considerably over the years since the scheme came into operation in 1948. In the first few years it went as high as 38.7 per cent. There was a period when it was 23 per cent., but since 1963 it has averaged 18 per cent. A statutory obligation that it should be 18 per cent. was established, not through any Act passed by a Labour Government, but through the 1973 Social Security Act. The supplement was fixed at 18 per cent. from 1975. It became law—this had never previously been the case—as a result of actions taken by a previous Conservative Government.
My main case against the clause is that it undermines further the principles of the Welfare State that were established following the Beveridge report. Once again the national insurance fund is being used as a means either of raising money for the Treasury or of saving money that would otherwise have been spent by the Treasury. It is difficult to understand why the Government have decided upon this course, other than that the Treasury requires it of the Department of Health and Social Security.
490 6.15 pm
On Second Reading I sought to discover from the Secretary of State what his argument was. The right hon. Gentleman linked non-contributory benefits and contributory benefits and said:
over the years, the proportion of benefit expenditure"—both national insurance and non-contributory—met from general taxation has tended to rise. It was about 37 per cent. in 1975–76. It is 45 per cent. in the current year and, even with the 1.5 per cent. cut in the Treasury supplement it will still be about 45 per cent. in 1982–83".—[Official Report, 15 December 1981; Vol. 15, c. 176.]There is no logic in that. We are talking about the national insurance system. We are not talking about supplementary benefit. We are not talking about other types of means-tested benefit. Of course, it is true that, as a result of action taken by the Government, an increasing proportion of people are dependent not upon their national insurance contributions but upon the topping-up that supplementary benefit and supplementary pensions provide for them. The Government have made such a mess of things that there is now an increasing proportion of people dependent on supplementary benefit, yet their answer is to place a heavier burden on the working population to pay for national insurance benefits. The Government have blurred the issue and made no distinction between the national insurance system and the system of supplementary benefit, which is a safety net and a topping-up provision for people in great difficulty.I asked the Secretary of State in an intervention on Second Reading why he argued that it was more unfair to put the burden on the taxpayer than on a limited number of workers. The national insurance system has its weaknesses. For this reason the Opposition will urge at a later stage that the upper limit should be increased. It is not as fair a system as taxation, which does not have an upper limit. The right hon. Gentleman gave no answer to my question. He said that
we must consider two aspects. The first is the Treasury supplement. The second is the amount that the taxpayer pays for benefits in general."—[Official Report, 15 December 1981; Vol, 15, c. 176.]What answer is that? It is no answer at all. I hope that the Minister will be frank in replying to the debate. He can repeat the Secretary of State's argument that because an increasing proportion of the sad British public are dependent upon supplementary benefit, the increasingly lucky people still allowed to have a job will, as unemployment increases, have to pay more as the Treasury pays less. I am really asking the Minister to justify the cut from 18 per cent., which was the statutory requirement, to the present 13 per cent.I wish to put a specific question, which I hope will be answered. If the Government had not sought to change what has been happening for almost 20 years, and had not moved from the 18 per cent., how much money would the national insurance fund have saved? My hon. Friend the Member for Pontypridd (Mr. John) has done his arithmetic more carefully than I have done mine. I am certain that the Treasury Minister has done his. Would it have been necessary to raise the level of workers' contributions if the Treasury had fulfilled the statutory obligation placed on it by a previous Conservative Government?
§ Mr. Andrew F. BennettI hesitate to rise at this stage because I have just noticed that the hon. Member for Rugby (Mr. Pawsey) has entered the Chamber. He is one of the few Government Back Benchers present so perhaps 491 at long last we shall hear from a Conservative Member, other than a Minister, why the Bill should be passed. So far, on Second Reading and in Committee, no Conservative Member has pointed to any virtue in the Bill. Even the Ministers seem a little half-hearted. Perhaps we shall now have some enthusiasm, but I doubt it.
