Sitting of 10 January 1994

Preamble
Reassembling after the Christmas Recess, the House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln.

Access to Work Scheme
Lord Rix Lord Rix asked Her Majesty's Government:
Whether, following their meetings with disability and employer groups, they will reconsider the employer levy as proposed in the Access to Work Scheme.
The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley): My Lords, in reaching decisions about the details of the Access to Work Scheme, my right honourable friend the Secretary of State for Employment and I are considering carefully all the representations made by the disability and employer groups whom we have met. My right honourable friend hopes to announce decisions soon.
Lord Rix: My Lords, I thank the Minister for his Answer. Before I proceed to ask my supplementary question, perhaps I may, on behalf of the entire House, send our deepest sympathy to his colleague, the noble Earl, Lord Caithness, on the terrible tragedy which has befallen his family over this weekend.
Noble Lords: Hear, hear!
Lord Rix: My Lords, I am delighted to hear that consideration is still being given to the scheme. Are the Government aware that it is not just disabled people but the employers of disabled people who are worried by the possible levy, because they see it as a tax on good practice? I hope the Government will consider that before the announcement is made.
Lord Henley: My Lords, perhaps I may take the opportunity on behalf of my noble friend to thank the noble Lord and to echo his words. I believe that I speak personally, and on behalf of the entire House, when I offer my condolences to my noble friend and his family and say that all our thoughts are with them as they come to cope with this dreadful tragedy.
As regards the noble Lord's supplementary question, I can reassure him that we have consulted a large number of employers' groups, and other groups of people both of and for disabled people, and we shall take on board all suggestions that they have to make before, as I said, we come to our final decisions.
Lord Campbell of Croy: My Lords, is not the proposed levy certain to reduce employment opportunities for the very people we all wish to help—the disabled who need special equipment to be able to work—and who are being helped now by the loan system? Is it correct that the modest budget for that has been underspent in recent years?
Lord Henley: My Lords, I should be the last to wish to reduce the employment prospects of disabled people. Everything that we are doing with regard to the Access to Work Scheme is designed to increase their employment prospects. My noble friend is right in that there has been considerable underspend in previous years on the various schemes that go to make up access to work. I offer a word of caution to the House as to whether that underspend will continue, because we should like to promote access to work as actively as possible, and we hope that that, in itself, will lead to a much greater take-up of the various forms of help on offer.
Lord Ashley of Stoke: My Lords, is not the Minister aware that the Access to Work Scheme has some welcome innovations which reflect credit on the Government, but that this aspect of it—the charging of employers—is damaging? No one who believes in market economics, as the Minister presumably does, can reasonably or logically argue that the charge will not deter employers from keeping on disabled workers. The

3
wrong message is being sent to employers by the Government. It is, "If you employ disabled workers you pay more". That cannot be right. The message to the Secretary of State from this side of the House is, "If you do not press ahead with this charge you will get more credit from withdrawing than from pressing on regardless".
Lord Henley: My Lords, I am grateful to the noble Lord because he started by stressing that, in the main, the Access to Work Scheme has been welcomed broadly by all groups. But, as the noble Lord stressed, considerable reservations have been expressed by many groups, particularly employer groups, about the proposal that they should pay some small amount. We are proposing that they should pay only a small or reasonable amount which should not deter them from retaining existing employees, as the charges would not, under any circumstances, be levied on new employees. We believe that a reasonable level of contribution will not deter employers from retaining their existing employees.
Baroness Gardner of Parkes: My Lords, on that point about a small contribution, in the Commons Hansard Written Answer of 22nd June it was said that there would be a 50 per cent. contribution by the employer. Has that figure been changed? It was also said that there would be an upper limit on the amount of help to be received by any particular person, and that that upper limit would be announced shortly. Has that already been announced?
Lord Henley: My Lords, final figures have not been announced. What was announced in the summer was that it would be 50 per cent. up to a certain ceiling. We propose that that ceiling, which will be considerably lower than 100 per cent. of the total amount that can be received, should not be high enough to deter employers from retaining their existing employees. As I said, final decisions have not been made about the total ceiling that will exist for individual employees or the ceiling that employers will have to pay.
Lord Stallard: My Lords, following the Minister's reply to the noble Lord, Lord Campbell of Croy, on the Access to Work Scheme, was the 3 per cent. quota discussed with employers? Will that be included in the report back from the Government? Will the Government's reaction to those discussions on the 3 per cent. be reported to the House?
Lord Henley: My Lords, the quota scheme is under review. I cannot announce any final decision. However, as my right honourable friend made quite clear some time last year, the scheme is under review and we shall continue to keep it under review.
Baroness Turner of Camden: My Lords, is the Minister aware that obviously we on this side of the House applaud the intentions of the Government in regard to the Access to Work Scheme? As the levy is the controversial item, would it not be possible to postpone
4
it for at least a year while other ways of raising the money could be considered? The levy appears to be the only outstanding problem with the scheme.
Lord Henley: My Lords, I can assure the noble Baroness that we shall consider that particular point. However, I must stress that if we cease to take a contribution from the employers it could involve sacrificing funds which might be used to help people with disabilities in other fields. Our aim—and no doubt that of the noble Baroness—is to help as many people as possible. I can give an assurance that the scheme will be reviewed after a year and we will consider the suggestion of the noble Baroness that we should not impose the levy during the first year.
Lord Allen of Abbeydale: My Lords, the scheme is imaginative, but can it be borne in mind during the review that the net saving to public funds might at best be tiny if, to be realistic, the imposition of the levy results in fewer disabled people being employed? They will not then pay the taxes and national insurance contributions that they pay when in employment. Perhaps more significantly, is it not inevitable that there will be additional demands on social service moneys?
Lord Henley: My Lords, as I said, final decisions have not been made. Our aim—and I am sure that the whole House will agree with it—is to help as many people as possible. We believe that if we can help more people, without others suffering, by asking for some small contribution from employers then that probably will be the right way forward. However, if we find that we can go ahead without an employers' contribution—and certainly we shall take on board the suggestions of the noble Lord—obviously that will be the best way forward.

British Coal Pension Schemes
2.45 p.m.
Lord Ezra: My Lords, I beg leave to ask the Question standing in my name on the Order Paper, in connection with which I wish to declare that I am in receipt of a pension from one of the schemes.
The Question was as follows:
To ask Her Majesty's Government whether they are having discussions with the trustees of the British Coal pension schemes in the light of the relevant proposals contained in the Coal Industry Bill.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Strathclyde): My Lords, the Government have held extensive discussions with the trustees of the coal pension schemes on the relevant provisions in the Coal Industry Bill. These discussions are continuing.
Lord Ezra: My Lords, I thank the Minister for the reassurance that discussions are continuing. Does he accept that in view of the large scale of the schemes, the total assets of which amount to more than £16 billion, and the very large number of people involved—the number of pensioners and deferred pensioners exceeds

5
600,000—the issue needs to be treated with the greatest care? Is the Minister aware that there is grave anxiety about the proposal that the Secretary of State shall retain powers to modify the schemes in the national interest? Will he give art assurance that the interests and entitlements of pensioners will be as much safeguarded in the future as they have been in the past, bearing in mind that the schemes are among the best managed pension funds in Britain?
Lord Strathclyde: My Lords, I agree with the noble Lord about the size and the scale of the pension schemes to which he referred. I confirm that the Government have no plans to override the fiduciary duties of the trustees. The Bill ensures that the trustees shall have proper regard to the interests of the taxpayer as guarantor in performing their fiduciary duties.
Lord Molloy: My Lords, is the NUM represented among the trustees? Will the Minister find out for sure whether it is? If the NUM is not so represented, ought it not to be invited to attend the discussions because it is undoubtedly the greatest representative of Britain's miners?
Lord Strathclyde: My Lords, as I said in my Answer, discussions are still continuing with the pension trustees, during which these matters can be raised.
Lord Morris of Castle Morris: My Lords, is it a correct interpretation of Schedule 5 to the Bill that the Secretary of State can help himself to half of any surplus assets in an existing pension scheme even though those assets will otherwise be distributable in accordance with the scheme?
Lord Strathclyde: My Lords, yes, that is the case, but there is a clear reason for that. The Government will he taking on a substantial contingent liability when they take over the current pension schemes.
Lord Marsh: My Lords, many people will understand that if the Government give a guarantee they have a right to some kind of return. On the other hand, is it not a somewhat novel concept that the Government shall advise otherwise assumed independent trustees on how they should behave and on what they should take into account? Is there not a strong case for an independent body to be involved on these occasions?
Lord Strathclyde: My Lords, of course, those are precisely the kind of issues that we shall be able to discuss in detail when the Bill comes to this House. In the meantime, I can say that the modification powers which are currently included in the Bill are strictly limited.

Bosnia: Arms Embargo
2.49 p.m.
Lord Mackie of Benshie Lord Mackie of Benshie asked Her Majesty's Government:
What justification they have for maintaining the Bosnian arms embargo.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, we continue to believe that any relaxation of the UN arms embargo would be a mistake: it would increase the fighting and seriously undermine the humanitarian effort. But we have never ruled out the lifting of the embargo if it becomes clear that there are no prospects for achieving a negotiated peace.
Lord Mackie of Benshie: My Lords, I thank the Minister for that reply and in particular her assurance that the Government continue to look at the question of lifting the embargo. Is the Minister aware that throughout the whole country there is a dreadful unease when, day after day, the people hear of the continued killing in Sarajevo and when they look at the efforts of our negotiating team whose sole purpose seems to some to be to legalise the conquests of the Serbs and others? Will the Government consult their European partners to reverse their decision and really try to do something about ending this war, which has now been going on for nearly three years?
Baroness Chalker of Wallasey: My Lords, no one wishes more than the British Government to find a way to bring an end to this terrible war. We have constantly reminded all parties of their responsibilities: that is, not only the Moslems who this morning cut the Croat pocket in Vitez, but also the Serbs fighting around Sarajevo, as the noble Lord said. During all that we are trying, through the talks which started yesterday in Bonn and other talks which are going on, to find a way to improve the situation on the ground and also to achieve some means of resolving the conflict. We deplore the violations of so many ceasefire agreements and we shall do all that we can, as we did last week, to try to intervene to stop the strikes wherever and by whomsoever they are committed.
Lord Boyd-Carpenter: My Lords, in view of all that is going on in Bosnia at the moment, is it not desirable to minimise the amount of arms available to any of the parties there?
Baroness Chalker of Wallasey: My Lords, my noble friend Lord Boyd-Carpenter is absolutely right but we understand that arms get in in a variety of ways. Those who re-arm any party are, of course, just prolonging the situation to the disadvantage of all and the death of many. In the meantime, we continue to try to save lives. Last week the ODA delivered 1,200 tonnes of goods to try to keep alive those whom we can reach. But reaching them becomes an increasingly difficult problem.
Baroness Blackstone: My Lords, according to the Prime Minister in an interview given yesterday, conditions have not been entirely satisfied for air strikes against Serbian positions in Bosnia. Will the Minister tell the House what are those conditions? Have we not now reached the point at which the United Nations should issue an ultimatum to the Serbs to cease shelling Sarajevo or face air strikes?
Baroness Chalker of Wallasey: My Lords, on Friday last the British Government, together with the

