§ 2.50 p.m.
§ Lord WELLS-PESTELL
My Lords, I beg to move that this Bill be now read a second time. As your Lordships will appreciate, this is a short but, nevertheless, a rather important Bill. The main purpose of the Bill is to provide the money with which to pay National Insurance benefits from April, 1975, at the increased rates which the Government will introduce in April and December, 1975. Clause 1 of the Bill amends the Conservative Government's 1973 Act, which comes into effect in April next, 8 by altering the rates and amounts of contributions payable under it and the earnings levels against which contributions are calculated. The Bill does not—and I want to emphasise this—alter the structure of the contribution arrangements with which we agree. We have welcomed this structure which will secure that, as far as possible, contributions are earnings-related.
My Lords, there has been some misconception about the amount of extra money which this Bill produces. A figure of £150 million was mentioned in another place, but this is totally out of line with the Government Actuary's Report. As the Minister of State has explained, the amount of income from increased contributions under the Bill is £610 million as compared with the amount which would be produced if the Social Security Act had merely been updated to take account of changes in the general level of earnings since it was introduced. Your Lordships may be interested to know that the figure is made up as follows: earnings-related Class I contributions from employers, £366 million; earnings-related Class 1 contributions from opted-out married women, £47 million; earnings-related Class I contributions from other employed earners, £83 million; flat-rate Class 2 contributions from the self-employed, nil; earnings-related Class 4 contributions from the self-employed, £21 million, making a total of £517 million, to which is added the Treasury Supplement of £93 million, making a total of £610 million.
It may help the House—and particularly the Committee which will consider the Bill later this week—if I say that there are two ways of looking at the effects of the amendments. One can compare what will be payable under the Bill with what would have been payable if the 1973 Act had been left unamended. On this basis, clearly, the need to take account of changes in values means that all classes of contributor pay more. Alternatively, one can compare the contributions payable from April 6th 1975, under the Bill with those payable immediately before then under the present legislation. On this basis, employers, and also the self-employed, will pay more in total whereas employed earners, including opted-out married women will pay less. One can properly argue on either basis, 9 but I hope that the House will avoid the inconsistencies which result from using arguments which rely on one basis for one purpose, and on the other basis for another purpose.
My Lords, the points in Clause 1 which have attracted most attention are those which increase to 2 per cent. of relevant earnings the Class 1 contribution payable by married women and widows who have opted to pay at the reduced rate, and which increase to 8 per cent. of the relevant profits or gains the Class 4 contribution payable by self-employed people. With regard to the opted-out women's contribution, the point I would make is that unless the percentage contribution rate as increased from the 0.6 per cent. in the 1973 Act, these women will cease in April next to help with the general cost of flat-rate benefits, as they do at present through the "Boyd-Carpenter" graduated contributions. Those with high earnings would have excessive reductions in their weekly liability—up to a maximum, in fact, of £2.58 per week. Even with the new rate of 2 per cent. almost all opted-out women will pay less than at present—with a maximum reduction of £1.71 per week. Therefore, I cannot see that there is anything unfair about this.
Our policy with regard to the self-employed has been to maintain the ratio between their contributions in total and contributions for employed earners in total, as it was under the 1973 Act. The Government could perfectly well have left the percentage rate of Class 4 contributions at 5 per cent., in which event the right level for the flat-rate Class 2 contribution—taking account of the change in values since the 1973 Act was introduced—would have been about £2.70 per week. But as flat-rate contributions bear hard on those with the lowest incomes, the Government decided that it would be wrong to increase Class 2 contributions above the present level of £2.41 per week. The loss of income which this involves is being made good under the Bill by increasing the Class 4 percentage. In other words, the burden on the self-employed with lower earnings is being kept down by increasing the contributions of those with higher earnings. Those who would criticise this action must say whether they would be 10 prepared to impose a greater burden on lower earners.
My Lords, there has been comment elsewhere about the amount of additional contribution a self-employed person will be required to pay from April next, but it is rarely made clear just how much—or, rather, how little—difference there is between what the Government propose under this Bill and what the Opposition would have imposed under the structure of the the 1973 Act to pay for the same benefit levels. Let me first say that it is perfectly clear that the Opposition, if they were now in Office, would not be levying a Class 4 contribution of 5 per cent. of profits or gains between £1,150 and £2,500 a year, which were the levels set in the 1973 Act.
Perhaps I may quote the then Conservative Minister who said in Committee in another place:The figures in the clause"—that is, Clause 5—namely, £1,150 and £2,500, are also on a ratchet. They are illustrative figures in the same way as the other figures in the Bill are, and, therefore, as the other figures move, so we would expect these figures to move as well.That is what was said.
§ Lord WELLS-PESTELL
My Lords, I am glad we are agreed on one point. The other figures have moved. The earnings levels for employed earners' contributions have gone up from £8 and £48 to a minimum of £11 and a maximum of £69. This is why the range of profits or gains on which Class 4 contributions arc levied is being increased to £1,600 and £3,600. That is the new band. In other words, when considering the difference between the two Parties on this issue the starting point is that the Opposition would now be levying a 5 per cent. Class 4 contribution over a range of £1,600 to £3,600, not of £1,150 to £2,500. The maximum Class 4 contribution would not be £67.50, which has received much publicity, but it would be £100 taking into account the necessity to increase the band.
By raising the percentage rate to 8 per cent. we have increased the maximum contribution to £160 a year, a difference of £60 a year. But I ask noble Lords to 11 remember that the maximum contribution is payable only by those whose profits or gains under Cases I or II of Schedule D tax are at least £3,600 a year, that by increasing the Class 4 percentage we have kept down the rate of Class 2 contribution for all self-employed contributors to the extent of about £15 a year; we feel that this is the right thing to do so that the lowest income of all self-employed persons derives some benefit.
Taking both Class 2 and Class 4 contributions together, the position is that the self-employed will be between about £15 a year better off and about £45 a year worse off than they would have been if we had not made changes to protect the lower paid self-employed people. That the difference is no more than £45 may come as a surprise to those noble Lords who have followed the publicity which has been given to the Opposition in another place. Clause 1 also amends the 1973 Act so as to remove all contribution liability from retirement pensioners who go out to work, and I am sure that this has the approval of the whole House. The remaining provisions of the Bill are of a minor and technical nature.
Finally, I ought to mention that there has been criticism that the Bill is being rushed through Parliament. It is certainly true that it is important that the procedures of the Bill should be completed as soon as possible. There are new sets of figures, new tables, a good deal of work to be done in the Department, and, if I may say so, a good deal of work will fall upon employers. This is because the Bill has been delayed through the occurrence of a second General Election this year, something which, as your Lordships will know, has not happened since 1910. It is important that the Bill should soon receive the Royal Assent, because we are asking employers and most others who pay contributions to operate on a totally new basis from next April. We are dependent on contributions for the money with which to pay retirement pensions and other benefits, and it is vital that the new arrangements should be off to the smoothest possible start.
This is why we have found it necessary —in the interests of those who receive benefits as well as of those who have to pay the contributions—to issue leaflets 12 giving information about the new arrangements. In these leaflets we have shown that some of the provisions are subject to Parliamentary approval, which they are. The change to the new arrangements means that the larger employers have to make advance preparations and incur some expense in doing so. The sooner the contributions figures have Parliamentary approval the sooner we will be able to give firm and final guidance to all concerned, and the better will be the prospect of a trouble free start to the new arrangements, which we hope will take effect from April of next year. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Wells-Pestell.)
§ 3.5 p.m.
