§ 6.11 p.m.
§ Lord WELLS-PESTELL
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 Wells-Pestell.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The Baroness WOOTTON of ABINGER in the Chair.]
§ Clause 1 [Contributions]:
Lord ABERDARE moved Amendment No. 2:
Page 2, line 20, leave out from "2,500)" to end of line 21.
§ The noble Lord said: May I begin by declaring an interest as a self-employed person, as I did on Second Reading? May I also say very briefly that I am sorry not to have been able to move the first Amendment, because I feel strongly about the married woman's option. But in view of the importance of this Amendment and the lateness of the hour, I thought it best that we should pay more attention to this one.
§ I should like to remind your Lordships of the facts. Under the 1973 Act we proposed that the self-employed man should pay a flat rate stamp at the rate of £1.68 per week and 5 per cent. on his Schedule D profits in the band £1,150 to £2,500. This Bill now proposes a flat rate sum of £2.41 and 8 per cent. on his Schedule D profits in the band £1,600 to £3,600. I say again, as I did on Second Reading, that we have no quarrel with the increased band of profits, which is 358 effected merely by inflation, but we think it wrong and unjustified to increase the percentage on the Schedule D profits from 5 per cent. to 8 per cent. for no extra benefits whatever. The purpose of this Amendment is simply to restore the situation to what it would have been, so far as percentage is concerned, in our 1973 Act; that is, to reduce the percentage from 8 to 5.
§ We realise that more money has to be found to finance the extra benefits that have been announced, and that therefore the 1973 Act has to be amended, as it is by this Bill. But we believe that the way in which the Government have distributed the burden of these extra contributions is unfair to the self-employed. The employed person comes out of this Bill very well. In almost every case he will in future pay less than at present, because of the abolition of the flat rate stamp. At the same time, the self-employed man will be expected to pay substantially more, and we ask: is this fair on the self-employed man? He has no powerful trade union to defend his interests. He has no part in the social contract. Not much, I fancy, was said about the self-employed at the recent Labour Party Conference, and yet, as the noble Lord, Lord Wells-Pestell, himself said, they form a most valuable and indeed an indispensable part of the community.
§ Lord WELLS-PESTELL
May I interrupt? I am sorry, but as I understood him, the noble Lord started by referring to the flat rate contribution of £1.68 under the 1973 Act. I think I am right in saying that it was the Conservative Government which raised the contribution to £1.99 last January and, if I am right in my recollection, it would be much fairer to talk about £1.99 and not £1.68. That gives the impression that this Government are raising the contribution to a very substantial amount.
§ Lord ABERDARE
I am not talking about the flat rate stamp. In the first figures I gave I was comparing the 1973 Act with this present Bill. But my quarrel is with the percentage increase and not with the flat rate contribution, because of course the flat rate is now £2.41 so there is no change in the flat rate. I am talking about the increased percentage from 5 per cent. to 8 per cent. If we 359 compare the self-employed man with the employed man, and take, for example, a man earning £50 a week, we find that the self-employed man will be paying £205 per annum and the employed man will be paying £111 per annum; that is, £94 less. On a weekly basis, whereas the self-employed man pays £3.94—that is, taking into account the flat rate and the percentage—the employed man will be paying £2.14 or £1.80 less. Yet the fact is that many of these self-employed people are themselves small employers and as employers they see their own contributions going up by a further 1 per cent. from 7½ to 8½ per cent. and, as self-employed people, they see their contributions going up from 5 per cent. to 8 per cent., while their employees continue to pay 5½ per cent. as at present. How can they be expected to think that this is a fair way of distributing the burden?
During the Second Reading, the noble Lord, Lord Wells-Pestell, based his whole case on the fact that the self-employed were not being asked to pay more in proportion than they would have paid under the 1973 Act. Just to get the position quite right, I should like to quote his words: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."—[OFFICIAL REPORT, 2/12/74; col. 41.]The noble Lord went on to say:This…is not in dispute.But it is in dispute.
I am sorry to have to go into figures, but I must refer to some figures because both this Bill and the 1973 Act were accompanied by Reports from the Government Actuary, and figures are given in both of them for the contribution income in the year 1976–77. These two documents are Cmnd. 5143, which was the Government Actuary's Report relating to the 1973 Act, and Cmnd. 5652, which is a similar Report relating to the Bill which we are now discussing. Under the 1973 Act, the self-employed would have paid £143 million in the year 1976–77; that is, 3.8 per cent. of the total of all contributions. Under this Bill, the self-employed will pay £224 million in that year, which is 4.2 per cent. of total contributions. So I really cannot see how 360 the noble Lord can say that this Bill is maintaining the same proportion as the 1973 Act. If we are to keep the proportion the same as the 1973 Act, then the self-employed should be paying 38 per cent. of the total contribution and that would be some £21 million less than they are being asked to find. That is what would be achieved by this Amendment, reducing the proportion from 8 per cent. to 5 per cent.
On the last occasion a number of your Lordships spoke about the value to out economy and to our way of life of the self-employed. I do not wish to go over all that again because I am sure it is well in your Lordships' minds, so I will content myself with making one more point. I may well be asked how this cost of £21 million is to be found if it is not to be raised from the self-employed. There are a number of ways of doing this, a number of ways in which the contribution of other people to the fund could be altered; indeed it could be taken from the Treasury supplement. But I very much doubt whether it is necessary to find this money. I believe that the fund itself can well afford £21 million.
Again, I am afraid that I have to refer to the Government Actuary's report, but according to that the fund will be in deficit by £52 million in the year 1975–76, and thereafter there will be a handsome surplus. But the extraordinary fact is that this deficit is calculated on a rate of increase in earnings of only 8 per cent., and it is specifically stated in the Government Actuary's report that the Government have instructed him to take that figure. That is far below a realistic figure. The present figure for the increase in earnings must be more than double the rate of 8 per cent., and if a realistic figure is taken there will certainly be no deficit in 1975–76.
Indeed, the Government Actuary himself has acknowledged that there will not be a deficit, because since this Bill was introduced another Bill has gone to the other place—the Social Security Benefits Bill—which brings in a host of new benefits. Although there are new benefits and no new contributions the Government Actuary, left to his own devices and not being told by the Government what rate of increase to assume, has assumed an increase of the order of 361 17½ per cent. per annum, and has therefore arrived at a surplus in 1975/76 of £268 million. This is the latest figure in the latest Government Actuary's report for the surplus of the fund in 1975/76. Surely from that figure £21 million could be used for the benefit of such an important group of people in our community as the self-employed. I beg to move.
§ 6.22 p.m.
§ Lord WADE
I think that this Amendment should be supported, mainly because it reduces the figure from 8 per cent. to 5 per cent. and that, as is apparent, is less of a burden. Although, as I pointed out on Second Reading, I do not suggest that there is a deep difference of principle between 5 per cent. and 8 per cent., this proposed 8 per cent. is a steep additional burden on those self-employed with a net income of between £1,600 and £3,600. There is undoubtedly a wide range of people affected, including musicians, writers, persons with small businesses and many others who were referred to on Second Reading. Of course we have to weigh up the arguments about the distribution of the burden, and if your Lordships feel that too great a burden is being placed upon the self-employed then I hope you will support the Amendment moved by the noble Lord, Lord Aberdare.
