NATIONAL INSURANCE BILL

HL Deb 03 March 1966 vol 273 cc807-31

4.44 p.m.

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Committee.—(Lord Bowles.)

On Question, Motion agreed to.

House in Committee accordingly.

[The Baroness WOOTTON of ABINGER in the Chair.]

Clause I agreed to.

Clause 2:

Benefit under Insurance Act by way of earnings-related supplement

2.—

(3) Where a person has been entitled to earnings-related supplement in respect of an aggregate of one hundred and fifty-six days in (or in what, but for section 21(3)(b) of the Insurance Act, would Faye been) the same period of interruption of employment, he shall not be entitled thereto in respect of any further day in that period.

LORD DRUMALBYNmoved, in subsection (3), to leave out "earnings-related supplement" and insert "unemployment benefit". The noble Lord said: I beg to move the first. Amendment standing in my name. If it is the will of the Committee, I would suggest that we take Amendments Nos. 2 and 3 along with it, they being inter-connected. The effect of these three Amendments would be, or is intended to be, and I think would be, that only earnings-related unemployment benefit would be limited to six months and earnings-related sickness benefit would be unlimited in time.

The noble Lord, Lord Bowles, said in introducing the Bill on Second Reading: In the Government's view the provision of benefit on a long-term basis for people such as the chronically sick raises different issues, which are being considered as part of the review of social security."—[OFFICIAL REPORT, Vol. 273, col. 488, 28/2/66].

In winding-up, he gave two reasons for not covering long-term sickness, in column 516, and these were (if I may paraphrase) first of all, that long-term sickness is a form of premature retirement; and secondly, that it would not be fair to base benefit for long-term sickness on average earnings in the last complete income tax year, as is done in the case of this Bill. That is the base for earnings-related unemployment benefit and earnings-related sickness benefit.

As to the first of those points, that it is a form of premature retirement, while that may be so, it is not necessarily so. It seems to me that only is it so where incapacity is permanent and the invalid has to give up work forever. Then, in effect, he retires through ill-health, even if it is at an early age. As to the second reason, that it would not be fair to base benefit for long-term sickness on average earnings in the last complete income tax year, it might be unfair, but again it is not necessarily so. If it is unfair to take the last complete income tax year, there is nothing to prevent some other income tax year from being taken, unless, of course, the Government think that that would be too generous.

It seems to me that the arguments in favour of having some kind of long-term sickness benefit provision in this Bill are these. First of all, in the debate in another place on the Welfare State on February 23 last, Mr. Douglas Houghton said [OFFICIAL REPORT, Commons, col. 429] that the present Government aimed at producing a White Paper some time next year. With that time-table, legislation might be introduced in the Session 1967–68 which might cover long-term sickness. It could hardly be earlier. There would probably be a gap before the Statute came into operation, as there is under this Bill, and in the nature of things one would expect that to happen.

Moreover, the fact is that this Bill is more apt to cover long-term and short-term sickness benefit, because, as I pointed out on Second Reading, well over half of the employees are covered to some extent already in the earlier periods of sickness. I do not know how many are covered in the long-term, but it must be relatively few, and I think quite few. Therefore, the need for some form of insurance against long-term sickness is greater than against short-term sickness. Of course it occurs much more rarely; but when it does, its effects upon the individual and upon the family who are affected are bound to be much more devastating. Even if the benefits of the long-term sick, under the arrangements which apparently the Government are now studying, were now related to what they would have received when they reached retirement age after their full span of work, and if that were to be based on their earnings over some period, the very earliest anyone could benefit, so far as I could see, would be three years after the benefits payable under this Bill come into operation. So there is going to be a three-year delay before they can benefit—and it may be very much longer.

If there is one thing that most of us in public affairs learn, it is never to refrain from doing something worth while when one gets the chance to do it, because chances occur rarely, and anyone who has been a Minister knows that legislative chances come very rarely. When one gets the chance to do it, one should never refrain from doing something worth while simply on the ground that it may be possible to do something a little better later. This Bill gives the opportunity to do something worth while for some who will become sick after next autumn and who remain sick for more than six months. Not all long-term sick are incurable; and by long-term sick "we are talking about people who are sick for more than six months. It is only the incurables who can be compared with those people who retire, and even for them flat-rate benefit, plus a third of earnings up to £30, is scarcely over-generous. The rest have a period of interruption of employment which may be a period of six months, nine months, one year or two years; illness may last for much more than six months. Therefore, it is reasonable to ask why should the earnings-related benefit end after six months. Flat-rate unemployment benefit has always been limited in time, and one would expect to find earnings- related unemployment benefit also limited in time. But flat-rate sickness benefit has no limit in time. It is both short-term and long-term. Therefore, one asks why should the new earnings-related sickness benefit have a limit.

