HL Deb 16 January 1986 vol 469 cc1220-6

7.15 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington), rose to move, That the draft order laid before the House on 17th December be approved. [7th Report from the Joint Committee.]

The noble Baroness said: My Lords, the purpose of this order is to raise the rates of statutory sick pay—known as SSP—that employers pay to their employees when they fall sick. The order also increases the earnings thresholds that determine which rate of SSP is payable. Subject to your Lordships' approval, the new rates and earnings levels will come into operation on 6th April 1986.

Under Section 7 of the Social Security and Housing Benefits Act 1982, my right honourable friend the Secretary of State for Social Services is required to carry out a review of those amounts each year to determine whether they have retained their value in relation to the general level of prices. In the 12 months to October 1985, the general index of retail prices rose by 5.4 per cent. The draft order accordingly provides for the SSP rates and earnings levels to be increased by that amount from April 1986.

As your Lordships will know, there are three rates of SSP. In working out the new rates we have followed normal social security practice in rounding to the nearest five pence. The earnings thresholds covered by the order have been rounded down to the nearest 50 pence. Again, this is normal practice and is the same rule that is used in setting the lower earnings limit for national insurance contributions liability. The lower earnings threshold, below which no SSP is payable, is not covered by this order. This is tied by the Act to the lower-earnings limit for Class 1 contributions which will be £38 from 6th April 1986.

The effect of the order is that from next April employees with average earnings of £74.50 per week or more will qualify for the new standard weekly rate of SSP of £46.75. Those whose earnings are less than £74.50 but not less than £55.50 will qualify for SSP of £39.20. And employees who earn at least £38 but less than £55.50 will be entitled to SSP of £31.60. Those new rates represent increases of £2.40, £2 and £1.60 respectively over the present rates.

As usual, the draft order makes transitional provision for periods of entitlement to SSP that are running when the up-rating takes effect. This will ensure that any employee who would otherwise have been taken out of his existing earnings band by the increase in the earnings threshold nevertheless continues to receive the same level of SSP—standard, middle or lower rate—as before. All employees getting SSP at the time the up-rating takes place will thus receive an increase in the amount payable to them.

As I am sure your Lordships are aware, April 1986 will also herald other changes in SSP. Under legislation passed in the Social Security Act 1985, an employer's maximum liability for paying SSP will be increased from eight weeks to 28 weeks. This has resulted in some other changes in the present rules and procedures for paying SSP that have been developed following consultations we had with employers and interested organisations last year. I am pleased to tell your Lordships that a completely revised Employers Guide to Statutory Sick Pay, taking account of these changes, was sent to all employers last October to enable them to make the necessary preparations for these changes. The new rates in the draft order before us will therefore be the first ones to apply to the revised scheme.

Details of the new rates approved by Parliament will be sent to all employers shortly, at the same time as the new national insurance contribution rate tables, which also take effect from April. The new rates are also published in a revised version of leaflet NI208, which is available from the Department of Health and Social Security.

The draft order provides for the SSP rates to keep pace with the rise in the general level of prices since the last review and I feel sure it will meet with your Lordships' approval. I beg to move.

Moved, That the draft order laid before the House on 17th December be approved. [7th Report from the Joint Committee.]—(Baroness Trumpington.)

Baroness Jeger

My Lords, I thank the Minister for telling the House about these increases in statutory sick pay. There is no division between us about them. We might wish that they were even bigger increases but we accept that they are made in compliance with the legislation before us.

I hope that, within the rules of order, I may ask a few questions about the working of the Act to which the noble Baroness herself referred. I have read many observations from small employers about their administrative difficulties in coping with the Act. Does the department have any response from employers about problems with which it can deal? The other obvious question which occurs is that although these rates are going up, does that mean that income tax payments—because statutory sick payments are subject to income tax—will also go up? In fact, does this mean that the net increase is much less than the increase which we have in front of us tonight?

I am sure that all of us who deal with problems from the public know that one of the most frequent grievances is that the Government give you more with one hand and take it away with the other. To what extent can one estimate that people who are getting this increase in statutory sick pay will thereby be brought into the income tax net and end up very little better off and certainly not as well off as we wish them to be with these increases?

I also note that the length of time—and I know I must be in order in referring to this point, because the Minister referred to it—of eight weeks' payment period is to be raised to 28 weeks. That seems to be a very long time. It is, I believe, about seven months. Why was 28 weeks picked out? Is there any magic about the figure of 28? That is puzzling me and I ask purely for information. Why not 25, 26, 15 or 16? I hope that we can find out more about that.

Does the department have any figures about people who are on SSP benefit and who are appealing for supplementary benefit in increasing, or decreasing, numbers? I think that would be a good index as to the way in which the Act is working. If we find that more people are having to go on to supplementary benefit it would give us some cause for anxiety. There must be many people for whom the statutory sick pay is less than they would be getting on the old-fashioned sickness benefit, because that was not liable to income tax or to national insurance contributions. If the Minister is not able to give that information now I shall understand, because it is complicated. However, I ask as a matter of general interest.

