§ 2.49 p.m.
§ The Minister of State, Department of Education and Science (Baroness Young)
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.—(Baroness Young.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [THE LORD ABERDARE in the Chair.]
§ Clause 1 [Increase in contributions]:
§ The Chairman of Committees (Lord Aberdare)
I have to point out that if Amendment No. 1 is agreed to I cannot call Amendment No. 2.
§ Lord Wells-Pestell moved Amendment No. 1:
Page 1, line 13, leave out subsection (2) and insert—
("(2) In section 4(6) of the principal Act, at the end there shall be added the words "and there shall be an additional primary contribution of 1 per cent. of so much of the earnings as exceeds the said upper earnings limit or prescribed equivalent." ").
§ The noble Lord said: I beg to move the amendment standing in my name on the Marshalled List. As your Lordships will know, the Bill provides for an increase of 1 per cent. in the national insurance rates of earnings between the lower amount of £27 per week and the upper amount of £200 per week. May I say at the very beginning that we on this side of your Lordships' House—and I know that those of you on the Government side will agree with me entirely, if only for the very first time—agree that there is a need on the part of every Government, and particularly on the part of this Government at the present moment, to raise more money to meet a variety of types of expenditure. Having said that, we on this side suggest that the method adopted in this Bill is seriously open to question and in some measure quite unfair. A section of the earners will be bearing an unfair burden, compared with those earning very high incomes. The purpose of the amendment now before your Lordships is to try to make the position more equitable. I would ask your Lordships to spend a moment or two looking at the situation.
§ Taking the £27 per week to £200 per week employees, the £27 earner will pay 7¾ per cent. on all his earnings, as will the £200 per week earner. The £27 per week person, as I understand it, is not likely to be eligible for income tax, so the extra 1 per cent. that he is required to pay under this Bill—I try to say this kindly, although I do not feel very kindly about it—is in fact a form of taxation. The £200 per week person will pay—taking the 7¾ per cent. which he will have to pay under this Bill—something like £15.50 per week national insurance contribution. At this point the amount remains fixed, regardless of what he may earn in the future and regardless of what anybody else is earning. So a person earning £300 a week, £400 a week, £500 a week will still pay only £15.50 per week. It is this point which I want to stress.
§ If the Government have to raise extra money—and I have already conceded that it is necessary to do so—is this the most appropriate way or the most equitable way of doing so? I say that there is an obligation on any Government, regardless of their political complexion, to be fair. This amendment would provide for an employee earning more than £200 per week to pay an extra 1 per cent.; that is, an extra £1 per week for every additional £100 of earnings. So whereas a £300 a week man will now only pay £15.50, if this amendment is accepted he will have to pay £16.50, and so it would go up at 1 per cent. This seems to me to be not unreasonable, and although I cannot give your Lordships the exact figure, it will in fact bring in an extremely substantial sum to the Treasury. Is it right, is it fair, is it equitable that people earning over £200 a week, regardless of whether it is £300, £400, £500, £600, or £1,000, should still pay the same rate of national insurance as the person on the £200 a week limit?
§ I know the answer will be, "Ah, but they pay a great deal more in income tax". This I do not deny. 564 But what I do suggest is that they are in a position to pay this extra amount, bearing in mind that a great deal of the burden of raising this extra money will come from the £27 a week to the £200 a week employees. It seems quite reasonable to me—I am open to be told that I am wrong, if it can be proved that I am—to say to people earning in excess of £200 a week that they should be required to pay 1 per cent. on all they earn over that. It is only £1 in respect of an additional £100 per week. It will bring in a substantial amount for the Treasury and will relieve the burden on other people. I beg to move.
§ Lord Drumalbyn
Before the noble Lord sits down, may I ask him what estimate he has made of what this £1 will bring in on earnings above the upper limit?
§ Lord Wells-Pestell
I have seen this, and I had cut it out, but I have mislaid the cutting. I do not often do that. I gather it is a very substantial amount. I do not know whether the Government, who have undoubtedly considered this matter, will be in a position to reply to the noble Lord.