But in discussing this Amendment I find that I must go a little wider than a comparison of the figures of 5 per cent. and 8 per cent. I do not wish to go over the whole debate on Second Reading, but I hope I shall be forgiven if I go a little wide of the Amendment before the Committee. It seems to me that three basic questions have to be asked. The first is: is this 8 per cent. imposition—if I might call it such—fair? The second question is: how strictly must we rely on the Government Actuary's calculations, having regard to the fact that the premises on which he worked are not decided by him, and we are not questioning the calculations? The third question which we have to ask in deciding whether 5 per cent. or 8 per cent. is right is: is the method of arriving at the amount payable, which is mainly by taking a percentage of net profit after 362 tax or net income after tax, justified or necessary?
On the first question as to whether this is a fair or an unfair burden, the point has already been made by the noble Lord, Lord Aberdare, that the contributions do not produce increased benefits. In the leaflet NP18, which has been prepared in advance in order to make the position as simple as possible to those who wish to understand what is happening, there is a quite fair statement on the second page. It states:Clause 4 contributions will not entitle you to any additional benefitIt then goes on:The purpose is to ensure that the self-employed as a whole pay a fair share of the cost of pensions and benefits.That is the question: is it a fair share? As your Lordships are aware, there were pleas on all sides of the House to the effect that the burden falling on the self-employed was not fair. I am not going over all that ground again, but there is an additional point—and if I am wrong I am sure that the noble Lord, Lord Wells-Pestell, will correct me. I understand that it is now provided that a director of a company who works part-time, or perhaps whole time, for the company of which he is a director may be treated for contribution purposes as being employed, and it seems to me that he will be in a more advantageous position than a self-employed person who is not a director of a company. But we must be realistic about this. I do not think there are many self-employed musicians who can turn themselves into limited companies, unless they are right at the top of the financial tree.
On the second question, I am not going over all the ground as to whether it is fair; that is a matter of judgment. But must we be strictly bound by actuarial calculation, which is based on the assumption that there is a National Insurance Fund? I am bound to say that I am a little sceptical about this National Insurance Fund which we have already been told does not exist. I want to be fair about this. The noble Baroness, Lady Phillips, asked what noble Lords had done when the 1973 Bill went through. I admit I did not take part; I had other responsibilities. The question was rather like: "What did you do in the Great War, daddy?" My answer to the noble 363 Baroness is that I did not do very much in 1973 as I had other tasks. But in days gone by I have on a number of occasions, mainly in the other place, taken part in these discussions about the contributions when a Government have brought in some new pension scheme.
We have had lengthy discussions about the calculations. We heard of the year 2004, now the calculation is the year 2010. Were the contributions too much or too little? Again, I say, it was rather unreal. Within a few years the discussion is forgotten because the calculations have become out of date. Therefore I for one must look at these calculations with some scepticism., This is important because it may affect the amount at a particular time that we have to pay into this somewhat mythical National Insurance Fund. It does, as your Lordships will know if you look at Cmnd. Paper 5652, go up to the year 2010. There is even one estimate of the cost of administration in the year 2010–11. I wonder whether it is possible to assess the administrative costs of a somewhat mythical fund in the year 2010. In passing, one wonders how many self-employed there will be in the year 2010. I suggest one is entitled to be a little sceptical about the Government Actuary's figures without for one moment questioning the arithmetic.
I do not think there would be any cataclysmic adverse effects if, for example, one adopted the 5 per cent. proposed in this Amendment without necessarily making other alterations. I understood the noble Lord, Lord Aberdare, to be making the same point. We can rightly consider temporary alterations to this Bill. My main point is that I think this must be a temporary Bill. I hope it will not be long before tax credits are introduced, or there is a major change in our tax laws. When this is done the whole question of Social Security contributions will have to be looked at again.
My third question is whether it is right to take a percentage of net profits after tax in the case of the self-employed; in other words, their contribution cannot be set off against income for the purposes of arriving at their tax liability. In this case —only in the case of the self-employed—the percentage is taken on the net profits after tax. Here may I very briefly correct a remark I made on Second Reading. 364 At column 19 of Hansard on 2nd December I was dealing with a case of a self-employed small businessman receiving £2,500 after tax. I said he would pay a flat rate plus £200 per annum. That was a mistake on my part—I meant £200 per annum including the flat rate tax. It did not affect the material point that I was making; namely, that the self-employed person who has to put capital into his business may have to find it out of what is left after paying tax, and he will have that much less if he also has to pay these contributions out of what is left after tax. I think this is a serious point so far as those who come within the band are concerned. It will be a very serious problem for people with small businesses; it is difficult enough as it is. Here you have a situation where they have to pay their tax and then, out of what is left, they have to pay these substantial contributions.
There is a temptation, as I mentioned on Second Reading, that people will try so to arrange their affairs that the net figure is lower in order that their contributions will be lower. I do not think that is a good idea. Therefore, for various reasons, I think it would be reasonable to reduce the figure from 8 per cent. to 5 per cent. I go much further, because I should like to see a complete revision of this method of arriving at liability. I should like to see the employed and self-employed put on a similar basis. But, within the terms of what we can do under this Amendment, some relief should be afforded. I think it is reasonable, and I hope the Amendment will be supported.
§ 6.35 p.m.
§ Lord SANDYS
I support my noble friend Lord Aberdare in his Amendment, and in so doing I declare an interest, both as a self-employed person and as one interested in the agricultural industry. Your Lordships may be somewhat impatient at this late hour and, for that reason, I will speak only briefly. But I feel it important to stress the particular problems of the agricultural industry in this context. Your Lordships will be aware there are over 280,000 self-employed persons in this industry. There is a special problem concerning Schedule D in the farm context. It is a very complicated and difficult matter. The best explanation on which I can lay hands, which your Lordships may have 365 seen and read, is the Annual Review of Agriculture 1974. It is very brief. It is Cmnd. Paper 5565, and it says:… farm income is not directly comparable with incomes in most other sectors of the economy, since it includes elements of wages and changes in stock valuations as well as profits. It provides the return to farmers and their wives for their manual and managerial labour. It also provides the return on occupiers' investment in the farm businessThis is a special problem. If you are assessed under Schedule D and you have a farm, or you are a tenant of a farm, your particular problem is not how you stand at the end of one year, but at the end of a group of years.
Perhaps I may quote a personal experience. In the years when the tax system was changed, between 1965 and 1966, no less than three years of my personal taxation were in the hands of the Inland Revenue until the first, second and, finally, the third years were evolved. Farmers are totally unaware how they stand in relation to the Inland Revenue from year to year because of changes being made, because of the problems of their own stock valuation and because of the specific problem of the alterations of the tax position. I support what the noble Lord, Lord Wade, said in almost every respect and I should like your Lordships to consider the problem of assessment. The self-employed are not making muted mumblings; this is a real problem and they are seething with rage about it.