This is a bad Bill, and each clause is bad and vicious in its own way. My constituents will be disappointed that clause 1 was passed, because they will be asked to make larger contributions. Most of them feel that they already make large national insurance contributions and that they should not be asked to pay more. Some of them would perhaps be prepared to put up with the extra contributions if the level of benefit were improved, and particularly if some of the extra money were used to expand and improve the National Health Service. If they believed that, as a result of the extra contributions, the queue of people waiting for kidney transplants were to be shortened, or that doctors should be more willing to treat people over 45 who need kidney transplants or other major surgery, they would perhaps go along with the proposal. If my constituents believed that the waiting lists for hernia operations and treatment for people with bad backs would be improved, again they might go along with it. However, they find that their extra contributions to the National Health Sevice will not improve the service, but will merely allow the Treasury to make a smaller contribution.
We do not know how the Treasury intends to use the money that is to be saved. If the Treasury said how it intended to use the money, my constituents might have some sympathy with this proposal. As this is one-third of the package and the other two bits—the tax changes and the benefit changes—are firmly wrapped up, we shall not know the answer until the Budget. At present, people are being asked to pay increased contributions for an unknown reason. We have been given no clear statement how the Treasury intends to use the extra money that will come in in this way, enabling the Treasury to make a smaller contribution.
Is the Minister prepared to give us some enlightenment? Will the extra money help to reduce income tax? If so, my constituents would then know where they stood. Of course, most of them would be disgusted, because they feel that income tax is little more progressive than national insurance contributions as a form of taxation. Nevertheless, they would know where they stood. If it meant a change in VAT, again my constituents would know what was involved. As it is, we have had no statement from the Government on how the money saved is to be used.
If child benefit or supplementary benefit were to be increased as a result of the saving, my constituents might be sympathetic. If the Treasury were expecting a loss of revenue from the tax on cigarettes, again my constituents might feel a little sympathy for the increase. But if they have no idea how the Treasury intends to use the money that it saves, they will be firmly against the increase.
The Government are again placing burdens on those who are making contributions and giving benefits, to those who have unearned incomes or earnings of more than £220 a week. My constituents will be bitter if they are asked to make extra contributions so that people with unearned 492 incomes and high earnings can benefit. I therefore challenge the Economic Secretary to tell us what the 1.5 per cent. that is being saved here will be used or.
§ The Economic Secretary to the Treasury (Mr. John Bruce-Gardyne)I approach my reply to this debate with some trepidation. I admit that this is the first time that I have participated in a debate on social security legislation. I realise that for the unwary and for the neophyte, the subject is beset with pitfalls.
We have had an interesting debate. The hon. Member for Pontypridd (Mr. John) put his arguments with lucidity and reasonableness, and I shall attempt to answer one or two of the matters that he and his hon. Friends raised.
First, however, I am bound to draw attention to the implications of the defeat of this clause, if the Opposition take it to a Division. If the amendment were accepted, the Treasury supplement would remain at 14.5 per cent., as this year. The House has already agreed to clause 1, which increases the rates of national insurance contributions and earnings limit to the levels that are proposed by the Government. Thus, we have already secured sufficient income under clause 1 for the fund to meet the Government's objectives. If we were to leave the Treasury supplement as it stands in 1981–82, there would be a surplus of income to the national insurance fund of some £261 million more than is required. The hon. Gentleman queried that figure earlier, and he was right when he said that it was £261 million. That addition, as I understand it, would simply increase the surpluses in the national insurance fund. They would have to be invested in gilt-edged securities, and thus help the financing of the public sector borrowing requirement.
If the House were to reject the clause, the effect would be to take from the taxpayer or raise money by borrowing beyond the moneys required for the purpose of the national insurance fund expenditure simply to have the proceeds reinvested in gilts or handed back to the taxpayer in another form. In other words, as the Bill is drafted, clause 2 is consequential on clause 1. Now that clause 1 has guaranteed the income to the fund, the deletion of clause 2 would have no effect beyond an unnecessary recycling of money. I want that to be absolutely clear.