Can the Minister tell me what progress has been made towards more occupational sick pay schemes? I have been reading through earlier debates in this House and it has been said over and over again that the Government want to encourage more occupational sick pay schemes. I must ask when the most recent figures became available, because yesterday in another place figures were given of a survey on occupational pension schemes suggesting that 80 per cent. of employees were covered in such schemes; but the Minister had to say that the survey was based on figures from 1977. That is a long time ago and I feel that we ought to be given more up-to-date information on that aspect.

I must put another question to the Minister. Have the Government any information which satisfies them that part-time workers and seasonal workers are not suffering any deprivation under this scheme? I ask that because it is very difficult for such workers and their employers to work on the basis of the present legislation.

I assure the Minister that I have read the pamphlet for employers on statutory sick pay which sets out the questions very clearly. I asked on an earlier occasion what protection workers have against employers who do not seem to be paying enough statutory sick pay or are not paying it at the right time. I understand from my very careful reading of the documentation that if an adjudication officer, a social security appeal tribunal or a social security commissioner issues a formal decision that a person is entitled to statutory sick pay then the DHSS can enforce payments—or can it not? Or does the claimant have to take the employer to court? How many such cases have there been of non-payment or of inferior payments? What sort of delay is there? What happens to the sick person during the delay? Does he receive any money from the DHSS in the interim?

I raised this question on a previous occasion and the Minister, as kind as ever, sent me an undated letter. Incidentally, I wish her office would date letters, because it messes up my filing system when it does not. I have this undated letter in which the noble Minister writes: If an employee thinks he has been underpaid statutory sick pay, he does not … need to take his employer to the county court. If he cannot sort the matter out with his employer, he has a right to refer the question to the independent adjudicating authorities … It is that decision which, if it is neither complied with nor appealed against, is enforceable through the county court as a matter of last resort. In such rare circumstances, the DHSS will provide the employee with his court expenses, and will help and advise him on the procedures to follow. But these will be very rare cases; we know of none so far". Therefore, I ask the Minister whether, her department having known none so far at this undated point in time, there have been more recent cases and whether the people who have appealed have had the help which she promises them. Of course, there are some absolutely fundamental problems about this situation, which we shall not go into tonight because I would be out of order in trying to raise questions about whether it makes sense to have three rates of statutory sick pay and only one rate of sickness benefit, and why we have statutory sick pay subject to income tax and national insurance contributions but sickness benefit not so subject. But I hope there will be another occasion on which we can go into these problems in greater depth.

7.30 p.m.

I should be interested to know if there have been offences committed by employers under this Act, and whether the department has any information about the working of the Act in so far as it concerns employees who feel that something has gone wrong with their receipt of statutory sick pay. It is often people who are ill and perhaps not very well informed about their rights who fall into difficulties of this kind.

So far as tonight is concerned, I accept that it is good that there is to be some increase, but again I must make it clear to the Minister that I want to know what the net gain is for people who are on sick leave, considering that the increase in sickness benefit might well be reduced by their sudden liability to income tax. I also want to know how the legislation is working in terms of the fulfilment by employers of all their obligations and the right of employees to combat cases where they feel they have been disadvantaged.

Lord Banks

My Lords, I, too, should like to thank the noble Baroness, Lady Trumpington, for her explanation of this order. As she made very clear, it provides a routine rise in benefit to take account of inflation, and as the noble Baroness, Lady Jeger, indicated, to that extent it is not controversial, though we on these Benches have also criticised the concept of the three rates. However, the order provides the opportunity to ask one or two questions. It is an opportunity of which the noble Baroness, Lady Jeger, has taken advantage, and I should like very briefly to reinforce one or two of the questions which she put and perhaps to put another.

I wonder whether the noble Baroness, Lady Trumpington, when she comes to reply, can say from the current monitoring being carried out by her department how many mistakes are in fact being made, and what percentage is getting less than entitlement. Earlier figures which we had were rather disturbing in that respect. There also appears to be evidence that small employers cannot get the statutory sick pay calculations right, and the National Federation of Citizens Advice Bureaux were particularly worried about this in their submission to the social security review.

I should like to ask: if family credit as proposed in the Fowler White Paper is to be paid also through the pay packet, will small employers be able to cope? I should also be glad if the noble Baroness would tell me whether the Government are confident that the move to 28 weeks from 8 weeks which will take place in April, to which the noble Baroness, Lady Jeger, referred, will go smoothly.

Finally, some beneficiaries will be on ordinary national insurance sickness benefit even after April, and the 5 per cent. abatement imposed in 1980 still applies to sickness benefit. I wonder when the Government will withdraw the abatement, as has been done for invalidity benefit. While we seek the answers to these questions, we do not oppose approval being given to this order by the House.

