HL Deb 12 June 1973 vol 343 cc540-52

3.5 p.m.


My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—(Lord Aberdare.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clause 1 [Outline of basic scheme contributory system]:

LORD REIGATE moved Amendment No. 1: Page 3, line 5, leave out ("18") and insert ("17").

The noble Lord said: It may be for the convenience of the Committee if with Amendment No. 1 we discuss also Amendment No. 2 and Amendments Nos. 47, 48 and 49 to Clause 44, since all five Amendments are part and parcel of the same proposal. This is a simple Amendment and I shall not detain your Lordships for long. It is to remove from this Bill the present obligation on the National Insurance Fund to contribute to the National Health Service. I apologise to my noble friend the Minister because I am quite certain that my drafting is imperfect. I do not want to burden the Committee for too long with the arguments that I put forward on Second Reading, which were much reinforced by the speech of my noble friend Lord Boyd-Carpenter, who was of the same opinion.

Briefly, we have at present a complicated system of cross-accounting by which the Exchequer adds 18 per cent. to the contributions into the National Insurance Fund, and then the National Insurance Fund pays to the National Health Service what is called in Clause 44 the "appropriate National Health Service allocation". The National Health Service is of course almost wholly Exchequer financed. This is a rather complicated piece of Whitehall accounting which I earlier described as "robbing Peter to pay Paul" in order to pay Peter back again and speaking on Second Reading I said. as a lighthearted joke, that I was afraid that if the proposal were accepted I might be doing somebody out of a job. This is apparently true because I notice that Clause 4 provides for deducting the cost of this manoeuvre. I do not know whether my noble friend will be in a position to say what has been in the last few years the amount deducted. So. "many a true word is spoken in jest'', and if this proposal finds favour in the eyes of the Government I am afraid someone will be out of work.

This Amendment provides for the supplement from the Exchequer contribution to be 17 per cent. instead of 18 per cent. Here I must say this is only a cockshy because I do not think it is possible for someone from the Back Benches to be in a position to put forward an authoritative figure, and I shall be grateful if my noble friend can give me some idea of what it should be. I plead with the Government that in this day and age they should correct what really has been a rather outmoded piece of bookkeeping, and I shall be more than satisfied if my noble friend says that he will look at this again to see whether he can do something better by Report stage. I beg to move Amendment No. 1.


I am grateful to my noble friend for having explained his point so lucidly and logically, as indeed he did on Second Reading. Quite simply, his point is that the National Health Service should be wholly financed by the Exchequer charges and this would correspondingly reduce the contribution of the Exchequer to the National Insurance Fund. Of course, to do this would be an act of administrative tidiness—just the sort of thing that we are so often wrongly accused of doing. In this case we are being asked to tidy up an administrative situation which my noble friend thinks is anomalous, although in fact to do so would not have any effect on the total contributions made by insured persons, nor on the total Exchequer payments. As a good Tory I wonder why we should change an established practice when to do so does not, on the face of it, seem to have any advantage for anyone. In fact we believe the reverse. We believe that there are advantages in the present arrangement. It may seem to my noble friend somewhat of a ritual dance but we see some merit in the ritual itself.

Since the original recommendation in the Beveridge Report, successive Governments have followed the principle that persons insured under the wider schemes of National Insurance should also make some contribution to the National Health Service. Although the stamped card is to disappear, I think that contributors and employers will still be aware that they are, within their contributions, making a contribution to the National Health Service from earnings. This is a contribution quite separate from the amounts paid indirectly through the general tax system. If the National Health Service contribution were to disappear we should lose this well-accepted and, indeed, substantial source of revenue from the Health Service, because under the new scheme it will be worth some-think like £300 million a year and because it is tied to earnings automatically it would increase as earnings increase. We think it is still reasonable that people should contribute to the National Health Service with their National Insurance contributions.