7
United States Government, spoke with Mr. Milosevic to get the bombardment of Sarajevo stopped. That bombardment was then lessened, although not stopped, after Milosevic had spoken to Karadzic. I understand that political clearance would be needed if there are to be air strikes. The humanitarian aid would then be placed at very grave risk. That is a calculation that we must make extremely carefully. The North Atlantic Council would have to meet if interdiction were to be considered, but the decision to activate air strikes requires the specific authority of the United Nation's Secretary General. I do not believe that we have yet reached that stage. We established the basis for it in the Security Council resolutions and in the August meeting of the North Atlantic Council. Let us hope that it will not come to air strikes.
Baroness Blackstone: My Lords, I am sorry to pursue the Minister on the issue, but much of what she said in answer to my question concerned the consequences of rather than conditions for air strikes. I accept entirely that the agreement of the Secretary General of the United Nations must be sought. However, I am asking whether or not we have reached the point at which that agreement should be sought. Perhaps the Minister will answer my question as regards what the conditions must be for that point to be reached.
Baroness Chalker of Wallasey: My Lords, I find it difficult and dangerous to speculate, which is what the noble Baroness asks me to do. I believe that the situation would have been more likely to require air strikes had we not persuaded Milosevic, last Friday, to work on Karadzic. That resulted not in the cessation of the bombardment but a very considerable lessening of it. The bombardment of Sarajevo last week is but one aspect of bombardments all over the Bosnian area. I believe that if we heighten trouble, which is what we do with air strikes, and lessen humanitarian aid in one area, the consequences could be extremely damaging and much more widespread.
Lord Gilmour of Craigmillar: My Lords, leaving aside humanitarian aid as regards which all credit is due to the Government and, above all, the British Army, does my noble friend agree that, broadly speaking, there are two positions which are defensible? The first is to do absolutely nothing and to say that if the Yugoslavs wish to kill each other, that is their own affair. The second is to seek to impose a just peace. However, merely to impose an arms embargo, which in the circumstances is grossly discriminatory, and otherwise confine ourselves to fairly futile attempts at mediation is not justifiable.
Baroness Chalker of Wallasey: My Lords, I understand the concern of my noble friend but in this day of instant media, and even more instant reaction, I do not believe that the do-nothing option is one which we or any other nation in the European Union is prepared to face. We have sought to reach a peace settlement. The talks continue. We shall try to secure a ceasefire and the implementation of it. As the noble Baroness, Lady Blackstone, said, there may come a time when that seems, to those with far more knowledge than
8
I, not to be possible without delivering air strikes. If that is so, the United Nation's Secretary General and the North Atlantic Council will confer and air strikes may follow.
Lord Richard: My Lords, the noble Baroness accused noble Lords on this side of the House of speculating. However, I am sure that she knows that yesterday the Prime Minister said that the conditions for air strikes are not yet satisfied. Will she tell us what the conditions are and when they will be satisfied?
Baroness Chalker of Wallasey: My Lords, in answering the noble Baroness's second question I tried to explain that had Milosevic refused on Friday to intervene with Karadzic and the level of action had continued at that suffered last week, then the conditions might have been met. However, Milosevic intervened with Karadzic on Friday as a result of British-US intervention. If there is a further reduction in the bombardment of Sarajevo we can say that we have had some effect. In the meantime, we continue with the peace efforts.
Lord Beloff: My Lords, are we to understand that pledges made by Mr. Milosevic are taken seriously by Her Majesty's Government and their friends in view of the constant record of pledges given and broken? Is it not the case that some future military ruler elsewhere in Eastern Europe might say, "The European Union is a push-over. If it cannot tackle Milosevic, it cannot possibly tackle me"?
Baroness Chalker of Wallasey: My Lords, as I have now said twice, had Milosevic not reacted to our intervention, it would have been a different situation. That was not a pledge. But I do believe that we should only take seriously the pledge of any single leader anywhere in Bosnia or the rest of that area for the time during which his agreement may last. However, one should not damn the enormous efforts that have been made to bring about a peace by reading across to other areas. Moreover, I believe that that is a question for another time.
Lord Monkswell: My Lords, perhaps the Minister can confirm an aspect that worries me. In her answers, the noble Baroness referred to discussions held by the Americans and the British with Mr. Milosevic. She also mentioned the North Atlantic Council and the United Nations Secretary General. However, can the Minister say who is in charge of the world's attempt to achieve some peace in Yugoslavia? There seems to be so many different people, organisations and countries involved that, I suspect, the efforts are damned to lead to an impasse. Can the Minister clarify who exactly is in charge of the world's attempts to seek peace in Yugoslavia?
Baroness Chalker of Wallasey: My Lords, the governments of the European Union are obviously in charge of the decisions that they take, as are the individual governments of NATO. So far as concerns the peace negotiations, the European Union has our noble friend Lord Owen as its negotiator and the United Nations has Mr. Stoltenberg. The United Nations

9
Secretary General is obviously in charge of implementing the decisions of the United Nations Security Council on which governments are represented.
Lord Mackie of Benshie: My Lords, is the Minister aware that her reply to her noble friend Lord Boyd-Carpenter was a little naive in that the embargo on arms does not affect the Serbs, who have the arms, equipment and arms factories of the former Yugoslavia? It really affects the Moslem population of Bosnia. Is the Minister further aware that the effect on a thousand million Moslems throughout the world of the apparent preference of the West and Europe for the Serbs and the Croats must cause enormous harm?
Baroness Chalker of Wallasey: My Lords, I sometimes feel that perhaps it is not understood just how effective, in economic terms, the embargo has been against the Serbs. It has been very effective indeed. The fact that they have arms resources is not feeding the Serb people. The noble Lord also spoke as if the Moslems were without arms and unable to fight. I have to tell the noble Lord that that is simply not true, as we saw only this morning when the Moslems cut through the Croat pocket of Vitez with considerable force. They have pinned down Dutch and Belgian troops, who had to be helped by British troops in Vitez. Whatever is going on, there is certainly no lack of armaments among the Moslems, the Serbs or the Croats.
Lord Mackie of Benshie: My Lords, but that means that the embargo is quite useless.

Social Security (Contributions) Bill
3.2 p.m.
The Parliamentary Under-Secretary of State, Department of Social Security (Viscount Astor): My Lords, I beg to move that the Bill be now read a second time.
The Bill is a short one and has just one main purpose: to give effect to the 1 per cent. increase in national insurance contributions from 6th April which, your Lordships will recall, was announced in the Budget last March. However, the Government have taken the opportunity presented by the Bill to include two subsidiary items which are essentially clarification of existing legislation. They concern the allocation of money out of national insurance contributions to the health service and the liability of self-employed people with a personal pension for Class 4 national insurance contributions. I shall of course say more about the precise provisions in the Bill in a moment but, on the matter of the proposed contribution increase, it may be helpful to the House if I say something about the background to the measure and the operation of the National Insurance Fund.
As your Lordships will be aware, the National Insurance Fund operates on pay-as-you-go basis, with current contributions meeting the costs of current benefits. It was not set up as a true funded system. The fund operates under the control and management of my right honourable friend the Secretary of State for Social Security and its main source of income is the national
10
insurance contributions payable by employees, employers and the self-employed. If the fund is not to run out of money, these must broadly speaking match expenditure on the contributory benefits payable out of the fund—such as retirement pensions, but also widows', sickness, invalidity, maternity and unemployment benefits.
I use the words "broadly speaking" because, as your Lordships will recall, the Social Security Act 1993 introduced the facility for my right honourable friend to seek a grant from the Treasury to the National Insurance Fund. There is a statutory ceiling to the amount of grant which may be made available. This is a maximum of 17 per cent. of estimated expenditure on contributory benefits. The rest of the fund's expenditure must be met by contributions.
I should like to emphasise the uniqueness of the National Insurance Fund. Aside from the Treasury grant, it must be self-sufficient in income, but by the same token its resources cannot be used to pay for any matters other than benefits and their administration. Unlike general taxation, which goes into the Consolidated Fund, national insurance contributions are a hypothecated charge, which means that they cannot be used to fund items paid for out of general taxation. Apart from a small allocation to the health service and appropriate rebates for those contracted out of SERPS (the state earnings related pension scheme) all the money from contributions goes into the National Insurance Fund. It cannot find its way to the Exchequer.
I think it is important that the House should recognise the constraints under which the National Insurance Fund operates because of concerns about the Government's plans to increase employees' contributions in 1994–95 yet at the same time announcing their intention to make changes to benefits in later years—as if there were plans for the Government to raise contributions, reduce benefits and pocket the difference ! That is not the case.
As my right honourable friend the Secretary of State has already announced, there will be uprating of all benefits in line with inflation and in many cases increases above inflation next year. We will be spending well over £2 billion more next year on benefits, around a billion of that from the National Insurance Fund. Changes to some benefits have been proposed for future years, but any government of whatever persuasion must expect to make adjustments to the scope of the social security scheme in order to meet the evolving needs of society. Whatever changes may occur in subsequent years, expenditure is still likely to go on rising.
The plain fact is that existing levels of contributions are not sufficient at present to sustain the levels of expenditure to which the fund is committed. There is nothing unusual or untoward about that. It is a feature of a pay-as-you-go scheme that adjustments to contributions will be needed from time to time, either up or down, depending on the calls upon the fund and on the state of the economic cycle. in 1985 and again in 1989 we put contributions down. We have not increased them for 11 years, but an increase is now necessary to keep the fund stable in the year 1994–95. What the position may be beyond that I cannot predict. Rates before us

11
will not be set in stone. It may well be possible to reduce them again at some time in the future as we have done before.
Clause 1 provides for the main primary percentage rate of national insurance contributions for employees to be raised from 9 per cent. to 10 per cent. from April next. Your Lordships will be aware that the Government restructured national insurance contributions in 1989 and introduced a two-tiered system for employees. There is now an initial percentage of just 2 per cent. which applies to the first £57 of weekly earnings, and the main percentage applies to earnings over £57.
The 1 per cent. increase before the House applies only to the main percentage. So the structure will become 2 per cent. plus 10 per cent. That means of course that the increase applies to a lesser extent to lower paid workers, who pay a greater proportion of their contributions at just the 2 per cent. rate. The increase will also apply to those people whose contributions are a modified version of the main primary percentage, most notably people who are contracted out of SERPS and whose contributions are rebated by 1.8 per cent. Their main rate will rise from 7.2 per cent. to 8.2 per cent.
I will turn now to the other provisions in the Bill. Both measures have retrospective effect as the Bill is drafted. I mentioned earlier that a proportion of national insurance contributions is allocated to the health service. This dates back to the inception of the contributory scheme as we know it. Under the old flat rate stamp scheme it was a proportion of each contribution; since 1975 we have had earnings related contributions, and the health service allocation comprises part of the percentage rate which is applied to people's pay. Thus, of the current 9 per cent. rate, 1.05 per cent. goes to the health service and 7.95 per cent. goes to the National Insurance Fund.
In 1989 the Government restructured national insurance contributions and introduced for the first time the concept of an initial primary percentage—the 2 per cent. rate. It was always intended that all the 2 per cent. should go to the National Insurance Fund so that the NHS allocation would only be payable on that part of contributions due at the main rate on earnings above the lower earnings limit. It is quite clear that the amendments brought about by the 1989 Social Security Act correctly exclude the payment of a health service allocation on the initial 2 per cent. rate. However, they do so by providing for an allocation only on contributions paid at the main primary percentage rate. We now note that it is possible to construe the provision as drafted in such a way that no allocation is payable on variants of the main primary percentage of 9 per cent. —for example, where employees are contracted out of SERPS and a rebated main contribution rate of 7.2 per cent. is then paid. This was never the intention and the allocation has in fact been paid all along to the NHS from all contributions from employees above the initial 2 per cent. rate. It therefore needs the minor amendment provided for in Clause 2 of the Bill to ensure that the law is clear.
12
Finally, I turn to the remaining item in the Bill. Clause 3 is again a simple clarifying amendment and does not involve any change of policy. It simply ensures that the taw reflects the intended policy that payments made to approved personal pension schemes by self-employed people are not allowable as a deduction in the computation of profits on which Class 4 national insurance contributions are charged. This policy is in line with the basic principle that only genuine business expenses, not personal expenses, are allowed as a deduction. It therefore provides for equity of treatment with employees who do not get a contribution relief for contributions they make to personal pension schemes. The provision applies from the date approved personal pensions were introduced in 1988, since which time there has been no formal legal challenge to the way we have applied the law. This clause merely clarifies the position and prevents what might otherwise be a period of potential uncertainty.
There is a temptation for some to see this as a taxing Bill. Its aim is to raise money, there can be no doubt of that. But it is money for the National Insurance Fund, not the Exchequer. It is money so that our commitments to the old, frail and sick can continue to be met under the contributory principle. I commend this Bill to the House.
Moved, That the Bill be now read a second time.—(Viscount Astor.)
3.13 p.m.
Baroness Turner of Camden: My Lords, this Bill comes to us having had a rushed passage through the other place where I believe the Opposition objected so strongly that I understand normal co-operation has been withdrawn. I believe that we in this House have an even greater responsibility than usual to ensure that the Government's intentions as regards this Bill come under close scrutiny. This is not a small, insignificant, technical Bill at all, although, of course, it is a short Bill. However, it is part and parcel of the Government's overall strategy in regard to social provision—I believe the Minister made that fairly clear when he introduced the Bill—and it therefore must be examined closely.
Of course it is understood that any government must be careful about public expenditure. Every government must seek to raise taxes, often from a reluctant electorate, in order to provide the social and public services without which a civilised society cannot function. The argument is about whether the policies adopted are fair and equitable and, even more important, whether the philosophy underlying the policies is an acceptable one. I believe that it is not. We have had over 14 years of Conservative administration and during that time the gap between the very well-off and the poorest has widened considerably. I do not think that this is disputed. For the poorest 10 per cent. of the population real incomes are said to have declined by some 14 per cent. since 1979. Recent research would appear to indicate that one-third of our children now subsist at a level below that regarded as the poverty level. We have, as everyone knows, a high rate of unemployment. The continuing argument about the Government's statistics surfaced again during the holiday break. A study

