HL Deb 12 May 1970 vol 310 cc512-27

3.7 p.m.


My Lords, I rise to move that this Bill be read a second time. As your Lordships will see from the Explanatory Memorandum, the object of the Bill is to increase the employer's National Health Service contribution by 1s. a week, from 8d. to 1s. 8d. With permission, I will hereafter refer to the National Health Service contribution as "the N.H.S. contribution". The need for the increase is that the contribution, being a flat rate, yields about the same amount each year. The cost of the services, on the other hand, increases year by year. The contribution therefore has to be revised from time to time, and we are now due for such a revision. The N.H.S. contribution is collected with the weekly National Insurance contribution, and the increase applies, therefore, in respect of every employee for whom the contribution is paid. The Bill covers Great Britain. I should add that the stamp for self-employed and non-employed persons also includes an element for the N.H.S. contribution, but this Bill does not increase this.

If I may remind the House, health and welfare services are financed from three sources: charges to recipients, the N.H.S. contribution and taxation. In recent years, charges have provided about 5 per cent. of the total and the N.H.S. contribution about 10 per cent. This leaves by far the greatest proportion of the cost to fall upon taxation—about 5 per cent. from rates and 80 per cent. from central Government taxation. The weekly insurance stamp has provided part of the cost of these services since the introduction of the National Health Service in 1948. Some of your Lordships may indeed recall that under the old National Health Insurance scheme medical benefit for the insured person was financed entirely from the stamp. The Beveridge Report recommended that persons insured under the wider scheme of National Insurance, introduced in 1948, at the same time as the National Health Service, should not be relieved wholly of the burden of contributing as such to the health services. This recommendation was accepted. The Service therefore started with a contribution towards the N.H.S. amounting in the case of the adult male employee to 10d. a week, of which the employee paid 8½d. and the employer 1½d.

Looking back, we must surely now be surprised at this division between the employee and the employer, the latter paying only 15 per cent. of the total contribution. This anomaly has been continued through the various changes in the contribution. In 1957 it was established as a separate N.H.S. contribution to make clear to contributors by special printing on the stamp how much goes towards the National Health Service. This Act increased the rates and there were further increases in 1958, 1961 and 1968. The 1965 Act, which this Bill amends, was a consolidating Act which did not alter the rates. As a result of these various changes we have now arrived at a rate of 3s. 10d. a week for the adult male employee. Of this 8d. is paid by the employer and 3s. 2d. by the employee. In other words, the employee still pays about five times as much as the employer.

Your Lordships will be aware that the Government's proposals for a new system of earnings-related contributions and pensions continue this levy towards the N.H.S. I do not wish to anticipate the debates which will no doubt take place on that measure. But the point which is relevant to us to-day is that a very significant change is proposed in the division of the contribution between the employer and the employee. This is explained in Cmnd. 4222, the Explanatory Memorandum on the National Superannuation and Social Insurance Bill 1969. The Government have decided that under the new scheme employers should bear a higher proportion than employees. The rates are 0.6 per cent. of the payroll by employers and 0.3 per cent. of earnings (up to a ceiling) by employees. The yield of this earnings-related contribution is expected to be about the same in the first year as would be yielded by the present flat rate contribution increased by the 1s. of this Bill.


My Lords, would the noble Baroness allow me to interrupt? I hesitate to do so; but she said that the Government had explained this. Did the White Paper give an explanation of that decision?


My Lords, to which decision 'does the noble Lord refer?


The decision to divide the total contribution into three parts: two-thirds to be paid by the employer and one-third by the employee.


My Lords, my reference was more directly concerned with the broad proposals on the earnings-related contribution. I do not think that this explanation is in the Memorandum, but I will check it for the noble Lord. The good employer recognises his interest in a good Health Service being provided for his employees. An added factor is that as we turn our eyes towards Europe, we find that it is the practice there for the employer to bear the bulk of the contribution towards the equivalent of our health services.

I have traced back the history of this contribution and outlined its future because we can from both directions explain why an increase is needed now and why this should fall on the employer. The present flat-rate contribution has become out of date. The employer's element has not been revised since 1961 except for getting rid of the odd halfpenny in 1968. Looking to the future under the earnings-related scheme, the employer will then pay twice what the employee does and this Bill makes a modest step towards this in raising the employer's contribution so that he will pay about half what the employee does.