§ Lord ABERDARE
My Lords, the noble Lord, Lord Wells-Pestell, has given us a very concise and very clear explanation of what this Bill is about, and I am sure all your Lordships are grateful to him for that. In brief, the Bill amends our 1973 Act in order to raise more money in contributions to meet the improved rates of provision for beneficiaries, and, in particular, the increased pension. May I begin by making quite clear that in two respects we have no quarrel whatever with this Bill. In the first place, as we have already made clear, we welcome the improved benefits. Whatever criticism we may have of the Government's economic policy in general, we have always said that in a time of high inflation and soaring costs it is most important that we help the most vulnerable sections of the community, and to that extent we welcome the increased pensions and we welcome the other increased social security benefits.
We also fully support the system of earnings-related contributions. This was one of the main purposes of our 1973 Act, and we still clearly believe that this is the right way to raise contributions. It is, indeed, much fairer than the old flat rate standard system, and it means that once it is established there will in future be no need to make constant changes in the rates of contribution other than in the bands of earnings to which they apply. But where we have a serious disagreement with the Government is on the distribution of the burden of these increased contributions, in that, in our view, they are biased against the married woman 13 who decides to rely on her husband's insurance, and biased against the self-employed. I think that the best way in which I can illustrate the complaint that we have against the Government on these two scores is, unfortunately, to give some figures, but I will relate those figures to those which the noble Lord mentioned. There was a certain amount of confusion about the global figure between the amounts raised by this Bill and the amounts which would have been raised by our own 1973 Act, and so I rely on the figures that were given by the noble Lord himself this afternoon as being the correct figures for the difference between this Bill and our Act. But, for convenience sake, I will take them, if I may, in a different order.
First of all, the State contributes £93 million more. This is the normal Treasury supplement of about 18 per cent. with which, of course, we have no quarrel. Then, as the noble Lord said, employers will be contributing £366 million more, as their contribution rises from 7½ per cent. to 8½ per cent. I think that it is unfortunate that this additional burden should be placed on industry at the present moment, but at least the employer is better able to shoulder it than either the opted-out married woman or the self-employed, and, of course, employers contribution is deductible for tax purposes.
Employees will contribute £83 million more, as their contribution rises from 5¼ per cent. under our Act to 5½ per cent. under this Bill. The employee is already paying 5½ per cent., and he will continue to pay 5½ per cent. on April 1, 1975. so in effect there will be no change, although in practice most employees will be paying less than they do at present, because although the earnings-related contribution remains the same they will no longer be paying the flat rate stamp. Naturally we have no quarrel with this—this is a very satisfactory situation for those who are employed—but again it contrasts very strongly with the severe increase in the contributions to be required from the self-employed.
Then I come to the married woman who opts out, who prefers to rely on her husband's insurance. She will be contributing three times as much as she would have done under our 1973 Act proposals, in total £47 million more than we had proposed. We put her contribution 14 at 0.6 per cent. We chose 0.6 per cent., not out of the air, but because it is the actuarial calculation of the contribution required to finance what are her only benefits; namely, her contribution to the National Health Service and her contribution to the Industrial Injuries Scheme. The present Bill increases that contribution to 2 per cent., which is more than her benefits require. It is all very well for the noble Lord to say, as he did, that this will not increase her actual contribution because of the ending of the Boyd-Carpenter graduated contribution scheme. While this is perfectly true, it will also mean that the married woman will lose her benefits under that scheme; so she is giving up paying the graduated contribution but she is also giving up the benefits she would have received under the graduated contribution scheme, and she will be required by the Government to pay more than the actuarial amount that is required for the benefits she will enjoy. Knowing the Government's stated intention to abolish altogether the married woman's option, I cannot help feeling that clearly they have seen an opportunity here to make that final abolition less severe by increasing her contributions at the present moment, and we greatly deplore the Government's action in so discriminating against the married woman who opts out of the full scheme and prefers to rely on her husband's insurance. Three out of four married women do so prefer, and they are now to be discriminated against.
I come now to the self-employed. May I begin by declaring an interest, as I believe I am self-employed. They are most unfairly treated under the Bill, and there is indeed a real injustice here for no apparent reason. When we were in Government, the self-employed man was paying a flat contribution of £1.99 a week. Under the proposals in the 1973 Act, he would have paid £1.68 and a 5 per cent. contribution on profits under Schedule D between £1,150 and £2,500. Under this Bill, that contribution is increased £2.41 flat and 8 per cent. in Schedule D profits between £1,600 and £3,600 per annum.
The noble Lord made a great point about the band of earnings. We have no quarrel whatever on that score. Obviously the band of earnings on which graduated contributions is charged will change over the years, but what we strongly object 15 to is the increase in the percentage contribution from 5 per cent. to 8 per cent. At the top earning rate, the man earning £3,600 per annum will pay a weekly stamp amounting to £125 per annum and a lump sum of £160 in addition to his Schedule D tax. That is a total per annum of £285. If this is contrasted with the case of the employed man who is earning the same £3,600 per annum, he will pay a total annual contribution of £166—over £100 less than the self-employed man.
In weekly terms the contributions work out at £5.49 for the self-employed and £3.19 for the employed; and while the self-employed suffer an increase in their contribution from 5 per cent. to 8 per cent., the employee will pay no more than he does at present. No wonder that the self-employed are furious at this iniquitous proposal. They have suffered badly from inflation, increased taxation, VAT, soaring rates on business premises (for which they get no relief), price control, and in future the threat of capital transfer tax and wealth tax. Now they are to be penalised yet further in comparison with the employed person; yet their enterprise and individuality make an essential contribution to the wealth and prosperity of this country, as well as to the quality of life of every citizen. There are 2 million of them—small shop-keepers, authors and musicians, farmers and professional people, and they employ about 6 million people and produce about 20 per cent. of our gross national product.
I had the privilege this morning of having a talk with one group that represents some 2,000 of these people—the Writers Guild of Great Britain, who care for the interests of writers for films, television, radio, stage, and books. They are a trade union, and they are affiliated to the Trades Union Congress. That fact may have some influence on the noble Lord opposite. They wrote originally to me saying:We regret there has been so little public debate about this Bill, and it has been extremely difficult to obtain correct information about the measures proposed and how they will affect the self-employed.Necessarily authors are self-employed, and theirs is a very hazardous occupation; yet their contributions are to go up very steeply under this Bill. What do they 16 stand to gain from these increased contributions? They get no unemployment benefit; they get no redundancy pay; they are not included in the Industrial Injuries Scheme; they get no graduated pension, and yet they are subscribing at a graduated rate. One man may have contributed at the maximum all through his life, whereas another will not have contributed more than the flat rate; yet they both get the same pension.
My Lords, I am very glad that the noble Baroness, Lady Phillips, is in the Chamber. The self-employed are being asked to subscribe to this scheme at a vastly inflated rate and their widows get nothing on their death. Surely, this is scandalous, and I hope that the noble Baroness and other Baronesses in the House will take this matter up. The self-employed are even discriminated against on their contributions to the National Health Service, because whereas when employed persons travel within the EEC they get reciprocal treatment, the self-employed do not. And, worst of all perhaps, they do not get income tax relief on their contributions. I mentioned the figure of £285 per annum as the top rate, and this would work out at a gross of £410 which has to be earned by a self-employed person before he can show any profit on his business. That is the amount that will be taken for social security contributions.
My Lords, I have had another letter from the Law Society who are equally appalled at the proposals of the Government. They have written to the Secretary of State and their reasons are very much the same. I think that the Government are to blame in that they have had too little consultation about this measure. The noble Lord said that it was all very difficult; that there had been a General Election which had made things difficult for them. This afternoon we have heard the Government blame first of all the computers, then the weather and now the General Election for their difficulties. I do not accept that at all. I think this matter has been rushed through Parliament, and certainly those to whom I have spoken—the Writers Guild is one—feel that they have not been consulted and that many problems of their members have not been properly aired.
