HL Deb 24 January 1994 vol 551 cc836-55

4.45 p.m.

House again in Committee.

Lord Carter moved Amendment No. 1: After Clause 1, insert the following new clause: ("Statement of change in contributions and entitlement .—The Secretary of State shall annually supply every contributor to the National Insurance Fund with a statement of the increase (as against the level at 5th April 1994) in the value of his annual contributions consequent upon section 1 of this Act and of any change (as against the level at 5th April 1994) in the value of the benefits from the National Insurance Fund to which that contributor is entitled.").

The noble Lord said: This amendment has been carefully drafted to ensure that all the contributors to the National Insurance Fund receive that information which they would receive if they were in a private insurance fund.

Perhaps I may deal immediately with the question that has been discussed; namely, whether this is a contributory insurance fund or a tax. I refer the Committee to what was said by the Minister for Social Security, Mr. Nicholas Scott, on 16th December: The House will be aware that the Bill concerns the national insurance fund, which provides finance for the range of contributory benefits, the most notable of which is the retirement pension, but which also includes widows' benefits, sickness, maternity and unemployment benefits". —[Official Report, Commons, 16/12/93; col. 1301.] Mr. Scott went on to say: The increase in employees' national insurance contributions requires social security legislation separate from the Finance Bill, because it is not a taxation measure, but a national insurance fund income measure under the care and management of my right hon. Friend the Secretary of State".—[col. 1302.]. Incidentally, I should say that, the Minister having said that in the Commons, his right honourable friend the Chancellor of the Exchequer, when he spoke at the Conservative Party Conference, said with his usual disarming frankness that he did regard it as a tax. After all, he is only the Chancellor of the Exchequer. It is important that, if we are to contribute to the National Insurance Fund, there should be a clear statement of what goes in and what comes out so far as the individual is concerned.

I took the trouble to look at the information that I receive annually, which I can have whenever I want it through the year from any insurance company which provides me with a pension. I receive an estimate of the total and the capital value of the fund; the basic guaranteed sum; the sum for death before retirement; the amount of a level annual pension; the level of a dynamic annual pension; the level of the reversionary bonus; the level of additional bonus; and the total value of the fund. The same information would be provided if I were insuring for permanent health insurance, mortgage protection policies or against injury or accidental death. For all the normal insurance cover in the private sector a very full statement will be provided to show what I have contributed and what the levels consequent on the benefits are. As I said, that information is obtained annually automatically, but I can have it all through the year and when I want it. At the same time, in the area of local government we all now receive an annual statement which shows exactly how the council tax and the unified business rate is spent.

It is clear therefore that the public sector should be trying to match the private sector in that respect in this era of open government and the Citizen's Charter. We should also remember that half a million people do not pay income tax but they pay national insurance. The Government seem to be in something of a quandary as to whether this is a tax. But there is an actuarial valuation in the scheme, so for this purpose we can regard it as a funded insurance scheme. In reference to the scheme, there have been a number of references to an increase of 1 per cent. It is not an increase of 1 per cent. but an increase of one percentage point. An increase of 1 per cent. on 9 per cent. is an actual increase of 11.1 per cent., which I believe is about eight times the current level of inflation.

As I said, we feel that the contributors to the state and national insurance scheme should have exactly the same information as the contributors to a private insurance scheme. That is borne out by the excellent ninth report of the Social Security Advisory Committee under the chairmanship of Sir Peter Barclay, who is now retiring. He has done a first-class job as chairman of that committee. In summary the report says: The social security system in the United Kingdom is extremely complex and changes in one area have to be considered carefully in terms of their ramifications for other parts of the system and for possible impact on the policy of other Government Departments … the contributory system provides accrued rights for contributors which the Government has a moral duty to sustain; social security is everyone's business. Almost without exception, everyone will be a recipient as well as a contributor at some point in their lives; the maintenance of an adequate social security system which is perceived by the population as fair is, in our view, a necessary factor in maintaining the social cohesion of the nation". Therefore for all those reasons—the demands of equity, the importance of the social security budget (about which we never tire of hearing from the Government) and the very important fact that individuals are contributors to a fund which we are continually assured is a funded insurance fund —we argue that contributors should have the sort of statements sought in the amendment. I beg to move.

Viscount Astor

The noble Lord wants a clear statement. That is a laudable aim. However, I do not believe that his amendment achieves that aim. It may be helpful for me to explain a little about the contribution conditions that people must satisfy in any year in order to qualify for benefit.

Contributors must pay contributions on a prescribed level of earnings in a particular year in order for that year to be a qualifying year. For retirement pensions this will be £2,964 in the year 1994–95, which is 52 times earnings at the weekly lower earnings limit of £57. The requirement for sickness and unemployment benefits is slightly less, at 50 times earnings at the weekly lower earnings limit. Thus, although Clause 1 seeks to increase the contribution rate for employees, this does not affect the way in which people qualify for benefits. That will continue to be based on contributions paid on a set level of earnings, and that remains unchanged.

Although we are proposing to increase the rate of contributions paid by employees, the increase will not in itself result in any change to personal entitlements. Benefit entitlements remain assessable under the rules relating to those benefits. The increase simply alters the level of contributions paid on a given level of earnings. In view of that, there seems little point in establishing a statutory arrangement to advise contributors of how much or how much extra they are paying. They can already obtain that information from their payslips and P60s, supplied by their employer.