As to the second point the noble Lord made, I agree that the previous income tax year might not in all cases be appropriate, but the Bill as it stands, as I understand it, makes provision for regulations to prescribe that the relevant income tax year should not always be the previous one. I also agree that my Amendment does nothing for those who are already permanently incapacitated, but this is a mutual insurance scheme to cover contributors from the start of the scheme. There is nothing to prevent long-term sickness from being one of the risks that contributions would cover under this Bill. One has to start somewhere in dealing with the long-term sick, and I believe we should be starting to cover long-term sickness now, when we have the chance to do so, rather than wait three years or more.

If any future earnings-related retirement scheme is to cover long-term sickness, it seems to me that it can be only on the basis of earnings. The alternative would be to cover it by something along the lines of the National Assistance provisions, even though the term "National Assistance" is changed. I admit that the cost is not covered in the calculation of contributions needed to finance the scheme, but the cost in the first year, I imagine, would be relatively small. Thereafter it would grow from year to year, as more and more long-term sick were carried under the scheme. But surely the scheme could meet this extra commitment. I see from the Government Actuary's report that a surplus of £2 million is anticipated in 1968–69, and of £4 million in 1969–70. If the Government accept this Amendment, it would be for them to add a suitable clause providing for regulations to be made to prescribe the details—details as to which income tax year is to be taken into account in line with the current cost of living and so on.

I submit that we are entitled to more explanation than we have so far had as to why the Government decided to restrict earnings-related sickness benefits to six months. Long-term sickness is one of the most intractable of problems, as I know from my own experience; but here is an opportunity to deal with it on a clear, intelligible principle of contributory insurance. I submit that this opportunity ought not to be massed. I beg to move.

Amendment moved— Page 2, line 40, leave out (" earnings-related supplement ") and insert (" unemployment benefit ").—(Lord Drumalbyn.)

4.58 p.m.

LORD BOWLES

Subsection (3) of Clause 2 lays down the maximum period for which the new earnings-related supplement can be paid as 156 days in a period of interruption of employment. A period of interruption of employment comprises spells of both unemployment and sickness, and a new period starts only when there is a gap of more than 13 weeks without unemployment or sickness. The 156 days of supplement start to be counted after 12 waiting days. The effect of the three Amendments to the clause is, broadly, to apply the limit on duration of the supplement only to cases where it is paid with unemployment benefit. As a result, supplement to sickness benefit would be paid without limit of time as long as the flat-rate benefit remained payable (and, except for people who have paid less than 156 employed or self-employed contributions, the flat-rate sickness benefit is paid as long as incapacity for work remains). The intention of the Amendment is presumably to allow supplement to continue to be paid after six months to the long-term sick. The noble Lord and I discussed this matter on Second Reading.

If this is the purpose, the proposed Amendment does not fully achieve it. For instance, the Amendment would certainly preclude payment of further supplement after a person had been entitled to 168 days of unemployment benefit in a period of interruption of employment; but, because such periods can include sickness as well as unemployment, this would mean that the person who fell chronically sick after 168 or more days on unemployment benefit would not get the supplement, for his period of sickness.

The basic objection to the Amendment is that it is seeking to use the Bill, which is designed and appropriate only for the early months of unemployment and sick- ness, to try to solve the difficult and different problem of the long-term sick. The form of the Bill simply is not suited to this. The Government recognise the special problems of the long-term sick and are studying them very closely in their general review of the social security scheme. They hope, as further stages of the review are completed, to produce proposals which will provide a proper solution to the question.

The first criticism of the Amendment is that only some of the long-term sick would benefit. It would be very difficult, and in many cases impossible, to calculate a supplement for the existing long-term sick because many of them have not had earnings for years. The supplement would also have to stop under the Amendment when retirement pension came into payment at or after minimum pension age, even though the chronic sickness continued and perhaps became more severe in old age. This is very important because most people who fall chronically sick do so in their fifties and early sixties. It would therefore be very difficult suddenly to stop payment of the supplement. But if supplement continued to be paid to people who were chronically sick at pension age this would create a privileged group of retirement pensioners and would lead to pressure for similar provision for those who become chronically sick after pension age. All this illustrates the inevitably close links between the long-term sick and the old; and, as I said earlier, and as the noble Lord repeated, chronic sickness is in effect a form of premature retirement. I agree that chronic sickness can stop, but we feel here that what the noble Lord really wants to do is to go a great deal further than the Bill is drawn to do. To plan a solution for the one group of chronic sick, which takes no account of the other, would inevitably lead to intolerable anomalies.

The second criticism of the Amendment is that it is not feasible to use, for a long-term benefit for chronic sickness, the machinery in the Bill, which is designed for short-term supplements. The Bill is intended to cushion the initial drop from earnings to flat-rate benefit which occurs during unemployment and sickness. It is therefore reasonable that supplement for up to six months should depend on earnings in the latest income tax year. But long-term sickness often lasts for many years, so that a man's standard of life over a long period might, under the Amendment, depend on what his earnings happened to be shortly before he fell sick. Sometimes they might be disproportionately high, and in other cases disproportionately low, perhaps because the onset of the illness had reduced the man's earning power. To use the Bill's machinery in this way would create anomalies and grave dissatisfaction. It would probably he necessary to take a much longer reference period for earnings than a year, and here, again, there may be a link with earnings-related retirement pensions and widows' benefits which are also being carefully considered by the Government in the review.