17 If the noble Lord cannot meet me in any other way, will he give an undertaking that his right honourable friend will meet and listen to the representations which people who represent the interests of the self-employed wish to make to her? I would ask him urgently and seriously to consider that. I believe that the Government, both in financial terms and in terms of the quality of life, are doing a grave injustice to one of the most important sectors of our economy and we should do our best at the Committee stage to see whether we can put some of these things right.
My Lords, before the noble Lord sits down, may I ask one question in regard to the self-employed people of whom he gave a list—farmers and so on? Am I right in thinking that clergymen are also included as self-employed?
§ Lord ABERDARE
My Lords, I think the noble Lord, Lord Wells-Pestell, will be in a better position to answer that question. I understand that there are special arrangements being made for clergymen.
§ 3.23 p.m.
§ Lord WADE
My Lords, on behalf of my Liberal colleagues and myself, I thank the noble Lord, Lord Wells-Pestell, for outlining the provisions of this Bill. On the point raised by the noble Viscount, Lord Monck, I think a Statement about clergymen was made in another place. I recall what was said, but I am sure that the noble Lord, Lord Wells-Pestell, is in a better position than myself to make a statement on the subject. While I thank the noble Lord for introducing the Bill, I cannot congratulate the Government on the way in which the burden is distributed in the case of some of the contributors. I have in mind in particular the self-employed. I think the concern that has been expressed in many parts of the country is justified. So far as married women are concerned, I am not proposing to follow the noble Lord, Lord Aberdare, although an opportunity may arise when we come to the Committee stage. I would merely say that if one believes in equality of the sexes, one must consider this subject in the wider concept and make quite sure whether this Bill is removing a concession in favour of married women or discriminating against them. But if I 18 may, I will leave that point for the Committee stage. Also, in order not to be unduly long, I will limit my comments to the problems of the self-employed where I think there are serious grounds for complaint.
Of course one must try to get these matters into perspective, and I would not contend that there is a fundamental difference in principle between the 5 per cent. of the Conservative Bill and the 8 per cent. under this Bill. The Minister of State, Mr. O'Malley, on the fourth sitting of the Committee stage in another place said:We are discussing a Conservative Party structure which the Government have inherited.I think that is a fair point but it is a matter of degree between 5 per cent. and 8 per cent. and that may mean a very great deal to some of those who have to pay. I am not contending that this is the first time that the self-employed have suffered from legislative acts or economic trends. For a number of years some self-employed have been battling against very adverse winds. If I may be allowed an appalling mixture of metaphors, this may prove to be the last straw for some.
It seems to me, my Lords, that this tax, calculated as it is by taking a percentage of taxed income (8 per cent. of income after tax) in addition to the flat rate, is complex, illogical and oppressive. I use the word "tax" deliberately as opposed to "insurance contributions". The original concept was that of social insurance, and that involved building up funds for the future, except in the case of health where, I think, it was always on a pay-as-you-go basis. That was the concept. But if this were insurance in a strict sense, surely a few months ago the Minister responsible for the insurance fund would have said that over the years this fund had been built up, had increased in value and assets—thanks partly to the wise investment of the insurance fund—and that, therefore, the Government were in a position to announce a bonus as a result of the strength of the fund. That bonus would enable pensions and other social security benefits to be increased. But, as we know, it does not work out that way. The decision to increase pensions was a very necessary one in the light of inflation, but it was a political decision, and 19 the problem now is how to raise the money to pay for the necessary increase. In effect, this is a tax to pay for the increased benefits.
I think that this is an important point psychologically because one cannot say to the contributor, "It is to your benefit to go on increasing your contributions; this is sound insurance and in the future it will bring increased benefits to yourself, your wife and your family". But, in fact, we are operating a scheme on a pay-as-you-go basis and we have to raise taxes to pay for the necessary increased output. But if that is true, then surely the tax should be as simple and fair as possible in the light of what contributors are to receive, and it should not be imposed in such a way that for some there will be a sudden increase which may result in their having to give up their employment because they cannot carry on. Those are fair conditions but, unfortunately, none of them is satisfied in this case.
There is a further legitimate objection in that this is a hybrid tax, partly income-related and partly not so, with all the complexities that that involves. On reaching—as the noble Lord, Lord Aberdare, has pointed out and as the noble Lord, Lord Wells-Pestell, agrees—a net income of £1,600 the tax will suddenly go up. The self-employed will pay the flat rate of £2.41 per week and 8 per cent. on net income until the income reaches the figure of £3,600, when it will remain on a flat-rate basis, taking into account the net income. But of course there is no corresponding increase in benefits as this contribution rises. There are no related benefits. Therefore, one cannot say to the contributors, "Well, it is in your interest to pay more, because the more you pay the more you will benefit". That is not so. I am not objecting to the principle that where there is a community responsibility everybody who is able to contribute should pay according to his ability to pay. I am not questioning that underlying principle; I am questioning this complex form of hybridity. So far as the contributors are concerned, the practical question is: how great will the burden be?
My Lords, may I take the case of a man with a small business with a net income of £2,500 after tax? He will pay 20 a flat-rate plus £200 per annum. Out of what is left, apart from keeping himself and his family, he will have to try to find something in the way of additional capital to keep his business going. Unfortunately, that will clearly be necessary in times of inflation. After paying tax that will all have to come out of income; otherwise he will have to give up. It has been suggested—not in this House—that the real object of this imposition is to get at "the lump". I am well aware of the evils of "the lump", but it seems to me unreasonable to knock all the self-employed on the head in an attempt to get at it.
I know, and I am anxious to be as fair and objective as possible, that it is sometimes alleged that small businesses, such as small shopkeepers, do not always show every item that they should in making their tax returns. On the other hand, most businessmen, large and small, rely on their accountants for filling up their tax forms. I believe that the accountancy profession in this country has a reputation higher than any comparable profession in the world. But if it is true that some are tempted not to disclose some items, it surely follows that if this 8 per cent. is levied on net profits there will be all the greater temptation not to disclose some items. In other words, it is a premium on honesty. The more honest you are the more you pay.
On the other side of the coin, there is the very real anomaly that no allowance is made for the inflated value of stocks due to inflation, producing paper profits on which tax is payable. Therefore, in the case of the net profits, the 8 per cent. levy would apply to unreal profits in some cases. I hope that eventually this anomaly will be removed for the small companies and the unincorporated businesses to which the Chancellor's concession does not at present apply. I understand that some hope has been expressed that relief will be granted, but that will not help in April, 1975. So whatever way one looks there are anomalies and injustices.
May I take one last case of the man with a net profit of £2,500? It is not easy to save anything to provide the additional capital to which I have referred, but if he does so he will have to pay this 8 per cent. levy on any interest which he receives from the capital which 21 he has put into the business. Of course it is not only the small firms to which I have been referring which are hit. The noble Lord, Lord Aberdare, has mentioned a wide range of categories that come into the definition of "self-employed." But if I might make a plea for the independent firm, I ask your Lord-ships to consider the independent craftsman, the one-man business, or the business carried on by father or son or two brothers. These small independent craftsmen perform a valuable service. They are increasingly difficult to come by and if they were forced out of business it would be a loss. There is no doubt that an accumulation of circumstances are forcing them out of business. It is true that if they pack up they may find jobs as employees in industry, but that is not the same thing. It is a loss to society and this tax is likely to be an additional burden, an additional adverse factor, which will cause a great tragedy.
My Lords, time does not permit me to outline what I think ought to be done—a complete overhaul of the financing of our social security system, accompanied by taxation reform. But, in the meantime, something must be done about this Bill now. I hope that the Government will have second thoughts before the Bill leaves this House.
§ 3.38 p.m.