There are already existing measures to advise contributors of their entitlements under the national insurance scheme. The Contributions Agency issues over 3 million annual notices following the end of any year to those contributors whose contribution record is insufficient to count towards their basic retirement pension. The statement provides details of contributions paid and gives contributors the opportunity to pay voluntary contributions to bring the year up to the qualifying level and thus secure benefit entitlement. In addition to that administrative arrangement, the Benefits Agency also provides a retirement pension forecast service to contributors. They can request a forecast by completing an application form obtainable at local social security offices. The forecast gives details of the pension entitlement based on the national insurance record held. It states the number of qualifying years required in the future to obtain the maximum pension which can be achieved and offers advice on the payment of additional contributions, if required.

The Committee may also be aware that all changes to contributions and benefits are reflected in departmental publications which are widely available. I do not think there can be any doubt that individuals already have wide access to information about their likely entitlements.

Moreover, published Bills, including those which deal with the structure of specific benefits, have to have a financial memorandum which sets out the financial effects of the provisions in the Bill. Additionally, from April last year, they have to include a compliance cost assessment which assesses the cost to the business community of the proposals. All this information is in the public domain and can of course be discussed and debated during the normal passage of the Bill through Parliament.

It is of course quite proper that people should be able to get information about their entitlements and that we should inform them where there is a risk that they will lose out on qualifying for benefits. We already have substantial administrative arrangements towards meeting those aims.

For the future, the Contributions Agency is considering the possible issue of a fuller statement to a wider range of people but has not fully evaluated the costs or benefits of such a move. The current computer system would not permit such a change and it would take some years to provide such flexibility within the new system which is being planned for the future. Early indications are that the costs of moving to such a system would be very considerable. Postage costs alone at current rates would be in excess of £6 million per annum. In addition there would be development, maintenance and staff costs and also the cost of dealing with additional inquiries generated as a result of such a move. All those costs would need to be borne by the National Insurance Fund out of money otherwise available for paying benefits.

The new clause proposed by the noble Lord, Lord Carter, does not attempt to give the recipient a full statement of his contribution record but a rather narrow and, I believe, unhelpful set of figures which could even be misleading to the recipient. With that explanation of our intentions for the future and of why I feel that the noble Lord's amendment is not suitable, I hope that he might feel able to withdraw the amendment.

Lord Carter

I am grateful to the noble Viscount but not surprised by his answer. I wish I had a pound for every time that I have heard a Minister say that the computer system will not allow them to change the system. I am very pleased that the noble Viscount has put it firmly on record as a statement from a Minister that an increase in contributions produces no increase in assessable benefits. That is exactly what we have been saying when we opposed the Question that Clause 1 stand part of the Bill.

We are continually told that there is a funded insurance fund, but the Minister is in fact saying that an increase in contributions does not produce a corresponding increase in assessable benefits. In a private insurance fund that would be automatic.

I was interested to hear that the Benefits Agency is considering a fuller statement of the wider range of benefits. I should be pleased if the Minister could keep the Chamber informed of how that is progressing. It would be helpful. We are all aware of the complexity of the social insurance system. It is all very well to say that the information is available and tucked away in various departmental documents. It would be extremely helpful if every contributor to the fund had information of the kind that he set out so clearly on the pensions forecast and the statement of pension entitlement as one approaches retirement age. For all those reasons I believe that this is an idea that has to be followed up.

The Minister said that the way in which the amendment is drafted might not be the right way to provide even the information that we feel is necessary. We shall take that point on board. No doubt we shall wish to come back on Report with a similar but more helpful amendment.

Viscount Astor

It might be helpful to tell the noble Lord that one of the problems with the computer system is that it is 17 years old. I understand that it is one of the oldest large working systems in this country. Therefore the ability to access information about individuals and produce it is a problem. I agree that the noble Lord's aims are laudable in the long term. But there are certain practical difficulties. That is the argument against the amendment.

Lord Carter

It is another failure by this Conservative Government over 14 years to invest in up-to-date technology.

Viscount Astor

We are making sure that we get the best value out of the technology that we have.

Lord Carter

Obviously I intend to withdraw the amendment but I believe that we shall wish to come back to the matter at Report stage.

Amendment, by leave, withdrawn.

5 p.m.

Baroness Hollis of Heigham moved Amendment No. 2: After Clause 1, insert the following new clause: ("Report by Secretary of State .—The Secretary of State shall publish and lay before Parliament a report on the impact of the increase in the main primary percentage under section 1 of this Act upon—

  1. (a) contributors to the National Insurance Fund who pay primary Class 1 contributions but who do not pay income tax;
  2. (b) the level of Home Responsibilities Credits and those persons who qualify for such credits.").

The noble Baroness said: This amendment asks for a report to be made by the Secretary of State, on the impact of the increase in the main primary percentage under … this Act", upon two groups: those contributing to the National Insurance Fund who pay contributions but who do not pay income tax, and those who are currently receiving home responsibility credits.

The amendment may appear to be somewhat technical. I would be the first to admit that it was tabled partly as a probing amendment so that the Minister can give us a fuller explanation than we have been able to obtain from the various organisations and his department in relation to the effect of the Act on those people at the lowest levels of income.