Perhaps the noble Lord and the Committee would like to know something about the cost. The noble Lord gave an estimate which I think he will see is very far from the Government's estimate. I think the noble Lord suggested a surplus of about £ 2 million in 1968 and £4 million after that, from which these benefits could be paid.

LORD DRUMALBYN

I merely pointed out that there was that surplus.

LORD BOWLES

It was only relevant to point that out, if the noble Lord expected the benefits which he wanted improved by this Amendment to be paid out of that surplus. Let us see what the brief says. It is estimated that there are about 350,000 people at any one time who are receiving sickness benefit and have been sick for more than six months. The cost of the Amendment in the early years would depend on how far it was possible to provide and calculate earnings-related supplement for people already sick, who may have had their last earnings many years ago.

The Government Actuary estimates that the ultimate cost would be of the order of £50 million a year, on the basis that supplement ceased to be paid when retirement pension came into payment, as would be the case under the Amendment. Any proposal to extend the supplement to retirement pensioners who were sick would acid very greatly indeed to this cost, since there are about 6 million retirement pensioners, of whom a large but unknown proportion will he chronically sick. In view of those reasons, I am sorry to say that the Government cannot accept the noble Lord's Amendment.

LORD DRUMALBYN

I am grateful to the noble Lord for his explanation. I quite understand, of course, that the form of the Bill is not suitable for this, because the Government did not intend to introduce this long-term sickness benefit and, therefore, did not frame the Bill in a suitable form. What I was arguing was that it would have been quite possible to contain a benefit for long-term sickness within the framework of a similar Bill, had the Government intended to do so from the start, which I still think they should have done.

The noble Lord was also good enough to give some figures of what the cost would be, but he did not cost my proposal. He costed the proposal that I think he had in mind, which was the application of this proposal to all longterm sick from the start, from next autumn. Of course, that is not the proposal here. The proposal is that you have a new insurance scheme, and it is only the people who start to contribute to that scheme—that is, the earnings-related benefit—who would be included in the scheme. Therefore, the cost in the first year will not cover anything like 350,000 people and would not increase at anything like the rate suggested. I think the figure of 350.000 is almost certainly the total figure of long-term sick at any given point of time. I do not doubt that in the end the figure might increase towards that point, although that figure no doubt also includes some people who have never earned at all and so would not be covered in this sort of scheme.

It is difficult to argue something which, I admit, cannot easily be contained in the framework of the Bill as it stands. But what one really wanted was that it should be contained in the Bill at the start. I can see that it is very difficult to do this, but I still maintain that this opportunity has been missed. I think one can over-stress the arguments as to what happens after retirement. This is a question which, of course, will have to be examined by any Government in the course of deciding what has to be done about the retirement pension. But so far as the unemployment and sickness benefit on the short-term basis is concerned, it is related to interruption of work, and I was arguing only on the basis of interruption of work up to the time when work ceases on retirement. Therefore, that was the basis that had to be taken for consideration of this Amendment.

I quite see that it is not possible to press this Amendment any further. I felt that it was right to get a fuller explanation of the reasons why the Government had decided not to cover this in the Bill. The noble Lord has been good enough to give that explanation and, while I do not agree with it entirely and do not accept it without reservations, I am grateful to him for having given it. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 2 shall stand part of the Bill?

5.9 p.m.

LORD DRUMALBYN

There is one aspect of sickness benefit which I thought, with respect, was left in a rather unsatisfactory state after the Second Reading debate. I have already referred to the fact that over half of the employees are already covered in some measure by employers' sick pay schemes. I believe that the numbers in 1962 were 13 ½ million out of 22 ½ million employed. About two-thirds of the 13 ½ million are covered by schemes under which employers pay full normal wages or salaries, but deduct whatever National Insurance payment is made. I understand that about one-eighth of the numbers covered received full pay on top of National Insurance, sometimes a fixed payment, and about one-fifth of male employees covered receive flat-rate payments on top of National Insurance. Some of the flat-rate payments are substantial. The effect is that many people, when sick, get more than their take-home pay when they are working; and, of course, that means that if they are injured they get very much more, although there is no doubt an element of compensation involved in the industrial injuries benefit.

I think it is right to recognise that this Bill will still farther add to such disparity as exists. I do not think that this is something which can be ignored or passed over rather lightly, in the way the Minister did in another place in the words which the noble Lord himself quoted on Second Reading, in column 516. The noble Lord finished up with this quotation: No doubt employers will want to discuss with their employees what they will do as a result of the provisions of this Bill and this seems to me to be the right way of going about the matter."—[OFFICIAL REPORT, Vol. 273 (No. 42); 28/2/66.] That was a quotation from what the Minister had said in another place, in column 1351. Perhaps it is the right way to go about it provided that employees respond and are willing to negotiate.