§ Lord PLATT
My Lords, I intend to speak on only one aspect of the Bill which has already been referred to in very excellent terms by the noble Lord, Lord Aberdare, and the noble Lord, Lord Wade; namely, the position of the self-employed. The noble Lord, Lord Aberdare, quoted examples of the Writers Guild and the Law Society. My own interest is in self-employed musicians. My attention was drawn to the iniquities of the situation, as set out in this Bill, by the Incorporated Society of Musicians, a reputable body of over 90 years' standing, of which the Leader of the Opposition in another place is an honorary member. My wife is a member and at least one of your Lordships is a member of that Society. I myself have had an amateur status as a musician for longer than I can remember, and I have been connected in an official capacity with musical bodies of various kinds for some 25 years.
22 What I have to say will be based on what I know of the position of the self-employed musician, but I am quite sure it will apply equally to many other categories of self-employed people. The self-employed musician cannot withdraw his labour or take any other kind of industrial action without himself becoming bankrupt. Some of us may think that it is rather good that professional organisations should not engage in industrial action, but it is, at least in most cases, one of the possible disadvantages. Other self-employed people in small businesses perhaps have friends, elderly relatives or other people—married women not fully employed—to look after their business for a short time while they have a well-needed holiday or, more importantly, when they are sick and drawing no sickness benefit at all. The self-employed muscian cannot, of course, do any such thing; and he receives no unemployment pay and no benefit under the Industrial Injuries Act, no sickness benefit nor earnings-related pension. Nevertheless he seems to be seized upon in this Bill, as the two noble Lords who have already spoken have pointed out, to pay a much higher, and I would say unjustifiable, share of the bill, which money is then largely paid to other people.
He has expenses which he must shoulder himself, whereas the employed person expects his employer to provide for him many of the things which he needs for his work. The young musician must pay at least a few hundred pounds, now, to obtain a stringed instrument which is really worthy of being played. He or she must wear the kind of clothes which are conventional for public appearance. It is true that, under Schedule D, his expenses are free of tax in the sense that he can deduct his expenses from his total income, but he has to pay for all these things for himself, including travelling expenses, and deducting tax in respect of his expenses is not the same as having them paid for him. I think that it is very easy for a little confusion to come in there and for it to be thought that because he can deduct tax in respect of them he does not really pay for these things. But he does in fact, and the tax he deducts is, at the most, only one-third or so of the expenses to which he has been put.
So the burden of my speech, my Lords, is just the same as that of Lord Aberdare 23 and Lord Wade: why is he being subjected to this unfair amount of the total expense? It is true, of course, as it is in most legislation nowadays, that the really poor man at the bottom end of the scale is being looked after, but, as I have said a number of times in this House, more often than not I am speaking not for the poor and not for the rich but for the middle-man, who I think makes up what in many ways is one of the most worthy groups in our society. So I hope that if we obtain no satisfaction from the noble Lord who is to reply today we shall table a number of Amendments at the Committee stage, although the time is very short—I think it is on Thursday—and I hope we shall pursue those Amendments as hard as we possibly can.
§ 3.45 p.m.
§ Lord SANDYS
My Lords, I, too, should declare an interest as a self-employed person, but I should like to start the burden of my remarks by looking at the clauses of the Bill before looking at the Bill as a whole. Your Lord-ships will observe that pages 1 to 7 comprise the clauses of the Bill and that pages 8 to 37—no less than 29 pages—are comprised of Schedules containing detailed amendments to other legislation. This leads me to one inescapable conclusion: that it is a major Bill which is now before your Lordships and I think it is of great significance to compare these no less than 30 pages of amendments in the Schedules with the number of amendments contained in the Schedules to the last Act on the Statute Book; namely, the Social Security Act 1973. In the Schedules to that Act there were only 10 pages of amendments to previous legislation. It is all very well for the noble Lord, Lord Wells-Pestell, to say—and I quote his words—" the remaining provisions of the Bill are of a minor and technical nature", but this, of course, gives one the impression that what is in the Schedules is of comparatively minor importance.
May I first say quite clearly what a vast amount of work will need to be done, should this Bill become an Act, by those who will operate it—by those who are employers and by those in the offices of local government who are attempting to serve the public and inform the public generally on the purport of this Bill.
24 It needs a most basic approach to legislation as a whole, which I personally adopt, namely: after such a major Act as that which was passed in 1973, is this current Bill before us really necessary? In our view, especially following the remarks of my noble friend Lord Aberdare, this is not so, and, as I continue my remarks, I wish to address myself to certain other aspects.
I begin with the position of the Government Actuary. I have no quarrel with the Government Actuary, but I do quarrel with the instructions which have been given to him over a period, because I believe he has been asked to do an impossible task. I refer in the first place to the Government Actuary's Report, which is Cmnd. Paper 5143, on the Social Security Bill 1972. Here, it is of great significance to see, on page 7 in paragraph 26, which is headed, "Future Income and Outgo". in Table 2, that in 1975–76 the total cost of benefits was estimated to be £3,832 million. Taking a precisely parallel group of benefits in the parallel Reports by the Government Actuary in 1974 on the Financial Provisions relating to Basic Scheme and Industrial Injuries Benefits and Family Allowances (Cmnd. Paper 5788), the outgo in relation to this Bill, the estimated expenditure of the National Insurance Fund is shown as no less than £6,659 million.
I do not know whether the noble Lord is following me, but the point I am getting at is this, that there appears to be rather more than a 100 per cent. error in the figure there. This is not the official's fault—these were the instructions which were given to him by successive Governments, and perhaps the circumstances concerned—but it is of considerable importance that we relate this to a Question asked this afternoon by my noble friend Lady Young in regard to the recent Census. Here, it will be general knowledge to noble Lords, from both demography studies and generally, that there is no less than a 100 per cent. error in the figures produced and the forecasts, the projections, by that Department. With my noble friend Lord Nugent, I would urge from these Back Benches that it is of great concern that the Government Departments should, in the first place, relate their figures to each other and, secondly, that the standard of accuracy of projection wherever possible should be 25 increased. It seems monstrous that there are so wide margins of error in both these fields of study. It was an impossible task to project it 30 years forward; but here we are projecting for 1975–76, which is, after all, only a short time ahead.
The second part of my remarks I wish to relate to the Government's thinking on retirement as a whole. I listened with interest to the speech of the Secretary of State which she made after assuming Office in March of this year. I listened with sorrow and anger to the general purport of her remarks. It was apparent that no new thinking had been devoted to the subject of the retirement age. Your Lordships will have enjoyed a debate initiated by the noble Lord, Lord Raglan, on a Motion in 1970, in which the noble Baroness, Lady Phillips, who I am glad to see in her place this afternoon, drew your Lordships' attention to the need to re-examine the position of age in our society. It is not unimportant to consider on the Second Reading of this Bill the valuable debates which we have had in this House on the overall concept of retirement, on our considerations of at what age people desire to retire, should retire, or possibly have retired from one or more careers. This debate was one which deserved much wider acclaim. I had great pleasure in re-reading last night the noble Baroness's quotation from Aristotle on the subject, which I commend to your Lordships.
My Lords, today especially it seems that we should have another look. It is clear that in this Bill the Government are addressing themselves not to new aspects of retirement, but to altering the basis of retirement benefits and pensions on lines of Party dogma rather than taking on board new thinking, new ideas, and new concepts from the society in which we live.