The amendment refers to two groups of people. The first group is made up of the 500,000 people—400,000 of whom are women—who do not pay income tax but will see their national insurance contribution rise by 1 per cent. I refer to the hairdresser, the nursing auxiliary staff member, the shop assistant earning £6,000 a year and others who are earning perhaps one-third of the national average earnings and are therefore too poor to pay tax but face not only increases of VAT on fuel but also a 1 per cent. increase in national insurance contributions. The Minister may say that it represents a good deal for them notwithstanding. However, given that it is a pay-as-you-go scheme rather than a fully-funded scheme, one might argue that their benefits should come from general taxation and not from an additional levy on already low earnings. The amendment therefore asks the Secretary of State to report the effects of such changes on their real income over time.

The second group to which the amendment refers is even more invisible. The implications of the national insurance changes for those people are even more obscure. I refer to those women who are in low paid, usually part-time, work; those who are earning even below the national insurance level—the lower earnings level—of £57 a week. The people in the first group earn between £57 and income tax levels; those in the second earn even less than that. There are 2.25 million women who earn less than £56–£57 per week. Such women may be care assistants earning £1.80 an hour; a travel agency worker earning £1.79 an hour; a bingo-hall worker earning £1.50 an hour; a cleaner earning £2 or £2.20 an hour; a switchboard operator earning £2 an hour or a state registered chiropodist earning £1.75 an hour, among others.

Jobs like that mean that if a woman—they are usually women—works between 15 and 25 hours a week her income is likely to be below the lower earnings level of £56–£57 a week on which one pays contribution. Such women may be married and that income is often a modest but welcome addition to the household. They may be the sole income earner in their family, particularly if they are single parents on benefit, and that benefit may be reduced accordingly. On either count it is surely welcome that such women are in the labour force. It keeps those marginal to the labour force attached to it with the opportunity later to increase their hours and qualifications. It helps to reduce their entire dependence on benefit and, if it does not sound too moralistic, it encourages children of such families with a model of a working adult often combining that work with home care.

Such women will usually have children; alternatively, they may be carers offering large numbers of hours of care to an elderly person. If they earn above £57 a week and pay national insurance contributions, they are fully entitled to SERPS; that is, an earnings addition to their old-age pension. However, at the other extreme, if they do not work but have such home responsibilities as dependent children or are carers working over 35 hours a week, since 1978 that has counted as work for the purposes of pension and SERPS entitlements; that is to say, the number of years one is required to contribute in order to be eligible for SERPS is proportionately reduced by the number of full tax years in which one is receiving child benefit or, alternatively, being a full-time carer.

In other words, home responsibilities give women at home with legitimate caring responsibilities an entitlement to SERPS in the same way as though they were paying national insurance contributions. Therefore, though such women may be penalised by losing income during their working years, they are not doubly penalised when it comes to pensions. The problem is for the women who are in the labour market; they are not now at home and therefore apparently entitled to home responsibility protection but are still not earning enough to pay a national insurance contribution. If they were at either extreme they would have an entitlement to SERPS; between the two it appears they do not.

As I understand it, a woman earning under £56 a week might be in one of two categories, depending on the number of hours she works. If she works more than 16 hours a week she is deemed by the DSS to be working full time. But she may be receiving only £2 an hour and earning therefore under the £56 a week limit. Nonetheless, her 16 hours a week and, say, £50 income would be topped up by family credit. Will she retain her entitlement to her home responsibility protection or will she lose it by going into the market place, not having regained it by earning enough to pay national insurance contributions? If a woman works under 16 hours a week and is therefore on income support with perhaps, as a single parent, a £15 disregard and thereby reducing her benefit, what then happens to her home responsibility payments?

We fear that if a woman moves out of the home into low-paid work and begins to enter the labour market she will lose her right to an adequate pension in old age. Precisely because of her domestic responsibilities-child care or caring—she will not earn enough to pay national insurance contributions in her own right and will therefore lose her build-up entitlement to SERPS. By doing what the Government urge her to do—moving into the labour market consistent with her home responsibilities—she appears to be punishing herself with a promise of greater poverty in old age.

We believe that to be the situation. I would be delighted to have misstated it and hope that the Minister can assure us that such women, who lose their home responsibility credits by not being at home but nonetheless are not earning enough to pay national insurance and regain their entitlement benefit, are fully protected when it comes to their pensions. I beg to move.

Lord Redesdale

I support the amendment. It is obvious that a rise in the national insurance contribution will affect far more people than would a similar rise in income tax, simply because the national insurance contribution bites at a lower level of income. As was pointed out, 500,000 people who pay national insurance contributions are earning below the income tax threshold. The people who will be hit by the tax will be the poorest members of our society. To scrutinise the damage that the tax will do can only be a good thing.

Lord Astor

The noble Baroness is concerned about the effect on low-paid workers of the Government's proposal to increase the main rate of national insurance contributions for employees. It may be helpful for me to explain that the way in which we restructured national insurance in 1989 provided a system which cushions the effect of changes for the low paid.

The system we took over from the Labour Party in 1979 had a single percentage rate which became payable once a person's earnings exceeded the lower earnings limit. People therefore paid a fixed percentage on all their earnings up to a maximum. That meant that an increase in the contribution rate was applied to the whole of people's earnings—again up to the maximum. Low-paid workers would therefore find all their pay subject to any change in the rate.

The present system—which I say to the noble Lord, Lord Redesdale is better—is in two tiers. Earnings up to the lower-earnings limit of £57 a week are assessed for national insurance at just 2 per cent. That is not changing as a result of the Bill before the Committee. It is only the main rate due on earnings over £57 a week which is due to rise. It will be obvious therefore that for people earning not much more than £57 a week, the increase in contributions will be very small compared to what it would have been had it applied to all their earnings.