It would help if the noble Lord would say what they are going to get out of the extra pound if they become sick or unemployed. It is to some extent an insurance scheme. Is the rich man going to get any more benefit than the £200 a week man?
§ Lord Wells-Pestell
If the Committee will allow me to reply, anybody who is paying national health insurance, whether earning £200 a week or £300 a week, is entitled to the same benefits, and those benefits, if I may say so, are numerous.
§ Lord Banks
I should like to say a brief word in support of this amendment. It has always seemed to me, as it seems to the noble Lord, Lord Wells-Pestell, that it is unfair that those earning over the top limit, of £200 a week under this Bill, should have their national insurance contributions as a percentage of their earnings actually decline the higher their income is. The continued extension of intervals of upper limits results in those caught between the old upper limit and the new upper limit having to pay in the year that they are caught a particularly heavy amount. I did point out on Second Reading that for the person on the £200 a week maximum it will be an increase of 39 per cent. in his national insurance contributions. If there were no top limit for contributions, that would remove that anomaly.
There is the question of whether to do that would be a disincentive. I am not, of course, suggesting that a higher rate should be paid by those who are earning higher salaries; merely that a rather lower rate than the present one should be spread over the whole of earnings. I do not think that need be a particularly serious disincentive. I would not increase the benefits provided on the other side. I would not increase the limit on the benefits side, which does of course include the earnings-related pension. I would not do that because in my view to do so would upset the balance—which was established when this scheme was set up—with occupational schemes.
That then raises the question of whether it is right 565 to have contributions with no limit on the one side, whereas benefits are related to a limited amount of income on the other. The Government already seem to be moving in this direction because they are phasing out the earnings-related supplements attached to other benefits and this would merely be a move in that direction. Moreover, the position exists at present with the self-employed that they get no increased benefits for the increased amount, the percentage, that they pay of their income. So, the principle would seem to have been established in one part of the national insurance field. This particular amendment would be a very modest step towards that end. It would not extend over the top limit the whole percentage, but merely the 1 per cent. that the amendment sets out; so it would not remove the anomaly, but it would mitigate it to some extent. To that extent I would support the amendment.
§ Lord Boyd-Carpenter
As we are in Committee I think that I am entitled to ask the noble Lord, Lord Wells-Pestell—if I may have his attention—whether he will clarify a little the answer that he gave, admittedly off the cuff, to my noble friend Lord Hawke as to the effect on benefits of acceptance of his amendment in relation to contributions. I am concerned with the retirement benefits. As the Committee knows, we have—up to a point—an earnings-related system of retirement benefits. As a matter of interest I had the privilege of taking through another place the 1959 Act which started that system, so it is fairly familiar to my mind.
But, as I understood the noble Lord, Lord Wells-Pestell, he said that benefits generally—which obviously include retirement benefits—would not be increased by the adoption of his amendment. I respectfully express a doubt as to whether his amendment is, in fact, framed to have that effect. As I understand it, if it were passed into law it would have such an effect. But I think that one is entitled, in Committee, to take the intention of the mover. As I understand it, his intention is to superimpose on a wage-related system of retirement pensions a further contribution which has no effect at all on retirement benefit. With great respect, that will surely reduce the scheme to a measure of some confusion.
If, on the other hand, the Committee were to adopt the noble Lord's amendment as it stands, I would express the opinion that it would "up" at any rate the retirement benefit and this, of course, as the noble Lord, Lord Banks, has rightly pointed out, would have a considerable effect on the understanding between the national insurance scheme and the private schemes as to their scope and area of activity and as to the whole machinery of contracting out.
Therefore, I think that the noble Lord owes the Committee a little further explanation on this point, and I hope, if he gives it to us, that he will also be good enough to explain why he thinks it right to impose what, on his own view of it, would be a direct additional tax on people who already pay very high rates of taxation indeed.
