§ 11.57 a.m.
§ Lord Glenarthur rose to move, That the draft order laid before the House on 28th November be approved.
§ The noble Lord said: My Lords, I beg to move, that the draft Statutory Sick Pay Up-rating (No. 2) Order 1983 which was laid before the House on 28th November, be approved. The purpose of the order is to raise the rates of statutory sick pay (known as SSP) from 6th April 1984, together with the levels of earnings which determine the rate of SSP which is payable. This fulfils the requirement of Section 7 of the Social Security and Housing Benefits Act 1982 that the value of these amounts be reviewed annually in relation to the general level of prices obtaining in Great Britain. The draft order provides that all the amounts in question are increased to reflect the increase of 5 per cent. in the general index of retail prices during the 12 months up to and including October 1983.405
§ The rates of SSP have been rounded to the nearest 5p, in line with normal social security practice. I can assure your Lordships that this does not cause undue problems for employers in calculating daily rates of payment. Each year, to help them, we include a table of the daily rates of SSP in the contribution tables which are sent to every known employer in the new year.
§ The two earnings thresholds which are subject to up-rating by this draft order have been increased by the same 5 per cent. to maintain the same relationship between the SSP rates and the employee's normal earnings as before. The thresholds have been rounded down to the next 50p, in line with practice when setting the lower earnings limit for national insurance contributions. It is that lower earnings limit itself which forms the lowest earnings threshold for SSP, below which no SSP is due. Thus, the effect of the order, if approved by your Lordships, will be that from next April employees who earn £68 or more a week will qualify for SSP at £42.25. Those who earn at least £50.50 but less than £68 will qualify for SSP at £35.45. And those who earn at least £34 (the lower earnings limit from next April) but less than £50.50 will qualify for SSP at £28.55.
§ Your Lordships will wish to know that it remains the Government's intention to increase the SSP rates and earnings levels each April in line with the actual annual increase in prices up to the previous October, subject to taking account of all relevant factors. This timetable is a practical one. It allows time for the proposed figures to be approved by Parliament before inclusion in the contribution tables which are sent to employers in the New Year, and thus enables employers to have reasonable and individual notice of the new rates. The new rates are also included in the up-to-date version of leaflet NI 208 available from my department.
§ Your Lordships may wish to note that this year's contribution tables will also include some explanatory notes on a few aspects of the statutory sick pay scheme which have given rise to some queries and misunderstandings during the first year of operation. But these problems are few, and I should like to take this opportunity to commend the efforts of all those concerned with launching and implementing the SSP scheme—both employers, large and small, and officials of the DHSS at local and central levels. The SSP scheme has been operating quite smoothly since April 1983, with few and minor difficulties of a type which could be expected in the early months of any major new scheme. In particular, we have no indication that the rates of SSP have resulted either in hardship for employees or in administrative or financial difficulties for employers. The draft order provides for these rates to keep pace with the rise in the general level of prices, and I therefore hope that it will meet with your Lordships' approval. I beg to move.
§ Moved, That the draft order laid before the House on 28th November be approved.—(Lord Glenarthur.)
§ Baroness Jeger
My Lords, it is no surprise to your Lordships to know that as we fundamentally opposed this scheme, we are not particularly concerned with the details which the noble Lord has put before the House this morning. We are much more worried 406 about the whole concept of the scheme. The noble Lord said that the revision was taken in relation to the actual increases in prices. The people who are to get this small increase, which relates to prices in retrospect, are now facing considerable increases in the costs of gas and electricity during the coming colder months. Earlier this morning we heard that some may have to pay higher contribution rates because under this sick pay scheme, unlike previous schemes, people who are away because they are sick do not have their cards franked and have to pay their contributions as if they were at work. It makes no extra provision for children.
I dare not mention rents because I think the noble Lord must have suffered enough from the confusion and complaints about the housing benefit disarray which is afflicting the country and which greatly concerns people who are off work for periods because of sickness. However, I realise that that is not the subject before the House this morning.