I remember drawing attention to a similar state of affairs arising out of the Redundancy Payments Bill. On that occasion the noble Lord, Lord Lindgren, took a rather more robust attitude than the Minister has on this occasion. He said this: … it is up to the trade unions, whether in the electricity, gas, coal or railways industries, which have existing redundancy agreements to re-negotiate in the light of the Redundancy Payments Bill and of its effect on their schemes."—[OFFICIAL REPORT, Vol. 269, col. 232; 3/8/65.] Everyone is pleased when satisfactory arrangements are made by employers for their employers in sickness or when they become redundant, whether on the employers' own initiative or as a result of negotiations with employees. But to go on adding National Insurance benefits on top, to the point where the total received for not working is considerably higher—and I stress the word" considerably ", as it is applicable in some cases—than the take-home pay, surely exceeds the bounds of common sense and equity. It seems to me to be the duty of the Government to give a much stronger lead on this matter than they have so far given.

LORD BOWLES

In the first place, I made clear—at least, I thought I did—during the Second Reading debate the Government's position about this. Perhaps I might just refer to it again. The Government position on this is quite clearly stated in my reply to the debate on Second Reading, in column 516 ofHansard, when I also quoted similar statements, as the noble Lord has said, made by my right honourable friend the Minister of Pensions and National Insurance in another place. Perhaps I may restate the position. It is the Government's view that it is open to employers with sick pay schemes, where the new supplements are not automatically taken into account, to discuss with their employees how far the particular scheme should be amended to take account of this Bill. This will apply whether it is a private employer, a nationalised industry, or indeed the State itself in its role as employer, and whatever the type of sick pay scheme should be. I take it on my own responsibility to echo what my noble friend Lord Lindgren said: I think it is probably up to the trade unions in these industries, in this kind of situation, to negotiate for their employees. It is a question for further negotiations.

The last point the noble Lord made was that it would be rather unfortunate if people took home more if they were not working than if they were working.I agree with that. Without being able to put my hand right on it, in my Second Reading speech I know I referred to the fact that the 85 per cent. provision was introduced so as, on the whole, to prevent people from taking home more when they were not working than when they were working. I hope that satisfies the noble Lord.

LORD DRUMALBYN

I am much obliged to the noble Lord for what he has said. I am sure this is good sense; but when he is talking about the 85 per cent. provision, of course, this relates only to flat-rate benefit plus the earnings-related benefit. It does not take account of any payments that may be made from private schemes or by employers under their own schemes.

LORD BOWLES: That is quite right.

LORD DRUMALBYN

I was not certain that the noble Lord's last point was right.

LORD INGLEWOOD

May I ask the noble Lord whether he can tell me what subsection (9) means? I know that legislation in this field is difficult, because I was involved in it at the time of the first graduated pensions Bill, which noble Lords opposite opposed so violently, but subsection (9) looks even more difficult to understand than anything we had in that Bill and I really think we should ask for a simple explanation.

LORD BOWLES

Subsection (9) ensures that questions arising with respect to any person's reckonable earnings for the purpose of earnings-related supplement under Clause 2, or widow's supplementary allowance under Clause 4, shall, like contribution questions, be determined as though they were Minister's questions under Section 64(1) of the National Insurance Act. These questions will thus be for decision by the Minister, with a right of appeal on a point of law to the High Court (or, in Scotland, to the Court of Session), and with provision for review by the Minister if new facts come to light or if she is satisfied that her decision was given in ignorance of, or based on a mistake as to, a material fact. The last lines of the subsection ensure that these new Minister's questions attract the provisions of the National Insurance Act on existing Minister's questions under Section 73, subsections (1) and (2), which provide regulation-making powers, and Section 97, which provides that certain decisions shall be conclusive for purposes of proceedings under the National Insurance Act. I hope that satisfies the noble Lord.

Clause 2 agreed to.

Clause 3:

Amendments as to unemployment benefit and sickness benefit

3.—(1) For the purpose of earnings-related supplement under section 2 of this Act and, as from the expiration of the period of three years beginning with the date of the passing of this Act, for the purpose of any provision of the Insurance Act relating to unemployment benefit or to a day or period of interruption of employment. section 20 of that Act shall have effect as if—

1. (a) for paragraph (b) of subsection (1) there were substituted the following:—
2. "(b) where an employed contributor's employment has not been terminated but a person's employment therein has been suspended by the employer, a day shall not be treated in relation to that person as a clay of unemployment unless it is the seventh or a later day in a continuous period of days on which that suspension has lasted, there being disregarded for the purpose of determining the first six days of that period, but for no other purpose—
1. (i) Sunday or such other day in each week as may have been prescribed under paragraph (e) of this subsection; and
2. (ii) any day of recognised or customary holiday in connection with that employment; and
819
3. (iii) such other day or days, if any. as may be prescribed";

5.18 p.m.

LORD DRUMALBYN

The effect of this Amendment, as I understand it. will be to exclude earnings-related supplement from this clause, which deals with the six days of suspended employment. It is not apparent to me how suspended employment can affect the operation of earnings-related unemployment benefit at all, even in the three-year period before this subsection is to apply to flat-rate unemployment benefit. It is not apparent how it affects them, because the six days of suspended employment would not in any case be taken into account for earnings-related unemployment benefit, which starts only after twelve days—that is, after two weeks. I do not know if the noble Lord could kindly explain to me why it is that these words are necessary at all. I beg to move.