§ Lord Wells-Pestell
Yes, of course. I think that I interpreted what the noble Lord, Lord Hawke, said rather too negatively. I thought that the noble Lord was referring to benefits to which one was entitled—I was thinking quickly about unemployment. I would accept that it must marginally—I cannot say to what extent and I cannot say the exact amount—affect the benefits that people are entitled to by way of retirement and matters like that. I accept that. But it would only affect them marginally because we are talking about an increase of only £1 a week, which I grant you is £52 a year, for a person who earns an additional £100 a week. As I have said, I wish I could tell the Committee what has been computed to be the value to the Treasury of this increased amount, if it were implemented. I am afraid I have forgotten the third point which the noble Lord asked me about.
§ Lord Boyd-Carpenter
I asked the noble Lord why, on his assumption originally made that this increased contribution would carry no benefit or indeed on the assumption he now makes that it would give only little additional retirement pension, he thought it right to superimpose on the national insurance scheme what would, in substance, amount to a direct additional tax on that section of earners already paying high rates of direct taxation.
§ Lord Wells-Pestell
I thought that I had dealt with that when I introduced the amendment by saying that it seemed to me that the burden of raising extra money was going to be put on that section of the community which was not in such a happy state financially as the other section of the community earning £200 a week or more. I went so far as to say that I accept the fact that they already pay more income tax, as a result of high income, than the band about which I have been talking. But, what I was saying—and if not saying, implying—is that I still think that they are in a position, having regard to the times that we are going through, to make an extra contribution of £1 a week for every £100 they earn.
§ Lord Drumalbyn
I should like to ask the noble Lord to clarify his general intentions here. If I may say so—and I am not, of course, criticising the Chair in any way—it came as a surprise to me that if this amendment were accepted the next amendment could not be called. I had imagined that the noble Lord was intending that the extra contribution for those above the earnings limit was to be related to the diminished extra contribution that those within the two limits were going to have to pay. In other words, instead of paying 1 per cent. extra, they would be paying one quarter per cent. extra. I had envisaged that the two amendments hung together and that it was intended that the one would compensate for the other.
But am I now to understand that the noble Lord is advocating this change on its own merits without regard to compensation at all—without regard, for example, to the amendments that he is proposing to Clauses 2 and 3? Is that the case?—because if that is so, the argument, of course, is quite a different one: it is related only to what he regards as a matter of justice, which some of us on this side would regard as going a very long way to undermine the whole basis of the national insurance scheme.
§ 3.10 p.m.
§ Lord Houghton of Sowerby
I am bothered about this amendment and others on the Marshalled List because I doubt whether the role of this Committee is to do what we are setting about doing this afternoon. I do not know whether I am unduly sensitive about this matter, but at a time when the composition, the role, and indeed the very existence of this House is under constant discussion, we must choose with care what role we assume on particular occasions.
We are all aware that not even the House of Commons can impose an additional charge upon the citizen without either a Budget resolution or a financial resolution to provide for it. Therefore, the sovereign House of Commons cannot impose, by its own will, without the sanction of the Government of the day, additional taxation on the citizen. It is a quirk in the financial arrangements of another place and here that the national insurance fund has never been brought within the restraints of public expenditure, which are imposed upon Members of another place. In the House of Commons we used to say, "You cannot increase taxation by a ha'penny in the pound, but you can increase national insurance benefits threefold; you can halve the contributions and you can bankrupt the national insurance fund, and no Government can stop you". That was the extraordinary anomaly in the differences of financial procedure, because from the beginning we had a national insurance fund which was kept separate and distinct from the whole range of public expenditure.
This and other amendments have the effect of increasing the charge on the citizen, whether for additional benefits or not is really irrelevant to the point of principle that I am discussing. On the general question, we must remember that this Bill has been through a Committee of the House of Commons, which was differently constituted from this Committee this afternoon, and these intricate questions—which noble Lords have quite properly raised—will have been examined with some care and in detail. I doubt whether a Committee of your Lordships' House is the suitable place to deal with some of the matters which are much more appropriate to the smaller Standing Committee, which could give much closer attention to intricate matters of this kind.