Members of the Committee may find it helpful for me to explain the exact effect upon people who do not pay tax. For a single person, we are talking essentially about someone earning under the single person's allowance of £3,445 a year or about £66 a week. For a married man or single parent the figure is £5,165 or just under £100 a week.

For a single person beneath the tax threshold the maximum increase in national insurance contributions will be 2p; that comprises 9p from the 1 per cent. increase on pay of £9 above the lower earnings limit, offset by 7p caused by the raising of the lower earnings limit as a result of which a further £1 of pay is assessed at 2 per cent. instead of 10 per cent. For a person earning £99 a week, that is just below the married couple's allowance. The maximum increase will be 35p a week.

I now turn to the second item which the noble Baroness wishes to be covered in the report proposed by the new clause—the impact of the increase in contributions on the provision of home responsibilities protection, or HRP for short. There would in my view be no effect whatsoever and I fear that the noble Baroness has perhaps misunderstood the way in which HRP and contributions interact. I hope to be able to explain to her why that is the case. It may help the Committee if I say a little about how HRP operates to help people maintain their entitlement to a retirement pension when they have to stay at home due to caring responsibilities.

As the Committee will be aware, the retirement pension builds up over the working life of contributors through the payment of national insurance contributions. Broadly speaking, nine-tenths of the working life needs to be covered by qualifying years of contributions to give entitlement to a full basic pension. A qualifying year is one in which contributions have been paid on earnings equal to 52 times the lower earnings limit in force for that year. The Committee should note that it is not the amount of contributions that count, rather the earnings on which they were paid. Thus an increase or decrease in the percentage rate of contributions has no effect whatever on potential benefit rights.

People who are unable to work and maintain their record of qualifying years may be given a credit of sorts by means of HRP if they are undertaking the role of carer. The most common example is looking after children. Thus the main payee for child benefit automatically has potential title to HRP for the years child benefit is in payment. Carers of sick or disabled people receiving attendance or certain disability benefits can also get HRP. The effect of each year of HRP is to reduce the length of the working life and hence the number of qualifying years of contributions needed to get a full pension.

If higher contributions meant that people attained qualifying years more readily, there would indeed be an effect upon the level of HRP, because HRP and qualifying years are mutually exclusive—one cannot get HRP for a qualifying year because it is not needed. However, as I explained earlier, qualifying years are based not on amounts of contributions but on the earnings underlying them. As these will remain a constant factor in calculating qualifying years, there will be no discernible effect upon awards of HRP.

I hope that I have answered the noble Baroness's questions. I shall study in Hansard what she said and will write to her if there are any points which I have not covered in my reply.

Baroness Hollis of Heigham

As we are in Committee perhaps I may ask the noble Viscount for clarification. I have before me a document from the DSS dated 24th January 1994. It states: From April 1978 a man or woman who stays at home and satisfies one of the conditions outlined in paragraph 2 can have their retirement pension entitlement protected". I would draw attention to the words, who stays at home and satisfies one of the conditions". The question I was putting to the Minister—I do not think I have yet had an answer—is: if they are not staying at home (in other words, they are in work but receiving below £57) will they still get HRP?

Viscount Astor

Nothing is changing. Those earning under £57 who enjoy the protection of HRP will be completely unaffected by the Bill because they pay no national insurance. Any woman with appropriate responsibilities gets HRP for any year in which she does not pay enough national insurance to make the year count for pension. She does not need to stay at home. The point is that she must earn under £57.

Baroness Hollis of Heigham

I want this to be very clear because everyone else's understanding is different. A woman who is in the labour market earning up to £57 a week will continue to receive HRP.

Viscount Astor

Yes, that is correct.

Perhaps I may return to the general thrust of the noble Baroness's amendment. We already publish a report by the Government Actuary on the financial effects of any changes to national insurance contributions. The proposed clause requires a separate report on the coming into force of this Act. That would be an additional burden on Parliament and one which is unnecessary and indeed of limited vale.

Baroness Hollis of Heigham

I thank the Minister very much for that reply. We shall want to study it. It is at odds with the extract from the White Paper but it may just be that the wording there was casual and informal and does not have the degree of accuracy that the Minister has offered today. In the context of the Minister's reply, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.15 p.m.

Baroness Turner of Camden moved Amendment No. 3: After Clause 1, insert the following new clause: ("Annual Report to Parliament .—The Secretary of State shall publish annually a report to Parliament setting out the yield from the increase in primary Class 1 contributions payable as a consequence of the provisions of section 1 of this Act.").

The noble Baroness said: This amendment stipulates that the Secretary of State should publish annually a report to Parliament setting out the yield from the increase provided for in the Bill. We on this side of the Committee do not like the Bill but we acknowledge that revenue must be raised by any government to meet the social security obligations appropriate in a civilised society. However, we view the Bill as part of a social security package designed by the Government under which everyone—or almost everyone—will be expected to pay more for a declining level of benefit. I still hold that view despite the exchanges we have had on the point this afternoon.

The notion behind the amendment is that Parliament should have the opportunity of overseeing regularly what the Government are doing. Our concern stems from our suspicion that the Government do not really care very much for the welfare state. There have been frequent references to dependency and derisory statements by some Conservative supporters about the so-called "nanny state". There have been alarmist prognostications about the demographic time-bomb awaiting us in the year 2030 when those in employment will have to support a much larger retired population. I find that a little surprising since the equalisation of the state retirement age at 65 for women could be expected to reduce the numbers involved rather than the reverse, and that change alone is likely to produce savings of £5 billion a year at today's prices.