So far as the amount of money is concerned, the 1 per cent. which my noble friend is suggesting should be the reduction is worth about £33 million so that if the reduction were entirely to counterbalance the £300 million held back from the National Health Service, then the Treasury supplement would have to go down from 18 per cent. to 8½ per cent. That may well be what my noble friend would think was a very good thing, but a reduction of this order in the level of State support for the National Insurance Fund seems to me —and it may well seem to many of your Lordships—rather drastic. The total level of State support for the Welfare State as a whole would not be diminished by my noble friend's Amendments, but it is not altogether how the matter really stands but how it appears on the surface. We have always had support for National Insurance from employers, contributors and the State; and the amount of State support, though it has varied over the years, has in recent years been stabilised at about 18 per cent., which is the level we should like to keep. That is not a sacrosanct figure, but we think that it is about right, and to reduce it drastically would arouse suspicion that the State was not playing its full part in social security.

In summary, my arguments against my noble friend's proposals are that the system we have is one which the people have got used to and one they regard as fair. It could be that if we were starting completely afresh we might not choose this particular system, but as we go through the Bill I think it will become obvious to your Lordships that in social security it is very difficult to start afresh. I commend to your Lordships the well-tested means of financing our schemes that we have at the moment and that we should like to continue. I hope that my noble friend will not persist in his Amendment.


I cannot pretend that I am not disappointed with my noble friend. I see that it will take a year or two more before I shall persuade him of the rightness of the cause that I have advocated. It is, frankly, a piece of administrative nonsense and I do not think that his case was a very convincing one. I think he is—dare I say it?—out of touch if he thinks that the average contributor to this scheme really in his heart of hearts realises that a proportion of his National Insurance contribution is going to the National Health Service, let alone how much is going to the National Health Service, I know what it is. It takes a long time to move bureaucracy. I am sorry that my noble friend has been enlisted in the ranks of the bureaucrats, and I hope that he will learn in due time that mine is the wiser course. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

3.15 p.m.

THE EARL OF GOWRIE moved Amendment No. 3: Page 3, line 40, leave out from ("liable") to end of line and insert (' to pay Class 1 or Class 2 contributions").

The noble Earl said: With the leave of the Committee may I take Amendments Nos. 3 and 4 together? These Amendments are to clarify the drafting of Clause 1(10) by removing a slight overlap between the provisions relating to liability for contributions and those relating to entitlement to pay contributions. At the moment the prescribed conditions as to residence or presence in Great Britain, that is to say, Clause 1(10)(a), refer to both liability and entitlement. Our legal advice is that this inhibits any separate provision conferring entitlement to pay, for a less stringent condition as to residence or presence is satisfied under Clause 1(10)(b) by restricting the new Clause 1(10)(a) to liability the Amendments avoid this technical defect. I beg to move.


I wish merely to ask the noble Earl whether he could put this into slightly simpler English. Is he saying that everyone is liable but that some are not entitled to benefits? I am not quite clear. I take it that this is a legal definition; but, even so, it needs a little more clarification. What is the difference?


Possibly sometimes we all have difficulties over legal definitions, but I shall do my best to clear this one up for the noble Baroness. Perhaps it would help if I gave a case in point. Restricting the new clause under discussion to liability will enable suitable provision to be made in particular for a case where an overseas employer, with no place of residence in Great Britain, nevertheless has one or more employees here. It is the intention that such an employer should not be made liable for contributions under Clause 1(10)(a) since, for one thing, there would be no practical means of enforcing such liability. It is to get over such difficult cases that the Amendment has been drawn. I beg to move.

On Question, Amendment agreed to.


I have already spoken to Amendment No. 4. I beg to move.

Amendment moved—

Page 3, line 43, leave out from beginning to end of line 45 and insert— ("(b) be entitled to pay Class 3 contributions, unless he fulfils such conditions; or (c) be entitled to pay Class 1 or Class 2 contributions other than those which he is liable to pay, except so far as he is permitted by regulations to pay them.")—(The Earl of Gowrie.)