I was sorry that the noble Lord, who is always very fair and honest, should have expressed himself as rather satisfied with the way this abominable scheme is working. His own department told us last month that it knew of 4,000 firms that had paid out the wrong benefit. I am appalled to think how many there really are if 4,000 have come to his attention. Surely the full number is likely to be many more. It would be useful for the House to know how many people away for reasons of sickness have been underpaid. How many firms are still in confusion about it in addition to the 4,000? I know that the party opposite is interested in small firms and the self-employed, but a leading member of the National Federation of Self Employed and Small Businesses said in the Daily Telegraph of 29th November:The scheme has gone down like a lead balloon. It is a bureaucratic nightmare for many small businessmen grappling with the complexities of operating the rules at the same time as running their businesses".That is a very different view from the view that the Minister put before your Lordships this morning. I hope that there will not be this continuing complacency from the Government.
I know that many small businessmen are worried about the delay in getting refunds. They are having to pay sick pay out of their current income and some are running on overdrafts. It is serious that they have to wait for the refund. They are paying for doing the Government's work for which many of them think they ought to be paid and not the other way round. Though we are not disagreeing with this small, and some of us think very mean, increase, I hope that the Minister will promise us that there will be a more detailed study of the scheme. We are glad that the rates are going slightly upward, but to change the rates again will mean that these employers will have to do some more arithmetic to get their records updated. It is a poor, poor scheme and I am sorry that we have not been able to throw it out. We only wish that the order were more generous.
§ Lord Kilmarnock
My Lords, I apologise to the noble Lord for having jumped the gun on this order, but now that he has been kind enough to introduce it and explain it, there are one or two points I should like to raise.
407 The Social Security Advisory Committee says that employers are worried at the risk of abuse arising from self-certification and the consequences of the changes for their own management of sickness absence. I am not sure I would go quite so far as the noble Baroness, Lady Jeger. in referring to an abominable scheme. In chapter 3 paragraph 11 of the report the Social Security Advisory Committee says:Initial experience does, in fact, seem to show that these worries were unfounded".But there is a curious factor that is mentioned in the report. It turns out that the number of spells of short term sickness have reduced dramatically since the new system was introduced. The Social Security Advisory Committee is not clear why this has taken place. I gather also from the report that the noble Lord's department has been monitoring the new system. Has the noble Lord any news of the results of that monitoring? Does it mean that the new lower rates are discouraging people from going sick when they might otherwise have done or ought so to do? I am asking only for information, but on the face of it it seems unlikely that there should have been a dramatic improvement in health simply as the result of the introduction of a new system. I should be grateful to the noble Lord if he would comment on that.
§ Lord Glenarthur
My Lords, I am grateful to the noble Baroness and to the noble Lord, Lord Kilmarnock, for their comments. I will try to answer as many of the points that they raised as possible. The noble Baroness asked particularly why we have based the SSP up-rating on the historic movement of prices. In answering all these points I should say that I understand that she is thoroughly opposed to the scheme anyway, but I do not think there is any point in going over that ground again. As she will know and as I described, both benefits and SSP are now up-rated by reference to the known movement of prices over the year just prior to the announcement of the new rates; this is known as the historic method. This was always the intended practice for up-rating SSP and it has been generally welcomed and is in line with other up-rating. Apart from anything else, it means that one has a clear picture of what has happened, as opposed to the rather haphazard way of guessing what might happen in the future, which in the past has more often been wrong than right.
The noble Baroness asked why was RPI chosen as the general level of prices. In relation to a general provision not aimed at any particular section of the population there is no reason for giving weight to any particular element of the prices index nor eliminating any other element. The published RPI figure is the one on which we worked and is the one we envisage using in years to come.