We are told also that European countries face the same problem as we do. That may well be true. Although many are having to review social security spending, they are doing so from a much higher base than the UK. According to a table I have, the UK is seventh in the league of EC countries in social security spending per capita and the benefits in the UK are relatively low compared with those in many EC countries. I cannot help feeling therefore that much of the Government's concern about social security spending, and thus their concern to increase contributions, is ideologically motivated. They would prefer a society in which almost everyone provided for themselves through the private market—"private" in their terms being good and "public" bad—and that despite the fact that poorer people are simply not a commercial proposition for the private sector and their only hope of being protected is via a socially motivated public sector.

For these and many other reasons we believe that Parliament should have a positive duty of monitoring what the Government are doing. The annual report to which the amendment refers would provide the opportunity for doing that. Moreover, this is an argument for open government which I thought the Government were supposed to favour. I beg to move.

Lord Boyd-Carpenter

It seems to me that the amendment is wholly unnecessary. The information it seeks is relevant and interesting but it is information which could be obtained simply by tabling a Question either in this House or in another place—a perfectly simple, straightforward Question which would produce the answer. Therefore, to load the statute book with a solemn provision of this kind seems wholly unnecessary and really rather bad draftsmanship.

Perhaps I may comment a little further on what the noble Baroness said as regards the suggestion that there was no great anxiety on this side of the Committee concerning the beneficiaries of social security. As one who was actually in charge of social security for a longer period than any other Minister, I resent that. On the contrary, on this side of the House, as on the other, there has been great anxiety about the working of our national insurance system. The fact that it seems to me to be quite unnecessary to put an annual report into the Bill when the information can be obtained by any noble Lord or Member of another place tabling a Question in either House, is not inconsistent with that.

Baroness Elles

I support my noble friend Lord Boyd-Carpenter, particularly as the noble Baroness referred to figures from the EC comparing our benefits with those of other member states. As she will know only too well, statistics can be read in all sorts of ways. The benefits in the United Kingdom compare more than favourably with those of any other community country otherwise I would wonder why so many Community citizens come to this country and, under the obligations of the Community, benefit very fully under the social security scheme, particularly under the national health scheme. I know that the noble Baroness is very knowledgeable about these matters, but I suggest that she looks at these figures with a certain amount of fairness.

As regards benefits for women, no one more than her party has been seeking equality for men and women. Unfortunately, in seeking equality for men and women what has happened is one of the results of that policy. The pensions are then paid at the same age which was the result of a case which came before the European Court of Justice. Therefore, whether one likes it or not, 65 is the age which has been chosen.

I suggest that the Government have pursued very fair and active measures to benefit the country, and particularly those who are least advantaged. The one method which I thought was extremely helpful was introduced by the Conservative Government. That was the home responsibilities credit which allowed women to stay at home and to draw benefit despite the fact that they were not actually in work. I know that this is slightly off the purpose of the Bill itself, but in view of the noble Baroness's comments I felt obliged to support what my Government have been doing all these years and particularly to support the words of my noble friend Lord Boyd-Carpenter.

Viscount Astor

To put this amendment into context, it might be helpful if I summarise the current arrangements for reports of this sort. The Committee will be aware of the requirement that a report by the Government Actuary must be laid with the annual orders that set the rates of benefits and contributions for the coming year. These reports give details of expected contribution income and benefit expenditure in considerable detail, highlighting any changes in structure or rates.

The Committee will also be aware that a Bill includes a financial memorandum which sets out the financial effects of the provisions in the Bill. Additionally, a compliance cost assessment, which assesses the cost to business of the proposals, is now required. All this information is in the public domain and can, of course, be discussed and debated in the course of the Bill's parliamentary stages.

I should make brief mention of the requirement for the Government Actuary to undertake a five-yearly examination of the National Insurance Fund and report on the extent to which it may be expected in the longer term to bear a proper relation to demands in respect of benefit. This review typically looks 50 or 60 years ahead.

From what I have said I am sure your Lordships will recognise that there is already a substantial body of published material dealing with the workings of the National Insurance Fund and legislation which affects it. The report by the Government Actuary will be laid before your Lordships in connection with the benefits and contributions orders next month. It will need to recite changes which have occurred to the contributions system and will set out the yield deriving from them. This will include the financial effect of the 1 per cent. increase and is, I believe, exactly what the noble Baroness is seeking.

The noble Baroness's amendment would also require reports in respect of the 1995–96 and each subsequent year to he made to Parliament separately identifying the yield deriving from the 1 per cent. increase. I believe that that would be an unnecessary burden. Once contribution rates have been changed with the agreement of Parliament, those rates become the new base rates, which are then subject to periodic review and further amendment up or down, again with Parliament's approval.

I do not think it would serve any useful purpose to monitor on an ongoing basis the effect of a simple change in rates. The Committee is fully aware of the financial effect of the provision and this will not vary year on year. Obviously, the yield will increase slightly with the general tendency for earnings to rise, but this is a feature of the contributions scheme.

The function of reports to Parliament about the National Insurance Fund is to look ahead and to assess the ability of the fund to meet its prospective expenditure. The proposed addition by this amendment to the report does not aid that function. I agree with both my noble friends Lady Elles and Lord Boyd-Carpenter that this amendment is not helpful. Therefore, with that explanation, I hope that the noble Baroness will feel able to withdraw it.