My Lords, I should like now to turn to some remarks made in a major speech very nearly 20 years ago in another place during a debate on the Second Reading of the National Insurance Bill. I hope I may be forgiven for quoting the late Mr. Aneuran Bevan. I believe his remarks to be very important in the present context. I quote his views. He said:There is no such animal as 'the Fund'. It does not exist. It is a pure myth. We have spoken about it annually, from year to year. 26 The Minister himself has said, 'We do not want to have the Fund too big or people will ask why they cannot have some of it.' The Fund is not there. Let us get behind these figures to the actual economics of the situation: but before we do that, let us try to get rid of this bunkum about insurance.'—[OFFICIAL REPORT, Commons, Col. 1150, 9.12.54.]In my view, this strikes at the very root of the problem to which I address myself. I agree with the noble Lord, Lord Wade, and the views which he has put forward this afternoon. We are really concerned here not with insurance, but with taxation. From that point of view it is surely not a subject with which this House should be concerned. I am aware that the noble Lord, Lord Wells-Pestell, will assure us that this is not a Money Bill. Nevertheless, it is the burden of my views that this is not insurance that we are dealing with, but taxation. Manifestly in the case of the self-employed, it is an impost which a section of our society is unwilling to bear. My noble friend Lord Aberdare has gone to considerable detail and pains to explain to your Lordships that the self-employed are unable in very wide measure, to benefit in the way that those in the employed category benefit. It is also quite apparent that within the self-employed categories there are further hardships. I should like to refer particularly to the agricultural industry.
In my view, and in that of the National Farmers' Union, it seems manifestly unfair that there should be a gross differential in the circumstances in which the employer pays his contribution and the self-employed pays his. One payment (that of the employer) is subject to tax relief; the other (that of the self-employed) is not. In the Finance Act 1965, this change was made by a Labour Government. In our view, in that of the self-employed and in that of a very wide number of people, there is now a case for reviewing that situation, because at the present moment it is impossible to reclaim tax on this particular impost. At the time of the 1965 Act this was of no great importance; today it is of vastly more importance as will be seen from the respective contributions which will have to be made.
My Lords, I should further like to address myself to the question of the cost of financing social security. In a book published in America by Meriam and Schlotterbeck a few years ago called, The 27 Cost of Financing of Social Security one reads:Adoption of the term 'insurance' by the proponents of social security was a stroke of promotional genius. Thus social security has capitalised on the goodwill of private insurance and through the establishment of a reserve fund has clothed itself with an aura of financial soundness.This is a situation which has developed over a very great number of years, and, particularly due to the fact that inflation has carried us into totally different conditions from those of twelve months ago, I feel that there is an opportunity now to re-examine our position. Are we attempting in our social legislation to disguise insurance as something else? Are we, in fact, disguising taxation as insurance?
It is manifestly clear from their White Paper what were the Conservative Government's aims on social policy. In their White Paper of 1972, they make mention on page 3 of a previous White Paper, Strategy for Pensions, in which it was stated:The main objectives of the Government's policy are:—(1) To clarify the essential differences between State and occupational provision and to establish conditions in which each can develop in the way best suited to future obligations and opportunities.This was a noble and essential aim which we set ourselves.
§ Lord WELLS-PESTELL
My Lords, the noble Lord is very generous to give way. I am sure that he will not mind my reminding him that retirement pensions are not the subject of this Bill at all. The whole question of retirement pensions is a matter for a future Bill which, as I understand the situation, will be introduced early in the coming year. I thought I ought to tell him that because I could not, in any reply I may make, go into great lengths on this matter. It is outside the scope of this Bill.
§ Lord SANDYS
My Lords, I entirely accept what the noble Lord said. My remit, I regret, has wandered a little wide, but it is nevertheless in the social security field and around, which is so important. If we concentrate on one area, it makes it very difficult to see the whole without having the benefit of looking at the particular objectives which, on 28 this side of the House, we uphold in our social policy.
My Lords, I do not wish to detain the House further on this subject. I have spoken for fifteen minutes, which is much more than I usually do. But I should like to say once again that in dealing with this legislation the Government are promoting something under camouflage. It is in our view something of very much greater importance than the Government admit, and I hope that they will come clean in the course of the Bill.
§ 4.1 p.m.
§ Baroness ELLIOT of HARWOOD
My Lords, I will not keep the House for many minutes, but I should like to say a word because no one so far has spoken from Scotland. I have just been passed a note to say that the Law Society of Scotland is deeply concerned with the question of the provisions made in the Bill with regard to contributions payable by self-employed persons. I support all that has been said by the noble Lords, Lord Wade, Lord Aberdare and Lord Platt on this subject. I do not think that the provisions which appear in the Bill and which bear very heavily on self-employed people are something that we can let pass without trying to get some amendments.
It is very hard on individual self-employed people whose income may vary from year to year, either because of what they are doing—they may be artists or they may be in the profession about which I know most, farming—or because events may occur over which they have absolutely no control. In the case of artists or craftsmen there is the question of whether they happen to strike it lucky in the market when trying to sell their goods. Therefore, the income of such self-employed people is subject to great fluctuations, so that sometimes they make quite a lot of money and sometimes they make very little. It is exceedingly hard if they do make a certain amount of money that they should be penalised for doing so, and it means that once again there is a vicious circle of people trying to avoid taxation by presenting their earnings in a way which enables them to pay the least amount of tax. We all know that that happens and that probably one of its worst manifestations is in what is called the "lump".
29 I quite understand that the Government want to get the people who are profiting from this method of working and I support any effort that can be made by the Government against this evil—because it is an evil—but I hope that those who are perfectly honest and who are making efforts to earn their own living as individuals are not thrust into the same category as those who are known to avoid taxation through this method of earning their living which is known as the "lump". I say to the noble Lord, Lord Wells-Pestell, therefore, that, when it comes to the Committee stage, I think that Amendments will be put forward, especially from the Law Society of Scotland which will wish them to apply to the Bill when it takes effect in Scotland.
§ 4.5 p.m.
§ Lord GEORGE-BROWN
My Lords, before the noble Lord, Lord Wells-Pestell, replies, may I put a point as a trade unionist and as a worked. I feel very strongly that the Labour Party and the Government must be very careful not to go on presenting themselves as the representatives of a class division which ended a long time ago.
§ SBVERAL NOBLE LORDS: Hear, hear!
§ Lord GEORGE-BROWN
My Lords, I should be obliged if the Conservative Benches would not say "hear, hear" but would leave it to my friends, because, if I may say so to my noble friend Lord Wells-Pestell, few of us on these Benches do not have children who are now what we would some years ago have called "middle class". That, after all, was why we began our mission. It was so that those who came after us should not be what was then called "working class". I want to follow the thoughts of the noble Lord, Lord Platt, because so many of our people now become what is called "self-employed". They are no less good because of that. They contribute no less to the community because of that and, when one thinks of what goes on in the factories and in some of the trade unions, one might be forgiven for thinking that they contribute a little more because of that.
I want to ask my noble friend Lord Wells-Pestell—himself a notable member of the middle class—to be good enough to ask his colleagues in the Government to look at the Bill again before we reach 30 the Committee stage, and to study not for the contributions the so-called self-employed are asked to make. The noble Lord, Lord Willis, is away at this moment in Australia and cannot speak for the Guild of Writers, but he asked me to mention his name and the views of his association in the course of what I want to say myself. This I am very happy to do because they accord with what I want to say.
There seems to me to be no reason at all why people who are called "self-employed"—they may be writers, but they are contributors, they add to the excitement of life, they contribute more to life than many other people—should be charged a lot more and yet receive far less in benefits, indeed in some ways nothing at all. The Government must produce some good arguments to get a Bill such as this through this House. One of the advantages that we have in this House is that, while we have Whips, the system does not operate quite so stringently because one cannot be denied one's constituency. There is no Eddie Griffiths in this House.
§ Lord GEORGE-BROWN
My Lords, if I may say so to my noble friend Lord Castle, I should like to think that there is room for a Dick Taverne in this House; but there is no room for those who would deny to a Member of Parliament with a 20,000 majority the right to stand again by a 20–11 majority in a caucus. If my noble friend Lord Castle wishes to argue that with me, I suggest that some other occasion would be best, but I am very willing to accept at any time he wishes. However, my point at the moment is to say that this House is a place where things do not easily get by if they seem to offend the ordinary canons of proper behaviour.