However, I fully understand hon. Gentlemen's anxiety to discuss the rationale of our decision to reduce the Treasury supplement from 14.5 per cent. of contributions to 13 per cent., and it is to that subject that I shall now address my remarks.
6.30 pm
The hon. Member for Pontypridd said that fairness was an elastic concept. I confess that when my children upbraid me with the allegation that something is not fair I tell them that the world is not a fair place and that the sooner they realise that, the better. In my experience, fairness tends to be a concept which is in the eye of the beholder. It is a highly subjective judgment. The hon. Gentleman was fair enough to acknowledge that there is no golden figure for the size of the Treasury supplement. It has fluctuated widely for many years.
We heard much on Second Reading—and there have been references this evening to the speeches made by my right hon. Friend the Secretary of State for Social Services and by my right hon. and learned Friend the Chief Secretary—about the balance between the taxpayer's contribution and the contribution made by the national insurance contributor. The hon. Gentleman and his hon. 493 Friends pointed out that they are often the same person. That is so. But the balance between the two parts of the equation is a matter of judgment, not of absolute principle.
The financing of national insurance benefits inevitably involves a partnership between the national insurance contributor and the taxpayer who contributes through the Treasury supplement. In examining the financing burden and the balance between the two classes of contributor, I must tell the House—I know that this is disputed by the right hon. Member for Norwich, North (Mr. Ennals) and by all Labour Members—that it is argued that it is perfectly legitimate to take account not only of contributory but also of non-contributory benefits in striking a balance.
When the national insurance scheme started, the bulk of social security expenditure was on national insurance benefits. I understand that the only non-contributory benefits were supplementary benefits—the old national assistance—family allowances and war pensions. The bulk of expenditure was on contributory retirement pensions. Even as late as 1970 the majority of social security benefits were still contributory. In 1970, national assistance, family allowances and war pensions still amounted to only just under £1,000 million out of a total national insurance bill of £3,700 million. Since 1970 there has been a veritable explosion in expenditure on non-contributory benefits. A large part of this has been increased expenditure on supplementary benefits—a point made by the right hon. Member for Norwich, North. I accept that.
That is by no means the whole story. Child benefit replaced the old child tax allowances and family allowances, and a whole raft of new benefits was created to meet different circumstances—attendance allowances, invalid care allowances, non-contributory invalidity pensions, mobility allowances, old persons' pensions, and family income supplements. All have added to the non-contributory total expenditure.
In 1978–79—the year that the Conservative Party took office—total expenditure on non-contributory benefits was £4,600 million out of a total of £15,200 million—about 30 per cent. In the current year, expenditure on non-contributory benefits is expected to be £9,300 million out of a total of £26,600 million, or 35 per cent. Next year, expenditure will be nearly £11,000 million out of a total of nearly £30,000 million. Compared with the year in which the Conservative Party came to office, total expenditure in 1982–83 will approximately double and expenditure on non-contributory benefits will more than double.
§ Mr. Andrew F. BennettSurely it is unfair to include child benefit in that category. It has replaced the tax allowance and should be considered in the same light as that. It should not be used to justify the argument that the balance of non-contributory benefits has greatly increased.
§ Mr. Bruce-GardyneThat does not alter the fact that that benefit adds to the totality of non-contributory benefits and hence to the burden that falls directly on taxpayers.
§ Mr. Bennettrose—
§ Mr. Bruce-GardyneI listened carefully to the hon. Gentleman's earlier remarks, but I shall now concentrate on bringing my remarks to a close.
The House can see that the burden has shifted over the years in the direction of expenditure on benefits financed 494 entirely by the taxpayer. That is not a temporary phenomenon that has resulted entirely from the tragic increase in unemployment, but a long-term trend. Against that background, it is only right that those who stand to benefit directly from their contributions should shoulder a greater proportion of the burden on the taxpayer.