The noble Baroness also drew attention to the fact that SSP is subject to tax and national insurance contributions. Sickness benefit is not. She was asking whether or not the comparison with the rate is fair. The rate of SSP was set to ensure right at the beginning of the scheme that employees as a group would receive the same extra income from the SSP scheme after deduction of tax and contributions as they would lose by withdrawal of sickness benefit if that benefit were 408 taxable. This is something which successive Governments have agreed should be the case. In individual cases, the net amount received in SSP may be greater or less than the amount of sickness benefit which would formerly have been payable. As was the case before the SSP scheme these amounts may be topped up with occupational sick pay or, if necessary, supplementary benefit under the normal rules which exist. With the rates of SSP that have been set, it was not estimated that there would be a net increase in claims to supplementary benefit, however.
The noble Baroness asked whether SSP has led to an increase in the numbers of people having to claim supplementary benefit when sick. During sickness, supplementary benefit is available subject to the normal rules: SSP and occupational sick pay are not treated as earnings but as resources to be set against need. It was estimated that there would be no net increase in supplementary benefit claims because of the SSP scheme. Although it is too early to provide statistics on this. there is no indication that claims to supplementary benefits have increased because of the scheme.
The noble Baroness was concerned about the ability of firms or employers to handle the scheme. She produced some figures which I cannot confirm. I do not believe that the situation is nearly as black as she makes it out to be. As far as small businesses are concerned, officials from my department at local offices around the country, are carrying out a programme of visits to all main employers in their areas during which they check a sample of cases of SSP payment and give guidance on the operation of the scheme. A number of mistakes are found; they are usually very minor in effect and a visit from the department is usually all that is needed to clear up any misunderstanding or lack of knowledge on how it operates. An improvement in performance can be expected once the scheme has settled in and the rules become more familiar. We are satisfied that the SSP scheme has made a good start despite what the noble Baroness says and that employers are generally managing quite well.
If it was her intention to suggest that it provided a huge administrative burden for employers, we have been very conscious of the need to keep employers' procedures simple and flexible and, in consultation with their representatives, have made every effort to achieve this in the context of other constraints on the scheme. The administrative burden on employers, I hope, has been mainly the initial one of setting up the thing in the first place. We hope that the on-going administrative costs are not large. The method of compensation by which employers can recover in full the SSP that they have paid out, while being able to offset payments against contractual sick pay, has meant for many' individual employers, and employers as a whole, that additional costs in the form of the administration and their national insurance contributions are more than met.
The National Federation of Self-Employed and Small Businesses (and maybe one or two others) have criticised the scheme. I hope that the explanations which I have just given to the noble Baroness will help put it more into context. The noble Lord, Lord 409 Kilmarnock, asked about sickness-absence management. He asked what evidence there was that self-certification is being abused. That seemed to me to be the theme of what he was asking. I think that there have been some recent press reports which have linked the start of self-certification with the introduction of the SSP scheme in April this year. In fact, self-certification was introduced in June 1982 and operated within the state scheme for nine months. Experience in that period showed that it did not lead to any increase in claims to state benefits and there was therefore no reason to believe that employers would be faced with an influx of self-certified sickness absences when SSP was introduced. It is understood that some employers have experienced an increase in sickness absences lasting for a week or less but a decrease in absences for longer spells. Such developments will be for each employer to monitor and to consider. It is true that we are monitoring self-certification. The study will not be completed for a few months but we have no evidence that people are deterred from claiming SSP or benefits by self-certification. I am sure that there were a number of question which I have not been able to answer for the noble Lord—
§ Lord Kilmarnock
My Lords, the main burden of my question was whether the Minister would comment on the SSAC's findings that there had been a dramatic reduction in short-term sickness claims since the introduction of the system. As his department is apparently monitoring this, I wondered whether they had come up with the answer and whether the answer is that people are being deterred from claiming owing to the lower rate they will be receiving.
§ Lord Glenarthur
My Lords, I do not think that that is the case. There was a reduction in claims to benefit following the introduction of self-certification, but this may be part of what is a general decline in claims since 1979. I will study the noble Lord's remarks in the Official Report and write to him if I can help him further.
§ On Question, Motion agreed to.