13
recently produced by a Cambridge economist argues that the number of people unemployed but unable to claim benefit is of the order of 1.08 million. That number includes school leavers, long-term unemployed who have been out of work for over a year, and other groups of people.
Since 1979 there have been 29 changes in the way in which British unemployment figures are calculated. Even so the Government's own figure of 2.8 million is unacceptably high and it accounts partly for the high level of social security expenditure. Now the Government are proposing in this Bill that employees' contributions should be increased by 1 per cent. However, that increase cannot be looked at in isolation. People are entitled to ask what they will get for it. The answer, simply, is that they will get less.
There is to be the so-called "reform" of unemployment benefit. There will be a job seeker's allowance which will be payable for only the first six months of unemployment. Thereafter individuals still unemployed, even though able to satisfy the "actively seeking work" criterion introduced by the Government in a previous social security Bill, will have to rely on means-tested benefits, and if their partner is earning, they could well end up with nothing.
Of course it is argued by the Government that the social security budget has increased. It has done so because we are having to fund unemployment. It has done so because we have more poor people and so more has to be paid out by way of social benefits. Of course the Government will say that they have to try to make the books balance—the Minister said so this afternoon—but in our view they are doing so by making the least able and most vulnerable pay for it. The Government won the previous election by claiming to he the party that was against high taxation: yet we now face tax increases on a massive scale—I disagree with the comment that this new increase is not a tax; of course it is—increases which will total £24 billion over the next three years, and with the tax bills of the average family escalating by £15 to £16 a week within the next two years. Now there is to be the increase in national insurance contributions. We must look at this Bill having some regard to the economic policies which brought us to this point.
The Government really cannot blame anyone else for high unemployment and the present state of the economy. We are being told that there are signs of improvement and we honestly hope that that is the case, but improvement will only be obvious to most people when we begin to see a real growth in employment. There are areas of the country where the prospect of alternative employment for men in particular appears to be virtually nil. Yet the Government come along with this Bill which cuts the benefits for people in that situation while increasing the contribution that those in employment must pay.
One cannot but recall that over the years successive pieces of legislation have been introduced with the objective of tightening the conditions for entitlement to benefit. It is sometimes forgotten that when the Conservatives took office in 1979 we actually had provision for earnings-related unemployment pay
14
through the earnings-related supplement, like many other countries in Western Europe—however, it is true that we had much less unemployment with a Labour government—but that was one of the first benefits to go.
Then we had the new definition—instead of being simply available for work, a claimant had to be actively seeking work and could not be too choosy about it. Then entitlement was reduced for men aged 55 with small, early occupational pension schemes. Sixteen to 18 year-olds have no entitlement either; and now we have this latest infringement of rights. It will mean that around 240,000 people will come off the register of those claiming benefit and presumably this will result in further doctoring of the statistics so that the Government can claim that the unemployment figures are not as bad as everyone thinks they are. However, it will fool no one. It will simply increase the cynicism with which large numbers of the population regard politicians. That is something which bodes ill for democracy and which cannot cause any joy to any of us in this House.
In the meantime the Government will no doubt continue with their policies, which seem to be, deliberately designed to introduce more injustice and inequality. A great deal of that injustice and inequality is due to unemployment and its attendant evils. Such growth in employment as there has been is in low paid, often part-time employment, mainly among women. Perhaps the Government really believe that the so-called entrepreneurial culture which they were so proud of having espoused in the 1980s would result in everyone becoming richer, but that has not happened. The trickle-down effect has not been forthcoming.
In the meantime even those in employment—say at a level of £22,000 a year£are beginning to feel unhappy. They are the people who will have to pay more all round, not only as regards the increase in national insurance contributions, which will cost them approximately an extra £4.56 per week but as regards other measures stemming from the recent Budget which seem designed to impact on that section of society most concerned to make prudent provision. However, that section of the population—mainly white collar employees—has no more protection against unemployment and no greater expectation of employment security than manual workers have had. Furthermore, in some instances they have been unwise enough to be taken in by the Government's national insurance bribe and have gone in for private personal pensions. The Government have done everything they possibly can to persuade people to make their own, individual pension investment. As we are now seeing, that is proving disastrous for some of the people concerned.
Only a few years ago the Government ceased payments into the National Insurance Fund. I agree that it is a notional fund, but the Government ceased payments which until that time had been set aside for that purpose. They have given rebates to encourage people to make personal provision. I do not blame the insurance industry for what has happened because I am sure that, although unacceptable practices have been used in order to sell insurance in inappropriate circumstances, the principal blame for the whole affair rests with the Government whose idea it was. The

15
Government are so ideologically motivated against collective provision, whether by the state or good occupational schemes, that they had to provide national insurance rebates—and thus forgo income—in order to persuade people to enter the individual pensions market.
As I said earlier, it is not possible to look at a Bill of this kind without considering the philosophy which I believe motivates the Government's approach to social security generally. The Government's approach is an intensely individualistic one. They believe that we must all provide for ourselves and our families and must break away from the dependency culture. However, most people do not want to be dependent on anyone. One of the problems with means-tested benefits is that some people who are entitled to them do not claim because they find it too humiliating. However, if ill luck strikes and poverty looms through unemployment, illness or other misfortune, people who have spent money paying their national insurance contributions are entitled to expect that their basic needs will be met since that was the objective of the social insurance programme.
No one is saying that the welfare state as envisaged by Beveridge should not be re-examined. Times have changed substantially since 1944 and adjustments have to be made to cope with those changes. However, the Government's attitude has been to try to cut back. The result is that the poor and the vulnerable pay the highest price.
Of course a great deal depends on the economy, which we all hope will improve, but there is no sign yet from the Government that they espouse the cause of full employment, even as a desirable objective. Nor is there any indication that they are intent upon developing an industrial strategy which has any hope of bringing that about.
This Bill is another helping of the same old policies. As such we cannot welcome or applaud it. To put it simply, people are being asked to pay more for much less. Were it not for the tradition that stipulates that we do not oppose Government Bills at Second Reading in this House I would be disposed to oppose the Bill. However, we shall simply do our best with it when we have the opportunity in Committee.
3.26 p.m.
Earl Russell: My Lords, I should like to congratulate the noble Viscount on the skill with which he introduced the Bill. It was an outstanding example of the sedative style of ministerial speaking. In fact, it demonstrated why the Opposition is exhorted to show eternal vigilance. The Minister, did not make it easy for us but I hope that he did not make it impossible.
National insurance has the same sort of relationship to tax as Berwick upon Tweed has to England: we include it when we feel like remembering it and leave it out when we feel like making a distinction. As I am sure the noble Lord, Lord Boyd-Carpenter, will say again in a few minutes, in this House national insurance Bills are not money Bills. As I understand it, we are entitled to amend national insurance Bills and they enjoy only the usual qualified financial privilege of another place. On
16
the other hand, the Bill is obviously part of a Budget package and, as the noble Baroness, Lady Turner of Camden, said, must be considered in the light of that Budget package.
It is fairly clear that the purpose of the Bill is to raise revenue. I admit that, as the noble Viscount said, the measure is hypothecated. The House may take note that this is one context in which the principle of hypothecation has been accepted by the Treasury, is accepted by the Treasury and continues to be accepted by the Treasury. But to say that it is a hypothecated tax is not to say that it is not a tax. At the last election we put forward a proposal for a hypothecated tax of one penny on income tax to be devoted to education. We never dreamt of telling the electorate that because it was hypothecated to education it was not a tax. Had we done so I can imagine what the noble Viscount and his colleagues would have said about it. Therefore, the purpose of the measure is to raise revenue.
The noble Viscount said—I think that I took down his words correctly and I hope that he will correct me if I did not—that the money in the National Insurance Fund was insufficient to meet the pressures to which the fund was committed and therefore it had to be raised because of the state of the economic cycle. Translated into plain English that means that this increase is brought in to pay for the recession. At the same time, as the noble Baroness brought out, it means there will be greater contributions for benefit. Therefore it appears, whether rightly or wrongly, to undermine and weaken the contributory principle.
The noble Viscount may remember that in the Social Security Bill of 1989 the Government removed the Treasury supplement for the National Insurance Fund. The first decision that I had to take while holding this brief in this House was whether to divide the House against that proposal. I was probably right not to do so but I still feel a hankering regret that I did not, because the Government reintroduced the Treasury supplement in 1993, but too late to avoid the present increase, which would have been unnecessary if they had kept the Treasury supplement.
We are reaching the situation illustrated by the noble Lord, Lord Gilmour of Craigmillar, in his book, where we have a government who feel entitled to raise taxes only during a recession. I do not find that a particularly helpful approach to tax increases. For this Budget has certainly been one of tax increases. Taking together the Budgets of March and November, we have tax increases of£15.2 billion over two years. I think that I am correct in saying that that is the biggest tax increase which has been introduced in peace time.
Overall, this has not been a tax cutting government, it has been a tax increasing government. In the first Budget of this Government, the noble Lord, Lord Howe of Aberavon, said that he was offering people income tax cuts with which to pay their VAT. That seems to have been the signature tune of the early years of this Government.
In that context, I must say I am prepared to take no lectures from the Government Benches about any proposals which my party may put forward to increase taxes. Of course, the Minister may reply, perfectly

17
reasonably, that he will similarly take no lectures from me about any proposals of his to increase taxes. If he does so, I would accept the justice of the reply and I would regard it as a helpful contribution to political debate. We cannot live in a world in which all tax increases are taboo. That is like saying that every car should go on the road without brakes. It is not a situation that I should wish to carry on for long.
However, if we can once agree that tax increases are not anathema but something that may have to occur from time to time, we still have two questions which need to be discussed. One is, "Why should we have tax increases?" We recommend tax increases to pay for better public services. The Government recommend tax increases to pay for a ravaged tax base. That ravaged tax base seems to be characteristic of late Reaganomics in any country. In fact it marks the Government's recruitment to the firm of Keating and Campbell. In all countries where Reaganomics are applied the result of making control of inflation the sole objective of macroeconomic policy seems to be that unemployment rises. That means fewer taxpayers. It is also a regular objective of Reaganomics to lower wages by competition. That means that many people drop out of the bottom of the tax base and many others who pay tax pay a great deal less than they otherwise would have done. In fact some become dependent on means-tested benefits. Therefore the cost of the social security budget rises also. That seems to be why Reaganomic governments around the world in general have not succeeded in lowering public spending to any significant degree. I admit that they have tried. They have tried very hard indeed, but they have not succeeded. In fact they had better start thinking of other ways to go about that objective.
When considering tax increases one needs to ask the question, "What taxes?" In any century, not only in this century, a low taxation philosophy has tended to go with high indirect taxes because, however low the Government's taxation philosophy may be, they cannot succeed in forgoing revenue. Therefore they tend to use indirect taxes in the hope that people will not notice. At first the Government operated on the policy of income tax cuts to help people to pay VAT. When now considering remarks about the 20 per cent. tax rate, we wonder whether we are seeing income tax cuts to enable people to pay national insurance.
I am not sure that that is a good approach to taxation. National insurance is in effect a tax on employment. If we want more taxpayers, I do not believe that that is the right tax to raise. We are offered a yield of £1.9 billion from the Bill. That is the same amount that could have been achieved from raising the standard and 20 per cent. rates of income tax. I do not understand why it was not proposed in that way. It would have produced the same amount of revenue. We are now back with the Treasury supplement. I do not understand why that revenue could not have been paid legally into the national insurance funds, just as this yield will be. I see that the noble Lord, Lord Boyd-Carpenter, shakes his head. I shall listen with interest to his reply.
However, even if we use national insurance, there are other ways in which we could set about this. We could
18
have cut out the 2 per cent. on income below £57 a week. That would have meant a much less steep step in the costs to the employer when the £57 threshold is passed. It would have diminished the incentive to the employer to pay people wages which take them out of the national insurance base altogether. It might have benefited the National Insurance Fund as well as the employer. The Government could have considered a taper in the rate at which national insurance comes in. That again would have made a less steep poverty trap and would have diminished the incentive to keep wages down.
Such a concession would have had to be paid for. I can envisage no reason why it should not have been paid for by a slight movement—it would have only needed to be slight—in the upper earnings limit. In the Chancellor's Budget speech we were also promised a 1 per cent. reduction in the lower rates of employer contributions and a 0.2 per cent. reduction in the standard rate. I shall be glad if the noble Viscount will tell us when and in what form—I presume in regulations—that proposal is likely to be laid before us and whether the regulations will be under the affirmative or negative procedure.
The Chancellor said in his Budget speech that the proposal was to provide an incentive to employers to create low-cost jobs which might get people out of unemployment. At first glance that looked as though it might be a good idea. However, the Chancellor also said that that same reduction was meant to pay for the costs of statutory sick pay. We shall discuss that issue tomorrow. I had always thought that one cannot spend the same money twice. I have been looking at the figures. Employers are being offered an £830 million reduction under this procedure. Of that, £695 million will go to meet the cost of statutory sick pay. That leaves only £135 million to encourage the creation of jobs. Spread around all the employers in the country, £135 million really is not much money. Once again we have good and bad ideas in the Budget fighting each other to a standstill. It looks more than ever like an eightsome reel danced by Englishmen.
So here we are, my Lords. The Thatcher revolution is slowly winding to its close. Instead of a great liberation, we have a steady drop in the tax base, a difficulty in bringing about recovery because of lack of productive capacity, and the recruitment to the firm of Bush and Major, and Keating and Campbell—two down; two to go.
3.38 p.m.
Lord Boyd-Carpenter: My Lords, I wholly agree at any rate with the opening sentence of the noble Earl's speech that my noble friend the Minister has given a good and clear exposition of the Bill. I believe that your Lordships' House is greatly indebted to my noble friend for the clear statement he gave of what is undoubtedly an extremely important measure. There is no question that we are dealing with a matter of major importance, and of major importance to the whole of our working population and to the working of our economy. As I