Baroness Trumpington

My Lords, I am very glad that this has been comparatively such a painless operation. If I may endeavour to answer together the questions raised by both the noble Baroness, Lady Jeger, and the noble Lord, Lord Banks, I think that would be the simplest course. To start with, how well are the employers coping with SSP? The staff from the Department of Health and Social Security local offices have been visiting all employers to check that the present scheme has been understood and is working properly. In the main, employers have taken SSP on board most successfully and are operating the scheme very well. Though some technical mistakes are being made, these are on aspects where improvements can be expected as employers become more used to the rules. In the majority of cases checked, the right amount of SSP has been paid.

I can say to the noble Lord, Lord Banks, that we expect the transition to 28 weeks to go smoothly. With regard to small employers finding the scheme difficult to operate—which was a point raised by both the noble Baroness, Lady Jeger, and the noble Lord, Lord Banks—despite any so-called criticism, we have received very little complaint from employers about difficulties in operating SSP. We made considerable efforts to keep the scheme as simple as possible and DHSS staff and inspectors, who visit employers regularly, are available to give advice on any problems. Our experience has been that where an employer has run into difficulties in operating any aspect of SSP, once the procedures have been explained to him there have not been any further problems.

On the question of the amount of increases in SSP being less because of taxation, the effect of tax on the increases will vary from case to case. So I am afraid there is no simple answer that I can give to the noble Baroness. Why choose 28 weeks? Because that is the period covered by the state scheme of sickness benefit which is designed generally to cover short-term sickness; after 28 weeks of sickness the state invalidity benefit, which is a long-term benefit, comes into effect instead, as the noble Baroness will know.

As regards the effect of SSP on the numbers of people having to claim supplementary benefit when they are sick, the answer to that point is that 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. I am pleased to be able to tell the noble Baroness that there is no indication that claims to supplementary benefit have increased because of SSP. The noble Baroness said that the survey of occupational sick pay is very out-of-date—I think that 1977 was the date she mentioned—and we certainly plan to update this information as soon as we can.

With regard to the business of the courts and the difficulty that employees will be at the mercy of their employers, there is an existing procedure which an employee can use if he has not been paid SSP or thinks that the amount paid is wrong and he cannot sort out the matter with his employer. The employee can ask the DHSS to arrange for an adjudication officer's decision on his SSP entitlement. A copy of the officer's decision goes to the employee and to the employer and either of them can appeal against it in the usual way. This is explained to employees in the leaflet Check Your Right to Statutory Sick Pay, NI244, and to employers in the Employers' Guide to SSP, NI227.

There is little evidence to suggest that employees are having to resort to court action to get SSP. We do not consider that an increase in liability will lead to an increase in disputes over entitlement. So far as the department knows there are only two such cases. The employee is able under the usual rules to claim supplementary benefit. Part-time and seasonal workers will be entitled to SSP on the same basis as other employees provided they are working for an employer under a contract of service. We have no evidence that they are experiencing difficulties. If they are not entitled to SSP, they will of course be able to claim sickness or supplementary benefit.

The effect of the extension on employees when they fall sick means that they will get 28 weeks' SSP from their employer before moving on to state invalidity benefit. The indications are that many employees prefer SSP to sickness benefit because they get all their money from one source (their employer) rather than two (their employer and the DHSS).

The noble Lord, Lord Banks, asked about wrong payments by employers. The latest information is that the overall percentage of wrong payments discovered by DHSS inspectors is running at about 28 per cent. That may seem high, but I must emphasise that we are concentrating our efforts on visits to those employers termed as high risk—that is, those whom the inspector noted as having made mistakes during the first phase of visits. We know that we can leave responsible employers to pay SSP efficiently and that they will contact us if they have a problem. I should also make it clear that the mistakes are mainly technical and the situation will improve as employers become more accustomed to the procedures. The 28 per cent. error rate is made up of 16 per cent. overpayments and 12 per cent. underpayments.

Current proposals would mean that employers need to make larger deductions from monthly remittances over much longer periods where family credit is concerned. There are existing procedures for a direct refund to the employer who cannot get a full self-refund, and we would extend that arrangement to future schemes.

My last point deals with the last point made by the noble Lord, Lord Banks, concerning abatement of sickness benefit. The Government are committed to bringing sickness benefit into tax. When that occurs, and that will be a matter for the Chancellor, the Government will look into the question of restoring the 5 per cent. abatement at that time. I believe that I have answered all the noble Lord's questions, which is a rare record. He will no doubt correct me if I have not.

In conclusion, I wish your Lordships a happy New Year, and I commend the order to the House.

On Question, Motion agreed to.

Baroness Hooper

My Lords, I beg to move that the House do now adjourn during pleasure until eight o'clock.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.44 to 8 p.m.]