Amendment moved— Page 5, line 27, leave out from beginning to ("as") in line 28.—(Lord Drumalbyn.)

LORD BOWLES

I was rather amused when the noble Lord, in moving his Amendment, said "as I understand it". I find it equally difficult to understand his Amendment. Clause 3(1) provides that unemployment benefit should not be paid during the first six days of any temporary suspension of work to a man whose employment has not been terminated. The aim is that short-time working in the first week of temporary lay-off should be covered by guaranteed wage agreements, but that sufficient time must be given for these to be negotiated and for the Government to ensure that the needs of employees during these six days are being properly looked after. The clause thus provides for an interim period of three years during which flat-rate unemployment benefit will still be available as at. present. As the noble Lord has explained, or as I think he did, the effect of his Amendment would be that during the interim period the earnings-related supplement as well as the flat-rate benefit will be made available during the first six days of suspension.

In my speech on Second Reading I explained that there are a number of reasons for Clause 3(1). In order to pay unemployment benefit during short-time working and short spells of lay-off, it is at present necessary to calculate benefit rights according to a very complicated set of rules which have in practice led to serious difficulties and anomalies. When a firm resorts to short-term working it often happens that benefit claims by thousands of employees have to be handled all at once by the employment exchange who have to establish the days off actually lost by each employee. These may vary from worker to worker according to his individual record of working, his pattern of shifts, overtime and so on. It is often necessary to conduct detailed and costly investigations into individual records and to make exhaustive inquiries of the employers as well as of the claimants themselves. Employment exchange staff may have to be taken off other more constructive work simply to cope with handling claims for small amounts of unemployment benefit by people whose attendance at the employment exchange has little or nothing to do with looking for a job.

If earnings-related supplement were to be payable for days of suspension of work during short-time working, the work falling on employment exchanges would be very greatly increased at these peaks of pressure. For every suspended person who happened to have had a period off work or of incapacity in the previous 13 weeks—in which case waiting days would not have to be served—it would be necessary to make a further calculation of benefit to take account of the earnings-related supplement to which the claimant was entitled. The amount of effort needed to cope with the paper work would be out of all proportion to the amount of benefit involved.

The anomalies and difficulties that exist and will remain for the time being under the flat-rate scheme would be made much worse by any attempt to pay earnings-related supplements for such short spells. Indeed the Government's view is that payment of earnings-related supplement to workers on short time or during the first week of lay-off would be neither right in principle nor feasible in practice.

LORD DRUMALBYN

I find great difficulty in understanding this. I think the answer must be surely a simple one; that if a man has already had a period of a fortnight's unemployment or sickness and then comes back to work and there is no work because employment is suspended, then in that period of suspended employment he would be entitled to earnings-related supplement. I do not know; but I think this must be so; otherwise I cannot see how earnings-related supplement could ever arise in relation to suspended days because of the fact that earnings-related supplement only starts after a fortnight's unemployment. I think that must be the reason; but in any case I am not going to press this Amendment. I beg leave to withdraw it.

LORD BOWLES

May I thank the noble Lord. After all, if he, as an ex-Minister of Pensions and National Insurance, finds difficulty, he will understand my position, having never been a Minister at all.

Amendment, by leave, withdrawn.

5.25 p.m.

LORD DRUMALBYNmoved, in subsection (I), to leave out "three years" and insert "eighteen months". The noble Lord said: We now come on to the second part which relates to unemployment benefit, the flat-rate benefit in particular—the days of interruption for fiat-rate unemployment benefit. The point of this Amendment is simply that three years seems to be a very long time to allow before the new rule comes into effect that the first six suspended days are not to apply as days of interruption of employment for unemployment benefit purposes. The noble Lord has said that it is to give both sides of industry time to negotiate on the provision to be made for short-time working and the first week of lay-off. This is in column 491 of the OFFICIAL REPORT for February 28 last. Surely it must be true that the longer the time you give, the less incentive there is to start negotiations. Surely in a case like this it would be better to set a shorter time, even if power were taken to extend it, if you have to extend it. To set a period of three years from the start seems a very long time. It is almost in decimal currency terms. I beg to move.

Amendment moved— Page 5, line 29, leave out (" three years ") and insert (" eighteen months").—(Lord Drumalbyn.)

LORD BOWLES

The effect of this Amendment would be to shorten the interim period during which flat-rate unemployment benefit will be preserved for the first six days of suspension from one of three years after the Royal Assent to one of eighteen months. On the assumption that the earnings-related scheme is brought into operation in the autumn of this year, this would mean that Clause 3(1) would actually come into full effect less than a year after the start of the new scheme. We are hoping to bring this into operation in about seven or eight months.