19
have had good reason to know over a long period, the subject is highly complex. We are particularly indebted to my noble friend for his clear exposition.
However, I am afraid that I must part company with the noble Earl, Lord Russell. I always enjoy listening to his speeches—they have the entertainment value of high grade fiction. I thoroughly enjoyed his exposition. However, it was interesting to hear the way in which he drifted away from national insurance into general questions of taxation. We are not dealing with general questions of taxation. The Bill deals with national insurance. As was pointed out, I believe by the noble Baroness, we are dealing with national insurance which is a matter upon which, if your Lordships' House sees fit, it can divide and seek to amend, whereas we cannot do so on taxation. That is the clearest illustration of the fact that we are not concerned in this Bill with general questions of taxation at all. Your Lordships' House is not, either as regards this Bill or generally, in a position to vote and decide upon taxation matters.
Here we are concerned with national insurance. It is obvious that in the present state of the economy, with the present level of unemployment, the revenue from the National Insurance Fund needs to be fortified. As I understand it, that, in a sentence, is the purpose of the Bill. I hope it will be the case—and it may well be—that in years to come the call on the National Insurance Fund will be less. It may then be possible to make a reduction in the contribution which is exacted from the citizen to the fund. However, I beg noble Lords to bear in mind in discussions on the Bill that we are here concerned simply with the financing of the National Insurance Fund. That is a large element in the working of our national economy. It is a matter of great importance to almost every citizen, because very few of us, at one time or another, do not need to be supported or aided by one aspect or another of national insurance. That is the essence of National Insurance: it completely covers the whole of the population.
Given that and the fact that obviously the demands on the fund must be increased by the level of unemployment, it seems to me, with respect, that your Lordships' House has no option but to say that we must agree to the increases in the national insurance contribution which are necessary to keep the fund in balance.
I wish to ask a question which my noble friend may be able to answer when he replies. On page ii of the Explanatory and Financial Memorandum which accompanies the Bill it is stated that:
"Clause 2 provides authority for the future payment of some £1 billion per year to the National Health Service out of National Insurance contributions. It also provides authority for payments amounting to some £4.6 billion from October 1989 to April 1994".
I ask my noble friend why, if authority is required for those payments, it has not been sought over the five-year period during which they have been made. It seems that either there is no need for further legislation to deal with the matter or that we have been dealing with those large sums of money for five years without proper legislative authority. On either view, it is desirable that when my noble friend replies he should explain why this
20
extraordinary retrospective provision is included in the Bill. Is the provision necessary? If it is, why has it not been necessary for the past five years?
3.44 p.m.
Lord Ennals: My Lords, it is always a pleasure to follow the noble Lord, Lord Boyd-Carpenter, and I hardly ever do so. It is interesting that although he spent so many years dealing with social security in another life, as did I, in this place we hardly talk to each other about the subject.
This debate is unique in that we not only have the noble Lord, Lord Boyd-Carpenter, speaking, with all his experience in another place dealing with social security, but the noble Lord, Lord Renton, who has vast experience, and the noble Lord, Lord Dean of Harptree. Leaving out myself, we have a rather distinguished list of people who spent their time in another place dealing very much with those issues.
The noble Earl, Lord Russell, prophesied that when the noble Lord, Lord Boyd-Carpenter, spoke, he would say that, of course, this is not a tax. I shall not enter very much into that argument because for the people who pay it does not make much difference. For them, it is as much a tax as if they paid it in some other way. However, I shall take it as a tax, as did my noble friend on the Front Bench.
It is accepted that it is a short Bill, the main provisions of which are contained in Clause 1. We shall not be able to make many changes in it during the course of the debate in this place, but it is an important Bill. I suppose that is the reason why the Government decided to guillotine a reasonable debate in another place. That was a shocking thing to do. It has hardly been known in the history of the House of Commons for a decision to guillotine a debate to be taken before the Second Reading of the Bill. To give to another place only one day in which to deal with all the stages of the Bill is, I believe, an insult to our parliamentary system.
Part of the proof of the need for a second Chamber is, I suppose, to do what another place is denied the right to do. We shall do that tomorrow on another Bill that was forced through without any reasonable time for debate. That is perhaps because the Government think that the matters are important, so get them dealt with quickly—"Let us see that the public do not allow themselves to be aroused". I wondered whether that was why the Secretary of State decided not to accept responsibility for taking the Bill through another place and left it to the much more emollient Minister of State, Mr. Nicholas Scott, who has gained for himself from all sides of the House, both in another place and here, respect for the way in which he has applied himself to his main job of dealing with the needs of the disabled. The Secretary of State, Mr. Peter Lilley—one of the central figures in the "back to basics" campaign so brilliantly led by the Prime Minister—may wish to keep out of the controversial debate at this time. If that is the reason, then I suppose we understand it.
We must put the Bill into context. It has much to do not with "back to basics" but, so far as I am concerned, with "away from basics". I remember that the issues we are debating today of national insurance contributions

21
arose in 1942 when I first became interested in them and when the Beveridge Report was published. I was a young education officer with the responsibility of ensuring that the public —that is, at that time members of the Armed Forces—understood what it was all about. The welfare state and providing and ensuring that people's needs were met from their own contributions—whether by taxation or national insurance is not especially important at this time—was to establish that we were a community. Perhaps we were rather ahead of ourselves at that time: we are certainly not ahead of ourselves now—we are way behind—but it was to ensure that we were a community which, by taxation and national insurance, would provide a guarantee that in times of unemployment, sickness or disability people would know that they would not have their backs to the wall. Therefore, I wish to put the Bill, which is raising a large sum of money, into context.
This Bill is one of the Government's devices which tear up the pledges that they made at the time of the general election. The "party of low taxes" was the presentation made by the Prime Minister and all his colleagues; and no doubt noble Lords on the other side of the House who took part in the debate and stumped the country, telling the public what the debate was all about, were saying, "We are the party of low taxes. Vote for us and you will not have to pay out as much as you will if Labour gets into power". Of course, that was just so much hooey. It was just a device to confuse the public. I am afraid that one of the charming features of the British electorate is how easily it is fooled. People believe what those in high office say to them. That is very charming, but I am afraid that it now proves itself to be very disarming and very concerning that the public take at face value things that are said to them which we now know are blatantly untrue.
Yesterday, as no doubt many other noble Lords did, I followed the interview which the Prime Minister gave to Sir David Frost. I have to admit, and perhaps it is because of my old age rather than the boring nature of the two contributors to that debate, that I fell asleep. But when we reached the vital moment my wife woke me up. When confronted with the suggestion that promises made at the election had been broken—that pledges were made which had led the public to vote in one particular way but which we are entitled to say had been broken—the Prime Minister charmingly said that they had not been pledges but objectives. He was very sorry that it had not proved feasible to carry out those very recent promises, or hopes. They were not pledges, just hopes.
Certainly the changes made in this Bill play a very small part, though the sum of money is large when we see it in proportion. I see this provision, raising money as it does, as a contribution to what the British public will have to pay for the state of the economy. From October 1994, a typical family will pay an additional £10 a week in tax, rising to £16 a week in April 1995. As has been said, the tax increases already announced for the next three years amount to the biggest tax hike in British history, imposing an extra £24 billion in taxes on the public. Nineteen out of every 20 households will lose as a result of these imposts, of which this Bill is just
22
one. The Government promised year-on-year tax cuts but they are now delivering a tax rise every six months. They forecast that the nation's tax burden would rise every year over the next five years. Over the next five years it will become 38.5 per cent. of the nation's earnings. In 1979 the tax burden was 34.75 per cent.—4 per cent. less—so it is not true, if it ever was true, that the party opposite is the party of low taxes.
Let us look at the matter in perspective. From April 1994, the typical family with one earner will pay an extra £9.30p per week in tax. National insurance tax, up 1p, accounts for £3.19p. That is what this Bill is about. That is why it is so important. It is the largest single sum in the £10 to which I referred. We have the reduction in mortgage tax relief, which will bring in £2.24 per week. The married couple's allowance is frozen and cut to £20. That will bring in £1.85 per week. There is 8 per cent. VAT on fuel; the single person's allowance frozen; the extension of the 20p band; and excise duties, over-indexation, etc. The total is £9.32p.
After October 1994 that will increase to £10 a week. From April 1995 it will go up to £16 a week. That why I have said that the Government are starting on a course, of which this Bill is the first step, which will dramatically increase the amount that the public will have to pay. Whether it is referred to as taxes or national insurance, so far as they are concerned the effect is the same. It is taken out of a dwindling amount of money that is at their disposal. Ninety-nine per cent. of non-pensioner households will be worse off as a result of this measure. Over half of the total increases come from direct taxes, and half a million individuals who did not previously pay income tax will have been trawled into tax by the double freeze in allowances.
The second charge that I make against the Government is that the Bill further undermines the insurance principle. As my noble friend Baroness Turner of Camden said, people will be paying more for less in terms of services which they receive through the National Insurance Fund. They are paying more, and we shall see in other respects what will happen to their pensions, disability benefits, invalidity benefits, unemployment benefit, etc. Those are all issues that will be debated on the Floor of this House.
The whole of my political life, from the time that the Beveridge Report was first presented—whether or not in office; usually not in office but especially when in office—was given to finding ways of improving benefits and what the state could do for the public front the amount received in taxation and national insurance. We have now moved into a phase in which we are doing the opposite. The amount that is paid is going up and the degree to which people can expect to benefit is going down. I am happy to say that over quite a long period of some 30 years there was almost a consensus between the political parties on this matter. We all genuinely sought not to throw these issues at each other and argue about them. When the noble Lords, Lord Boyd-Carpenter, and Lord Renton, and my noble friends Lord Dean and Lord Houghton (I wish that he were here) were Ministers, that same relationship existed. There was a consensus which we sought to maintain. Of course charges went up arid down, as has been said. The national insurance