All I am trying to say to your Lord-ships is that if you wish to charge those whom you call "self-employed" as though they are a special class and especially to be discriminated against, and thereby charge them more than anybody else when they have no employer to whom they can pass it one—and many of them have no customer either to whom they can pass it on—there is no tax method by which they can recover it. On top of that, I would ask my noble friend 31 Lord Wells-Pestell to take into account the fact that they cannot get any benefits that equate with the contribution which they are being asked to pay.
It seems to me that this is an intolerable position. These two Houses of Parliament—and I happen to believe in a bi-cameral assembly—can, at the end of the day, impose anything they wish upon the long-suffering British public, but I do not believe myself that this is tolerable. I would therefore ask the noble Lord, Lord Wells-Pestell, not necessarily to answer me in any depth, but perhaps just to say that he has taken note of what the noble Lord, Lord Platt, has said, of what I have said and of what was also said by the noble Baroness, Lady Elliot of Harwood, and represent our views to his colleagues. In saying this, may I repeat that I am speaking also for the noble Lord, Lord Willis, for the Guild of Writers, for my daughters and also for a lot of people who really are, in a sense, the backbone of the country.
I do not go much for this middle-class argument, except that since I started nearly forty years ago we have been gradually blurring the edges between the workers and the white-collar workers. When I began we were all blue-collar workers. Then I wore a white collar and now nearly everybody else—certainly all my kids and the kids of my friends—wears a white collar, while the grouse shooters on the other side grow less and less, and are of less and less importance. I suggest to your Lordships that it is not really defensible to charge people a lot of money just because they are called "self-employed", and in return give them small benefits. I just want to make that point and to ask my noble friend—he really is a friend of mine and we understand each other perfectly well, and I understood his wink just now—whether he will wink to his colleagues and talk to some of them about this matter.
§ 4.14 p.m.
§ Lord ROBBINS
My Lords, I should like to take this opportunity of asking the noble Lord two questions. First, has he, or any of his colleagues, reflected upon the fact that if a differential burden is imposed upon any class of the community that class will tend to contract in the future? There can be no doubt in 32 my mind that if the self-employed are taxed differentially there are a hundred and one ways in which they can obtain employment, and so go into a less heavily burdened category. Secondly, does the noble Lord think that that would be a good thing? My opinion, and I believe it is shared by the noble Lord who has just spoken, is that it would be a bad thing. The self-employed are an important ingredient in this community and I think we would all greet with despondency the thought that their numbers would be proportionately reduced.
§ 4.15 p.m.
§ Lord SOMERS
My Lords, I should like to comment briefly on the point mentioned by the noble Lord, Lord Platt. I must declare an interest as a professor of the Royal College of Music, because there we are all self-employed, just as musicians as a whole are self-employed. Music is not a lucrative profession and I wonder how many of your Lordships have ever stopped to think what a musician's expenses involve. An oboist, for instance, perhaps needs to buy a new instrument. You may look at an oboe and say that it is only a little bit of wood with a few bits of metal stuck on to it. Nevertheless, a new instrument costs the musician anything between £1,500 and £1,800, because musical instruments are works of extreme and expert craftsmanship and they cannot be bought for a song. For that purpose, the average self-employed musician earns very little and find a great deal of difficulty in being able to buy an instrument when he is a student and, later on, in buying a replacement when his first instrument has worn out.
I, like the noble Lord, Lord Platt, had a letter from the Incorporated Society of Musicians, of which I, too, am a member. There is no doubt that anxiety in our profession is very widespread indeed, and also very deep. Therefore I hope that when he replies, the noble Lord, Lord Wells-Pestell, will bear this point in mind and will realise that these people—who are, after all, contributing a great deal to the life of our country—must be supported in some way and not have the whole of their earnings taken away by what, as the noble Lord, Lord Sandys, said, is purely taxation. Insurance is something which we enter into voluntarily, but this is 33 taxation; it is mandatory and we have to pay it. Therefore, I hope that the noble Lord will be able to say that he will refer that point to his right honourable friend.
Before I sit down, I should also like to comment briefly on the point which was raised by the noble Lord, Lord Wade, about the small self-employed shopkeeper. We are very fortunate in Epsom in having a small self-employed builder. Builders, of course, are not famed today for their efficiency, but this man is a remarkable exception. His men are all old friends and they really do a first-class job of work. They have very seldom done anything for us which has not been absolutely first-class. The head of the firm, having inherited it from his father, is now likely to suffer very much as a result of being a self-employed man. Therefore, it seems to me that we are allowing all the poor workers to flourish, and are really coming down very hard on the good ones.
§ 4.20 p.m.
§ Baroness PHILLIPS
My Lords, like most females, I of course cannot resist a challenge. As at least two noble Lords have been kind enough to mention me and my interests in this matter, I feel I must intervene, probably as an opted-out woman, although certainly not as a member of the middle classes. I can at least claim to be consistent. I put the case for the self-employed throughout the passage of the earlier Bill, when several noble Lords who have spoken today did not speak, possibly because they were not present. I shall continue to fight against the cohabitation rule, against the earnings rule, and in favour of a pension for all widows. I recognise that the Government, just as did the previous Government, are probably getting themselves into a very complicated situation from what was the simple concept that you had a Beveridge Plan in which you paid in if you worked, and drew out if you were not working because you were elderly, sick, handicapped, widowed or for some other reason. Now it has got into such a complicated form that confusion is being piled upon confusion.
If I may take one simple point on which I am sure my noble friend will be able to give me an answer, an opted-out 34 married woman (to use a horrible phrase!) at the moment, if she is widowed, can still continue opting out. This means she does not draw certain benefits. Equally, as a widow, were she to pay a full stamp, there are at present still certain benefits she cannot draw, such as unemployment or sickness benefit, because in its wisdom, or otherwise, the State decrees that nobody may draw two benefits. I said at the time of the last Bill that I did not follow this so-called logic since you are no less a widow because you are unemployed, and no less unemployed because you are a widow. The State says you may have only one benefit however many disabilities you may suffer. I should like to know if we have an equalisation now, where the opted-out woman will pay more as a single woman, whether if she becomes a widow she can draw unemployment benefit? If she becomes unemployed, can she draw sickness benefit?
To return to the self-employed, I add my plea to those other noble Lords who have indicated that there is no real justice in making the self-employed pay a so much heavier contribution. We, as politicians, have to be honest when we present our prospectus to the people. I have said in this House, and will say again, that no Government gives anyone anything. Everything that comes, as in the form of retirement pension, unemployment benefit or pension for the handicapped, comes as a result of the working population having paid their contributions into a fund. I agree with noble Lords who have said it is a misnomer to call it insurance; it is a contribution by one group in order that those who are not so fortunate should draw out. I plead again with the Government not to fall into the trap of inserting figures. If we insert figures of salaries, while they may be realistic in April, they will certainly not be realistic in June or September. We shall therefore be faced with yet another Bill in order to bring the matter up to date. The self-employed, as has been said, are no longer wealthy individuals who can do anything different from the rest of the workers. I know at least two self-employed people who have ceased to be self-employed because they said they spent their weekends worrying whether they were going to make a profit while the employees went off to 35 enjoy themselves. They decided it would be more sensible to be employed by somebody else. It will be a sad day if we lose many of these people. I plead for this rather unreal situation to be remedied.
I hope that the noble Lord will accept that I am trying to be consistent, and that what I am saying now is repeating what I said throughout the passage of the last Bill. May I remind the noble Lord, Lord Aberdare, that during the passage of the last Bill, now an Act, the Government did not give way on one single issue. I hope the present Government will be a little more understanding and flexible.
§ 4.25 p.m.