The Government have given much thought to the question of the length of time that ought to be allowed for the negotiation of new or revised agreements to take account of the withdrawal of unemployment benefit rights during short time working and the first six days of temporary lay-off. It will be clear from my earlier remarks that the Government would like to bring the present unsatisfactory arrangements to an end as soon as possible. But employers and unions have made their existing dispositions on the basis of existing benefit rights, and they must be given a reasonable time to adjust themselves to the new situation. To withdraw existing benefit rights without adequate notice might cause hardship which the Government are anxious to avoid. It is well understood that in many industries it would take a considerable time to bring important and involved negotiations of this sort to fruition and into operation.

There is also the important point that during the interim period the Government will need to verify that the progress made towards the completion of new agreements is satisfactory, and to allow sufficient time for further steps to be taken if progress is not satisfactory. As I explained in my speech on Second Reading, we propose to review the progress of these negotiations halfway through the interim period and we do not think it would be realistic to make such an assessment less than eighteen months from now. Similarly, the possibility that it might be necessary to resort to legislation to make guaranteed wages compulsory means that we must allow a further eighteen months between the review of progress and the end of the interim period.

Accordingly, while we share the noble Lord's desire to bring this clause into full effect as soon as possible, it would, in our view, be unreasonable to expect satisfactory alternative arrangements to be brought to finality within eighteen months. The consequences of shortening the interim period as the noble Lord's Amendment proposes would, therefore, be to cause hardship and to prejudice the smooth introduction of a worthwhile improvement in the scheme.

It might be of interest to note that the financial effect o: bringing Clause 3(0 into full operation in eighteen months instead of three years after the Royal Assent would be an estimated saving to the National Insurance fund of £3½ million. The additional cost of paying earnings-related supplement for the first six days of suspension during the shorter transitional period proposed in the Amendment is estimated at £750,000. Thus the effect of the two Amendments taken together is estimated at £2,750,000. I hope that satisfies the noble Lord.

LORD DRUMALBYN

I am grateful to the noble Lord for the information which he has given on this matter. I am sure we all agree that a reasonable time should be given for these negotiations, but what is a reasonable time is a question of judgment. From what I gather, the Government would have been prepared to have a shorter time than this, but it looks very much, from what the noble Lord has said about guaranteed wages, as if the trade union side has said:" We will do this only if there are guaranteed wages, and the Government must introduce a Bill to have guaranteed wages if the negotiations are not going right." That is why the Bill gives this long period of three years in order to provide time not only for the negotiations, which could obviously take place if there was the will for them to take place, within eighteen months—this seems to be the whole object of the exercise—but to see whether they have taken place after eighteen months and, if not, to allow further time to get the legislation through on guaranteed wages if that is not happening voluntarily. That is what it looks like, according to the interpretation of what the noble Lord has said. I do not know whether I am right.

LORD BOWLES: I agree with the noble Lord.

LORD DRUMALBYN

I am much obliged to the noble Lord. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.33 p.m.

LORD DRUMALBYNmoved to add to subsection (2) Provided that this subsection shall not apply to any person whose employment was interrupted at the time of the passage of this Act in respect of that period of interruption of employment ".

The noble Lord said: This is quite a simple point. The Amendment says that the reduction in the maximum period of unemployment benefit from 82 weeks to one year, as proposed in the Bill, shall not apply to those unemployed at the time when the Bill becomes law. That is to say, people who are unemployed at the time when the Bill comes into operation will continue to enjoy the benefit of the longer period that the rules will not he changed during this game, but only for the next game. That is the purpose of the Amendment.

Amendment moved— Page 6, line 38, at end insert the said proviso.—(Lord Drumalbyn).

LORD BOWLES

Subsection (2) of Clause 3 provides for rationalisation of the duration of flat-rate unemployment benefit. At present, unemployment benefit is paid for a standard period of 180 days plus up to 312" added days ", depending on contribution and benefit history. Accordingly, the duration can vary from 180 to 492 days, which means (as Sundays are excluded) from 7 months to 19 months. Under the subsection in the Bill this will he replaced by a straight maximum of 312 days flat-rate benefit (one year) in any period of interruption of employment. The Amendment adds a proviso which would exclude from the new rule people who remained in a period of interruption of employment which had been in operation "at the time of the passage of the Act". This presumably means at Royal Assent, but in practice would have to be the appointed day for Clause 3(2), which is expected to be a date this autumn.

The effect of the Amendment would be not only to retain the existing system temporarily for some existing cases whose added days gave them more than the new 12 months' benefit, which is presumably the interim period behind the proposal, but also to retain the present system temporarily where a person is now entitled to less than the new 12 months in total. The Amendment would also mean that in a few cases the transitional arrangements would persist for many years. This is because a period of interruption covers sickness as well as unemployment, and is not broken unless there is a period of more than 13 weeks without either of these contingencies arising. If, therefore, a person was sick at the appointed day, remained sick, on and off, for years, and eventually claimed unemployment benefit, then under the Amendment, the old arrangement would apply to him, whether to his advantage or disadvantage. As indicated briefly in paragraph 6 of the Explanatory Memorandum on the Bill, the Government accept that there should be some transitional arrangements to ease this rationalisation of unemployment benefit in the early days. These will be secured by regulations made by my right honourable friend the Minister of Pensions and National Insurance under the transitional powers in Clause 14(5) of the Bill. The regulations will be subject to the Negative Resolution procedure.