23
payments would sometimes go up and sometimes they would go down. But the state of the fund as revealed in the parliamentary research paper shows that by 1993 the working balance had for the first time for many years (possibly ever) gone below the recommended minimum of one-sixth of a year's benefit expenditure which is required in the months ahead to meet the expected allowances. Recent estimates on the state of the fund have shown a move from surplus to deficit. This refers to an excess of expenditure over income. It does not mean that there is not enough in the fund to pay benefits. The fund has a working balance to prevent that. However, it means that that balance has been eroded. We are told in the research paper:
"In the 1990 Quinquennial Review the Government Actuary stated that 'it would seem advisable to maintain a minimum balance of about one-sixth of a year's benefit expenditure'. Estimates in the 1991 report from the Government Actuary on the benefits uprating and contributions re—rating orders showed an excess of expenditure over income for the years 1991–92 and 1992–93. Consequently, the Government Actuary predicted that the balance of the fund would fall from 40 per cent. of benefit expenditure in 1990–91 to [only] 17 per cent. in 1992–93".
As the noble Lord, Lord Boyd-Carpenter, said, something had to be done. But I must say that at the time when I was Secretary of State and had responsibility for ensuring that the National Insurance Fund was properly funded in order to do its duty I would have come under very great criticism had I ever allowed the fund to get into its present dangerous position. So I do not argue that, pursuing the kind of policies that the Government pursue, they do not in fact need to make some changes. But they have done it in what I believe is a very unfair way.
Those are the charges that I make against the Government. I want now to look at the way in which this House will handle the matter. The changes can be seen in the context of recently announced cuts to national insurance benefits. As my noble friend said, they include the replacement of unemployment benefit, which was apparently paid for one year, by the new jobseeker's allowance, which will mean testing after six months. That will take place in 1996 but before then it will be debated, no doubt very furiously, in your Lordships' House as well as in another place. Another change is the replacement of sickness benefit and invalidity benefit by incapacity benefit for new claimants from April 1995. Unlike the invalidity benefit, the new benefit will be taxable and will have a tighter medical test. There is also the raising of the female state pension age to 65, which will be phased in between 2010 and 2020. The Government estimate that the first of those two changes, alongside certain other measures such as the abolition and recovery of statutory sick pay costs for larger employers, will save some £2.5 billion a year by 1996–97.
The Bill itself absolutely contradicts assurances that have been given by both the Prime Minister and other Ministers. The Prime Minister said—one occasion was on 28th January 1992—that the Government had no plans to raise the level of national insurance contributions. Why did he make that statement? Why should he say to the public that the Government had no such plans and then do so unless they were simply
24
weasel words, using the phrase "no plans to do so" to mean "not yet put into legislation to submit to the House"? I think that is a form of dishonesty. At the same time, during the election the Chairman of the Conservative Party ruled out an increase in national insurance contributions, but we are now deciding just what such a level of contributions will be.
I hope that in his reply the Minister will say a little more about the National Health Service aspect, as he was asked to do by the noble Lord, Lord Boyd-Carpenter. A statement was made in another place on 16th December by the Minister, Mr. Scott, who said:
"We currently allocate about 10 per cent. of all contribution income to the health service under a principle dating back to the inception of the contributory scheme as we know it".—[Official Report, Commons, 16/12/93; col. 1303.]
As an aside, I believe that it is about time we looked again at this matter. It does not make any sense to the public and not much sense to us that about 9 per cent. of the National Health Service funding is contributed through a grant made to it by the National Insurance Fund. It is not quite 50 years (in fact it is 45 years) since the ideal was introduced. It makes no sense at the present time. The Minister continued:
"However, we have uncovered a minor ambiguity in the legislation that split employees' contributions in 1989 into an initial rate of 2 per cent. and a main rate of 9 per cent. which, as the House will be aware, is to be increased to 10 per cent. I am entirely clear that it was always intended that the NHS allocation should, from 1989 onwards, be paid out of the main rate and not out of the lower 2 per cent. rate, because that would have left only about half the 2 per cent. contribution rate to go into the National Insurance Fund".
To me that is as clear as mud. It is a load of gobbledegook. Either the Minister did not understand or he was revealing a very serious situation. I hope that when the noble Viscount answers this debate he will make a clearer statement about just what the leak is with the National Health Service and how it came about that the correction is having to be made in this Bill.
4.5 p.m.
Lord Renton: My Lords, the noble Lord, Lord Ennals, with his usual modesty, describes himself as being of old age. I hope it will comfort him if I remind him that he is nearly 20 years younger than was Lady Elliot of Harwood when, alas, she left us some 10 days ago after an accident caused by tripping over her gown as she left this Chamber after the opening of Parliament. To the very end her mind was active although her body was so frail.
Characteristically, the noble Lord, Lord Ennals, did not make quite the attack on this Bill that was made by the noble Baroness, Lady Turner, when she opened the debate. In the course of my short remarks, I hope to be able to show the noble Lord, although I cannot answer all his points and shall have to read his speech—
Lord Ennals: My Lords, I was a great admirer of Lady Elliot and knew her for many years in so many of her capacities: her interests were not just in the welfare state but also in international affairs, including her presidency of the United Nations Association for many years. I am grateful to the noble Lord for allowing me to intervene to pay my own personal tribute to a very wonderful lady.
Lord Renton: I am sure that all your Lordships are pleased by that intervention of the noble Lord, Lord Ennals. Perhaps I may carry the matter a little further. The noble Lord was not only Secretary of State for Social Security but deeply involved in matters of health. In another place, when Colonel Walter Elliot, who had been Minister of Health, ceased to work on the Front Bench and went to the Back Benches, I often used to sit with him. It was from then onwards that Lady Elliot became a family friend.
The noble Lord, Lord Ennals, said that the Bill undermined the national insurance scheme. I am sure that if he reflects upon it, he will see that financially it strengthens that scheme. I welcome the Bill. We need to regard it in the light of the background of national finances which still show a budget deficit of £40 billion in the financial year. Also, there is a need to make the National Insurance Fund and the National Health Service more solvent and less dependent upon the general body of taxpayers. I should have hoped that both sides of your Lordships' House could agree on that.
The increased employee contribution from 9 per cent. to 10 per cent. means that employees earning less than £130 a week will pay less in national insurance contributions than they did under the Labour Government in 1979. I hope that that will comfort noble Lords opposite.
Bearing in mind that expenditure on national insurance benefits rose by no less than £10 billion in the four years to 1992–93—and they will rise further—surely the £1.9 billion in a full year, which the 1 per cent. increase in employee contributions will raise, is reasonable in the circumstances.
That is all that I want to say about the purpose of the Bill. Perhaps I may now trouble your Lordships with a few comments on the method used. Clause 1 is short and clear and has been well explained by my noble friend Lord Astor. Clauses 2 and 3 are technical and contain a lot of cross-references which some people may find obscure. As was pointed out by my noble friend Lord Boyd-Carpenter, each of them is retrospective. I shall say more about that matter in a moment. But neither of them involves any change in policy and neither Clause 2 nor Clause 3 will make anyone worse off.
As to the retrospection, I do not like this legal fiction being introduced. I know that I am only a stuffy old lawyer, but to have the word "deemed" introduced in a statute in order to give an interpretation to a previous Act of Parliament which was never intended at the time it was passed always seems to me to be a weakness from the point of view of drafting. But retrospection is sometimes acceptable and sometimes unacceptable; that is well established. I remember a Financial Secretary to the Treasury saying in another place many years ago that retrospection is not justifiable if it adversely affects individual taxpayers or indeed makes the general body of taxpayers pay more. But it is acceptable if it is in favour of taxpayers individually, as a group or in general. It is also acceptable if it is purely internal to the Government—if it merely enables the Government to justify moving public money from one account controlled by the Exchequer to another account controlled by another department of government. That
26
is what will happen here. Without going into details, it is perfectly clear that Clauses 2 and 3 are retrospective in a way which enables the Government to transfer funds already in their possession between one fund and another.
A brief word about drafting. I have only one suggestion to make. I think that Clause 2(1) would be improved if it repealed subsection (5) of Section 162 of the Social Security Administration Act 1992 and re-enacted it in the way in which it is intended in subsection (1) it should be done. It would be a very simple amendment, it would be easy to draft and it would be much easier for the users of the statute if such an amendment were made.
Those are the only comments that I wish to make but I hope that noble Lords opposite will realise, in view of what has been said by my noble friends Lord Astor and Lord Boyd-Carpenter and in view of the few further points that I have put forward, that their minds can be set at rest and that the Bill really is in the public interest and is not unjust to anyone.
4.13 p.m.
Lord Jay: My Lords, I rise to support the arguments advanced by my noble friend Lady Turner in her most persuasive and lucid speech this afternoon. There is an important sense in which the National Insurance contribution is a tax. There is another important sense in which it is not a tax. It is a tax in the simple sense that the contributor must pay the moneys compulsorily to the insurance fund. It is for that reason that I oppose this further 1 per cent. increase as being unfair.
Many people tend to judge the fairness of the percentage of income paid to the state by different taxpayers simply on the basis of income tax alone and ignore all other inputs. But most taxpayers nowadays, including the average salary or wage earner and indeed many low wage earners, pay not merely income tax but VAT, the other indirect taxes, council tax, the national insurance contribution and the EC food import levies, which alone amount to £5 or £6 a week per head of the population. Those taxes are often omitted from the calculation. It seems probable that, if one includes all those inputs, as one should, the average wage earning family today is paying as much as 50 per cent. of its total income to the state, a much higher proportion than is paid by many people with very much higher incomes. For that reason I am opposed to further increases in the contribution, which falls on everyone except those on the lowest incomes.
Secondly, there is another sense, equally real, in which the contribution is not just a tax. Unlike income tax or VAT the contributor buys in return for his payment a specific benefit and protection against poverty in retirement, unemployment, sickness and other problems. The contributor, after all, acquires the crucial security of knowing that he has a benefit which is unassailable and of which at any rate no responsible or reputable government would deprive him. For that very reason, however, this Government are also to be condemned for suddenly and arbitrarily cutting the payment period for unemployment benefit from 12

27
months to six months. That is a breach of contract which, if perpetrated by an insurance company, would be generally regarded as fraud.
I know that some rather glib financial journalists—the people whom the noble Lord, Lord Lawson, in his unregenerate days described as teenage scribblers—have recently been attacking the whole contributory principle on the argument that the contribution is really only a tax because its relation to the benefits eventually acquired is not a wholly actuarial one. That is an unsound argument. First, the Government Actuary regularly monitors the state of the fund. Secondly, even so, the practice of professional actuaries is not an exact science. A professional actuary has been defined as a man who is "dead on time"—but many of us amateurs do not die on time. In an age when money values, interest rates and unemployment percentages are all unpredictably varying, the actuary science cannot be exact. But that does not in the least alter the essential fact that if the contributory system is responsibly managed the contributor pays a substantial sum on which is based eventually a substantial benefit in turn. One does not by this system get something for nothing, and that is what I believe gives the contributory system great moral and social value.
My experience as a constituency member in another place would lead me also to believe that that is real for a large section of the population. Indeed in one way the contributory system is twice blessed. It is blessed from the point of view of the Exchequer—and in this case the fund—because the average person feels less resentment at handing over £1 knowing that he will get benefits in return than in handing over £1 in income tax or VAT. Secondly, throughout his working life he knows that he has some protection as of right—not charity—against unemployment or sickness in old age.
Ernest Bevin called the retirement pension "deferred pay". I believe that that is a just description. Winston Churchill once described the whole contributory system as "bringing the magic of averages to the relief of poverty". I confess that, having paid contributions myself for 30 years, I feel encouraged by the thought, when I receive a pension, that I have contributed something towards it. At the same time I fully agree (some people forget this) that the pension is itself subject to income tax. If people have other income they pay the corresponding amount of tax. The pension is not simply given away to those who do not need it.
For that reason it is highly misleading, as we sometimes read, that there are tens of millions of people who are getting benefit which they do not deserve and to which they do not contribute. I hope that most of your Lordships agree that the contributive principle, including, incidentally, the Exchequer contribution to the fund itself, is something which Parliament must remain determined to preserve. Therefore, I welcome the assertions of support which we have had recently from both the Prime Minister and the Chancellor of the Exchequer that the Government are determined to protect the retirement pension and to honour the contracts made in it by the Government.
28
Unfortunately, however, those pledges are somewhat weakened by two factors: first, the many grotesque U-turns from this Government on all kinds of issues and, secondly, the really deplorable story—which we shall have to discuss in more detail in this House on another day—of the Government driving contributors to contract out of the earnings related state pension scheme and then taking no effective steps to show that by leaving the state pension scheme, people will be very much worse off than before as in fact is the case.
In conclusion, I wholly support one change in the system which the Government have made; namely, the rise in the pension age. The whole idea, which has been so much publicised, that we are all faced with a great future burden of idle, elderly people, is largely a myth. If better health enables us to live 10 per cent. longer, it has also enabled us to work 10 per cent. longer. The retirement ages of 60 and 65 are becoming very largely obsolete. The fact that people live longer is a problem of employment and not of pensioner policy. An increase in the number of the working population is, after all, an opportunity and not a burden provided, at least, that we are following sane economic policies.
4.23 p.m.
Lord Dean of Harptree: My Lords, no one likes an increase in contributions, but in introducing the Bill I believe that my noble friend made out a convincing case for the necessity for it. I am puzzled by the argument that the Bill somehow undermines the contributory principle. Its aim seems to me to be far from that: it in fact strengthens and reinforces the contributory principle. One of the principles which has been in existence, ever since we have had national insurance, is that contributions should meet the bulk of the cost of benefits. It is on that basis that the concept of benefits as of right in return for contributions rests.
Lord Ennals: My Lords, before the noble Lord moves on, will he accept that if it is true that we are asking contributors to pay more for what we know will be less in benefits, that is undermining the contributory system?
Lord Dean of Harptree: My Lords, if the noble Lord, Lord Ennals, will wait just a moment, my next paragraph will deal with that point. There has never been an absolute right to an absolute level of benefit. The eligibility for and the level of benefit is changed at regular intervals. I believe that that really is the answer to the point which the noble Lord, Lord Ennals, has made.
As my noble friend said in introducing the Bill, it is not concerned with an insurance or a fund in the normal, commercially accepted sense of those terms. It is based on a pay-as-you-go principle which means that there must be sufficient revenue coming in each year, broadly speaking, to meet the costs of the benefits going out. If a shortfall should occur it has either to be met by increases in contributions or, alternatively, by the taxpayer. It is very dangerous to allow an Exchequer grant, or the old Exchequer supplement as it used to be called, to meet too big a cost of the benefits. If that were to happen the concept of benefits as a right in return for