I would not want the House to think that this measure can be justified only in cold arithmetical terms. There is no precise relationship of the contribution to total expenditure that can be regarded as proved right. But we must from time to time top up the yield from this contribution as the development of the health and welfare services continues. The Government's plans are that expenditure in real terms should increase 3.5 per cent. this year over last year and 4.3 per cent. again next year. These increases of course represent the allocation of additional resources to the services and the ability to meet greater demands upon them. In the last five years we have considerably increased both the hospital building programme and the staffing of hospitals in England and Wales. Expenditure on hospital building has more than doubled. Hospital medical and dental staff has increased by about 20 per cent. and nursing staff by about 15 per cent. As a result, a greater number of patients is being treated each year and the standard of treatment is being maintained, and indeed improved, by provision of more modern facilities. The humanity of the programme may be seen from the increase of day attendances at geriatric hospitals from 200,000 to 500,000 over these same years. Community services have also been improved; I mention only the increase in health centres from 30 to 159 and the increase in places at training centres for the mentally handicapped from 33,000 to 48,000 between 1964 and 1969. The family practitioner services are also being improved by the financial encouragement given to the provision of premises and the employment of ancillary staff.

In addition to these improvements in real terms in the Service, we also have to meet the effects of price and pay increases. What we are providing is services; and these depend heavily on manpower—indeed, I should say woman-power. I am sure your Lordships regarded as well deserved the recent substantial increases to nurses. But the cost of these and other pay awards has to be found.

The details of the Bill are simple. It has one main clause. Subsection (1) provides for the increase of 1s. 0d. in the employer's weekly rate of contribution. Subsection (2) provides for this to be modified as necessary for decimalisation. In practice, the present 8d. is £0033 in decimal terms and the 1s., which your Lordships will readily see is exactly 5 new pence, will make the new amount £0083. Subsection (3) provides for the increased contribution to be paid over to the Government of Northern Ireland and the Isle of Man in respect of members of Her Majesty's Forces and seamen of foreign-going ships who are treated as belonging to those places. The modest increase in N.H.S. contribution rising from this Bill is a necessary step to enable the development of the health and welfare services to be continued. I ask the House accordingly to give it a Second Reading. I beg to move.

Moved, That the Bill be now read 2a.—(Baroness Phillips.)

3.17 p.m.


My Lords, I should like to thank the noble Baroness for giving us the background to the Bill. She says that it is a very short Bill and that there is not much of it to go through. It is, however, important; it involves putting an additional charge of £53 million on industry, adding that, on the one hand, to the national coffers and, on the other, eventually to the cost of goods and services in the country. As those who have had to deal with these things know too well the question in cases like this is always: how is the additional cost of the Health Services to be divided; how much to be apportioned against the Exchequer and how much against the stamp? And in so far as it is apportioned to the stamp, how should that be divided?

I should like to make one or two general comments. It is not a criticism, because arguments have to be used; but inevitably when we on this side say that we in this country should bring something into line with what is being done on the Continent we are immediately told, "You must act in accordance with your own wisdom and not have too much regard to what happens abroad." But when it suits the Government to point out what happens abroad they do not hesitate to use that argument. I think that it is right to put this point now, because I doubt very much whether, when the countries to which the noble Baroness has referred were establishing their contributions, they were concerned so much with what was the right contribution as between employer and employee as with the raising of money; and with who could pay, and how much. But I think that we should have regard to what is the right contribution as between the employer and employee. I shall be coming to this in greater detail in a minute.

It is inevitably true that year by year the annual bill presented to the nation for the health services goes up. In so far as the increase is due to the improvement in the services there should be no complaint; and we certainly do not complain about it. The nation should undoubtedly provide for itself the best health services that it can afford. Year by year medical science devises new, and generally more costly, methods of treatment, prevention and cure. Year by year also, the cost of existing services rises through inflation.

I think I should say straight away that there has been no marked difference between the real increase in spending on health and welfare under Tory and Labour Governments. The noble Baroness told us what is being done at the present time, but I think I am right in saying that in the first four years of the Labour Government the increase in real terms was 15.7 per cent., and in the last four years of the Tory Government it was 14.2 per cent.—not a very marked difference. To put it into more concrete terms, in the 13 so-called "wasted years" of Conservative Government the number of family doctors increased by nearly 20 per cent.; the number of full-time nurses increased by over 25 per cent., and the capital expenditure on local health and welfare services quadrupled. By 1964, in the community care services, one new training centre, one new hostel for the mentally ill or handicapped, two new maternity or child welfare clinics and two or three community homes for old people were, on average, being opened every week.

Mr. Enoch Powell, as Minister of Health, made plans for a vast programme of hospital building which has gone ahead ever since. In the last year of the Conservative Government expenditure on hospital building was five times as much as in the last year of the previous Government. As for housing, the Labour Government have been able to take advantage of the great surge forward planned under Mr. Harold Macmillan's Administration. We can all, in our different ways, rejoice in that. Whether the Labour Government have taken full advantage of it is a matter for argument. What is not a matter of argument but is a matter of fact is that the surge forward has not been nearly so great as the Labour Party gave the country reason to expect.