§ Lord GEORGE-BROWN
I want to support this Amendment from a different point of view from that of the last speaker. Clearly, I have no self-interest to declare. I am, and always have been, an employed person. As an employed person, one also has to look generally at justice being done across the whole community. I have given as much attention as I could since the Second Reading debate to the Government's own case as it has, through the courtesy and kindness of my noble friend Lord Wells-Pestell, been given to me. I do not think that they, although trying very hard, make a case in justice for what the Bill does.
There is one question we must get clear and perhaps my noble friend will clarify it in winding up. The self-employed people, organised variously as 366 they are, believe that they do not obtain a widow's pension for their self-employed contribution. My noble friend whispers to me that they do. We have to get this point very clear because many of them seem to think that they do not and that there is no widow's benefit in consideration of paying a self-employed contribution. Would my noble friend like to make that point clear now?
§ Lords WELLS-PESTELL
Yes, if the noble Lord would be good enough to give way. This is a matter, if I remember rightly, that the noble Lord, Lord Aberdare, raised when we were considering the question on Second Reading. I was able to say that, in addition to sickness benefit, invalidity benefit, maternity benefit, retirement pension, child special allowance, death grant and guardian's allowance, they are entitled to widow's benefit.
§ Lord GEORGE-BROWN
To that extent I am relieved. I must tell the noble Lord that that will take a great deal of worry from many people's minds because for some extraordinary reason nobody seems to believe it. That point diminishes the case I want to make, but I trust my noble friend is right.
§ Baroness PHILLIPS
I do not want to confuse the issue, but the Minister said, "Widow's benefit". There is the widow's allowance which a widow receives for so many weeks after her husband's death. There is also the widow's pension. Perhaps the Minister would indicate what he is referring to.
§ Lord GEORGE-BROWN
So long as my noble friend will stand by that. I see a little consternation showing up in the Box—which when I was a Minister I got used to. I will keep talking for a while so that they may pass a note. But if the Minister is really committing the Government to the view that a self-employed man's contribution provides entitlement when he dies to a widow's pension, as an employed man's widow would be entitled, that to a large extent diminishes the case I was about to make.
§ Lord GEORGE-BROWN
I am so glad. There is a case for the Officials' Box after all. But I hope no Minister in the other House will walk away from it. To that extent, admittedly, the case I was to make is diminished, although politically it still stands. There are other benefits which the self-employed man does not receive, even on the Government's own case. The exceptions which the Government themselves make about unemployment, industrial injuries and earnings-related supplements are considerable. As I understand it—and I will give my noble friend and the Government credit for trying to state the case as fairly as they can—the situation is that they reached a point where the Government actuaries said: "If you do the thing right on the figures"—which, after all, is what actuaries are employed to provide—" you will have to put up the Class II rate"—and Class II, I gather, refers to the employed people—"to £2.70 a week." The Government decided—I do not think wrongly—that that would mean that a lower-paid worker earning, perhaps, £15 would be asked to pay much too large a proportion. The Government had to decide then whether to bear that additional burden on taxation, or redistribute it between the employed and the self-employed. They chose to do it by redistributing between the employed and the self-employed. As a result they pushed up the contribution of the self-employed from 5 per cent. to 8 per cent. in order to keep down, quite rightly, the contribution which the lower-paid person should pay.
The essence of this case is whether that was the right decision, or whether the right decision was, in fact, to put the cost on to taxation, which means, if I may declare my interest as a Socialist, putting it on to the shoulders best able to bear it. There is no reason, I submit to my noble friend (with whom I have had friendly talks on this matter behind the Chair), to assume that because a man or a woman falls into the category of being self-employed, like the lady from whose shop every morning I buy my papers, his or her shoulders are best able to bear it. We Socialists have always believed that the test of whether one's shoulders are best able to bear it is the income one has to return at the end of the year. Many employed people, including some friends of mine, have shoulders much better able 368 to bear it than some people who happen to be described as "self-employed". I frankly think that my Government—I say "my Government"—have been tempted wrongly here by the bureaucrats. I say to my noble friend: "If you aren't awfully careful, they'll get you wrong." I have a great deal of experience of this. They have been tempted to go the wrong way.
I take the figure the noble Lord, Lord Wade, gave. I have no figure to controvert it and I assume he has done his homework. He said it was £21 million or something of that order. If it was that which had to be distributed, then a better way to have done it, I submit, would have been by general taxation, placing the burden anywhere you like—placing it on me, if you like, because I am obviously better able to bear it than the lady in the newspaper shop; or placing it on some of the chaps on the other side of the House, if you wish, because they are obviously better able to bear it than I am: but, seriously, placing it appropriately, but not on individuals called "self-employed" who may well be a good deal less well off than the employed person in Ford's or Chrysler or a director who also can have himself described as an employed person.
I believe that this is where they have gone wrong. Having tried very hard, as the noble Lord asked me, to see whether I could find myself able to agree with their thinking, and having allowed for the fact that he has put right the question of the widow's pension—I trust for all time —and having to that extent diminished my argument, I still feel that they have put the burden in the wrong place. A figure of 8 per cent. instead of 5 per cent. in the case of somebody who is earning between £1,600 and £3,600, is putting hardship on to a section of our community which is suffering great hardship already.
There was a day when I thought that £1,600 to £2,000 was a hell of a lot of money, but I do not think so any longer. We have to remember that Members of the Lower House will become employed persons as from next April, having been self-employed persons until now. They are earning £4,500, plus a number of other things. I ask my noble friend, not as a farmer, not as a Conservative, not as any of these other things but as a 369 Socialist, how one explains to somebody who is working as hard, if not harder, than any other worker but who just happens to be doing it in his or her own name, that Members of Parliament get out of the self-employed category at the very moment when the impost on the self-employed, who are getting less than they are, goes up. To my regret—and I hope that my noble friend will accept that it is to my regret—I intend, if the Committee is divided on this issue, to vote with those who divide the Committee against the Government.
On Second Reading my noble friend said that if we did that we should hold up some benefits for some other people, and I am very conscious of the burden which I will share with them in doing that. I asked the noble Lord to consider whether he could put through the nicer parts of the Bill and hold back the other part, but for reasons which I understand he cannot do so. Having given a lot of thought to the matter, I shall vote with those who divide the Committee against the Government on this Amendment. I simply do not feel that one can divide this country between those who are employed by employers and those who work technically in their own name. Very often, the richer people are among those who can call themselves employed. A lot of my poorer friends are among those who have to call themselves self-employed. I wish that die Government could reconsider this point but, for timetable reasons, I understand that they cannot do so. I invite any of my noble friends who feel able to do so to follow me this time, with however a heavy heart, into the Lobby of those who divide the Committee against the Government on this Amendment.
§ Lord DARWEN
May I support what my noble friend has just said, and may I point in particular to the very diminished benefits which the self-employed get? I noticed that on Second Reading my noble friend Lord Wells-Pestell said that, naturally, the unemployment benefit is not paid to the self-employed. Why "naturally"? After all, self-employed people can become unemployed, just as employed people can become unemployed. Very often, a self-employed person is a specialist in a certain field. It may be that because his business goes bust, or because he is unable to carry on for 370 financial or health reasons, he becomes; unemployed. Surely, therefore, in paying the rate that is now proposed he should be entitled to unemployment benefit. I do not see why it is "natural" that he should not be so entitled.