I think that we are free to discuss these matters and to criticise them, as, indeed, was done on Second Reading; and on clause stand part in the Committee stage of the Bill, on closer examination of the Bill, we should be free to voice our criticisms. But I am bothered about any suggestion that the Committee should divide on an amendment which is virtually an imposition of an additional charge on the citizen. With the greatest respect, I think that it would be very difficult for this House to send such a Bill, deeply involving finance, economic policy and burdens on the citizen, back to the House of Commons, and to say, "We do not like it; you ought to amend it". Quite frankly, that is not within the role of this Committee on this subject.
Although the national insurance fund should remain a separate entity and, within its general framework, still be held to be a contributory scheme, it is a long time since that fund was immune from Government mutilation to meet questions of economic policy. Many 568 years ago I remember a Labour Financial Secretary to the Treasury moving in the House of Commons to reduce the Exchequer contribution to the fund, which was embodied in statute, because the call for unemployment benefit had been so much lower than had been estimated in determining the contributions. Therefore, it was felt that the Exchequer could contribute less because the national insurance fund was making a profit out of full employment. That is the first occasion that I recall when there was an intervention by Government in the financial arrangements of the national insurance fund.
However, it has happened a number of times since. Indeed, in this excellent summary of information relating to this Bill, prepared for the Library, one sees how in the past Government economic policy has been closely associated with the finances of the national insurance scheme, if only because of the very substantial Treasury contribution to it. My noble friend Lord Wells-Pestell said on Second Reading, on 13th January, 1981, at column 17, that Professor David Metcalfe of the University of Kent had said that,The Department of Health and Social Security is no longer running an insurance system, but has opened a bucket shop for the Treasury".The noble Lord, Lord Boyd-Carpenter, will remember that I accused him of presiding over a bucket shop 20 years ago when he first introduced the graduated contribution in order to provide a subvention for the financing of the flat-rate scheme. I went further—and with his unfailing good nature he took it in very good part—and said to him that financial men in the City had been sent to prison for less, for the sleight of hand that the noble Lord introduced in 1960 when graduated contributions were introduced, for which no immediate benefits were payable; we all subscribed to our 6d bricks and the money was passed over to finance the flat-rate scheme. But we forgave him that long ago.
§ Lord Boyd-Carpenter
If the noble Lord will allow me to intervene, I seem to remember that his noble friends have sometimes criticised the scheme as doing less than might be desirable for the lowest paid. Does the noble Lord not recall that the 1959 Act deliberately used some of the contributions of the higher earners to help the benefits of the lower paid? I would have expected him to applaud that.
§ Lord Houghton of Sowerby
Yes, I give that to the noble Lord. At the time I had the embarrassment of hearing some of my friends use much more abusive language than I used about what the noble Lord was doing. After all, it was called a swindle. But I never used that word; I must at least be credited with a sense of proportion—I did not call it a swindle.
Quite seriously, the manipulation of funds within the framework of the national insurance scheme, the obligations of the Exchequer to maintain it, and all these matters are important matters of Government finance and of national economic policy. I personally concede that these are quite suitable steps to take when examined on their merits in relation to a particular situation.
But if we are to talk about fairness within this national insurance scheme, there are many aspects of this 569 difficult quality of fairness which one has to examine. To quite a large extent we have to take the rough with the smooth to make the scheme understandable and, at the same time, broadly acceptable from a social point of view. But we must bear in mind that, as the contributions rise and people's earnings take them into the field of direct taxation, the fact that contributions by employees to the national insurance fund are not tax deductible is becoming quite an important consideration when looking at what is and what is not fair. We must remember that as the threshold for direct taxation rises and the less well paid are exempted from tax altogether, their position in relation to contributors in the higher ranges of income is disturbed, because the higher you go the heavier the burden of direct taxation. It is not as heavy as it was three years ago but it is still very heavy.