How should the bill for the health services be apportioned between the beneficiaries? That really is the question which this Bill raises. The services have never been completely free. When the Health Service was first introduced it was thought right to include a contribution to it in the weekly insurance stamp; but it was not a health insurance—a point that people did not really appreciate—it was a contribution which was included in the weekly insurance stamp. That was done, as the noble Baroness indicated, largely for historical reasons.

At the same time, a small weekly contribution per employee was to be made, not only by the employee but by the employer, and a contribution which presumably, at that time, the Labour Government thought appropriate and fair in proportion to the relative benefits to be derived by employer and employee respectively. As the noble Baroness said, the actual amounts were 8½d. per week to be paid by the employee and 1½d. by the employer. The smallness of the contribution reflects the staggering underestimate made by the then Government of what the National Health Service would cost. Although the cost of the health services rose steadily, these charges were not increased pro rata whenever national insurance contributions were increased. Looking back, I feel that perhaps this was a pity. In fact, the changes were not raised at all in 1957 and they have been increased three times since: the last increase, the noble Baroness said, being in 1968 when the contributions were fixed at 3s. 2d. for the employee and 8d. for the employer. I would point out that that is a four and a half fold increase for the employee and a five and a half fold increase for the employer. In addition, the charges for ophthalmic and dental appliances were introduced by the Attlee Government, and the present Government have, characteristically, wobbled in their attitude towards them.

My Lords, when the present Government were considering what contribution should be made in the future, by employer and employee respectively, towards the national insurance and the health services, their first idea was that the charge upon employer and employee for the health services should be equal. Then they baldly stated—I say "baldly" because, so far as I can find, there was not any explanation of this—in their White Paper last December (Cmnd. 4222) the words which the noble Baroness has quoted this afternoon. She did not mention that the employers would pay on the total payroll; they would not only pay two-thirds of the total health contribution, but would pay on the total payroll, whereas the employees would pay only on that part of their wages and salaries which does not exceed one and a half times the national average earnings. I think that is right.

No reason, so far as I can find (I looked it up because I was puzzled by this), was given in the White Paper for this apportionment. Now the Government have decided that the present yield from the insurance stamp to the National Health Service cost should be increased from, I think, £178 million to £231 million. My Lords, no reason is given for that amount of increase. Given the increase in average earnings since 1961, I can find nothing unreasonable, in principal, about increasing this amount, though how much it should be again is anybody's guess. It means that the combined employer and employee contribution per employee will increase from 3s. 10d. a week to 4s. 10d. a week. I think that because on a previous occasion (in 1961, I think) the National Health Service contribution was increased by 1s., the Government have thought of the amount of 1s. and said, "It is a good precedent: let us make the increase 1s." I doubt whether there is any more reason for it than that.

If it is now thought that the Labour Government were wrong in 1948 in their assessment of the relative benefit to employer and employee respectively of the National Health Service contribution included in the insurance stamp, I think we should be told rather more of how circumstances have altered to justify this change of view. Why should the employer in future be required to pay one-third of the total National Health Service contribution when hitherto he has been paying a little less than one-sixth? Why in the future is he to pay more than two-thirds of the total National Health Service contribution? These are big changes, and we ought to have reasons for them.

After all, my Lords, the married employee, in his contribution, is contributing also, if his wife is not working, for his wife and children, as well as for himself when he ceases working and paying any National Health Service contribution. On the other hand, most substantial manufacturers, so far as I know, not only provide medical services, at their own expense, in their factories but are expected to provide them; and they do so without assistance, I believe, from the National Health Service.


My Lords, may I interrupt the noble Lord? If, for instance, a patient is treated at the factory, he would probably be advised to go to his own National Health doctor afterwards. It is not a double service, such as the noble Lord suggests.


Quite so, my Lords, but that only means that in his personal capacity the employee is treated at home. The factory is paying for the medical service he gets in his capacity qua employee at the factory. This is my point: has this been taken into account in fixing the proportion between the employer and the employee?


My Lords, it is only a very limited service that he gets at the factory. The doctor at the factory does not provide him with medicine or anything like that.


My Lords, that is quite so, but I am concerned with the division of the total contribution between the employer and the employee. I am asking whether this service, albeit a limited service, that the employer is giving has been taken into account in fixing this proportion. I think we ought to know this sort of thing. The employer's contribution, as I have said, is an additional cost on the goods and services that he provides. To put the whole extra charge on him simply increases the prices that he must charge for his goods and services. This is directly inflationary, and at a time when the Chancellor of the Exchequer tells us that we must do everything possible to avoid letting inflation get a grip on our economy.