§ 6.56 p.m.
§ Lord PLATT
At this hour I will be as brief as I can, especially as nearly all the arguments which were fully deployed during the Second Reading debate have been deployed again this evening, with some interesting and important additions. However, may I make one or two points? The noble Lord, Lord Wells-Pestell, favoured me also with a document which I think is the same as the document which he gave to the noble Lord, Lord George-Brown. Whereas I see in it a good many of the mathematical arguments, I cannot pos- sibly accept its logic because this is not a matter of mathematics and actuaries; it is a matter of opinion and feeling.
To a simple-minded chap like myself who has no training as an accountant or actuary, it seems to me that the position is this. The employed person pays a contribution for certain benefits and his employer adds something to that contribution—something very substantial, I understand. I do not know what the figures are, but the point is that there are two people who are subscribing to his benefit. The self-employed man must, presumably, shoulder all of the burden himself, because he does not have an employer to shoulder some of it for him. If, therefore, you are going to have logic he ought to pay his own contribution, plus the employer's contribution, but nobody in this House thinks that that would be just. Then you say, "Forget about logic. Ought he to pay 40 per cent., or 50 per cent. or 60 per cent. of the double contribution—his own and his employer's?" It is entirely a matter of opinion as to where one thinks that the burden should fall and who can best pay it. Therefore, I do not think that logical arguments based upon statistics and the calculations of actuaries will get us very far.
My second point, which I am very surprised has not been raised, is not irrelevant to this Amendment, although at first sight your Lordships may think that it is irrelevant. In columns 43 and 44 of the Report of the Second Reading debate, 371 the noble Lord, Lord Aberdare, and, later on, the noble Lord, Lord George-Brown, both pressed that accredited organisations—that was one of the terms which was used—or, at any rate, respectable and responsible organisations which stand for some of the groups of self-employed such as authors and musicians (in which personally I am most interested) should have the chance of putting their case either to the Secretary of State or to the Minister of State. In reply, the noble Lord, Lord Wells-Pestell, gave an assurance that this ought to be done and that he would put it to his right honourable friend. That was on Monday of this week. It is now Thursday. There has been no time whatever for those consultations. I know that at least the body in which I am interested has written about the matter to the Secretary of State, but there has not been time for a reply. You may perhaps say that that is not wholly relevant to the Amendment before us, but it is wholly relevant because obviously to take the extreme case, if all these bodies—musicians, authors, self-employed shopkeepers and so on—came to the conclusion that it was perfectly right for them to pay 8 per cent. (which would be rather surprising, but supposing they did) obviously it would influence my position and my decision as to which way I would vote.
My final point is that on Monday evening on Second Reading, the noble Lord, Lord Wells-Pestell, put the case for the Government and of the eleven speakers not a single one spoke in his favour. Now is the opinion of this House being sought or is it not? If it is being sought, then there was 100 per cent. against the case which was being put forward—perhaps very reluctantly, I do not know—by the noble Lord, and to that number has been added one new speaker this evening, which seems to me to make twelve. If that is just to be cast aside and no notice taken of the influence of this House, I think it is a serious insult to this House and a very serious criticism of the whole of the Parliamentary system.
§ Lord HOUGHTON of SOWERBY
Although I shall not follow my noble friend Lord George-Brown into the Lobby in support of this Amendment, I have some sympathy with the case he 372 put and the case that has been put on behalf of the self-employed. In a few moment, if your Lordships will permit me, I will explain my position on this matter. First, however, I want to dispose of the misunderstanding about widows' benefits and the self-employed contribution. So far as I can recall, widows' benefits have always been attached to a self-employed contribution. I do not recall that ever was the widow's benefit not part of the insurance cover of a self-employed person. The two major benefits affecting the self-employed which it was originally proposed should not be attached to a self-employed contribution were sickness benefit and unemployment benefit. But Parliament decided, wisely, in 1947 that sickness benefit should be part of a self-employed contribution which unemployment benefit should not, and that is how the matter stands.
Now I must dispose of the position of Members of Parliament. It has been suggested that Members of Parliament are most conveniently being transferred from self-employed contributors to employed contributors, because it seems that the employed contributor will pay rather less than the self-employed contributor and therefore it is to the advantage of Members of the House of Commons that this change should be made at this point. That is purely coincidence.
§ Lord HOUGHTON of SOWERBY
I can assure your Lordships that it is. As Chairman of the Parliamentary Labour Party, for years I was pressing for the revision of the mistaken classification of Members of the House of Commons as self-employed contributors. It was never right. They were assessed for tax purposes under Schedule E. All employed persons are assessed under Schedule E, whereas self-employed persons are assessable under Schedule D, and it would have been to the advantage of Members of Parliament to be assessed as self-employed people for tax purposes, but they were not. They were always regarded as employed persons for the purposes of taxation. This was a grievous anomaly. When Members of Parliament lost their seats in the House of Commons there was no unemployment benefit, and after the General Election in 1970, the Parliamentary Labour Party Benevolent 373 Fund paid out £8,000 in a matter of two weeks to Labour Members of Parliament who had lost their seats and who were in need. It was disgraceful that Parliament should in that way treat its Members who had lost their seats.
The Boyle Report relating to the conditions of Members of Parliament generously revised those harsh conditions. The change from self-employed to employed contributions for Members of the House of Commons is long overdue and has been awaiting legislation for a long time, and the fact that it is being done now has nothing to do with the change in the contributions. That disposes of Members of the House of Commons.
I now come to the general proposition. What is wrong is the continuation of the mythology of the insurance principle. It was originally believed that under the insurance principle, the premium—which I think it is convenient to call it—was composed of two parts: the premium paid by the employer and the premium paid by the employee, and to the joint contribution an Exchequer contribution was made by the State. So it was thought that if a person was self-employed it would satisfy the insurance principle only if the self-employed person paid the two contributions which in the case of employed persons were payable by two separate persons, the employer and the employee. It seemed to the architects of the original scheme that the self-employed contributor must pay both as his fair part of the contributions to an insurance scheme.
But it is no longer an insurance scheme and it has not been so for a very long time. Therefore, when the contributions are switched from the flat rate principle to an earnings related principle, the principles of taxation come into this because it has nothing to do with insurance any more. It is a form of social tax, and in looking at taxation one should look at the equity of the matter, because the benefits that the self-employed contributor gets are no better, and in some respects are not so good, as the benefits of the employed contributor. Yet he can be asked to pay more for those benefits than is paid correspondingly by an employed contributor on the same income.
This is the injustice of what is proposed, and I think it should be rectified before long. The question is whether this is 374 the moment to attempt to do it. I fear that if this Amendment is carried, the Bill will be left in a very ragged state. If I may say so, it does not achieve the purpose that it sets out to achieve and it leaves the Bill almost incoherent in the structure of the contributions. It does not do the job. Nor, of course, does it deal with the substantial lowering of the contribution income which would come from the passing of the Amendment. Therefore I think it would be a mistake to make this change, though my message to the Government is that when the big change comes about next year—or so we are led to understand—then the opportunity should be taken to rid the Scheme of this nonsense that it is an insurance scheme. If that is done, I think the contributions can be put on a rational and equitable basis related to income, and related also to the common level of benefits to be given under this Scheme.