29
contributions could easily be undermined. It could then be easily argued that all benefit should be paid on a means-test basis.
As the noble Lord, Lord Ennals, said, it is very clear from the Government Actuary's reports that additional revenue is required for the fund. In the Government Actuary's quinquennial review 1990, he stated,
"it would seem advisable to maintain a minimum balance of about one-sixth of a year's benefit expenditure".
That is certainly not the case at the present moment. The position would deteriorate still more were there to be no increase in contributions as envisaged in this Bill. So I believe that the Government are right in principle in introducing the Bill and that they have the authoritative support of the independent Government Actuary for what they are doing.
In conclusion, perhaps I may raise two individual points. The first concerns the self-employed. I note that the increase in their contributions is also to be 1 per cent. as for the employee. On the face of it it seems to be somewhat harsh that they should have a similar percentage increase in contributions. I recognise of course that the self-employed contributions come out of profits, but none the less they are not entitled to statutory sick pay and if they wish to have provision of that kind they have to make it for themselves. In answering the debate perhaps my noble friend will be able to assure the House that the increase of 1 per cent. is not unduly onerous on the self-employed.
My second point concerns personal pensions. I recognise that they do not appear directly in this Bill, but none the less there is reference to them. Your Lordships will recollect that the Securities and Investment Board found some disturbing evidence of high pressure salesmanship persuading people to exchange their present occupational pension scheme for what looks, on the face of it, a superior personal pension. I believe that the Royal College of Nursing has drawn attention to the fact that there may be a large number of nurses who have been misled in this way and who will suffer unless some retribution or compensation is made.
I am not suggesting to your Lordships that this is a matter in which the Government should intervene directly or that they should make any financial contribution. But I hope that when my noble friend comes to reply he will be able to assure the House that if the Securities and Investment Board needs any assistance from the Government in righting what appears to be an injustice, the Government will use their good offices to assist it in whatever remedial action it may feel is appropriate. I welcome the Bill. In introducing it I believe that my noble friend gave ample justification for the measure.
4.30 p.m.
Lord Rea: My Lords, this has been an interesting debate and, for one speaking on social security matters for the first time from this position, an instructive debate. Notwithstanding the strong defence of the Bill made by the noble Lords, Lord Renton, Lord Boyd-Carpenter and Lord Dean, the speeches of my noble friend and others have shown that the Bill
30
provides for a regressive form of fundraising. They have shown how it is part of a whole package of measures introduced by the Government, aimed at squeezing the least well off and cutting welfare provision.
It is clear that contributions to the National Insurance Fund are falling behind benefits, because many people are receiving unemployment benefit and there are many others who could be working but who are not included among those claiming unemployment benefit. As other noble Lords have done, I draw attention to the irony that simultaneous with the proposed increases in contributions, unemployment benefit is being withdrawn for the second six months of the current year of payment of unemployment benefit. As my noble friend Lord Jay pointed out, that is surely a breach of contract for those who are paying their NI contributions and expect a full year's unemployment benefit. It is a prime example of a pay-more-get-less principle. It is one which, I am afraid, underlies too much of the Government's social security legislation. At the same time as the withdrawal of the second six months of unemployment benefit, it appears, as explained by my noble friend, that some 240,000 people will disappear from the unemployment total.
Noble Lords opposite may ask how we on these Benches would rectify the deficit in the National Insurance Fund. The proper answer here is to take the position of the proverbial Irish farmer who, I think, was a great deal more intelligent than he is supposed to be in the story, and who, when asked by a lost traveller how to get to Tipperary, said:
"If I were you, I would not start from here".
We do not accept the Government's position that the National Insurance Fund has to stand entirely on its own feet as a self-funding entity. Neither do the Government appear to hold that view strongly, or why would they have given a supplement of £7.8 billion to the fund last year?
When David Lloyd George introduced the national insurance scheme he said that it would involve paying in fourpence to get out ninepence; in other words, that the benefits would be assisted by general taxation in addition to direct contributions, including those from employers. That ensures that the least well off are supported by the better off as does any progressive rather than regressive tax.
The proposals contained in the Bill w ill take money from those between the lower and higher earnings limits as well as those above the higher earnings limit. Many of those are low paid or paid only moderately. It would have been more equitable to have raised the higher earnings limit. My noble friend explained how that would probably have raised more money and cost the contributor less. Doubtless the Government feel that that would be electorally unpopular.
More could be done—I believe everyone on this side of the House will agree with me—by the Government to get people back into employment and thus raise the base from which national insurance contributions are taken. It would simultaneously lower demands for benefits. That is obvious. I was interested to see how vigorously the Government attacked M. Delors' plan to boost employment through programmes of public works and

31
to increase the numbers in caring roles. Such plans, whether they be called Keynesian, neo-Keynesian or New Deal, will trigger the revitalisation of the economy of the western world. As it is, we are afflicted by the spectre of high unemployment with its devastating social effects.
A recent report from Cambridge, which many noble Lords will have seen, confirms what most of us know: unemployment, especially that of young people, is associated closely with crime. As a family doctor, my experience is that it is strongly associated with drug abuse.
Lord Renton: My Lords, perhaps the noble Lord will allow me to intervene. Does he remember that in the 1930s a higher proportion of the population was unemployed than now and that there was far less crime, in relation to the size of the population, than there is now?
Lord Rea: My Lords, I dispute the fact that unemployment affected a higher proportion of the population than it does now. The published unemployment figures conceal a large number of people who are unemployed but who are not included in the statistics, as my noble friend pointed out. A recent report has suggested the figure of 1.08 million in addition to the published 2.8 million. The other point about crime not being so prevalent in the 1930s during a period of high unemployment is that the pressure to acquire was not so great. There were not so many people with consumer goods. There was not constant encouragement to own and possess more and more material goods.
A recent report in the British Medical Journal shows clearly that hospital admissions of people suffering from severe psychiatric illnesses are significantly higher among the unemployed.
The Bill is unnecessary, unjust and petty. It bears most heavily on the less well off and upon those whom the Government would normally regard as their friends—those earning about £20,000 a year. As my noble friend said, the Bill should be rejected by the House, but, of course, by convention we cannot do that. In Committee, as my noble friend said, we shall move amendments to try to improve it and to spread its burden more fairly.
4.40 p.m.
Viscount Astor: My Lords, my noble friend Lord Boyd-Carpenter was right in saying that we are not dealing with general taxation but with national insurance contributions and the National Insurance Fund. My noble friend Lord Dean of Harptree was also right in saying that the Bill reinforces the contributory principle, not as otherwise suggested. National insurance contributions are part of the contributory system whereby contributions paid make people eligible to receive benefits. Therefore, it is right that the rising costs of benefits should be addressed by higher contributions and not, for example, by raising levels of income tax.
The noble Earl, Lord Russell, accepted that taxes or contributions should, where necessary, rise to meet
32
expenditure. But, of course, in doing so he exposed the fallacy of the Labour Party's policy, which always offers greater benefits but never explains how it will pay for them. Indeed, it did not do so today.
The noble Baroness, Lady Turner, and the noble Lords, Lord Jay and Lord Ennals, charged the Government with cutting benefits while raising contributions. That is simply not true. Aside from administration costs, receipts from national insurance contributions are spent on the National Health Service and on contributory benefits. None of the money is used as general taxation. Expenditure on benefits will continue to rise next year. The Secretary of State has announced the full uprating of benefits, some by more than inflation. That will cost the National Insurance Fund about £1 billion extra at a time when contribution income is already several billion pounds short of expenditure. Thus the national insurance contribution increases are needed simply to fund existing benefit commitments. Our proposals for the future will ensure that we have a benefit system that is fair, that ensures that help is given where appropriate and that is affordable. Any government must be able to make modifications to the social security scheme in order to meet the changing needs of society.
The noble Lord, Lord Ennals, said that the proposed increases broke the promises given by the Government at the last election. It is clear that the deficit in the fund is liable to persist. Earlier this year we introduced a Treasury grant to ensure that the fund could finance the level of benefits we have maintained. The grant is paid for by all taxpayers. However, in a contributory system it is right that contribution rates should be adjusted to reflect the rise and fall of benefit expenditure. This is the first increase for 11 years in the main contribution rates.
The noble Lord also charged that the Bill was pushed through on a guillotine Motion in another place. Does the noble Lord, Lord Ennals, remember that when Michael Foot was Prime Minister he had five guillotine Motions in one day? I believe that the noble Lord was actually a Member of his Government—
Lord Ennals: My Lords, can the Minister give any example of a guillotine Motion being introduced even before Second Reading had been taken? I know of no such example. The cases to which he referred when Michael Foot was Leader of the Labour Party were quite different. There had been many hours, days and in some cases weeks of debate.
Viscount Astor: My Lords, that all goes to show that a guillotine is right for one side but not for another. However, I remind the noble Lord, Lord Ennals—
Earl Russell: My Lords, can the noble Viscount tell us the dates when Michael Foot was Prime Minister?
Viscount Astor: My Lords, I should have said the noble Lord, Lord Callaghan. As regards the history of the Labour Party, my knowledge of some of its policies is weak. I have always tried to concentrate on the policies of my own party. I apologise if occasionally I make a mistake about the policies of the Opposition. However, from the recess of my memory I recollect that the noble Lord, Lord Ennals, moved the Social Security

33
(Contributions, Re-rating) (No. 2) Order, 1977, which raised employees' national insurance contributions from 5.75 per cent. to 6.5 per cent. and employers' rates from 8.75 per cent. to 10 per cent. Those increases were larger than the ones with which we are dealing today—
Baroness Turner of Camden: My Lords, does the Minister agree that in those days employees received a little more? Does he recollect that in 1979, when the Labour Party was last in government, there was an earnings-related supplement with unemployment pay which disappeared when his party was elected?
Viscount Astor: My Lords, I was merely pointing out that the charge that this Government should not raise the rate when necessary is not right because the party opposite did so when it considered such a step to be necessary.
The national insurance system cannot stand still. We shall not hesitate to make changes that are necessary and suited to the needs of the country now and in the future. Those in need will always be looked after. At the same time, we must ensure that resources are in place to fulfil those needs. None of the money is used as general taxation. Expenditure on benefits continues to rise. It will cost the National Insurance Fund about £1 billion extra. Our proposals will ensure that we have a system that is fair.
The noble Baroness, Lady Turner, suggested that there will be a reduction in benefits. There will he no reduction in benefits for the year with which we are concerned. Benefits have gone up. We must match contributions to the needs of expenditure. The 1 per cent. increase applies only to the main contribution rate. Due to the dual structure for employees, which we introduced in 1989, the low-paid pay proportionately more of their national insurance contributions at the initial rate of 2 per cent. That remains unchanged. Even after the 1 per cent. increase in the main rate, someone earning up to about £130 per week will still pay less than they would have done at the fixed-rate charged by the Opposition when it left office.
The noble Baroness, Lady Turner, said that people will pay £4.56 per week more in national insurance contributions. Only those people earning more than £22,000 per year will pay that much more. Low earners will pay proportionately less. The noble Earl, Lord Russell, asked about regulations. Reductions in national insurance contributions can be given effect by an affirmative resolution order. That will be brought before your Lordships' House in the near future.
My noble friend Lord Boyd-Carpenter asked why the legislation is required if money has already been paid over to the National Health Service; that is the £4.6 billion since 1989. A drafting flaw in the Social Security Act 1989 means that there has not been full and clear legislative cover for part of the allocation paid over since then. The deficiency in legislation has only recently been discovered and we are quite properly taking the first opportunity to clarify beyond any doubt the legal provisions governing the calculation of the amount of contribution which is payable to the National Health Service. I hope that that answers my noble friend's question.
34
The noble Lord, Lord Ennals, asked about the rate and the changes. Our intention was always to restrict the National Health Service allocation only to the main rate of contribution and not to the 2 per cent. rate; that is, to the 9 per cent. full rate or to the variations of that. We are making that absolutely clear in the Bill.
My noble friend Lord Renton made as always some interesting drafting points. I am sure that the parliamentary draftsmen will read carefully what he said about Clause 2(1). My noble friend Lord Dean of Harptree asked about the self-employed and wished to know whether they are paying more than is fair. Under this Government the self-employed will continue to receive a good deal. The Government have announced that there will be no increase in the flat rate Class 2 self-employed contribution beyond inflation. That is particularly helpful to lower-paid, self-employed people. However, it would not be right completely to absolve the self-employed from helping to meet the rising cost of benefits. That is why it is proposed to raise the contributions for self-employed people with higher profits. Nevertheless, from April the average rate of contributions paid by the self-employed will still be below the equivalent of that for employees, even after allowing for reduced benefits entitlements. Half of Class 4 contributions can also be offset against income tax. Of course, the self-employed also receive sickness benefit, which is different.
My noble friend asked me also about the Securities and Investment Board and whether it will find a solution for those who opted out of occupational pensions into personal pensions. The Government support fully the Securities and Investment Board initiative to assess the size of the problem and to find remedies. The regulation of selling personal pensions is primarily a matter for that board and the Financial Services Act regulators. Where failure to comply with regulations on selling has damaged investor protection, it will fall to those responsible for non-compliance, and not to the Government, to take remedial action.
The noble Baroness, Lady Turner, and the noble Lord, Lord Ennals, asked about our proposals for the jobseeker's allowance. That allowance will not be introduced for over two years. We need to ensure that funds are available in 1994–95 to pay for the benefits to which we are committed in that year. That includes the cost of the uprating as well as the additional help that we are giving to all pensioners to help with the cost of VAT on fuel bills.
Your Lordships should be aware also that we are again providing for a grant from general taxation to help with the financing of the fund. Without that grant, contribution rates next year might have to be increased further or benefits reduced. The Government believe that neither of those measures would be appropriate.
The noble Baroness, Lady Turner, spoke about people coming off the register. The number of people who may lose from the introduction of the jobseeker' s allowance will depend on the level of unemployment and the benefit rates in 1996 when the benefit is introduced. The majority of those affected by the restriction on the contributory conditions will, we expect, be entitled to a jobseeker's allowance on a