Baroness Turner of Camden

I note what the Minister has said this afternoon. We shall look at it very carefully in Hansard tomorrow. As regards the comments made by the noble Lord, Lord Boyd-Carpenter, what we were after is not replies by individuals to questions, but a regular opportunity for Parliament as a whole to look at the situation, which is very different from tabling a Question and receiving an answer from an individual Member of this House or in the other place.

Lord Boyd-Carpenter

I am grateful to the noble Baroness for giving way. If, as she accepts, the information can be obtained simply by tabling a Question; if the information as produced seems to be debatable, then she or any of her colleagues on the Opposition Front Bench would very easily find an opportunity to debate it.

Baroness Turner of Camden

I still do not accept what the noble Lord has said. If there is a regular obligation to publish a report, that is an item which comes before both Houses of Parliament. Therefore, the opportunity is made available, through legislation, for the Secretary of State to be questioned about it. That is very different from an individual taking the initiative and putting down a Question. There are no similarities between the two situations.

As regards what the noble Baroness said, I am not objecting to the notion that there should be equality for women at the age of 65. I simply mentioned that because there we are talking about a monetary yield as a result of that alteration. My information is that there would be a substantial yield as the result of women being required to work to the age of 65 before receiving the state pension. I am not arguing about the benefits as regards ourselves and other countries in the EC. I have had a lot of information on that score. Concerning the NHS, in this amendment we are not talking about that body, but about contributions on the social insurance side and the contributory benefits being achieved thereby.

It is not my intention to press this amendment to a vote this afternoon. We shall look carefully at what has been said because it is our intention to try to ensure that the Government are entirely accountable as to what happens as a result of the passage of this Bill. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carter moved Amendment No. 4: After Clause 1, insert the following new clause: ("Report by Social Security Advisory Committee .—Before the coming into effect of the provisions of section 1 of this Act, the Secretary of State shall submit such proposals to the Social Security Advisory Committee whose report shall be laid before Parliament.").

The noble Lord said: I believe that all Members of the Committee are aware of the excellent work which is done by the Social Security Advisory Committee. I suggest that it is probably one of the most effective committees which regularly reports to government. Because of the ramifications of the National Insurance Fund, we feel it important that that body should be in this Bill. We have touched on this matter in a number of the amendments today. We should ask the SSAC to report on the impact of an increase in contributions and the effect on the level of benefits although, as I have said, we did hear from the Minister as regards a previous amendment that the increase in contributions is not matched by an increase in assessable benefit. It is important that the SSAC should be able to point that out.

Perhaps I could give an example of the excellent work that is done by the SSAC in this area. There is now a great myth being peddled by the "militant tendency" on the Tory Right regarding the ability to pay for the welfare state. The myth is that we cannot afford the welfare state as it presently exists. A number of recent reports have shown that that is not so. With a reasonable level of economic growth, we can certainly support a proper level of provision for the welfare state as we know it.

The argument was memorably advanced by the late Anthony Crosland in the 1950s and early 1960s and has been brought up to date by the SSAC's most recent report, its ninth, which points out, with some calculations, that if we assume a real growth in GDP of 3 per cent. per annum and unemployment of 1.5 million, by the year 2000 social security benefit expenditure as a percentage of GDP will be less than it is now. I imagine that the present Government will try to attain a level of growth of between 2.5 and 3 per cent.—the next Labour government will certainly seek to attain that—and we all wish to see a substantial reduction in unemployment. If that comes about, the evidence of the SSAC (which is a fine and objective committee) shows that the percentage of GDP taken by social security benefit expenditure will decrease from the present level of 12.3 per cent. to 11.3 per cent. That is a reduction of one percentage point—not of 1 per cent. as is often said—and in the order of 10 per cent. of actual expenditure. That is an example of the excellent work of the SSAC.

At the more detailed level, an annual report on these proposals by the SSAC would provide an independent and objective comment on the relationship between benefits, entitlements and contributions. The committee would be able to comment on such matters as "reforming", which means reducing, the unemployment benefit, which is what the Government intend; changing the criteria for unemployment and incapacity benefits; changing the pension age, which has been mentioned; and rebates to bribe people to leave SERPS, which have amounted to £12.5 billion since they were introduced a few years ago.

We are continually told that national insurance is not a tax but a fund income measure. Well then, let the SSAC report on how the insurance fund is performing in relation to contributions and benefits. As I mentioned the National Insurance Fund, perhaps I may refer in passing to the statistical correlation that has not so far been discussed in debates on the Bill in either House. I refer to the correlation (which is marked when one looks at the table of the history of the fund) between the state of the National Insurance Fund and the years in which there have been general elections.

As I said, the SSAC is one of the most effective of the committees which report annually to government. I conclude with a quotation from the foreword to its ninth report: We live in a complex society and the social security system is correspondingly complex. It is therefore not surprising that the effect of changes on small but possibly significant groups at the front line of benefits will not always have been foreseen by policy makers. We believe that the Committee acts as a useful check before changes are made". That is the reason for the drafting of the amendment which asks that, the Secretary of State shall submit such proposals to the Social Security Advisory Committee before the provisions come into effect. I beg to move.

5.30 p.m.