§ Lord GEORGE-BROWN
Supposing we carry this Amendment, which the noble Lord, Lord Houghton, thinks would leave the Bill in a ragged state, but which he clearly thinks itself is justified, we will have left the Government with £21 million, or whatever the figure is, to find from some other place. Is that not what the noble Lord is saying? Does he not think the Government, between now and next spring, could then find that out of what he calls social taxation?
§ Lord HOUGHTON of SOWERBY
I am sorry, but my noble friend is mistaken here. The Exchequer contribution is fixed under Act of Parliament as a percentage of the total contributions by employers, employees and other contributors to the Scheme. If more of the burden of the benefits is to be thrust on the Exchequer, then it means revision of the Exchequer contribution. It is not merely a matter of putting it on taxation. It would disturb the relationship between the ratio of the Exchequer contribution to the total of contributions coming from other sources. But it would do more than that. It would maintain the self-employed contribution at a static level at a time when the Bill is increasing the contributions of the employed contributor. That anomaly would be left in the Bill, and would have to be rectified somehow, somewhere, if this Amendment were carried. I beseech your Lordships not to 375 mutilate this Bill now. This is the wrong moment, the wrong way. Let us keep our powder dry until we see the shape of the major proposals coming next year. I submit with great respect that then we can look for the riddance from social security of this outdated mythology that it is an insurance scheme, and we can no longer justify asking self-employed contributors to pay a disproportionate amount on the obsolete theory that they ought to pay two premiums instead of one.
§ Baroness BURTON of COVENTRY
I rise with some diffidence to disagree with the noble Lord, Lord Houghton, because on these matters I would think there is no greater expert than he in either House. I do not propose to offer the Committee any figures tonight; I have none to offer. When this proposal first came before this House, and before the Second Reading debate, instinctively I did not like it. I read the Second Reading debate with great care, and I have listened tonight to what has been said. I think this proposal is unfair. I find that a very simple statement to make, and I find it very difficult to avoid action to try to prevent unfairness taking place.
I note what was said by the noble Lord, Lord Houghton. I, for one, would not dream of disagreeing with him. I am sure he is right when he proposes that if this Amendment is carried it may leave jagged edges. But I do not think that is our concern, because after all—and speaking entirely in a non-Party sense—if Members of Parliament feel that something is unfair, I do not think we are ever going to get anywhere if we sit down and say, "We will leave it until there is a better time". I am sure those of us who have been in either House for some time, and particularly in another place, know that the only effective way of making a protest is to make it across the Floor of the House. It does not make one popular, but it carries more weight than making it upstairs in a Committee room, or in sitting down here and letting something go through.
I think this is unfair. What disturbs me is that I do not like to hear my Government—because while I am a nuisance I still like to think of it as my Government—being accused of something that is not fair. I think this is mean. It is attacking 376 a section of the community which is not able to fight back. I would go further. I do not think such an attack would be made on a section of the community which could fight back. I am sorry to contribute to the ragged edges, but unless by noble friend Lord Wells-Pestell can convince me otherwise, I shall vote for this Amendment tonight.
The Earl of LYTTON
I should be more delighted one day to take part in a debate with the noble Lord, Lord Houghton of Sowerby, on the abuse of insurance. It is evident we share the same kind of view. But I shall not do so tonight. I should declare an interest. For the last half of my life I have been a self-employed person. I am expecting to become an employed person as inflation progresses. I make my protest at the unfairness of this discrimination against the self-employed. I made a random list last night of 76 different groups of people in one-man jobs, one-woman jobs, man and wife jobs, father and son, two friends, brothers —hardly any of them employing anyone, and all of them on the first rung of the middle-class ladder and thereby engaging in work for an 80-hour instead of a 40-hour week. These are the small men and women who will be mightily hit by this. I feel certain it must have been done by some kind of accident. I shall support the Amendment.
§ Lord WELLS-PESTELL
It would appear that I am batting on a sticky wicket. But first of all, I want to say to your Lordships that following the Second Reading on Monday, I gave an undertaking that I would consult my noble friend the Minister of State for Social Security in another place, and in turn he would consult the Secretary of State for Social Services. I fulfilled that undertaking. A good deal of thought has gone into the matter since we discussed this on Monday last. In some ways regretfully, but I think quite rightly that, having said that, I must resist this Amendment. I do so because I personally believe it is right that this Amendment should be resisted.
The noble Lord, Lord Platt, complained with some feeling about various organisations not having an opportunity of consulting with the Secretary of State, but let us be quite frank about it. The Bill was introduced in another place in 377 June of this year. It had an unopposed Second Reading. Am I to be told that the various organisations which represent self-employed people did not know what was in the Bill? Of course they did. But there has been no move on their part, until presumably quite recently, to discuss this matter. My right honourable friend the Secretary of State, in the absence of applications which could have been made months ago and were not, presumably, is entitled to assume that the conditions that were laid out very clearly in the Bill—
The Earl of LYTTON
With great respect, may I interrupt the noble Lord. I find the Bill absolutely incomprehensible. It was not until someone jogged my elbow late in the day that I realised the peril in which my self-employed working friends were.
§ Lord WELLS-PESTELL
In that case, the noble Lord must blame the Party on the other side, because this is based solely upon their 1973 Act. The only difference between us is whether it will be 5 per cent. or 8 per cent.
The Earl of LYTTON
I really do not want to blame anyone. I am a Cross-Bencher and in search of justice.
§ Lord WELLS-PESTELL
It is quite extraordinary to hear members of the Opposition saying, "Hear, hear", when the structure of the Bill is entirely theirs. I am not complaining about it. We accepted the structure of the 1973 Act.
§ Lord MOYNE
I said "Hear, hear" from an independent point of view; it was put by the noble Earl, Lord Lytton, and that is why I said "Hear, hear"; I said it from a non-Party point of view. This whole debate has taken place from a non-Party point of view. If other Parties or our Party have made mistakes, never mind. We want justice.
§ Lord WELLS-PESTELL
It is very refreshing to hear the noble Lord put it like that. But from this side of the House, when there are so many "Hear hears" from the other side, I naturally ask myself what noble Lords opposite did when the Bill was introduced by them, when it was available; I do not know what action noble Lords on the other side took in respect of this matter. All I am saying 378 is—and it may be quite wrong—that so far as the Bill is concerned we have built the Social Security Amendment Bill 1974 upon the 1973 one.
After last Monday I made a point of seeing various Members of your Lordships' House because I felt, and I still feel, that there is some misunderstanding; I tried to get rid of that misunderstanding by giving them certain information to which my noble friend Lord George-Brown referred, because I thought it might help the situation. If I may put it like this, it has been the practice over a good many years that contributions should move in line with earnings. The noble Lord, Lord Houghton of Sowerby, has raised the point that perhaps we ought to look at our entire insurance scheme again, but we have always accepted that this has been the fairest way of dealing with it. It may well be that it is no longer the right way, but this has been the philosophy not only of the Government in power at the moment but a whole succession of Governments who preceded them. If we have to look at it afresh it may well be that the time has come, but at the present moment, basing the Social Security Amendment Bill on the structure of the previous Government's Act, it seems to me thta what we are suggesting is the fairest possible way for the self-employed man.