We are told that it is only a small additional burden. How often have we been told, when an additional impost is proposed, that in proportion to the total cost of producing the goods or selling them it is only a little. But it all mounts up. The same argument comes each time: it is only a little increase. One has only to recall the redundancy payments contribution, which falls entirely on the employer. It started at 6d. a week and now is already 1s. 3d. a week. But all these changes are completely dwarfed by the selective employment tax, which makes every other additional impost look small. For those industries which qualify for repayment it is a forced loan which still must cost them 4 per cent. interest—really 8 per cent., for six months or so—and for the rest, it represents a savage increase in the cost of the services that they provide. I think I should say this to your Lordships, because it shocked me when I saw it. I noticed in one field that the outgoings for selective employment tax in a particular service almost equalled the entire profits in that field before tax. That is extraordinary.

I said that, in principle, I saw no objection to increasing the total National Health Service contribution as a proportion of the total National Health Service costs. But in present circumstances does it make sense, with an expected Government surplus of £619 million, to put this additional levy wholly on industry at a time of inflation? We shall certainly have to re-examine the whole of the financing of the National Health Service. But what is extraordinary is the change of attitude of a Labour Government. I wonder whether the noble Baroness, Lady Phillips, recalls that the Prime Minister resigned from the Labour Government in 1951 when the health charges were first imposed. He took them off when he came to power, and then he put them on again. Does the noble Baroness also recall the fuss that her Party made when the National Health Service contribution was increased in 1961? I wonder whether she remembers that the Prime Minister then wrote in the New Statesman: Year by year the case is becoming stronger for taking the Health Service and its contributions under the general Exchequer system. My Lords, if the case is becoming stronger, I am afraid that the Prime Minister must be becoming weaker.

This Bill is one more example of the staggering from expedient to expedient that is so typical of the Labour Government. The awful thing about it is that it foreshadows the next lurch, which is contained in a Bill that has not yet come to your Lordships' House. When it does come we shall have a fuller opportunity of probing the reasoning, if any, behind the expedient. In the meantime, though few, if any, of my noble friends will be convinced that the balance of argument justifies the provisions of the Bill, we shall certainly not oppose it. I should like to ask the noble Baroness one question, and it is: when will this increased contribution come into effect? I would just mention to your Lordships that subsection (2) of Clause 2 of the Bill says: This Act shall not come into force until such day as may be appointed by order of the Secretary of State made by statutory instrument". We shall be most interested to know when this new charge will come into effect.

3.34 p.m.


My Lords, what an interesting electioneering speech we have heard from the noble Lord, Lord Drumalbyn. He even praises Powellism. Is that a sign of what is to come during the General Election period?


Perhaps I may ask whether the building of new hospitals is Powellism?


But the noble Lord went far from that and heaped coals of fire on the head of Mr. Enoch Powell. I can see the ranks of the Tory Party closing ready for the General Election which lies ahead. It struck me right through the noble Lord's speech that he seemed willing to wound, but afraid to strike. Does he want the National Health Service expanded? Does he want nurses to get more pay? Does he want more hospitals to be built? Does he want more general practitioners to be available for the general public? If he does, then the money for it has to be found. Where does the noble Lord want the money to come from? Should it be paid by the employer? We have heard that the noble Lord does not like that, despite the fact that British industry is now prospering and making handsome profits. Does he want the money to be paid by the taxpayer through increased taxation? If so, let him get on his feet and say that the Tory Party stands for an increase in taxation.


May I get on my feet and point out once again that there is a Budget surplus of £619 million envisaged? No extra taxation is necessary in order to cover this amount. As to division, all I want is a fair division.


But we need £600 million to underpin the safety and security of the pound sterling, especially when colleagues of the noble Lord go round the country talking about another forthcoming devaluation. We must have an insurance policy to defend the pound sterling against that. The noble Lord does not want the employers to pay; he does not want the taxpayers to pay—or does he? Apparently, he merely wants the worker to pay. Well, we know where he stands there, and no doubt we shall hear more about that in the Election period. He says, in a very sinister way, that if a Tory Government got back they would have to examine the whole financial structure of the National Health Service. That sounds to me like a threat to the people who now enjoy the benefits of the National Health Service. If I cast my mind back a few months, we then heard demands from the other side of the House that nurses should get extra pay. We have given them the extra pay. The money has to be found. The noble Lord is willing for them to have extra pay, but is not prepared for anybody to put their hands in their pockets to provide the money. We have heard of the hospitals that have been built—two or three of them while the Tories were in office. Large numbers of them are now being built. There is one being built in my part of the country which will cost well over £5 million in its first phase.