On Question, Amendment agreed to.

Clause 1, as amended, agreed to.

Clause 2 [Class 1 contributions]:


These are the drafting Amendments which are designed to clarify the references to "year" throughout the Bill. Amendment No. 136 is the other Amendment referred to. I beg to move Amendment No. 5.

Amendment moved— Page 4, line 4, leave out ("a context") and insert ("otherwise stated, or the context is one').—(The Earl of Gowrie.)


Could the noble Earl be a little more forthcoming? I was seeking to understand what he was saying in relation to the Amendment but I must say that I am slightly bewildered. Could the noble Earl be more forthcoming?


I shall do my best. The advice I have is that we need to clarify the references to the term "year" throughout the Bill and that Amendments No. 5 and also No. 136, which I am moving together, are designed to make such clarification.

On Question, Amendment agreed to.

BARONESS PHILLIPS moved Amend-men No. 6. Page 4, line 8, leave out from ("emloyments") to end of line 13 and insert ("and the owner earnings limit shall be £8.")

The noble Baroness said: This Amendment is a simple one; it refers to Clause 2 and contributions. As we were told at Second Reading, and indeed as we have been told throughout the whole of the passage of the Bill in another place, this is the Bill dealing with earnings-related contributions and I think that all of your Lordships will recognise, as I do, that this is a good move forward. This will indeed make it possible for better benefits to be paid, particularly in relation to pensions. I would respectfully suggest that earnings-related contributions do not need to have a ceiling, nor indeed do I think they should have a ceiling. It is obvious that there must be a minimum —" the floor ",I believe is the official jargon word—and, those earning less than £8 a week obviously would not come into this scheme, but I cannot see the fairness or the logical argument for having a ceiling. If you earn more, it seems to me reasonable that you should pay more into a scheme of this kind. If we do have a ceiling we then enable even higher paid workers to pay their fair share.

When this issue was discussed in another place the Minister said about these figures—namely, the £8 and the £48, the floor and ceiling: I am not concerned with the level of benefit or contributions because this will not come into force until April, 1975. We appreciate that. He went on to say: "Therefore, the figures in the Bill cannot be more than illustrative". I would say that if they are only figures for the sake of putting them in the Bill, I am wondering why they should be in at all; why not percentages?

I appreciate that the Bill makes the contribution of the employer higher than that of the employees; the employer pays 7.5 per cent. and the employee 5.25 per cent. If there is no ceiling, those with higher salaries, as I see it, will be making in proportion a smaller contribution. The figure of £48 is, I understand, the existing ceiling under the National Insurance Act 1972 and it is tied to average earnings. We all know that average earnings are something almost impossible to determine. I gather that on television or radio yesterday a plasterer said that he earned something like £200 a week, whereas in court this morning I heard about people earning £17 a week. To determine average earings seems to me wellnigh impossible. That being so, I feel that it is quite unreal to put a ceiling in a Bill of this character. I would ask the Minister to bear in mind the fact that if the Equal Pay Act is going to have any effect at all on the levels of earnings of lower paid women workers, a large number of these women will remain outside the pension scheme and dependent on supplementary benefit. There may be a case for lowering the £8. At any rate, I would ask that, in fairness, the ceiling be removed. I beg to move.


The reasons for putting figures of this sort in the Bill are that when the Bill finally comes into effect in 1975 there will have to be figures of this nature if there are to be a floor and a ceiling and a band of earnings on which contributions will be paid. The figures that have been taken for the purposes of the Bill are those that would obtain at the present moment; they are, roughly speaking, a quarter of average earnings at the floor, and one and a half times at the ceiling. The effect of the Amendment that the noble Baroness has moved would be to remove the upper earnings limit, making both employees and their employers liable for Class 1 contributions on all their earnings. So far as employees are concerned, I quote from the White Paper Strategy for Pensions, which considered this point: If the shift of the cost of basic benefits to the higher earner is not to move too far into the province of taxation, the extent of redistribution in the contribution structure has to be limited, and there will therefore be an upper limit of earnings above which further contributions will not be payable. Once you do away with the upper limit for employees there is very little distinction between the earnings-related contribution and the normal taxation system.