We are not arguing that there is anything god-given about one figure, whether that figure is 14.5 per cent. or 13 per cent. Given the shift in the burden between the contributor and the taxpayer, it is legitimate to make some modest reduction in the Treasury supplement, which will assist in striking the balance that must be struck at Budget time. If I were to try to speculate about the appropriate answers to the questions asked by the hon. Member for Stockport, North (Mr. Bennett) concerning the equations that will be struck at that time, I have a nasty suspicion that my brief tenure of office in the Treasury would come to an abrupt conclusion. To avoid that disastrous eventuality—for me, if not for other hon. Members—I shall not take up those points.
§ Mr. JohnI asked a specific question about how much the Treasury would save when earnings-related benefit no longer became payable from the end of the month. Will the Minister confirm the figure of £380 million?
§ Mr. Bruce-GardyneI apologise to the hon. Gentleman for not having answered that question. I stress that I am a complete innocent abroad in these matters—
§ Mr. Mike ThomasThe Minister must know this figure.
§ Mr. Bruce-GardyneIt is probably just as well that I did not hear that intervention. I understand that the latest estimate of the gross saving from the abolition of earnings-related supplement in 1982–83 is £445 million, which represents a revision of the figure that has been given.
That does not alter the basis of my argument, which is basically that, given the circumstances of this year and the steady drift in the burden from the contributor to the taxpayer, this adjustment in the level of the Treasury supplement is justifiable at this time.
I ask the House to support the clause.
§ Mr. JohnI am bound to say to the hon. Member for Knutsford (Mr. Bruce-Gardyne) that I realise that this is an arcane subject, as the attendance at these debates seems to show.
The Minister started with his best point and worked his way steadily down throughout his speech, and I shall deal with his points in reverse order and hope that my speech does not fade away in quite the same way as his did.
The hon. Gentleman spoke about earnings-related benefits. He described with charming candour his future as being well behind him if he went down this road, but stated that in view of the steady drift of our economic affairs throughout the last year we needed to save £261 million by decreasing the contribution of the Treasury to the national insurance fund. He said that £450 million would be saved as a gross figure anyway. The net figure might be somewhat less, because some people might then qualify for supplementary benefit. That is part of the logic chopping that has gone into the Government exercise on social security benefits.
§ Mr. Bruce-Gardynerose—
§ Mr. JohnLet me finish my point, and then, I shall give way.
495 By reducing the amount of benefit £450 million will be saved. People expected, and had every right to expect, that in certain circumstances they would be paid earnings-related benefit. The hon. Gentleman will know—and if he does not the Secretary of State and other Ministers know—that the two greatest sources of earnings-related benefit are unemployment and sickness, when people have every right to expect that benefit. It does not add to their sense of fairness if it is taken away. However we define that difficult word, if they see that benefit suddenly taken away and the Treasury contribution suddenly reduced by £261 million, and they are left with the supreme delight of paying 1 per cent. more for national insurance contributions, that does not add to their sense of fairness.
§ Mr. Bruce-GardyneI ought to set the record straight. I did not say anything about the £261 million being required because of the steady drift of our affairs, or something like that. All I said was that if the clause was rejected that sum of £261 million would be added to the fund and it would then have to be recycled through the Government's gilt-edged market.
§ Mr. JohnI understand that point. As that was the Minister's first and best point—and possibly his only point—I intend to deal with it last.
The hon. Member used the words "steady drift". Perhaps it was a Freudian slip. Or perhaps it was what he ought to have said had he really applied his mind to it.
Let me deal with the question of fairness. We are talking about people who are in employment, who are paying national insurance contributions. We think it right and proper—I hope that this applies to us all—that they should provide for other people's misfortunes. We are in agreement about that. But that depends upon what they are doing being seen to be fair.