§ Viscount AMORY
My Lords, I want to say only about four sentences, two of them flippant and the others more serious. The flippant ones I want to address to the noble Lord, Lord George-Brown. Just now, when he in a good natured way withheld his blessing from the "grouse shooters opposite" he appeared to be holding me firmly in his eye. That was the opinion of my noble friends on either side of me who appeared to shrink from me momentarily. I only wanted to say to the noble Lord, Lord George-Brown, that no single grouse has fallen to my gun during the last decade. I eat them when I get the chance, but I do not shoot them.
Rather more seriously, would it not be right that if one had to pick one interest as representing the mood of the British people today it is the desire that our society should be as fair as possible. I am sure that wish, too, is shared by every one of the noble Lords opposite. I suggest that in drafting this Bill the Government have gone astray from that desire, and I ask that, when responding to the various speeches that have been made this afternoon, the noble Lord, Lord Wells-Pestell—the fairest minded man one can think of—will put it to his colleagues in the Government that they should have another look at the way these proposed charges are to be distributed so that they really are in relation to the benefits and to the different types of contributor and are as fair as can be desired.
§ 4.27 p.m.
§ Lord WELLS-PESTELL
My Lords,I am grateful to those noble Lords who have participated in the discussion this 36 afternoon, which has ranged over a fairly wide field. I cannot promise at this stage to give a full answer to every question that has been put to me. I will, so far as I am able, deal with as many questions as I possibly can. But I regret—and I do not say this in any sense of criticism, because in this House we have certain rights and duties, and those must be preserved and fulfilled—the possibility that some parts of this Bill apparently are to be contested at the Committee stage. I have no quarrel about that, but when your Lordships consider this matter, whatever you may think of the Bill, it is in itself an essential piece of legislation, having regard to the fact that this Government, like the last one, want to increase pensions. We want to increase them next April and again next December. It will be impossible to do this if we cannot get this Bill on the Statute Book within the foreseeable future. If you say, "What do you mean by foreseeable future?" I would have thought that we should get the Bill on the Statute Book before we rise for the Christmas Recess.
This is an important Bill. There is nobody in your Lordships' Chamber who does not recognise the plight with which so many people in this country are faced. We have over 8 million pensioners, and it is your Lordships' duty, my duty, the duty of the Government and the community to see that their living standard is more than just at existence level. We have virtually a static labour force in the sense that numerically it is not growing; but people are getting older. As years go by, more money for pensions and the various benefits will be necessary. So I would appeal to your Lordships—I know you will not do it lightly; I know you will do it, if you do it at all, out of a sense of conviction—not to hold up this Bill to such an extent that the employers cannot get on with the job of changing their various codes. I hope you will enable them to do so and allow the Department to get on with the job of bringing in these new pensions and this new system on April 6. It is of supreme importance that we do.
§ Lord GEORGE-BROWN
My Lords, with great respect, that is nearly a blackmailing argument. Would not my noble friend like to consider dividing the Bill so that those things which we all think should be done by a given date shall be done by 37 a given date, thereby leaving us free to argue about the things that some of us think should not be done by any date?
§ Lord PLATT
My Lords, is it permissible to follow that up and ask the noble Lord, Lord Wells-Pestell, whether he realises that out of five speakers no fewer than ten have spoken against it!
§ Lord WELLS-PESTELL
My Lords, this is not an unusual experience for me. I am sorry if I have given anyone in your Lordships' House the impression that I am trying to blackmail this House. This is the last thing I would want to try to do because your Lordships would not allow it. What I wanted to do was to point out the difficulties in the time-scale. Your Lordships know as well as I do that any Amendment in this House must go to another place and must be accepted there. This is all I want to say, and having said it, I will try to deal with all the questions which have been raised.
The noble Lord, Lord Aberdare, mentioned that widows of the self-employed were not entitled to widow's benefit. My understanding of the situation is that they are entitled to it. If I am wrong I will certainly let the noble Lord know and I hope that I shall find some means of letting your Lordships know. My understanding is that the self-employed are entitled to sickness benefit, invalidity benefit, maternity benefit, retirement pension, child special allowance, death grant, guardian's allowance and widow's benefit. I will however look into this point. The only benefits I understand they are not entitled to are industrial injury benefit, earnings-related supplements to sickness benefits and, naturally, unemployment benefit.
While the self-employed do not participate in all the benefits as do those in Class I, one must bear in mind that they are not paying—whatever noble Lords may think—the same rates as do those who go to make up the Class I contributions. I do not want to go back to 1942 and the Beveridge Plan, but my understanding of the Beveridge Plan—which is something that has been accepted by every Government since that time—is that if self-employed people wanted all the benefits which others receive they would have to pay a contribution equal to about 90 per cent. of the joint contribution of the employer and the employee. If this were 38 so, it might well be possible to provide the benefits that certain noble Lords think the self-employed ought to have. But having made a very quick calculation, I would say that what the self-employed will be asked to contribute after April 6 next year will not amount to more than about 60 to 65 per cent. of the contributions paid by the employer and the employee, who together pay 14 per cent.——
§ Lord ABERDARE
My Lords, I do not want to interrupt the noble Lord too much, but, of course, the employer receives income tax relief on his contribution.
§ Lord WELLS-PESTELL
Yes, my Lords. If the noble Lord, Lord Aberdare, wants to pursue the point then let us pursue it. Self-employed persons will be paying their contribution on the tax that they paid the previous year and not on the current year because that could not be done; it would have to be paid on the previous year. They can set against tax—and they do—everything that it is humanly possible legally to set against it, including expenses which many employed people have to bear but cannot set against taxes. I myself (as we are disclosing interests) have been self-employed and I have paid a Class 2 contribution for a good many years. One knows what one can and cannot do, particularly if one can afford to buy advice in this matter. When we look at what the self-employed person is to pay in relation to the total Class I contribution and the benefits he is receiving we find that it is not unreasonable.
The noble Lord, Lord Wade, raised the question of clergy. I hope to be able to introduce three Regulations following this Motion, and in case any noble Lord will not then be present may I say that the clergy, at their request—it was not imposed upon them by the Government, but at their request—will be treated as self-employed after 6th April next year. But they will be dealt with under Schedule E for the amount they pay—in other words, the amount they return to the tax authorities for income tax. Obviously it will not be done under Schedule D which deals with profits and gains. As I understand the situation, the ordinary self-employed person will be assessed according to profits and gains, 39 which come under Schedule D, but the contributions of the clergy will be determined by their return of income tax under normal Schedule E.
My noble friend Lord George-Brown raised a matter, which has exercised the minds of a good many on this side of the House, as to whether it would be possible to do more for self-employed people. The only point I can make at this stage—I want to say this as a preface; having gone into the matter very carefully myself, this is something I accept—is that the Bill does not put an additional share of the cost of benefits on the self-employed; it merely maintains the ratio fixed in the 1973 Act. The difference is that under the 1973 Act the income band was lower. We have increased it for obvious reasons because the average earnings have gone up considerably. We have fixed the payment of 8 per cent., as against 5 per cent. by the previous Government, simply because we wanted to ease the situation on lower paid self-employed people.
So today there is a situation where self-employed people who do not come within the band of £1,600 to £3,600 will pay a flat rate contribution of £2.41. Those who come within and above the band will pay the flat rate, plus 8 per cent. As I tried to say in introducing the Bill to your Lordships, we could have kept it at 5 per cent., but having regard to increased average earnings and so on we should have have had to do what I say, quite frankly, the Party opposite would have had to do if they had been in power. We should have had to raise that flat rate from £2.41 to £2.70.
§ Lord ABERDARE
My Lords, I do not think that I accept that. There are many ways in which one can raise the income of a fund. It does not necessarily have to be imposed upon the self-employed; that is what we have been arguing about all this afternoon. There are many other ways in which to raise the income of the fund. There is one point of which the noble Lord must be aware; the most recent report of the Government Actuary, published in November, 1974, shows a surplus of income over outgo for the year 1974–75 of £428 million.