It is proposed that, under the regulations, the scaling up of unemployment benefit from a minimum of 7 months to a standard period of 12 months will take immediate effect, so that any person who is entitled to unemployment benefit under the present conditions on or after the appointed day (regardless of whether or not his period of interruption of employment started before the appointed day) shall be entitled to the new 12-month maximum period. However, in scaling entitlement to flat-rate benefit down from a maximum of 19 to 12 months, it is intended that the regulations shall provide for a transitional period of 312 days (12 months) during which added days will continue to be payable. This will mean that anyone who at the appointed day is unemployed and already receiving added days will, if he continues to be unemployed, be eligible for the full quota of added days to which he is entitled under the present rule.

For example, a man who is entitled to 17 months' unemployment benefit under the present provisions, and who has already been unemployed for 10 months at the start of the new scheme, would be able to get up to a further 7 months' unemployment benefit during the same period of interruption of employment. This transitional period will, of course, also be of advantage to people who have already received some unemployment benefit before the appointed day in a then current period of interruption of employment, but have not yet got on to added days. They, too, will be able to get any unemployment benefit over and above the 312-day duration to which they may be entitled before the expiry of the one-year transitional period.

These proposals by the Government are preferable to the proposed Amendment, in two ways. First they ensure that where the new provisions are to a person's advantage, they are put into immediate effect, even in existing cases. Secondly, they ensure that, while there is a transitional period for people who are better off under the old provisions, that is for a defined period of a year, so that there will be no open-ended transitional procedure which remains in being for a long period for a few cases. This would only be confusing for claimants and for the local offices, since such continuing transitional provisions would have to be covered in the Ministry's leaflets, forms and procedural instructions.

Perhaps the cost may interest the Committee. The Government Actuary estimates that, compared with the Government's proposals, the Amendment would result in a saving of £1 million in respect of people with a current entitlement to less than 12 months benefit who were not given the new standard 12 months. Off-setting this would be additional expenditure of £1½ million incurred by applying to people in a period of interruption of employment at the appointed day, the present" added day "rules without limit of time. The net extra cost of the Amendment, once and for all, would therefore be about half a million pounds.

LORD DRUMALBYN

Again I am grateful to the noble Lord for his comprehensive explanation of this point, which I think important. The transitional measures which the Government intend to take in conjunction with this Bill obviously more than cover the point I have in mind. Therefore there is no point in my pursuing this Amendment and I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4 [Earnings-related and other widow's benefit wider Insurance Act]:

LORD DRUMA.LBYNmoved, in subsection (2), to leave out paragraph (b).

The noble Lord said: I move this Amendment purely to secure an explanation of what paragraph (b) means. I can see that if a husband was employed or sick when he died there might be a complication in providing for the six-months period for the widow's allowance to start again. I can also see that if he had been ill in the previous income tax year it might be unfair to his widow to take another income tax year. What I cannot see is why it should be necessary to change the relevant income tax year, merely because the deceased husband would have been entitled to earnings-related sickness benefit in the earnings-related benefit year in which he died. I hope that the noble Lord will be able to explain that.

Amendment moved— Page 7, line 22, leave out paragraph (b).—(Lord Drumalbyn.)

LORD BOWLES

The noble Lord explained that his main purpose on this Amendment is to discover how the regulation-making powers in Clause 4(2)(b) will be used, and I will gladly do my best to explain the purpose of this provision to your Lordships. Paragraph (b) of Clause 4(2) is a provision under which regulations can be made varying in certain circumstances the "appropriate income tax year" which should be used in determining the husband's average weekly earnings for the purpose of assessing the widow's supplementary allowance. This provision would apply only in a minority of cases. Its purpose is that widows should not be troubled with avoidable inquiries about their husband's previous earnings, and it will generally operate to the widow's advantage. In essence, the intention is that where the husband was getting an earnings-related supplement at the date of his death the supplementary allowance to widow's benefit will be based on the same earnings as those used to deter- mine the husband's supplement. This is doubtless what the widow would expect, and it will spare her from having to provide, at a time of emotional stress, information about her husband's earnings or past employments.

Normally this will come about automatically, and the special regulations will be needed only where the husband's sickness began in one benefit year and continued into the next. Without these regulations, the widows' supplement would be based on the earnings in the tax year relevant at the date of the husband's death, in cases where the husband's supplement had continued at the rate appropriate at the beginning of his sickness. Where this meant using a later tax year for the widows' benefit, special inquiries would have to be made of the widow to establish the rate of her supplementary allowance. Such inquiries will, of course, be needed where a husband dies suddenly without any preceding sickness, but the widow whose husband had been getting a supplement when he died would not normally understand why she could not continue to get this supplement for 26 weeks without further inquiry. Furthermore, if the husband's sickness had lasted for some time, the normal rules might produce a much lower rate of supplement for the widow because of the effect of the long spell of sickness on the last tax year's earnings.