The noble Lord, Lord Aberdare, quite rightly pointed out that there is the flat rate of £2.41 per week for every self-employed man in receipt of an income after he has had an opportunity under Schedule D of deducting his overhead expenses and so on; it will be on net profit or net gain of over £1,600, and do not let us forget this. He will be dealt with under Schedule D and this means that he will have an opportunity—quite rightly so as a self-employed person—of being able to set against tax overhead expenses and so on, a good many of which are allowable out-of-pocket expenses which the income tax authorities permit. After the £1,600 he will be required to pay, we want 8 per cent. of the net gains or profits. If I may come to the question of benefits, I do not want to go through them all again.
§ Lord GEORGE-BROWN
Could we just get one point quite clear. I do not know how generous my noble friend's particular income tax inspectors are, but 379 we are quite clear, are we not, that the £1,600 represents the income of the self-employed person? He has not charged any wages before that. He may have charged his stamps or his stationery. I would hope my noble friend would not—I know he would not—even by inadvertence, mislead the House. The £1,600 represents the total income of the man after he has been allowed to charge whatever he is allowed to charge.
§ Lord WELLS-PESTELL
Let us put it in very simple terms. It is the net income, not the gross income. Those of us who have been self-employed for a good many years know that there are some advantages in being a self-employed person.
§ Lord REIGATE
Before the noble Lord leaves that point, what are these advantages he draws attention to? In column 38 of Hansard at Second Reading he referred to the expenses which many employed people have to bear but cannot set against taxes. Is he suggesting that a self-employed man is in a particularly privileged position, or is there some fiddle?
§ Lords WELLS-PESTELL
I think the self-employed man is in a privileged position when compared with an employed person.
§ Lord PLATT
Is this not just the trap I pointed out on Second Reading, that because expenses are free of tax people think one is getting ones fares. Let us say a musician goes to Glasgow and he gets a set fee for that. He has to pay his fare, and he can claim back about one-third of it by not paying tax on that fare, but he has still paid the other two-thirds, has he not?
§ Lord WELLS-PESTELL
With great respect, I would ask your Lordships to allow me to continue. I am merely saying that it is a well known fact that a person who is self-employed—and I have been self-employed for a good many years myself until fairly recently—can set against income tax certain kinds of expenditure, and the better the accountant the better you succeed. What I want to return to is the benefits which the self-employed people receive. I mentioned a moment ago that they are entitled to all 380 the benefits with the exception of unemployment benefit, industrial injury benefit, and earnings related supplements in relation to certain other matters. It is on that basis that the previous Government and we have determined the rate of contributions. I ought to explain at this stage that the term "widow's benefit" is a collective one for all the benefits to which a self-employed person is entitled; namely, a widow's allowance which is payable for the first six months of widowhood, a widowed mother's allowance payable to widows with children, and a widow's pension. We refer to these three benefits, all being available to the self-employed person, as "widow's benefits".
The Government Actuary estimates—and I do not want to burden your Lordships with figures, because I think they can be misleading and can be used to suit almost every argument—that the National Insurance benefits to which self-employed people are entitled is something like 90 per cent. in cost of all National Insurance benefits. The precise figures vary from year to year. From 1949 to 1950, and from 1950 to 1951, a self-employed person was entitled to 95 per cent. of the National Insurance benefits. It went up to 97 per cent. from 1960 to 1961; it was 91 per cent. in 1970–71, and in 1973–74 it was 93 per cent. So it means that to pay fully for what they get back in benefit the self-employed contributions should be—because it would not be unreasonable for them to be—90 per cent. of the employee-employer Class 1 contribution, but never at any time have the self-employed persons in this country been required to contribute that amount in terms of their own national insurance payment.
At the present moment the Class 1 payment—that is the payment made by the insured person and the employer—amounts to a total of 14 per cent. If we were to say—as the Government Actuary has said since about 1942 when we were considering the Beveridge Plan —to the self-employed person, "You have 90 per cent.; you are entitled to 90 per cent. of the benefits which the employee gets, therefore you ought to pay that amount", then we should be entitled, any Government would be entitled, to ask the self-employed person to contribute 12.4 per cent. In point 381 of fact, what we are suggesting in our Bill, the Social Security Amendment Bill 1974, is that they pay 8 per cent. and not what the Government Actuary has said over a period of time should be much higher.
I concede that the point between us is whether it should be 8 per cent. or 5 per cent. If it is 5 per cent., obviously —and I do not think the noble Lord, Lord Aberdare, would disagree with this —the flat rate of £2.41 per week would have to be increased to £2.70.
§ Lord ABERDARE
I do not agree with that. I tried to explain in my speech that there was surplus money in the Government Actuary's own figures which would meet the £21 million difference. I do not accept that.
§ Lord WELLS-PESTELL
But, you see, benefits have to be met and paid for out of contributions, and always assuming—and I would accept—that there is a surplus, one has to bear in mind that the Government are committed to raising pensions and benefits in April next year and again in December. One has to keep a surplus in order to raise benefits and pensions in the coming year. It seems that the whole structure of our system has been that benefits should be related to contributions. As I said at the beginning, it may well be that the time has come when we have to think out this situation again, but what we are faced with at the moment is benefits related to contributions. We feel, rightly or wrongly, that when dealing with self-employed people—and it has been represented in your Lordships' House on Monday and again today that there are many who are receiving far less than £1,600 a year—it would, in our view, be quite wrong that we should raise the flat rate contribution, which would have to be done, from £2.41 to £2.70 in order to maintain Class 4 at 5 per cent. We feel that relieving the burden a little on the part of the flat rate and putting it on, shall I say, to Class 4
§ contribution by raising the 5 per cent. to 8 per cent., is the right thing to do.
§ We have thought of this again very carefully this week, and I feel that if your Lordships are concerned about the plight of the lower paid self-employed person then it is far better that he, or she, should have a flat rate that is being kept down, and that the balance which one loses as a result of that should be obtained from those who are financially better off.
§ Lord DARWEN
May I ask whether my noble friend thinks that that is the only possible alternative; namely, to vary the flat rate in order to recoup the money?
§ Lord WELLS-PESTELL
As the situation is at present, the basis upon which we calculate contributions—not only this Government, but previous Governments—the present structure requires us to do that, yes.
§ Lord ABERDARE
I am sure that the Committee is ready to come to a decision on this matter. I am grateful to those noble Lords from all parts of the House, the Liberal Benches, the Government Benches, and the Cross-Benches, who have supported this Amendment. This represents the feelings of a great many self-employed people and organisations throughout the country, and it would be right that this House should express its view on this matter. I do not agree with the noble Lord, Lord Houghton, that this leaves any jagged edges. If there are jagged edges, then all we are doing is giving another place a chance to look at this again, to take into consideration the strong views that have been expressed in this House, and any jagged edges can be "unjagged".