Viscount Astor

I agree with the noble Lord, Lord Carter, that the Social Security Advisory Committee has since November 1980 performed art invaluable function. In accordance with laid down statutory requirements, the Secretary of State is required to submit for the committee's consideration a significant proportion of the proposals for changes in social security benefits and certain contribution rates that are put into effect by regulations. It is then open to the committee, if it chooses, to have the proposals formally referred; that is, the committee will conduct with outside interested organisations a consultation exercise and will produce a report on the proposals for the Secretary of State's consideration. Even where the committee agrees that the proposals need not be formally referred, it may well ask questions or express views on what is suggested. Either way a process of advice or consultation will take place and an independent view provided of the changes proposed.

Historically, neither the committee nor its predecessors—the National Insurance Advisory Committee and the Supplementary Benefits Commission—have had referred to them that legislation which is subject to full parliamentary scrutiny. Included in this category is the provision in the primary legislation before the House that the noble Lord would like the committee to consider before it can come into effect. The proposals for regulations that are considered by the committee are those which for the most part are not subject to full parliamentary scrutiny; that is, those which are subject only to the negative resolution procedure. It is therefore appropriate that someone else, in this case the committee, should have a chance to give a view that is independent of that of the government of the day. The enactment of primary legislation is, as your Lordships are well aware, handled in an entirely different way, with an opportunity given for debate in this House where your Lordships can make your views known.

With that explanation of the committee's important role in dealing with regulations and not with primary legislation, which is subject to full parliamentary scrutiny by both Houses, I hope that the noble Lord, Lord Carter, will feel able to withdraw his amendment.

Lord Carter

I think that the real answer as to why the Government do not want the SSAC to comment on their proposals before they come into law is that they dare not ask it to do so in a number of cases because they know what sort of answer they would get.

The Minister correctly pointed out the SSAC's valuable function and the fact that the committee reports on a significant proportion of changes which are required to be introduced through regulations. However, there have been examples of changes being made to benefits in the past—usually a worsening in the benefit level or a change in the rules to make the benefit harder to get—without the SSAC being given a chance to comment.

I was a little surprised by the weight that the Minister attached to the opportunity to debate primary legislation as if the SSAC had no role in that and it was all left to Parliament. The contents of the SSAC's ninth report show the matters on which the committee reported in the past year. They include the Benefits Agency, the situation in Northern Ireland, the Child Support Agency, the Contributions Agency, students, hardship payments, community care, mortgage interest, non-dependant deductions from housing benefit, the state pension age, VAT on fuel, housing benefit, the social fund and the invalid care allowance. All those things have been discussed by Parliament in the past but the SSAC has seen a need to report on them—and it has reported extremely well, but with hindsight.

All that we are asking for in the amendment is that the committee should have a chance to comment on such changes before they are put into effect. We feel that it would improve the operation of the benefit system if the committee were able to make its critical but constructive comments before provisions have the force of law. I am disappointed by the Minister's answer which we shall need to reflect on. We may wish to return to the matter on Report because this is an important suggestion. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 5: After Clause 1, insert the following new clause: ("Report by Government Actuary .—The Secretary of State shall publish a report by the Government Actuary setting out the consequences to the National Insurance Fund and the Treasury subvention to that fund of the increase in primary Class 1 contributions under section 1 of this Act.").

The noble Baroness said: The amendment would require the Secretary of State to publish a report by the Government Actuary setting out the consequences to the National Insurance Fund and the Treasury subvention to that fund of the increase referred to in the Bill. I know that we shall be told that the fund is simply a notional one, but when the present welfare system was devised Beveridge intended that there should be contributions on a tripartite basis from employees, employers and the state. He originally intended that all three should make equal contributions but, as we know, that notion has fallen by the wayside. Employees' contributions have increased, employers' contributions have decreased, and the Treasury subvention at one time disappeared altogether. We have been over this ground to some extent already today.

Back in 1979, the subvention was regarded as being of the order of 18 per cent. It was gradually eroded until it disappeared. It is now back again. It will be recalled that individuals who opted out of SERPS into private pensions were allowed a national insurance rebate for doing so. I have no doubt that that bribe—for that is what it was, although the Government do not like it being called that—was responsible for many people, who were badly advised, opting into the private market. That was as a result of some hard selling by the insurance industry. I well remember the posters on the Underground: When did the Government ever give you any money?". The advertisement continued, "Well, they are now". People were told that they could obtain £1,200 from the Government merely by taking out personal pensions by the approved date. It has now been found that large numbers of people have taken out personal pensions when they would have been better advised to stay in their firms' pension schemes or with SERPS. The SIB is to conduct an inquiry, and has talked in terms of compensation for people who were inappropriately advised. But, as I said, I do not blame the insurance industry for that. Still less do I blame the salesmen, who have a living to earn in a highly competitive market and are just as scared of unemployment as the rest of the labour force. The blame must rest with the Government, whose brilliant idea it was.

As it is, the revenue which might have come to public funds has been forgone and people are receiving less for their money in terms of security for old age than if they had stayed with SERPS or their firms' occupational scheme. As I understand it, £12.6 billion has been lost to the NIF which might otherwise have come to it. It is follies of that kind to which we on this side of the Committee take exception. Of course, the amendment will not stop the Government from embarking upon further follies induced by their obsession with private provision, but it will enable Parliament to look at what is happening at regular intervals. Again, this is an argument for open government which, as I said earlier, I believe the Government claim to support. I hope to hear from the Minister that he has decided to accept the amendment. I beg to move.