35
means-tested basis. It may be that some 90,000 or so will lose entitlement to benefit but they will be able to claim national insurance credits which will not be removed from the unemployment count.
The noble Lord, Lord Ennals, mentioned the invalidity benefit review. It is right that we should have that review. Over the past 15 years the case load has trebled from 550,000, to nearly 1.5 million at a time when the health of the nation has improved.
We have had an interesting debate on this short Bill. I am sure that subsequent stages will provide an opportunity for your Lordships to return to the matters that we have discussed today. The Bill is concerned primarily with the raising of additional money for the National Insurance Fund by increasing contributions. I expect that few of us would volunteer to pay extra contributions but, set against the need to meet the increasing level of benefits payable from the fund in 1994–95, most people will recognise that a contribution increase is necessary.
By restricting the increase to the main rate of contribution, we are minimising the effect upon the lower paid because the initial contribution of 2 per cent. will continue to apply to the first £57 of weekly earnings. It is intrinsic to the contributory principle of our national insurance scheme that contribution rates may need to be varied up or down as expenditure and income fluctuate. The Bill is in keeping with that principle and I commend it to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Flexible Working
4.54 p.m.
Lord Birdwood Lord Birdwood rose to ask Her Majesty's Government what measures are being taken to recognise the critical importance to employment, productivity and quality of life of the growth of flexible working.
The noble Lord said: My Lords, the object today in asking the Government about official attitudes to flexible working is to bring out into the open processes of social and commercial change which could be every bit as important to this nation as the Industrial Revolution. Like all the best revolutions, it is in harmony with the changing perceptions of millions of citizens. Like other revolutions, it is likely to take the government of the day by surprise. Today I propose to show that the United Kingdom, by chance almost, is extraordinarily powerfully positioned to show the way to the rest of the world how to grasp, and thrive in, an environment where information is the absolutely dominant commercial force.
Sometimes known as teleworking, the original concept of flexible work was of a person working remotely, from home, using a telephone. I think it is true to say that it got started around 1967 with a company called F International. Since then the practice has become more sophisticated, and while the option of working from home remains, advances in electronics make it possible for people to work together as teams
36
from cars, from hotel rooms, satellite offices, or purpose-built telecentres. And suddenly the whole world has become one person's "office".
My personal interest in this area springs from a larger fascination with how social change and technology, in a sense, feed on each other. When we examine the growth of flexible working both here and in other countries, we find a collection of sociological theories which used to be way in advance of the enabling science. The point I want to make this afternoon, above all, is that we are poised on the threshold of theory and practice coming together. The technology has nearly arrived.
History is littered with examples of science and society marching in step. Transport science has given us the car, which has changed the face of the whole world; telecommunications have given us, for instance, the free movement of capital with all its risks and rewards. But creeping up on us, as stealthily as seeds growing under the earth, is the enabling technology of the data highway. In my opinion the impact that that area of science will have on our society could be more profound than any other technology-driven change in our history.
I have used the shorthand of "flexible work" to focus on the consequence of that change. Essentially, it means releasing people from the tyranny of the central workplace and allowing them to be productive, fulfilled, managers of their own lives in a way that most of us can only dream about today.
Perhaps I may condense for your Lordships a list of the immediate benefits which flow from flexible work: first, the labour market itself thrives in that environment. The recent Delors White Paper on growth, competitiveness and employment has spotlighted the crucial importance of competitiveness which can be achieved only through increasing labour market flexibility—ideas which are entirely consistent with our Government's approach. As a fact of life, temporary work, part-time work, and out-sourcing are the growth areas of employment in Britain, but in contrast to that free-market approach to labour, which is driven mainly by the need to squeeze unit costs, the Government have been slow to identify the strategic benefits of flexible practices.
The impact of new technology and telecommunications has already been tremendous. One in three households now houses a computer and six in 10 people use information technology as a standard part of their work. Whereas physical presence is really essential for many kinds of work, it is not when the main medium for communication is data down a wire. Thus many jobs could be done anywhere; they are independent of location.
The impact on transport policy is self-evident and potentially enormous. Substituting telecommunications for transport signals the end of the rush hour more strongly than any amount of spending on public transport could do. In the USA so-called "telecommuting legislation" has led to measurable benefits in reducing congestion in city centres while improving the quality of life of employees. The federal government has started a "flexiplace" programme, urging all US civil servants to work part of the time away from the

37
office if possible, and now there are satellite offices being set up around the outskirts of Washington DC to reduce their commuting time.
Another benefit derived from bringing work to people, rather than people to work, is that important barriers are removed for people who find travel difficult; for example, the disabled, or those who live in remote parts of the country. It is a benefit also for people living in high unemployment areas, perhaps where many in the labour market are displaced from traditional but declining sectors such as heavy manufacturing or mining. New ways of working offer the chance of electronic inward investment—and perhaps this may succeed where traditional methods of regional development and job creation have failed.
And it is not only in socially desirable benefits that we can see enhancement. People studying these matters in Britain today can prove productivity increases of 30 per cent. and more when flexible work is sensibly implemented. At the moment we are carrying in this country a burden of misery from living in the wrong place, offering the wrong skills, the frustration of disablement and so-called structural unemployment.
I am not proposing that flexible work is an overnight panacea for all those problems. What I am saying is that communications technology, even in the past two or three years, has acquired the power to unlock productive activity for more of our citizens than ever we hoped. Moreover, as a footnote, we are finding out from experience of the several millions users of Internet, for instance, that smart networks can deliver to their users a quality of communication which approaches face to face speech.
It is worth making a couple of observations of a sociological nature about the United Kingdom which encourage me in my belief that we can lead the world in these desirable transitions. It would appear that we have a greater acceptance of changing the way we work, accepting the different disciplines of working from our homes with less anxiety or resentment than such experiments have generated in other countries. One must make an exception in the case of the USA, where, in certain communities on the West Coast, flexible working now provides a significant proportion of their total productivity.
Some of the factors behind that apparent ability to accept working from home could be the high percentage of home ownership and the recent years of soaring domestic property values. As a nation, we have come to think of the place where we live as being the focus of much of our financial and emotional investment. Perhaps it is a short step for a person to be comfortable with the idea that it can serve also as a place of work. But perhaps it is also the consequence of there being less childcare provision in the UK by comparison, say, with France., Spain or Germany; or perhaps it is tied in to a new openness in British unions, so that "atypical" working migrates more easily into becoming accepted practice.
I have just touched on the more obvious benefits of flexible work: job creation, environment, productivity, lowered stress and greater opportunities. It would be intellectually crass and lopsided if I did not air some of
38
the hazards which need to be foretold in any society; one of these was summarised last July by James Buchan in the Spectator in an article entitled The Redundant Male. If; as a nation, we are better placed to grasp flexible work and make of it a second Industrial Revolution, we are also the first developed society to be living through a tidal wave of change in male/female employment ratios. In the past 20 years, writes Mr. Buchan, the British labour force has grown by 3.2 million people; of these, 90 per cent. have been women. It means that women displaced about 1.3 million men from potential work. Of what new jobs there are going to be, the Department of Employment expects eight in 10 to go to women. Flexible work will hasten and confirm that process.
Corporate structures will change as flexible work takes over, and that will lead to its own stresses. Middle management layers become more difficult to justify and what evolves is a very flat hierarchy consisting of a department chief, possibly a small functional cabinet surrounding him or her and everybody else out on the edges of the network. The power relationships, incentive systems and risks of isolation are all areas worth analysis and research.
So what kind of response am I looking for from my Front Bench this afternoon? When I first cast an eye over flexible work as a social issue, I was interested how many departments of state have a say. The DTI has, of course, gone further—and I am pleased that it has been sending delegates to conferences in recent times—by commissioning a positive report on the subject, the full details of which have not been made public. However, I believe that there is a helpful synopsis in limited circulation.
The Department of Employment, I need hardly say, is critically involved, as flexible work is a new rogue factor in any manpower model in the UK. The Department of the Environment is involved, especially when one considers issues such as regional deprivation and reducing pollution. I have already touched on the substantial impact which flexible work will have on the Department of Transport's planning policies. I am happy to note that transport is creating for itself an active brief in monitoring developments. Nor is the Department of Energy left untouched by the issues. It has been estimated in America that if 10 per cent. of commuting had been eliminated by those techniques, they would not have had to import a drop of foreign oil after OPEC 1 in 1973.
While remaining on the subject of departments, I can single out the Scottish Office for its foresightedness in recognising the opportunities as they particularly impact on the Highlands and Islands and Grampian regions.
Where I have to point an accusing finger this afternoon is at Treasury policy. Where, in the real world, employers and employees, tied together by new technology, are happily exploring fertile new territories of productive activity, the tax structures stay as rigid as iron girders. I feel sure that the Treasury is looking at the trends and I urge the forward-planners of our future tax systems to recognise and accommodate the changes: otherwise the window of opportunity will close. As it is, all my researches indicate that we have something like