§ 7.35 p.m.
§ On Question, Whether the said Amendment (No. 2) shall be agreed to?
§ Their Lordships divided: Contents, 87; Not-Contents, 28.383
|Aberdare, L.||Belstead, L.||Courtown, E.|
|Airedale, L.||Bledisloe. V.||Cowley, E.|
|Amherst of Hackney, L.||Boyd of Merton, V.||Darwen, L.|
|Amory, V.||Brougham and Vaux, L.||de Clifford, L.|
|Arbuthnott, V.||Burton of Coventry, B.||Denham, L. [Teller]|
|Balerno, L.||Carrington, L.||Derwent, L.|
|Barnby, L.||Colwyn, L.||Drumalbyn, L.|
|Barrington, V.||Cottesloe, L.||Elles, B.|
|Elliot of Harwood, B.||Long, V.||St. Aldwyn, E.|
|Elton, L.||Lucas of Chilworth, L.||St. Davids, V.|
|Emmet of Amberley, B.||Lyell, L.||St. Helens, L.|
|Falmouth, V.||Lytton, E.||Saint Oswald, L.|
|Gainford, L.||Macleod of Borve, B.||Sandford, L.|
|George-Brown, L.||Merrivale, L.||Sandys, L.|
|Goschen, V.||Milverton, L.||Seear, B.|
|Gowrie, E.||Monck, V.||Selkirk, E.|
|Greenway, L.||Mowbray and Stourton, L. [Teller]||Somers, L.|
|Grimston of Westbury, L.||Stamp, L.|
|Hacking, L.||Moyne, L.||Strathcona and Mount Royal, L.|
|Hailsham of Saint Marylebone, L.||Northchurch, B.|
|Nugent of Guildford, L.||Strathspey, L.|
|Hanworth, V.||Oakshott, L.||Swansea, L.|
|Harvey of Tasburgh, L.||Peddie, L.||Terringon, L.|
|Hereford, V.||Platt, L.||Teviot, L.|
|Hornsby-Smith, B.||Polwarth, L.||Trefgarne, L.|
|Inglewood, L.||Rankeillour, L.||Vernon, L.|
|Killearn, L.||Reay, L.||Wade, L.|
|Lauderdale, E.||Redesdale, L.||Wakehurst, L.|
|Lindsey and Abingdon, E.||Reigate, L.||Waldegrave, E.|
|Lloyd of Kilgerran, L.||Robbins, L.||Young, B.|
|Balogh, L.||Hale, L.||Melchett, L. [Teller]|
|Beswick, L.||Harris of Greenwich, L.||Milner of Leeds, L.|
|Birk, B.||Houghton of Sowerby, L.||Pannell, L.|
|Brockway, L.||Jacques, L. [Teller]||Shepherd, L. (L. Privy Seal)|
|Castle, L.||Janner, L.||Strabolgi, L.|
|Crowther-Hunt, L.||Llewelyn-Davies of Hastoe, B.||Wells-Pestell, L.|
|Davies of Leek, L.||Lovell-Davis, L.||White, B.|
|Elwyn-Jones, L. (L. Chancellor)||McLeavy, L.||Winterbottom, L.|
|Fisher of Camden, L.||MacLeod of Fuinary, L.||Wynne-Jones, L.|
On Question, Motion agreed to.
§ Resolved in the affirmative, and Amendment agreed to accordingly.
§ 7.43 p.m.
§ Lord ABERDARE moved Amendment No. 3:
Page 3, line 33, at end insert—
(5) No Class 4 contribution shall be payable in respect of self-employed persons over pensionable age.
§ The noble Lord said: The object of this Amendment is to seek special concession from the Government in favour of those self-employed people over retirement age; that is, for men over 65 and women over 60. Many of these people are finding life pretty hard at the moment. They may well have saved throughout their lives only to find that their savings have been eroded by inflation, so that they are more or less forced to go on working beyond their normal retirement age. The Amendment suggests that to help them they might be relieved of the burden of paying Class 4 contributions of 8 per cent.—or, I suppose now, 5 per cent.—over the prescribed range of earnings.
There are several other instances where the Government have made concessions to the elderly, and only recently the Chancellor of the Exchequer put their exemption limit for investment income surcharge
at £1,500 instead of the normal £1,000. Indeed, in Clause 1(2) the Bill itself contains a concession to those over pensionable age. This is a complicated subsection, but it is summed up in the Explanatory Memorandum which states:
Subsection (2) provides that no primary Class 1 contributions shall be payable by retirement pensioners or by certain other persons over pensionable age".
§ Here is a valuable concession being made once again to employed persons. Why is it that if the employed earner is to be excused from paying Class 1 contributions on retirement in certain circumstances, no similar provision is made for the self-employed? Here, again, there seems to be discrimination against the self-employed. But, as the noble Lord has admitted, it is a complicated Bill. I may not have correctly understood the position, and I shall not press the Amendment; my object is to find out what is the real position. I beg to move.
§ Lord WADE
I want only to take the opportunity of asking a question. At column 11 of Hansard of 2nd December on the Second Reading debate, the noble Lord, Lord Wells-Pestell, said:Clause 1 also amends the 1973 Act so as to remove all contribution liability from retirement pensioners who go out to work, and I 385 am sure that this has the approval of the whole House."—[OFFICIAL REPORT, 2/12/74; col. 11.]Does that mean all retirement pensioners, whether they were self-employed or in some other category? I just wanted some elaboration of that sentence.
§ Lord WELLS-PESTELL
As I understand it, the purpose of this Amendment is to secure that self-employed people over pensionable age have no liability for Class 4 contributions. I think it would be fair to say that the Amendment is inconsistent with the contributions structure set up by the former Conservative Government under the Social Security Act 1973. The whole purpose of the Class 4 contribution established under that Act is to make the contribution arrangements for self-employed earners as close as possible to those of employed earners, and this is what I tried to say when we were discussing the previous Amendment. Although it is not possible to make contributions for the self-employed wholly earnings-related, as I accept they will be for the employed, the Bill goes a good way towards this by introducing the earnings-related Class 4 contribution.
This contribution ensures that the self-employed with higher earnings make a greater contribution towards the general cost of current benefits than those with lower earnings, as in the case with employed earners. Just as the liability of the employed earners under the new arrangement will continue beyond pensionable age if they do not require to retire, so will the self-employed persons' liability for contributions continue. There could be no justification for excepting the self-employed from paying Class 4 contributions without a corresponding reduction in the liability of employed earners for Class 1 contributions. So far as retirement pensioners are concerned, whether working as employed or self-employed, they will not be liable to pay contributions.
There is another factor. The loss of income to the National Insurance Fund which would result from the Amendment would, in isolation, be something like £1 million a year, and while the amount is comparatively small the point is that this Amendment could not be met in isolation. To do that would undermine the purpose of Class 4 contributions and 386 would produce a situation which was grossly unfair to employed earners. If anything were done it would have to apply to the employed earners as well. If all people were relieved of liability for contributions on reaching pensionable age, even though they did not retire, the loss of income to the fund would be something like £18 million a year, and this loss would have to be made good by increasing the burden on those below pensionable age. In fairness, this would have to include the self-employed, and in view of the Opposition's comments about the amount of contributions which the self-employed will have to pay from next April, I cannot think that they would wish to take any action which might increase it. If I may just say this, the Amendment talks about people over pension age who have not retired.