Those are my thoughts on this. I apologise for introducing this rather broad question of where the role of this House lies, but I think, with great respect, that while we should be free to examine and criticise we ought not to regard ourselves as free to say to another place, "We think you have it wrong. We think we have got it right, and we are sending it back to you to make the necessary adjustments". That I think would be a presumption, if I may say so with great respect, on the part of this House.
§ 3.21 p.m.
§ Lord Harmar-Nicholls
I should like to cross swords with the noble Lord, Lord Houghton of Sowerby, on his description as to the role of this Committee on a question such as this. If we accept his judgment as to what our role is on a Committee such as this, we may as well not come. Is this a school debating society? He says we can criticise it and debate it, but we must do nothing about it.
What is the role of this House, which is part of Parliament, when it is sitting in Committee? It is just as influential as the Committee in another place. Our role is to revise and improve where we can; but secondly our main responsibility is to give the other place a chance for second thoughts. Unless on occasion we pass an amendment, which is the only way of getting the matter hack to the other place, how can we carry out that function of giving the other place a chance to think again and to have second thoughts?
On this occasion I shall vote against this amendment, and I hope that the noble Lord, Lord Wells-Pestell, and his noble friends do not get their amendment. I think that that is the feeling of many of us. I believe that the situation is such that, if we can possibly avoid doing so, we ought not to disturb the flow of this piece of legislation towards the statute book. I am critical of it. I do not think it is good. I think the overall effect of it in many ways is to make it that much more difficult for small industries and self-employed industries to be able to play their great part in getting us back again on the road to real prosperity, and our relative position vis-á-vis our competitors in the world so much better.
I do not think this is a good Bill. I think it is mistaken in terms of how it is proposed to reduce public expenditure. But, because it is not such an outstandingly important part of the total strategy, 570 I believe it would be more damaging to delay it by trying to put right those individual things such as I have in mind than to let it go through on this occasion. But we can use this Committee stage as a means of firing a shot over the bows of the Government to let them know that, in the view of many of us, they have made a mistake on this and that they ought to look at it again when they arc thinking of similar legislation that may emerge in future.
It is all very well for the theorists in the various departments who can see as the theory that the thing fits in and dovetails nicely, but if you carry the effects of this Bill as it stands, completely, how it is going to affect small businesses with their added expenses added to the interest rates, added to the world depression they have to face, I do not think the result is good. But it would be more harmful to delay the Bill by passing amendments on those points about which I feel strongly, and which I wanted on the record.
I do not accept, and I hope that this Committee will not accept, the description that the noble Lord, Lord Houghton, gave as to what is our task. If this item was big enough to justify using our power to give the other place a chance to have second thoughts, we ought to use it and we ought to put it to a Division. If the noble Lord does so, I shall vote against him. But I do not believe that we can accept as correct the judgment that, just because there happens to be something involved with fiscal conditions here, we ought to do no more than just talk about it and criticise it.
We are part of Parliament. A lot of people want to take away what powers we have, which are good powers, which are stabilising powers, and we ought to guard them jealously. I do not like the amendment, but I cannot accept the judgment that it ought not to be pushed to a Division if those who are moving it think it is going to play that important a part in the whole set-up of trying to put this country right.
§ Lord Drumalbyn
Before the noble Lord sits down, may I ask him whether he is seriously telling us, after all the times in another place where he has opposed financial resolutions, and argued about them, that what has been said in another place and what the financial resolution contains do not matter? Here the noble Lord, Lord Houghton, is arguing that we are really talking right outside the financial resolution because this is in fact a tax. I have looked at the financial resolution and it seems to me perfectly plain that it is right outside the financial resolution. Surely he is not arguing that it is for us to put forward and pass amendments which are outside the financial resolution merely because we think this is something better to do? Incidentally, may I ask for a clarification here? My noble friend beside me points out that we are dealing with the Social Security (Contributions) Bill, and I find the Marshalled List says Social Security (Contributions) Bill [H.L.]. Perhaps my noble friend may have thought that this Bill was now starting.