The Beveridge concept, to, which my right hon. Friend the Member for Norwich, North (Mr. Ennals) referred, envisaged a tripartite funding of the national insurance fund—by employed persons, by employers, and in part by the Government. That is the origin of the Treasury contribution. Indeed, had the Treasury not contributed in the early years the scheme could not have got off the ground, because there was no money in the fund.
It will not add to any feeling of fairness if those who pay the insured person's contribution see that they alone have been singled out to carry this extra burden. The rest are either being left neutral or, in the Treasury's case being given the opportunity—rather like some speculator on the Stock Exchange—to take a quick profit and claw back £261 million.
If people see that happening and see the undermining of the tripartite system on which the fund has always been understood to be based they will feel a sense of unfairness. The figures that I gave were not disputed by the Minister, so I cannot be quite as bad a arithmetician as I had thought. If the taxpayer's contribution to the national insurance fund goes up to 45 per cent. bearing in mind that over the last three years their contribution has gone up by 11½ per cent. per annum, that will greatly increase the sense of unfairness.
§ Mr. Mike ThomasI agree with the point that the hon. Gentleman is making. Is not the argument here that the 496 Government have decided how they will treat benefit recipients? I agree that they are treating them meanly, especially in relation to making up the shortfall, and then considering whether to get the money back through this provision or through income tax. This is an artificial discussion, related to whether the Chancellor can pretend in his Budget next year that he has reduced income tax to 25 per cent. whereas he is taking it all back in these increased contributions.
§ Mr. JohnMarginal taxation has risen quite sharply.
For the reason that I shall give in a moment I agree that there is an element of artificiality about this debate, in view of what happened on the last clause. The point that I am making is that if people believe that it is right to make provision for others, they must have a sense of fairness. That sense of fairness is absent, and the danger is that people will say that they are not willing to believe in the concept of the welfare state.
That would be a great sadness to many people, but it would be the result of the temptations to which the Treasury has succumbed with monotonous regularity. Like Oscar Wilde, the Treasury has not been able to resist anything, not even the temptation to claw back money. The Treasury contribution has decreased from the 18 per cent. that it was when the Government took over, down to 13 per cent. under the Bill. That is a decrease of 5 per cent. If the Government were to maintain their contribution at 18 per cent., that would be equivalent to 0.75 per cent. weekly on the national insurance contribution which is almost all of this increase.
What we are really talking about, therefore, is a shift from that mythical creature the general taxpayer to the insured person. What I object to most in the whole of this exercise is putting the burden of the increased benefits on insured persons, who are a small fraction of the community and are getting smaller. We believe that the whole community should shoulder the burden of financing extra benefits, and that means involving the general taxpayer.
It is no good the Minister saying that the general taxpayer has to pay for his non-contributory pension. Of course he has. He is entitled to it, even if he is not an employed person. He, too, can benefit from it. Many people in employment go through their lives without ever claiming benefit; many others who are entitled to benefit are unaware of the fact that they are entitled.
The debate has been worth while, if only to enable us to air the sense of frustration that must be felt by employed people when they see whole burden put unfairly upon them. For that reason, if for no other, it has been a valuable debate.
I come now to the Minister's main point. He said that, clause 1 having been passed, the effect of not passing clause 2 would be to produce a surplus of £261 million, which would then be invested in gilts and produce a surplus to the community or to the Government. I do not think that the community and the Government are identical at the moment. I accept the logic of what the Minister said. Having failed to dislodge clause 1, if we were to dislodge clause 2 it would be a Pyrrhic victory. It would benefit the victor rather less than the vanquished. Therefore, I do not intend to press the matter to a Division.
The Treasury will, however, have to face the mounting sense of inequity and act accordingly; otherwise the whole 497 concept of the Welfare State, in which I understand all parties in the House believe, will be muddied and dirtied beyond recall.
§ Question put and agreed to.
§ Clause 2 ordered to stand part of the Bill.