The noble Baroness referred to the Committee stage in another place, and I think her own Party agreed there that there had to be a ceiling on employees' contributions. The right honourable Member for Blackburn spoke of the crippling level of employees' contributions if there were no ceiling. In fact the figures are quite large. A person with weekly earnings of £48 a week would at the present moment be paying £3.24 basic and reserve scheme contributions. That would be the ceiling. If you took away the ceiling, a person earning £100 a week would be paying £6.75, and on £200 a week £13.50. These would be very hefty increases if there were no ceiling so far as employees were concerned. As to the ceiling on the contributions made by employers, the result of not having a ceiling would be to increase the burden on employers by about £140 million a year, and this would be over and above the extra burden which they are already going to bear under the Bill of £275 million a year; in other words, another half again. This would certainly have an inflationary effect on prices. Moreover, it could be argued that the absence of an upper limit on the employers' Class 1 contributions could act as a disincentive for employers to pay high wages.

We therefore proposed in the White Paper, and it is reflected in the Bill, that both employers and employees should pay contributions over the same earnings range, but we made the split between them deliberately, so that a greater burden should fall on the employer. As the noble Baroness said. that split is 7.5 per cent. from the employer and 5.25 per cent. from the employee. That places a greater proportion of the contribution on the employer than was proposed in the pension scheme of the noble Baroness's Government. It seems to us that we have arrived at a reasonable band of earnings on which to base the contributions, and that to do away with the ceiling would impose too great a burden both on employers and employees. Those are the reasons why I should not like to accept the noble Baroness's Amendment.


I think the noble Lord will notice that I tried to be kind and not, like the Commons. place the burden on one side. I said it should be on both, if you are going to deal with a scheme of this kind. I must say to the noble Lord that quoting millions is never very impressive to me; I think it has to be broken down to the cost to the individual. I still feel that there is something unfair in somebody on a very high salary not making a higher contribution, because, as I understand it, he is going to draw out under an earnings-related benefit scheme. I also feel—this is not in my Amendment—that if the figure of £48 is arrived at by one and a half times average earnings. it would have been easier to put in the Bill something to that effect, since undoubtedly it will have to be reviewed by the time this becomes an Act. I will not press the point. 1 beg leave to withdraw the Amendment.


Of course the benefits are flat-rate benefits, not earnings-related.


Yes, that is so in this section.

Amendment, by leave, withdrawn.

3.30 p.m.

LORD SHEPHERD moved Amendment No. 7: Page 5, line 27, leave out from ("pension") to end of line 31.

The noble Lord said: I have pleasure in moving Amendment No. 7 on behalf of my noble friend, and wish also to speak to Amendment No. 8 because the same principle underlies that. We regard these two Amendments as part of the long continuing battle to obtain for the women of this country an equality with the men. By 1975, we will see the Equal Pay Act coming into operation, and we hope that next Session the Government will fulfil their promise, as a consequence of heavy pressure in your Lordships' House and in another place, to bring forward the Anti-Discrimination Bill.

The purpose of this Amendment is to deal with some of the inequalities that lie within this Bill in relation to women and men. Looking at the Amendment, it may seem strange that to deal with inequality one is in fact imposing a contribution on married women, who in the past have not been required to make contributions. That is true as far as the Amendment is concerned, but in later Amendments, and of course within the existing system, if the married woman were to make contributions she would enjoy very much higher benefits than she receives when she opts out of the pensions scheme. The opting out provisions were in the National Assistance Act 1948, and I understand that they slipped through the House of Commons pretty well on the nod. I think that the House, perhaps because of its exhaustion, was not fully appreciative of what was involved in the proposal.