§ Lord Harmar-Nicholls
In answer to the question put to me before I sat down, of course one ought to pay a lot of attention to what goes on in another place. Of course one ought to take into account that it has been examined, perhaps more meticulously than we 571 can, by a smaller committee; but I was not prepared, and am still not prepared, to accept the overall judgment of the noble Lord, Lord Houghton, that we ought not on any occasion in a Bill such as this ever to send anything back. If my noble friend is prepared to accept those reduced powers of this House, then I am surprised, because I should like to argue for much more than that.
I work on the basis—of course I may be wrong on this, and my noble friend can put me right—that if an amendment appears on the Marshalled List it is in order as regards procedure. If it is on the Marshalled List and it is out of order, as my noble friend has said, then somebody else has made a mistake. Whoever allowed it to appear on the Marshalled List in this form, whether it be the advisers of the noble Lord and his noble friends who moved it, or anybody else who is in a position to stop it, I do not know, but if it is on the Marshalled List I presume it is in order. If it is in order, then if we think strongly enough that second thoughts ought to be given to it, of course we ought to use our powers. But I am going to vote with my noble friends on this. I am surprised that my noble friend seemed to be more in sympathy with the noble Lord, Lord Houghton, than with the general proposition. I do not want any of these things to come to pass, and I am not prepared silently to accept that the powers of this House be reduced at a time when some want them more than ever to be downgraded. If the position left on the record were to be as it was put by the noble Lord, that may have been the beginning of just that course of events.
§ Lord Nugent of Guildford
May I just say a word of thanks to the noble Lord, Lord Houghton, for raising a point which in the 15 years I have been here I have never before heard raised but which I believe is a valid one. Certainly it is valid in principle. Although usually I find myself very much in agreement with my noble friend Lord Harmar-Nicholls, I am not sure that he is right on this. After all, my noble friend would accept that when the Finance Bill comes here from the Commons we do not think of amending that. The effect of this Bill, with all the curious anomalies of the national insurance fund, is to levy a charge on the citizen, just as the noble Lord, Lord Houghton, has said.
While it is true that this has not been precisely defined, and my noble friend Lord Harmar-Nicholls is right there, its practical effect is exactly the same as in changing the incidence of taxation. My noble friend is not right about the validity of amendments which appear on the Marshalled List. Only one person is responsible for amendments on the Marshalled List, and that is the noble Lord who puts them down. We in this House do not have the system as in the Commons where they have to get past the Table with all the authority of the Chairman of Ways and Means. Here we alone are responsible for amendments and must defend them ourselves.
I would not say that Lord Wells-Pestell's amendments are out of order. Indeed, we have this interesting debate coming out of it. But, on the question of whether it would be wise, having discussed it, to vote on it—so that, if by chance the noble Lord won, the amendment would have to be sent to the Commons— 572 I think the noble Lord, Lord Houghton of Sowerby, would be right. I believe it would be a serious error of judgment because it would be trespassing into a field where your Lordships normally do not go in regard to the effect of the incidence of financial measures on the citizens of this country.
We owe a great deal of gratitude to the noble Lord for raising this extremely interesting point. Without any criticism of the merits of the amendment—I understand what the noble Lord is doing, although I do not agree with him; if I were sitting on the Benches opposite I might wish to support him because I understand what he is doing—I suggest that when we come to the financial point, it is wrong in principle. We cannot tell what will come out of all this, but the noble Lord, Lord Houghton, is to be thanked for raising an interesting point which has added a great deal to the knowledge of all of us.