§ Lord ABERDARE
This is the insurance fund, my Lords. It is the Reports of the Government Actuary on the Financial Provisions Relating to Basic Scheme and Industrial Injuries Benefits and Family Allowances—(Cmnd. 5788). If there is this vast surplus in the fund, why can we not scrub the £21 million which the noble Lord is trying to obtain from the self-employed and treat them fairly?
§ Lord WELLS-PESTELL
My Lords, that is working on the assumption that they are being treated unfairly, and we do not accept that at all. It must be a cardinal principle of every society that everybody who is in employment, whether as an employee or self-employed, must be prepared to make the best possible contribution to those who are less favourably placed. There can be nothing wrong with that kind of philosophy, and I hope that everybody in your Lordships' House will accept it.
§ Lord GEORGE-BROWN
My Lords, if I may say so, my noble friend is distorting our Socialist philosophy. It is not only "each man according to his means"; it is also "each man according to his needs". All that the noble Lord is saying is that the employed and the self-employed should contribute as they are able. What some of us are challenging is the present assumption of the Bill that they do not get out of it what they are entitled to.
§ Lord WELLS-PESTELL
I was coming to the point that the noble Lord has just made again. Ministers have under consideration the benefit position of the self-employed. We say that in principle they should get earnings-related benefits. So far, however, successive Governments have found that this is impossible. The noble Lord, Lord Aberdare, says that there are a variety of ways in which this could be avoided. He spoke for fifteen minutes but did not give us one of those ways. Why did he not do so? If there are a variety of ways, and if they are so obvious, why has the House not been treated to one or two alternatives?
If they ought to have more benefits, may I point out that we had a Conservative Administration from 1970 to 1974; so why was something not done about it? The answer is very simple. I think that 41 Governments have wanted to do something about it, but so far they have found that it has been impracticable. I do not want to go on labouring this, but the main point is that, for the reasons which I gave earlier on, the contributions for the self-employed in this Bill are quite fair, compared with those of the employers and the employees. I would go so far as to say that anybody who took the trouble to go into the figures would find that the self-employed were being subsidised to some extent, having regard to the percentage of the amount that they are paying and the benefits that they are receiving.
May I remind your Lordships, once again, that Class 4 will be the earnings related part covering those who are earning over £1,600 and up to £3,600 and more. The whole concept was introduced under the Conservative Government's 1973 Act, and the structure established by that Act has not been changed by the present Government. We can argue about this all night long, but the structure has not been changed by the present Government. Class 4 contributions were devised as a method of sharing the cost of benefits more fairly among the self-employed. It enables less reliance to be placed upon the regressive flat rate contribution. Everybody is agreed that the contribution of the flat rate Class 2 contribution for the self-employed is not an ideal situation, but at least the new Class 4 contribution, which was welcomed and supported by the Labour Party when they were in Opposition in 1973, seeks to improve the situation
The fact is that under the Bill the self-employed will pay exactly the same share of the cost of benefit as they would have done under the 1973 Act. This, my Lords, is not in dispute. All that the Government have done is, we believe, to redistribute the burden more fairly among the self-employed themselves. Some will pay the flat rate and nothing more; others will pay the flat rate, plus. It was open to the Government to increase the flat rate contribution and to hold down the rate of Class 4 contributions to 5 per cent., but I have said already that if we had chosen to hold down the Class 2 contribution and to increase that of the Class 4 contribution, the only way that we felt we could have done it would have been to lessen the burden upon 42 Class 2 and to increase the burden of the self-employed under Class 4.
§ Lord DRUMALBYN
My Lords, the noble Lord seems to have erected his argument upon the basis that there is a well-recognised and immutable proportion between the total of contributions from the self-employed and the total of all contributions. Certainly that was not the case previously, and I do not see why it should be the case now. What grounds can the noble Lord give for that proposition?
§ Lord WELLS-PESTELL
My recollection, my Lords, is that what I said was that the amount of contribution which the self-employed are paying now is, percentage-wise, much the same as they would have paid under the 1973 Act. It may well be due to the fact that we have not moved away from our social services and our social security, which owe their origin to the Beveridge thinking. It may well be that we ought to do so in the foreseeable future; but this has been a pattern which successive Governments have adopted over the years, and I am saying that if we and the previous Government had followed that line the contributions expected of the self-employed would have been considerably more.
My Lords, I do not think that I can usefully add anything more other than to reply, if I can, to what the noble Lord, Lord Robbins, has said. He asked whether it is a good thing that we should lose the contribution in terms of, perhaps, health and happiness and all the other things which self-employed people contribute to the community. The answer is, no. As I have said, I have been a self-employed person for a good many years, as many of my friends on both sides of the House have been. We know, in our own circle of friends, the kind of contribution that they make, and we know the contribution that various sections in society make. There are some sections for whom I do not bleed at all. For instance, when I hear that the Law Society and members of the Bar are very worried about this Bill, I am reminded that it is not so very long ago that a noble Lord in your Lordships' House called attention to the amount of fees which the profession charged.
43 Of course there are bound to be those who will be worse off than others. In a kind of blanket operation such as this, how can one avoid anomalies? I do not suppose that in the history of social security and social insurance we have ever been able to introduce a measure that has not been slightly unfair to a certain group. What we have tried to do is to minimise that unfairness and, with great respect, keeping the flat rate contribution for those whose income is below £1,600 a year—poor though it is—has gone a long way towards that.
§ Lord ABERDARE
My Lords, before the noble Lord ends his speech, perhaps he will be so kind as to allow me to make one point. I asked him whether his right honourable friend would be willing to see delegations from these people who are very much worried about what is to happen to them. I mentioned, as did the noble Lord, Lord George-Brown, the Writers Guild, which is a trade union affiliated to the TUC. They really feel that they have not had an opportunity—because the legislation has come forward so quickly; it was whistled through the House of Commons in no time at all—to iron out some of the problems that arise for their members. I ask him to be good enough to give an undertaking now that some consideration will be given to them, because I know that they would appreciate it.
§ Lord WELLS-PESTELL
My Lords, I must give an undertaking of that kind. I do not think anybody speaking for the Government could refuse to entertain such an application, and I will certainly pass this on to my right honourable friend the Secretary of State. But having said that, I should like to inform the noble Lord and your Lordships that the Minister of State for Social Security met a deputation from the Federation of the Self-Employed, which I understand represents the self-employed. I do not know how large an organisation it is; I do not even know how influential it is, or whether it speaks for every facet of the self-employed. But, with great respect, I think one could not expect the Secretary of State or the Minister of State to receive a succession of deputations. It appears that the self-employed have a Federation, and——
§ Lord GEORGE-BROWN
My Lords, with respect, my noble friend must help us on this matter. The Federation of the Self-Employed is one thing; a trade union affiliated to the TUC is another thing, and I ask my noble friend, who I know is doing his best to help us, to make it quite clear that if an affiliated trade union such as the Writers Guild wishes to be seen it is no use telling us that some "odd bod" called the National Federation of this, that or the other, has been seen by the Minister of State. We can all help each other here, and I would ask the noble Lord whether he will rest on the assurance that he gave to the noble Lord, Lord Aberdare, that the Secretary of State will see the Writers Guild and any other similar properly accredited organisations.
§ Lord WELLS-PESTELL
My Lords, I undoubtedly made the mistake of thinking that the Federation of the Self-Employed was an all-embracing incorporated body. Obviously, this is not so. However, I renew my undertaking to draw to the attention of my right honourable friend the suggestion made by the noble Lord, Lord Aberdare.
§ On Question, Bill read 2a and committed to a Committee of the Whole House.