If one is today making a case that a married woman who, shall we say, earns £25 a week, should now pay by law a contribution of 85p per week—or if she is earning £32 a week a contribution of 91p—one would need to make a very strong case for such an imposition. I think that there is a strong case both on grounds of equity, taking one group with another, and in terms of the social security scheme as a whole.

Let us take the social security scheme. In 1957 we had 4.7 million pensioners; in 1972 that had risen to 7.5 million; by 1980 it will have risen to 9 million. It one takes the ratio between pensioners and working people, in 1948 there were five working people to every old age pensioner; in 1967 it had come down to 3.6, and in 1980 it will be down to 3.2. If we look at married women in about the same period, but perhaps start a little earlier for the dramatic effect, the number of married women at work in 1931 was 500,000; in 1951 it had risen to 2½ million; by 1971 it had risen to 4½ million and I believe that it has evened out at about that figure.

It is quite clear, therefore, that the burden upon the contributors is bound to increase if we are to improve the general standards. If the married women who now opt out of the scheme were required by law to make a contribution, there would be a new income of some £130 million. But I think it is fair to say that this would not be in any way a net gain because these contributors would be able to benefit, particularly from unemployment insurance benefits and sickness benefits; at present they do not. So it is quite likely that their contributions would be absorbed by the new benefits that would be available to them.

I think that there is a clear case for needing new money, but on grounds of equity I would have to say that it is arguably wrong that a woman should be able to opt out of a scheme because she is married whereas if she is a spinster, performing the same work and making the same amount of pay, she would have to make the contributions. Of course, if the woman opts out because she is married and then becomes a widow or is divorced, she immediately, by the existing law, has to make the contributions. One thing is clear: that when this arises, the benefits that she will receive will be a good deal lower because her contribution will have been a good deal less than that of a person who has made the contribution from the beginning.

I think that one of the reasons for the opting out provision was that the flat rate system of contributions would have borne very hardly upon married women who, in the main, were doing part-time work which in some cases, particularly I think during 1948, was regarded largely as a form of pin money. But today women go out because there is a need to do it; also, of course, the rates of pay are beginning to creep up in comparison with men. Certainly it is well to point out that, under this Bill, we shall be moving away from the flat rate scheme into the wage-related scheme, which will mean that anyone on a low rate of pay would have a very low rate of contributions to make. The Equal Pay Act will be in being in 1975, and it is significant that this particular provision will become operative at about the same time. So I do not see that any great problem arises there.

I have already mentioned that the benefits that married women are today being denied are the unemployment and sickness benefits. These are of very great significance where you have a husband and wife working with the object of meeting the household expenses. When the married woman losses her unemployment, or falls ill, the impact upon that home is very severe indeed. I wonder whether many of the women who opt out really appreciate the consequences. Certainly the Government Paper which is meant to be the guideline to the married woman is not exactly explicit or particularly encouraging to women to remain in the scheme. It is blank. It does not seem in any way to encourage women to make the contributions if they can, and so enjoy the higher benefits.

There is another aspect that we think makes this change really necessary. There is for women today a greater risk in terms of being a dependent upon the husband. There is no doubt that the divorce rate is increasing, and if a divorce takes place a woman who has worked and who has opted out can in those circumstances, be in a very difficult position and the aid must come from some form of charity, like the supplementary benefits. So we think that this is a time when we should not only provide equality for women but also give them the responsibility that goes with it. This is not in any way a political move. It is true that it was a proposal in the Crossman White Paper of 1969 but I understand that all the women's organisations support this proposal, in particular the National Women's Council which always speaks with high authority and goes right across the whole political and religious spectrum. So I move this Amendment confident that the women's organisations support the proposal. I beg to move.


My Lord, in order that the House may hear the Statement on illegal immigrants, I move that the House do now resume.

Moved, That the House do now resume.—(Lord Aberdare.)

On Question, Motion agreed to, and House resumed accordingly.