§ Lord Banks
I have followed with great interest the discussion as to whether the amendment should be discussed or not, and I appreciate the weight of the suggestion that perhaps we should not be discussing it. Nevertheless, social security is a matter of cash benefits and almost everything to do with social security involves money. Indeed, almost every, if not every, amendment involves Government expenditure and I am not clear where we should have to draw the line if we said the amendment should not be discussed, because I am sure that the amendments proposed by the noble Lord, Lord Spens, have a similar effect. Indeed, as the noble Lord, Lord Harmar-Nicholls, said, we might as well abandon our Committee stage if we cannot discuss the amendment.
I have attended your Lordships' proceedings quite regularly for about 35 years and I must say that the noble Lord, Lord Houghton of Sowerby, has raised a point that is new to me. I think he is right and that we should have thought of it before. What clinches the matter for me is that these contributions are raised in the same way as income tax and probably the same cheque from the same person covers both, and, for that reason, I believe it is merely a branch of income tax.
§ Lord Shinwell
I suggest that the time has arrived, after a rather protracted discussion of a subject with which few of us are familiar, to ask why the Government have not intervened to clarify the issue. The issue is not whether we should accept the amendment but whether, on a proposition which would in effect increase a contribution from some members of the community—whether they are capable of paying is beside the point, although that issue has been raised—we are competent to give a decision. I have been led to understand for a long time that whatever competence was vested in your Lordships' House, we were not entitled to intervene in matters of finance. We have no right, so I have always understood—I have never before changed my mind on that, although I am being asked to change my mind today; I do not like changing it and there are changes being suggested in other directions which almost frighten me, but I do not want to introduce another subject—to accept, or even to discuss, a proposition which in effect would mean asking some citizens in our community to pay more 573 than it was thought they should pay.
Who can determine this for us? My noble friend Lord Wells-Pestell, despite his great knowledge of the subject, cannot do so. We must ask a responsible Minister to clarify the position. Perhaps we may ask the noble and learned Lord Chancellor to attend our proceedings briefly to render some legal advice; he usually likes to discuss these matters. I do not know why he is absent, except of course that we are in Committee. It seems that we do not have a Chairman, Lord Chancellor or Minister able to help us. With the Government appearing reluctant to intervene, what are we to do? I might suggest that, having heard the discussion, we now proceed to the next business.
§ 3.35 p.m.
§ Baroness Young
I assure the noble Lord, Lord Shinwell, that I was not reluctant to intervene. I was trying to intervene but there has been such a tremendous amount of interest expressed in the amendment, and now on the constitutional points about your Lordships' proceedings, that it has been difficult to intervene at all. I shall not go far down the constitutional path today; this is not a money Bill and it is quite proper for your Lordships to discuss it, although I shall ask the Committee to resist the amendment, and therefore I do not wish it to be pressed to a Division (I understand that that would be possible if your Lordships wished to do so). The House of Lords has implicitly accepted the Commons financial privileges for a long time and does not seek to amend Bills of aids and supplies, or money Bills, under the Parliament Acts. However, as has been pointed out, this Bill is concerned with a fund, so it is technically possible for us to amend it. I feel, however, that all that has been said means that we should not put ourselves in a very good stance vis-á-vis the other place, apart from the fact that it is a wrecking amendment from the point of view of the Bill and would have a profound effect on the Government's medium-term strategy. For those reasons I am bound to ask the Committee to resist the amendment.
The noble Lord, Lord Wells-Pestell, said the amendment was intended to give an extra benefit. However, the effect of the Pensions Act 1975 of an upper limit for benefits would he lost; public expenditure would inevitably rise and, that being so, contributions would in turn have to rise to pay for it, so we should not achieve the kind of savings we are looking for. Apart from that practical point, we believe that such a change would, in the short term at any rate, be unworkable for both employers and the Department of Health and Social Service. It would complicate the calculation of the deductions to be made from wages to the extent that many employers using computers would be unable to implement the change from April. For the DHSS, it would mean a complete revision of the format of the contributions tables which have to be sent to about 1 million employers; and, again, that could not be done in time for employers to implement the new rates in April.