I should explain the significance of the phrase" or in the prescribed circumstances would have been ", which appears in the second line of the paragraph. The purpose here is to enable the regulations to go somewhat wider than the case where the husband was actually receiving the supplement right up to the day he died. For example, this power might be used where the husband was sick until very shortly before his death, but had in fact returned to work for a day or two. In short, the relevant income tax year for widows will normally be, as laid down in the Bill, the one preceding the benefit year in which the husband died. The powers in Clause 4(2)(b) would enable the income tax year before that to be used where the husband was getting a supplement based on that earlier year's earnings.

LORD DRUMALBYN

I shall be glad to study that reply. I must confess that I have not been able to follow it all. I am grateful to the noble Lord for the explanation, and beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Clauses 5 to 10 agreed to.

Clause 11 [Interpretation]:

On Question, Whether Clause 11 shall be agreed to?

5.46 p.m.

LORD 1NGLEWOOD

While giving noble Lords opposite full credit for this consolidation Act (this is not a carping criticism; I am only seeking information, because this legislation is going to be of interest to many people in distress and is not just technical stuff that is going to be read by lawyers), when we look at the last subsection of Clause 11, which deals with regulations and goes back to the regulations revoked in Schedule 12 to the principal Act and then to Section 116, it is very difficult to know which of the regulations are revoked and which are confirmed. I wonder whether the noble Lord will look at this point and, if possible, even at this late stage, by redrafting make it a little clearer, because it is so extremely difficult to understand which of the regulations are revoked and which revived.

LORD DRUMALBYN

There is a further point here arising out of consolidation. Unless I am mistaken, regulations which had been previously unsuccessfully challenged were written into the consolidation Act. Section 116(2), which I understand is now being repealed by subsection (4), was inserted to preserve the right to challenge those provisions as if they were still regulations. I am not clear as to the effect of this, but it seems to me undesirable in principle. I hope that the noble Lord will give an assurance that this will not he treated as a precedent.

LORD BOWLES

In answer to the noble Lord, Lord Inglewood, this subsection arises from consolidation. A number of regulations made under the previous National Insurance Acts were incorporated in the National Insurance Act (Section 116 (1)) to bring it into line with the Industrial Injuries Act where the corresponding provisions had always been in the Statutes and not in regulations. But so that the consolidation did not alter he exising law it was necessary to provide not only that the incorporated regulations could be amended by other regulations but also, in Section 116(2), that the validity of the provisions replacing the regulations could be challenged in the courts in the same manner as theviresof the regulations. The latter provision is, however, constitutionally exceptional in relation to the provisions of an Act. The first opportunity has therefore been taken to declare in this subsection that the regulations in question shall be treated as validly made.

Perhaps I may add this information. which was handed to me about an hour ago. The various sections of the Act specified in Section 116 (1) of the 1965 Act reproduce certain regulations which that section revoked. These regulations, which have not been subject to scrutiny by Parliament in the same way as they would have been had they been originally incorporated as provisions of a Public Bill, were by this means promoted in status without debate.

The Joint Committee on Consolidation Bills took the view that the right to challenge these provisions as regulations, on the grounds that they wereultra vires, which had been unsuccessfully exercised, should be preserved. They therefore inserted Section 116 (2) into the Act. As I said, this is the first opportunity to put the matter right.

The noble and learned Lord, Lord Morris of Borth-y-Gest, who was Chairman of the Joint Committee on Consolidation Bills when the National Insurance Act, 1965, was discussed, has to-day expressed to me the view that, as Government spokesman, I ought to inform the Committee of the effect of that clause and also of the history of the matter and the reason why the step now being taken is being taken in the manner proposed rather than in the form of a one-clause Bill. I hope that will satisfy the noble Lord.

LORD 1NGLEWOOD

I hope the noble Lord will agree that my question was a valid one, because there was a considerable point here, even though it is rather hard for anyone without a brief to put it into words. The noble Lord has said that this was putting the matter right, and that I do not dispute for one moment; but I hope that he, too, will not dispute with me that this method of doing it is not putting the matter clear. although it may be putting the matter right.

LORD BOWLES

The noble Lord has raised an important point, and I am only congratulating myself on being ready to deal with it, I hope satisfactorily. Perhaps I may say this. The noble Lord asked whether we could have a look at this again at a later stage. It is proposed, as the noble Lord no doubt knows, to complete all stages of this Bill this afternoon, and I do not think I can give any undertaking in that respect.

Clause 11 agreed to.

Remaining clauses and Schedules agreed to.

House resumed: Bill reported without amendment; Report received.

Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of March 2), Bill read 3ª.

LORD BOWLES

My Lords, I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(Lord Bowles.)

LORD DRUMALBYN

My Lords, may I just thank the noble Lord for his patience in giving the full explanations that he has done in regard to the Bill? We are all rather wiser than when it came along, and we are grateful to him.

LORD BOWLES

My Lords, I am grateful to the noble Lord, too.

On Question, Bill passed.