HL Deb 24 July 1979 vol 401 cc1848-55

4.46 p.m.

Lord CULLEN of ASHBOURNE rose to move, That the draft order laid before the House on 5th July, be approved. The noble Lord said: My Lords, the purpose of these regulations is to remedy an unintended consequence of the Social Security Act 1975, the result of which has been to put students who claim unemployment benefit during the short Christmas and Easter vacations in a privileged position compared with the general body of contributors.

Under the pre-1975 legislation a person entering National Insurance had to work for at least 26 weeks in order to pay sufficient contributions to satisfy the first contribution condition for unemployment benefit. Students entering higher education straight from school were not usually able to work for long enough to achieve this. Only about 10 per cent. of the students who registered for employment during their vacations qualified for unemployment benefit, and these were most likely to have been mature students.

By contrast, a person entering National Insurance under the 1975 Act can satisfy the first contribution condition after a much shorter period of work. This is because contributions are now related to the level of a person's earnings rather than to the number of weeks he has worked. To satisfy the first contribution condition, a person now has to have paid contributions on earnings in any one year of at least 25 times the weekly lower earnings limit. A student leaving school this summer and finding work would be expected to earn sufficient each week to satisfy the first condition within about 10 weeks before entering higher education compared with 26 weeks previously by paying contributions on total earnings of only £487.50. If he were then to claim unemployment benefit at the Christmas vacation, he could receive starting credits to enable him to meet the second contribution condition, which requires a person to have paid or been credited with contributions on earnings of at least 50 times the weekly earnings limit for the relevant tax year; that is the tax year preceding the calendar year in which the interruption of employment begins.

Starting credits have long been available to new entrants to insurance, but they were made more generous under the 1975 Act. In qualifying for unemployment benefit on the basis of this very limited amount of work, the student could then receive benefit at each vacation throughout his course without undertaking any further employment. This is because claims for benefit made within 13 weeks of one another link to form a single period of interruption of employment, and since university vacations are usually less than 13 weeks apart, each claim made by the student would be determined by reference back to the same contribution year in which he had received the benefit of starting credits.

In addition to this, it should be recognised that the Christmas and Easter vacations are so short as to make the employment prospects of any student who has not made previous arrangements to work very slim indeed and to make his unemployment at these times a virtual certainty rather than an insurable risk. Taken together these factors place students in an unduly favourable position compared with the general body of employed earners. If the latter lose employment, they may receive initial help from starting credits but thereafter they are likely to have to satisfy the second contribution condition on each occasion that they are unemployed. This is because these earners do not normally experience regular and successive periods of unemployment falling within the 13-week periods.

The previous Administration submitted proposals to the National Insurance Advisory Committee in 1977 which would have completely withdrawn a students' entitlement to unemployment benefit in the short vacations, but the committee rejected them as "too blunt an instrument." The following year a majority of the committee rejected fresh proposals requiring students to have paid 50 times the weekly lower earnings limit in the relevant tax year, or the tax year preceding it, in order to qualify for benefit in the short vacations. They held to their previous view that entitlement to contributory unemployment benefit should not be withdrawn from a particular section of the community. However, on that occasion two members of the committee supported the proposals on the grounds that it was fair and proper that those who chose to be full-time students before having had much employment and then claimed unemployment benefit should be required to meet an additional condition compared with the rest of the contributors.

On 30th November 1978 the previous Government announced in another place that they had taken account of the committee's recommendation and would not proceed with the regulations for the time being. They said, however, that they still considered it important in principle that students should not have such easy access to unemployment benefit, and that they would therefore be considering whether these or similar regulations should be introduced for the 1979 academic year.

We have considered the whole issue very carefully, not least because of the majority recommendations against the proposals by the National Insurance Advisory Committee, whose advice we take very seriously. However, in the light of all the facts, we are forced to conclude, like our predecessors, that regulations are needed to prevent continuation of a situation that is impossible to justify. I think that none of us was aware of the unduly generous effects that the 1975 Act could have for students when we were debating it.

To satisfy the additional condition that would have to be met under these proposals before unemployment benefit could be paid in the short vacations, students would need to have paid contributions on earnings of 50 times the lower earnings limit. Someone claiming for the first time in December 1979 could satisfy the condition if he had earned £750 in the tax year ending in April 1978, or £650 in the tax year ending in April 1977. These amounts could have been earned within about 2½ months by someone on average earnings. "Mature" students, who have always been able to claim unemployment benefit in their vacations, would normally satisfy the special condition, but it would be unusual for a student who had gone straight from school to further full-time education to be able to do so. The additional condition would not apply during the summer vacation.

About 30,000 students qualify for unemployment benefit in each short vacation, and it is estimated that around 6,000 of these may be mature students, most of whom will still be able to qualify for benefit at these times. The saving in public expenditure is estimated at about £4 million a year.

The conditions set out in the proposed regulations are the same as those submitted to the National Insurance Advisory Committee by the previous Administration. These regulations amend the principal regulations by inserting after Regulation 19 a new regulation, Regulation 20. Regulation 1 is formal and includes provision for the regulations to come into operation upon the day on which they are made. Regulation 2 inserts the new Regulation 20 into the principal regulations.

With regard to the new Regulation 20, paragraph (1) describes the category of persons in respect of whom an additional condition for the receipt of unemployment benefit is imposed. Paragraph (2) sets out the additional condition whereby a person who comes within the prescribed category is required to have paid contributions based on a minimum level of earnings in the tax years to which the paragraph refers.