If, however, all contributions had to be counted for benefit purposes, that would undermine the operation of the upper earnings limit for benefit entitlement and so increase public expenditure. The relationship 574 between the earnings-related component of the state scheme and the guaranteed minimum pensions provided by occupational schemes would be lost.
As I have indicated, we believe that the amendment as drafted is quite unworkable. But, even if it were workable, it would be disastrous from a financial point of view because it is preceded by the proposal to leave out subsection (2) of the clause, and that would mean that the primary contribution which we are proposing in the Bill would be reduced from 7.75 per cent. to 6.75 per cent. and we would therefore lose £900 million. The noble Lord, Lord Wells-Pestell, was asked by some of my noble friends how much the additional primary contribution would raise. We have estimated that it would raise about £34 million. However, with regard to the balance of all those figures, the national insurance fund would risk being in deficit to about £850 million, and clearly we could not possibly accept that.
I am grateful to my noble friends who have intervened in the debate and to the noble Lord, Lord Houghton of Sowerby, who I think feels that although it would be quite proper for your Lordships to discuss this matter, it would be quite wrong for it to be pressed to a Division. Based on what I have said, I should like to assure your Lordships that the operational difficulties are very real and could not be overcome without large-scale planning and consultation with employers. Although the new primary contribution would not raise much additional revenue, it would be a radical change in the structure of contributions and a major departure from the previous arrangements agreed in 1975.
From what I have said it will be clear that I must urge the Committee not to accept the amendment if it is pressed to a Division. In conclusion, may I point out to those of your Lordships taking part in the Committee proceedings who may be under the misapprehension that this is a House of Lords Bill, that I understand that the letters "H.L." which appear in brackets on the Marshalled List are a printing error. Those of your Lordships who have been following the progress of the Bill will know that it has gone through all its stages in another place.
§ Lord Wells-Pestell
I should like to say to the noble Lord, Lord Drumalbyn, that I would accept the decision of the Chairman of Committees; it is said that if this amendment is accepted by the Committee, the other amendment cannot be taken. My knowledge of these matters is very limited, but when I tabled the amendments I was not of the view that one amendment excluded the other. However, as I say, one would of course accept the decision of the Chairman of Committees in this matter, but I understand that, if this amendment is not accepted, I shall be free to pursue the other amendment.
I do not want to comment at great length on what has been said by the noble Lord, Lord Houghton of Sowerby, but I must say that his words came as a great surprise to me. It would have surprised me had any Member of your Lordships' House been able to table amendments which gave rise to conflict with another place without first being told so. I could see nothing to prevent me from putting down the amend- 575 ments and, if necessary, dividing the Committee on them. This is not a supply Bill; it is not a money Bill.
When the noble Lord, Lord Houghton, says that we ought not to say to another place that they have got it wrong and we have got it right, I would point out that we say that on almost every sitting day of your Lordships' House. If there is a Conservative Government in power, we certainly say that; if there is a Labour Government, then noble Lords on the other side say that even more vehemently than we do. That is the role of your Lordships' House, and I believe that, while we must act within the limits imposed on the House by various legislation, it is right and proper that we should take the matter to a Division if we feel strongly about it.
With regard to this particular amendment, I did not intend to divide the Committee, though what has since taken place rather urges me to do so, since I think that we ought to kill this idea once and for all and exercise what I consider to be our undoubted right. All I wanted from the noble Baroness the Minister—and I have obtained it—was a statement that there are very good reasons for not adopting this proposal. Noble Lords opposite may not believe this, but I thought that the amendment might have been helpful towards securing extra money without imposing such a great strain on that section of the community which, in my view, could afford to pay another 1 per cent. of its earnings. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
The Minister of State, Department of Employment (The Earl of Gowrie)
I think that it might be for the convenience of the House if I now repeat a Statement—
§ Moved accordingly, and, on Question, Motion agreed to: House resumed.