Now let us look at the benefits or burdens that this Bill will put upon employers. More money is going to be spent, and more is being spent: more is being spent now on the health services than was ever spent during the 13 years of the Tory Government; and we propose to increase it. The more that is spent on the health of the people the less absenteeism there will be from the factories, the mines and the shipyards through ill-health: and, as we all know, far more working days are lost to the nation through ill-health than through strikes. The noble Lord and his Party talk eloquently about the days lost through strikes, but not a single word do they say about the time lost through ill-health. Here we are trying to grapple with that evil of ill-health, and the noble Lord throws cold water upon this beneficent Bill. More people are now being treated; more people are now being cured. The noble Lord at one stage trotted out some percentages to show that expenditure on the Health Service increased by 14 per cent. under the Tory Government and increased by only 15 per cent. under the Labour Government.


Four years each.


But this 15 per cent. is upon an increased base figure; a base figure that was being increased year by year under the Tory Government, and is being increased year by year under the Labour Government.


I am sorry to interrupt again, but if the noble Lord puts words into my mouth I think I should be allowed to correct them. I did say "in real terms" in each case.


The noble Lord does not want me to put words into his mouth. He has already put them there himself, and I sincerely hope that when the Election comes next spring the electors will remember them. I think the noble Lord, instead of blinding us with statistics, as he tried to do during his lengthy speech, should come out openly and say whether the Tory Party want to see the National Health Service expanded, or whether do they not. That is the issue before us in this Bill to-day.


My Lords, after these splendid, fighting speeches I feel that there is not a great deal left for me to say. To the noble Lord, Lord Drumalbyn, I would say that I am sure I should have done exactly the same thing were I sitting where he is, but I think he will notice that in my historical survey I did not attack previous Governments; I simply described how the different increases had come about. I omitted to give some figures, following the remarks that we have heard that speeches are too long, and, as always, everything I omit seems to be something I should have included. This bears on what the noble Lord, Lord Drumalbyn asked me, and perhaps it would be useful to other noble Lords.

These are the figures of the relationship between the yield of the levy and the total cost of the services. Ten years ago, in 1959–60, the total cost of the services was £864 million, and the contribution provided £110 million, or 12.7 per cent. In 1969–70 the cost of the service had risen to £1,973 million, while the yield of the levy had risen to £176 million, or 8.9 per cent. In between those years there was, in 1962–63, a high point in the proportion of the cost met from the levy, when after the increase 14.9 per cent. came from the National Health Service contribution. If we left the contribution at the present rate the proportion it would meet would fall still further from the 8.9 per cent. of 1969–70. We estimate that the effect of the increase proposed, which will bring in about £53 million in a full year, will be to raise the proportion to about 10.3 per cent. in the current and next years.

The noble Lord asked me to explain the basis of the contribution, and he said that the White Paper did not do this. I confirm that he was correct: it does not do this. The reasons for this basis are the return which the employer receives from a good Health Service, keeping his staff well at work, together with the practice in the rest of Europe for employers to pay the greater share. I explained that in my opening speech, and it is not included in the Memorandum. We heard from the noble Lord the suggestion that by putting this contribution on the employers we are placing on them an unfair burden and indirectly raising prices. We have to remember that the amount which a good, healthy manpower service provides is to be assessed in real terms. Absenteeism has to be paid for, and a Health Service has to be paid for. If the employers have a good, healthy work force they are saving money. I do not think it has yet been proved that the increase which an employer pays is automatically passed on to the consumer. In any case, the Health Service has to be paid for and the employers are one of the groups in the community that benefit.

The noble Lord made some reference to the occupational health services. I do not think it is necessary to remind him that employers are not compelled by law to provide medical and nursing services. As my noble friend pointed out, this would be a very small part of the treatment given to employees.


On that question, my Lords, I felt it was a gross distortion of the truth to say that if an employer provides a nurse and a first aid service that is being very generous.


My Lords, this is really a simple measure, but, as the noble Lord, Lord Drumalbyn, has pointed out, it involves a great deal of money. We shall have ample opportunity to debate the whole principle when the major Bill comes before the House. I hope, therefore, in view of the answers provided by my noble friend on the Benches behind me, the House will give this Bill a Second Reading.


My Lords, before the noble Baroness sits down, I do not think she answered the very important question of my noble friend, Lord Drumalbyn, as to when the Government intend to bring this increase into effect.


No, my Lords, I did not, but I will see that before the passage of the Bill the reply is given.

On Question, Bill read 2a; Committee negatived.