Paragraph (3) provides for a student, in cases where the earliest of the two tax years referred to in paragraph (2) is the one ending in 1975, to meet either the condition in paragraph (2), or an alternative condition. Paragraph (4) provides for a student, in cases where both the tax years referred to in paragraph (2) fall before the tax year ending in April 1976, to meet the alternative condition referred to in paragraph (3). Paragraph (5) provides that the additional condition applies only in respect of days between the beginning of the first term starting after 31st August in any one year and the end of the last term finishing before 31st August in the following year, so that the additional condition will not apply in respect of days falling within the long summer vacation. Paragraph (6) provides that once the additional condition has been satisfied, it does not have to be satisfied again in respect of any future claim for unemployment benefit. Paragraph (7) defines "benefit year" for the purpose of these regulations.

These regulations will not affect many students, and the financial savings are comparatively small. But some restriction of students' rights to benefit is necessary in the interests of other contributors, and we do not think it unreasonable to expect a student who may qualify for unemployment benefit at regular intervals over three to four years to show that he has a reaonable attachment to the employment field. I recommend to your Lordships that the regulations be approved, so that they can take effect in the 1979–80 academic year. My Lords, I beg to move.

Moved, That the draft order, laid before the House on 5th July, be approved.—(Lord Cullen of Ashbourne.)


My Lords, there is not much I want to say beyond thanking the noble Lord the Minister for giving such a detailed and fairly simple explanation of the position. I do not find myself very much at variance with it, because the principle involved is very much in keeping with the thinking of the last Government, and although the figures may differ a little, what is proposed runs parallel with what we had in mind. Therefore, I approve of the order and give it support.

4.59 p.m.


My Lords, I wish to thank the noble Lord for his very careful explanation of the regulations. He has made it very clear that since the introduction of the 1975 Act students going straight from school to higher education, because under that Act they are given more generous starting credits than previously, and due to the working of the 13-week rule, can claim unemployment benefit during all vacations of a 3-year course, this being based on only a few weeks' actual employment. As the noble Lord has said, that was never the intention, and he has indicated that it caused concern to the previous Government as well as the present Government, and it led to the previous Government putting forward the suggestion that all students should be debarred from receiving unemployment benefit in the short vacation. The National Insurance Advisory Committee recommended against that suggestion. Then came the proposal from the last Government in similar terms to that before us this afternoon, requiring a longer term of employment in effect, and not affecting mature students—a regulation which would apply only to the short vacations.

During the operation in the last Parliament of the Lib-Lab pact (as it was called) the Minister for Social Security consulted me about this proposal, and at that time I got in touch with the National Union of Students and other student bodies to sound out opinion. At that time no objection in principle was made to me about the possible introduction of a third condition, although, of course, objections have been made subsequently. But there was concern expressed about mature students, because there was at that time the danger that a mature student's entitlement might run out before the end of the course. I recommended to my colleagues that we should say to the Government that we would support the proposal provided we were satisfied about the position of mature students; and in the order which we have before us I think that point has been met.

This point of view was expressed by my colleagues to the Government; the Government then drew up the order and presented it again to the National Insurance Advisory Committee; and, as we have heard, they recommended against it. They said that students should not be treated separately. As against that, there is the fact that other classes of contributor are treated separately already—share-fishermen and seasonal workers—and I think it is important to bear in mind that we are not talking about supplementary benefit. There are problems connected with the application of supplementary benefit to students, but we are not talking about that here; we are not talking about particular cases of hardship. It is a matter of contributions record, and the question is: Should perhaps two and a half months' employment between school and university be sufficient grounds for qualifying for unemployment benefit through all the vacations of a university course, particularly when you bear in mind that there is a maintenance element included in the student grant to cover the short vacations?

I do not believe that that was Parliament's intention, and I do not really think it is fair to other contributors—a view which, as the noble Lord has said, was sustained by two of the eight members of the National Insurance Advisory Committee. But they did recommend by six to two against these proposals, and therefore the question arises as to whether the Government should go against the advice of the committee. I suppose we then ask: Should the Government ever go against the advice of the committee? I think we must say that the committee are a most valuable and important body, and no Government should lightly reject their view—indeed, the noble Lord said that the Government had not done so; but they are advisory, and therefore must expect, surely, that their view will not be accepted in every case.

So, on balance, I support the order which both Governments have thought to be necessary, but in conclusion I should like to make it clear that I am not by any means satisfied about the adequacy of students' grants, nor about the practice of making some students dependent on a parental contribution. I want, too, to get away from the concept of benefit in relation to contributory record and into an entirely new system of tax credit. But so long as we have a contributory system it should be fair as between different sections of contributor.


My Lords, perhaps I may ask my noble friend a question. Unlike ordinary unemployed people, if students wish to take a job during their vacations can they at the same time have unemployment benefit? This is a question to which I have never had an answer, and I do not really know what the answer is: but is it in fact legal for them so to do?


The answer is, no.


My Lords, may I ask the noble Lord, Lord Cullen, a question, simply to elucidate on what he said? He mentioned a figure of 30,000 students, of whom 6,000 were mature students, and he said that most of them will be able to claim. Was he referring to the 6,000 mature students or to the whole of the 30,000?


My Lords, I should first like to thank both the noble Lord, Lord Wells-Pestell, and the noble Lord, Lord Banks, for their approval of the order, and I should particularly like to thank Lord Banks for having made such a valuable contribution to the short debate on this matter. I am sure that my noble friend the Secretary of State will read what he has said with great interest. Mature students have never had difficulty in the past; and, of the 30,000 students, the majority will be unable to claim because they will not have had the opportunity to do sufficient work. Before, it was quite easy for them to do about 10 weeks' work, but they would not normally be able to claim; and we reckon the savings would be about £4 million. I may say that the 30,000 students we are talking about are those out of, say, 500,000 students who are at universities, polytechnics and similar institutions.