§ Lord ABERDARE
I am grateful to the noble Lord, and I understood what he was telling me. There is only one more point about which I should like to ask him, and perhaps he would like to write to me later on it because it is a little complicated. Under Clause 1(2)(a) an employed person does not pay contributions if he is retired from regular employment, and that is also true of the self-employed. But, with employed persons, equally they do not pay contributions if they have not so retired but do not satisfy the contribution conditions for a Category A retirement pension on obtaining that age. This is a concession to the employed man. If his contributions do not entitle him to a Category A retirement pension when he reaches retirement age, he does not have to go on contributing. The question I should like to ask is: does this concession also apply to the self-employed person who has reached retirement age but who has not satisfied the contribution conditions for a full pension? However, I have said that I do not expect the noble Lord to answer me straightaway, and perhaps we could talk about it later.
§ Lord WELLS-PESTELL
If the noble Lord would allow me to look at Hansard, then perhaps I could write to him or see him in order to reply.
§ Amendment, by leave, withdrawn.387
§ 7.52 p.m.
§ On Question, Whether Clause 1, as amended, shall stand part of the Bill?
§ Lord ABERDARE
Before the Question on Clause 1 is put, I think the noble Lord, Lord Janner, and I are on to the same point with regard to people who are employed and self-employed and are liable to pay contributions under Classes 1, 2 and 4. It seems rather extraordinary that a person who receives only the same benefits as he would from paying Class 1 payments should be expected to contribute under Classes 1, 2 and 4. I can understand that if he is not doing a whole-time job and is filling in part of his time as a self-employed person, then there could be a case for asking him to contribute under these three different categories. But there are cases—and I am quoting particularly from the Council of Engineering Institutions—where engineers are fully employed in academic posts, in universities and polytechnics, where they are paying a full Class 1 contribution, but where, at the same time, they do consultancy work, which is very valuable to industry and very valuable to them in keeping in touch with industry, where they are expected to pay Class 2 and Class 4 as well. This is a particular case —and I am sure the noble Lord, Lord Janner, may wish to say a little more about it—and it is something that is worrying the engineers.
I am obliged to the noble Lord for having raised this point. It has been brought to my notice as well, and I think that before we finish with Clause 1 I should like to ask my noble friend to deal with this matter. There is a large number of people, mostly in the professional field, who may find themselves obliged to pay not only Class 1 contributions but Class 2 contributions as well, in certain circumstances even Class 4 contributions in addition to that. As the noble Lord has said, this issue is causing particular concern to the Council of Engineering Institutions, which coordinates the activities of the leading institutions of professional engineers in this country, such as the Institutions of Civil Engineers, Technical Engineers, Chemical Engineers, Mechanical Engineers and so on, numbering 15 in all. They point out, for example, that many engineers hold academic posts in universities, as the noble Lord has said, or in polytechnics 388 and so on, and in addition to their salaried employment at such places they are frequently involved as consultants or advisers in practical engineering projects.
This can obviously be of the greatest benefit to industry and to the universities, in so far as it keeps the academics in touch with up-to-date practice in their professions. It can be of particular value in the field of technical and technological education. The anxiety of the engineering institutions has not been in any way allayed—indeed, the contrary—by a paragraph in the leaflet entitled New Contribution System for the Self-Employed and Non-Employed, (NP 7), which reads as follows:If you have two jobs at the same time, one as an employee and the other in self-employment, then you will have to pay both Class 2 contributions and, as an employee, Class 1 contributions. However, if you pay more than a specified amount, the excess will generally be refunded. In certain circumstances, you may apply for liability for Class 2 and Class 4 contributions to be deferred until after the end of the tax year. Details will be available from local Social Security offices in September 1974".Of course, this kind of leaflet which is sent out is not very easily understood, particularly by people who are not accustomed to reading or to following legislation.
There appears to be no assurance in this paragraph that there will necessarily be any refund of the double or treble contributions, and unless the Minister can give some such guarantee there is obviously much trouble ahead. It is unfair in any event, I believe the Minister will agree, that one professional engineer earning a certain sum of money a year as an employee and another as a consultant—that is, shall we say, £5,000 or £6,000 in all—should have to pay substantially more in contributions than a colleague earning the same amount solely as an employee or solely as a consultant. I should like my noble friend to explain the position and to let us know how this is going to work in practice.
§ Lord WADE
I, too, have received this letter. I will not repeat what has been said but I shall be interested to hear the answers to the questions which have been raised. The only point which has occurred to me is that I do not know the date of the leaflet attached to the letter, 389 and that may possibly make some difference.
§ Lord WELLS-PESTELL
I am grateful to the noble Lord, Lord Aberdare, for mentioning this matter to me last night, and also to my noble friend Lord Janner, who did likewise. There is a leaflet—the noble Lord, Lord Wade, referred to it earlier today—NP 18, which refers to "Your contribution liability if you have more than one job". It sets out that, if you have more than one job and pay more than the prescribed amount of contributions for a year, you may obtain a refund; and then it sets out the ceiling of the contributions. Obviously, one cannot give a definite answer as to what the situation is in relation to people in that position generally. These matters have to be dealt with individually. It may well be that one person is employed almost whole-time, or whole-time, as a Class 1 contributor. He may be half and half; and these matters will have to be looked at individually. I would concede that perhaps the leaflet itself is not of very great help to people who are doing two or three jobs, because it has to be determined on the amount of time they spend in each job.
The only advice—and the best advice —I can give in the circumstances to people who find themselves in that situation, is that it would obviously be to their advantage, financial and otherwise, to go along to their local office of the Department and discuss their own position. The officers at local offices have been informed of this situation, and they are expecting people to put their own positions to them so that the level of contributions can be determined. If in any one year they do pay more, they can apply for a refund.
§ Lord ABERDARE
The only thing that is still unsatisfactory is the wording of the leaflet. When it says that if your contributions exceed a certain sum you may get a refund, it rather sounds as though you might not. I should have thought that if your contributions exceed a certain sum, you will get a refund.
§ Lord WELLS-PESTELL
With very great respect, the noble Lord will know that there are always exceptions, and I think it would be quite wrong in an official leaflet to say you "will" when 390 at the time the leaflet was issued no-one could possibly know the individual circumstances of everybody to whom it would apply.
§ Lord ABERDARE
If the leaflet gives a ceiling, if it says there is a limit to the total contributions you need make, then if your contributions exceed that limit you certainly should get a refund, I should have thought.
§ Lord WELLS-PESTELL
If it goes out from your Lordships' House to everybody who is likely to be involved that they can get on-the-spot, expert help and advice in regard to their own position by going along to the local office of the Department of Health and Social Security, I think this would meet every situation.
§ Clause 1 agreed to.
§ Remaining clauses and Schedules agreed to.
§ House resumed: Bill reported with an Amendment.