Viscount Astor

The proposal to increase by 1 per cent. the national insurance contributions for employees has been in the public domain since the Budget last March, and its effect on the income to the National Insurance Fund is set out in the Financial Memorandum and notes on Clauses to the Bill. The Committee is well aware that the amount to be raised for the National Insurance Fund by the proposed increase is some £1.9 billion. That sum can be placed in context by my right honourable friend's Statement at the time of the Budget that he proposed to seek a Treasury grant of some £6.4 billion in 1994–95 in order to ensure the stability of the National Insurance Fund in that year. Thus it is quite clear that, even with the proposed increase in national insurance contributions, expenditure on benefits is still significantly outstripping income from contributions. There can be no question of the Government withholding details of the financial effect of the proposed increase.

There is of course no pre-existing requirement for a report by the Government Actuary to go hand in hand with primary legislation, as applies with secondary legislation. We shall of course be laying a report as usual setting out the effects of all the changes to contributions and benefits in time for the debate on the benefit uprating and contribution re-rating orders which I expect will take place next month. That report will, I am sure, set out the consequences to the National Insurance Fund of the 1 per cent. increase in contributions. In effect therefore it will meet the noble Baroness's wishes.

The Committee will remember that we published a report with the Bill which provided for the Treasury grant last year. We felt it was necessary for the Committee to have available full details of the National Insurance Fund's finances when debating a structural change to the fund's finances which would affect it for years to come by providing a further and separate source of income. The position this year is quite different. We are dealing with a simple change in contribution rates. Therefore, I believe that the amendment is unnecessary.

There will still be a Government Actuary's report this year which will be laid as usual with the uprating and re-rating orders. I am satisfied that, generally speaking, that is the right and proper method of advising this place about the effect of various changes on the fund's finances. It would be superfluous, I think, to provide in this Bill for a further report, and in view of my explanation I hope that the noble Baroness will feel able to withdraw her amendment.

Baroness Turner of Camden

I am obliged to the Minister for his explanation and for pointing out that we shall have a further opportunity to look at the way in which contributions and benefits are being dealt with by the Government when we have the actuarial report. I am not certain that that satisfies entirely what we had in mind with Amendment No. 5, but it is not my intention to press it this afternoon. In a sense, it was a probing amendment to see what the Government's intentions were in this connection. Having listened to the Minister, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Remaining clauses agreed to.

5.45 p.m.

In the Title:

Baroness Turner of Camden moved Amendment No. 6: Line 2, after ("1992") insert ("and to require information on such increase;").

The noble Baroness said: This is an attempt to amend the Bill's title by the insertion after "1992" of the words, and to require information on such increase". The intention of the amendment is to expand the Bill's title to make it clear that it is not just a question of putting up the contribution rates, but that there is also the question of proper accountability as to how the contributions are utilised and to see what are the Government's intention in that connection.

We believe, as we have said repeatedly in discussions on the Bill, that, although it is a short, small Bill, it is an important and significant one and will mean a good deal to large numbers of people who will find suddenly that they will have to pay more in their national insurance contributions and may later, when they come to look at what they receive for those contributions, feel that they are not receiving as much as they had originally thought that they would. It is so important that we believe that there should be written into the Bill's title the requirement that information should also be made available, and we have used the wording, and to require information on such increase". Again, it is a question of accountability. It is a question of saying to the Government, "We want to know what you are doing and we want arrangements for monitoring made". If we put that wording into the title, it will give us the opportunity to come back on Report with other amendments based upon the discussion that we have had this afternoon. I beg to move.

Viscount Astor

If the Committee had accepted any of the amendments tabled by Members of the Committee opposite which sought reports to be provided either by my right honourable friend the Secretary of State or by the Government Actuary, it might well have been appropriate to amend the Bill's title in the way provided for by the amendment. However, that has not been the case and the amendment to the title is therefore unnecessary. In fact the title can, as I understand it, be amended only if the Bill has been altered so as to necessitate such an amendment. That is not the case here as the title as it stands is entirely adequate in relation to the scope and content of the Bill.

Baroness Turner of Camden

As I understand it, the Committee has not rejected the amendments about having reports; we have withdrawn the amendments on the basis that we would want to consider between now and Report what the Minister has said. If he does not want us to consider what he has said, that is a different matter. Presumably he gave us full explanations so that we could consider the matters between now and Report.

Viscount Astor

Perhaps I may help the noble Baroness. The point is that none of the amendments has been accepted and therefore there is no reason to change the long title of the Bill. If any of the amendments had been accepted, there would be good reason to change it, but they have not. So I am afraid that the noble Baroness will have to contain the amendment until she manages to persuade this place to accept one of her other amendments.

Baroness Turner of Camden

I still claim that this place has not had the opportunity to decide for or against the amendments because we decided not to take the Committee's opinion. In any event, my understanding is that if we want to amend a Bill's title that always comes last. It is one of those unfortunate things. One cannot amend the title before one starts on the Bill; one has to amend it at the end. So we have no alternative but to do it in that way.

Lord Campbell of Croy

I thank the noble Baroness for giving way. It is the practice of this Chamber to deal with the title at the end of the proceedings because it has to be dealt with only if the Bill has been altered. For that reason it is dealt with at the end, not at the beginning.

Baroness Turner of Camden

I am certain that we should not persuade the Committee to accept the amendment, but if we had, it would be impossible for us to amend the Bill on Report. I shall not press the amendment at this stage—I think that it would be most unwise to do so—and I beg leave to withdraw it.

Amendment, by leave, withdrawn.

House resumed: Bill reported without amendment.