39
a two-year start on the rest of the world in exploiting the lead, perhaps more. That has been much helped by the deregulation of the UK's telecoms environment.
I make no apologies for the superficiality of my observations this afternoon. My only purpose was to touch on some of the benefits and some of the problems which these changes will deliver. As I mentioned, my motivation comes from an interest in the consequences of mixing scientific advance and social evolution.
I am emphatically not looking for intervention from this, or any other, Government: heaven forbid. I have made certain assumptions, such as assuming the continued growth of information as an economic engine. I could have talked at length about the emergence of "the virtual company", as it is key to the subject. I have assumed that the Department for Education will get a grip on functional illiteracy, as everything that I have been saying becomes entirely irrelevant if we cannot rely on even the bedrock schooling skills.
If I were to urge any specific action, it would be for the departments of state to co-ordinate their respective interests. Only then will the government of the day be able to enter a dialogue with these new working people of Britain, based on deeper understanding. I hope that this will be accompanied by a review of the legal and financial disincentives to flexible work. After all, the Government are well placed to show the way in their own huge workforce.
My purpose will have been entirely served from the point of view of this House, when—having heard what my noble friend has to say—we are all in a position to reflect on the Government's observations on the nature and future of flexible work.
5.8 p.m.
Lord Desai: My Lords, we should all be thankful to the noble Lord, Lord Birdwood, for introducing such an important topic. He pointed out what has been going on around us. But, as he said, like many such revolutionary changes, if you do not look at it in a systematic way you might miss it completely. My purpose today is to take up what the noble Lord said and to expand upon it slightly.
For some time it has been clear that the nature of work in our society has been changing fundamentally and that the kinds of notions that we had of full employment will be very difficult to revive. Many politicians still talk in terms of full employment as if the type of employment levels which were prevalent in the 1950s and 1960s will be possible to achieve again. I do not think that that will be possible. One of the reasons for that is the different nature of industrial technology. It is caused as much by information technology as by the revolution in transport and the change in production technology away from what we used to call "Fordist" technology to a much more flexible technology.
Therefore, not only is technology an aspect of flexible working but, in a variety of ways, people will also be finding that they are working flexible time over their life cycle of employment as well as over the working week. In other words, people will be going in
40
and out of active work. They will be taking sabbaticals, retraining themselves and trying to find new ways of investing in new skills. If they do not do that, they will remain in long-term unemployment.
One matter is absolutely clear: it was possible in the 1950s and 1960s for someone to leave school at 15, get a job and stay in that job for 50 years. However, that kind of low skill manufacturing and construction work is no longer available. Those jobs have gone. They have migrated abroad and people carry out those jobs abroad for one-tenth of the wage that we would pay here. I am not against that system. I do not seek a protectionist world. All I am saying is that as those jobs have migrated abroad we must create new jobs and new working practices.
One aspect of creating new working practices is to consider work as a flexible experience over a person's life cycle. If we can think of it in that way, we shall no longer think in terms of full employment as we did in the past but rather in terms of what Professor Christopher Freeman of the Science Policy Research Unit at Sussex University has termed the active society. People should remain active throughout their life cycles, whether that involves working, retraining or obtaining new skills, and occasionally perhaps taking a holiday as and when they wish.
We need to think in terms of people being in productive employment, or a productive occupation, throughout their life cycles. If we are to achieve that state of affairs, we shall need to rethink a number of issues. In the UK and across the world people still think in terms of retraining people for low level manufacturing skills—metal bashing. I believe that era has passed. We need to train the long-term unemployed and those who have recently left school in information technology. We should aim to give people a minimum level of computer literacy and to give them the ability to handle information technology equipment. This is as important as the three Rs. We need to give every school leaver a basic level of information technology awareness. We need to do the same with many adults who are either employed or unemployed. If we do not do that, our labour force will rapidly become de-skilled. We need to adopt a proper policy on information technology education.
If people are to adopt flexible working hours and are to be flexible as regards their work location, we will need to rethink a number of our tax and benefit policies, as the noble Lord, Lord Birdwood, has already pointed out. I wish to propose a scheme in this regard although I have no hope that the Government will pay the least bit of attention to it. I believe that we should have a basic income guarantee for our citizens. If they were given a guaranteed flow of income, they could take up work at flexible wages. Thus people could take time out of work to retrain themselves and would not have to exist on unemployment benefit while they did so. We should be able to enable both women and men to undertake child care or care of the sick or elderly without having in addition to take on low-paid work when they do not wish to do so.
The matter that should concern us is whether people can pay their dues to society over their life cycles. If

41
they can do that, we should be happy to allow them to work when they wish to do so and to take on whichever work they wish to carry out. To allow that to happen we must remove people's fear that unless they remain constantly in the labour market, or are constantly seeking work, they are likely to suffer a considerable drop in income. My proposal may seem to be a distant Utopia but I believe that we should give some thought to changing our tax and benefit systems to enable people to pay their dues to society over their life cycles without being penalised financially.
Far too much importance is attached to having a job in a formal labour market. As the noble Lord, Lord Birdwood, pointed out, a number of male workers have dropped out of the labour market. Many of those people are active but they are not in the labour force because it does not pay them to be in the labour force because of the costs associated with working. We have established a tax and benefits system which constitutes a massive disincentive to work. It is now time for us to think of ways in which we can stop taxing employment and start encouraging it.
The noble Lord, Lord Birdwood, was correct to point out that in the document that M. Delors has issued there are indications of a willingness not only to think about competitiveness and flexibility, but also to consider how important it is to invest in information technology as that is the area which will create sustainable, high paid jobs for European workers in the future.
We will not be able to revive the old manufacturing industry; that has gone. We will have to create new industry— that may be services or other forms of industry —that will involve a highly skilled labour force for which our workforce will be trained. Flexible working clearly has many ramifications. After this debate has concluded I hope that a private or public charity, or the Government, will consider all the ramifications of flexible working and will consider what kind of new policies we need to adopt to encourage flexible working and to restore full employment.
5.16 p.m.
Baroness Dahrendorf: My Lords, this debate has been opened by two thoughtful statements with which I find myself almost entirely in agreement. I wish to express my gratitude to the noble Lord, Lord Birdwood, for giving us this opportunity to debate the matter. I am in agreement with some of his final comments; namely, that what one would expect from government in this important area is partly to set an example in their own areas of employment and partly to remove obstacles. Beyond that, flexible working is one of those values which must be largely in the hands of employers and employees, and in that sense subject to a favourable climate to which government can contribute but not subject to legislation or direct government action.
I find myself very close to the noble Lord, Lord Desai, especially as regards his opening comments on the importance of changes in the nature of work. It was not one of the great moments in human history when work and the rest of life were separated to the extent to which they have come to be separated in the job society. It would be a great step forward if we were able to use
42
modern technology, as well as our social and organisational imagination, to interweave work and life much more than has been the case for an important century in the history of mankind, if not more. Incidentally, as long as work and life were interwoven, the phenomenon of unemployment virtually did not exist. It is true there were periods in which people did not have enough to do and it is true there was poverty, but unemployment in the sense of not having a job and thereby losing the basis of life is itself a part of an organisation of life in which jobs and everything else we are doing are so largely separated.
Some of us are fortunate. Those, for example, who are academics on the whole should have a flexible life in which what they are doing and their lives in general are interwoven and closely related, although I am bound to say that the subject raised the other day in your Lordships' House by the noble Lord, Lord Annan, on the bureaucratisation of academic life and other matters has been a movement in the opposite direction to the one we desire to have. That does not apply only to academics. It applies to the self-employed. It would be highly desirable to provide opportunities for such flexibility for those in employment.
There are two questions which I should like to put to your Lordships without necessarily expecting an answer from the Government. The first point is that flexible working has to involve an increase in choice. That increase in choice will only come about if one achieves something which is rather complicated; namely, matching individual wishes and organisational needs. That is not an easy thing to do. That is particularly true in the area of public services, where the rest of the population rightly expect certain services at certain times and where matching that expectation on the part of consumers with the wishes and desires of those who provide the services can be exceedingly difficult. Examples come readily to mind.
I may well be wrong, but my guess is that the longer what the noble Lord, Lord Desai, calls the cycle or the period over which flexible arrangements can be made, the more likely it is that individual wishes and organisational needs can be matched. In other words, to use not very beautiful jargon, flexi-years are better than flexi-months, and flexi-months are better than flexi-weeks or flexi-days. Ideally, we should like to reach a situation in which there is the kind of flexibility over the entire cycle of our lives to which both the noble Lords, Lord Birdwood, and Lord Desai, referred.
The second point is an even more serious one. We must beware that the notion of flexible working does not become an excuse for a return to casual working on a large scale. We already see much of that at all levels of employment. It is perfectly acceptable for young graduates and school leavers to do a bit of waitressing, to drive vans to markets with goods, to work as part-time secretaries with limited term contracts, or even to work as research assistants in your Lordships' House, but there comes a point at which those young people want a longer perspective. That is even more true for those who do not have the choices which I have just indicated.

43
I confess that I am sometimes horrified by the extent to which the principle of casual working has returned at all levels. My eldest daughter works in a large and excellent international organisation in which she has extraordinary responsibilities for resettling refugees in a war torn country. She is employed as a consultant, for the sole reason that that is a more flexible method of employment than giving her a proper job. It really means that she has full responsibility for the task with which she is faced but she does not have the perks which would go with the job; neither the security nor any of the other advantages.
Every now and again I wonder whether we are not witnessing a re-casualisation of work. Recently I reread what William Beveridge—who was quoted several times earlier this afternoon—said earlier this century when around 1905 or 1906 he first took an interest in unemployment. He identified three types: redundancy, caused by technological innovation or the decay of industries; cyclical unemployment; and what he called chronic under-employment of the casual labour market. I am serious in saying in the context of this debate that we must beware of returning to the wasteful and ultimately costly forms of casual work which were so widespread a century ago and which in some ways we have overcome. However, I am wholly in agreement with the noble Lord, Lord Birdwood, in adding that they were overcome by methods which were rigid and in their own way costly and were in no sense the last word on the subject.
That takes us back to public action and to government. The structure of taxation will undoubtedly have to adjust to changing methods of work. Perhaps it is already doing so, without much planning or intention. To the extent that flexible working in some ways involves re-casualisation, we have to find methods of providing those public services to which everyone is and should be entitled in ways which are available to those who work extremely flexibly over a year or a lifetime. If we do not want that, we have to find some other method.
I am not quite sure why the noble Lord, Lord Desai, half apologised for his interest in basic income guarantees. Without any apology let me say for my own part that I believe that some means must be found of providing not minimum wages, which are one of the most rigid, destructive and unfortunate inventions in the industrial scene, but a guaranteed basic income for all, whether housewives or casual workers and whether young or old. Some way should be found to move in that direction. For some time I have been in favour of exploring more closely methods such as the so-called negative income tax, which would provide some minimum guarantee of a standard of living. If we can combine that kind of guarantee with the great advantages which technology and organisational imagination have given us in strengthening the opportunities of interweaving work and the rest of life, then we can achieve all the gains of flexibility without the costs of re-casualisation.
5.27 p.m.
Viscount Torrington: My Lords, when my noble friend Lord Birdwood asked me if I would say a few words in this debate I naturally accepted with alacrity. It was only after an hour or two's mature reflection that I realised that I was not entirely sure what he meant by flexible working. He had left the House by then so I had to make a guess.
It could, for example, have meant the ending of job demarcation—a concept which I am glad to say is increasingly accepted at all levels of the trade union movement and industry as a whole. It could equally have referred to flexible hours—the principle that as long as one turns up at the office for eight hours a day it does not matter too much when one turns up, thereby relieving pressure on the transport system. I am sure that that sort of flexible working is useful in solving the problem, but obviously technically it is practical only in certain circumstances. Finally, flexible working could have meant —as my noble friend has now enlightened us—the lessening of the requirement slavishly to turn up at an office or factory on a daily basis; namely, remote working.
Until someone comes up with "Beam me up Scotty" technology —perish the thought—it is most unlikely that the car worker will be able to take his work home or the fisherman to fish from his sitting room. Equally, there will never be a substitute for the face-to-face meeting in business. Nevertheless, this is essentially a debate about productivity and how best to use the working day. When I am not attending your Lordships' House, I spend four hours a day travelling from Hampshire to London. Of necessity, that four hours limits the amount of time I can spend working productively and the energy that I have to put into my work, especially when that four hours is turned into six or eight by the IRA, engineering failures, leaves on the line, or some other excuse from British Rail. Commuting may help to stem the losses of British Rail, although in theory at least commuters put more pressure on the transport system than they provide by revenue or profitability. But commuting does nothing for personal productivity.
As my noble friend has touched upon, the solution is telecommunications. It may not be fashionable at present to pay compliments to the Government but, perhaps by design although I am sure that some would say by accident, the Government have got one aspect of the problem right. They have created the most deregulated and competitive telecommunications environment anywhere in the world. With such peripherals as fax machines, personal computers and the host of further developments which are just minutes away from the retailers, the remote office is a real possibility. BT, Mercury, the cable television companies, the mobile phone operators, and indeed British Rail itself, are all competing in a way which within a short period of time will bring high capacity digital links right into the home at affordable prices. My noble friend used the expression, "Let us take the work to the people rather

45
than the people to the work". I should like to rephrase that. Let optic fibres rather than steel rails become the commuter highways for the future office worker.
The Government have assisted that process. I hope that in future they will do more and will look at ways to encourage remote flexible working. The noble Lord, Lord Dahrendorf, touched on the idea of fiscal incentives. Perhaps I may point to one small and rather silly disincentive to working at home. I understand that the Inland Revenue will seek to charge capital gains tax on a proportionate basis when one comes to sell one's house if one has used one room permanently as an office. Obviously with communication links it is not easy to use different parts of the home and thereby avoid the charge. I give that as one small example of something that can he done.
The environmental effects of eliminating commuting alone would be of massive benefit to society. But increased productivity, reduced stress and improved lifestyle are the ultimate benefits of flexible working for the workforce.
5.32 p.m.
Lord Rix: My Lords, today, for me, and I am sure for the noble Lord, Lord Henley, too, the calendar seems to have taken a leap from the first Monday in your Lordships' House in January to the first Monday in September in Canada or the USA, in other words to Labour Day, when all manner of people can celebrate the opportunities of offering or partaking in meaningful employment. We are all indebted to the noble Lord, Lord Birdwood, for focusing our attention on this vital subject and for offering us the chance to debate flexible working in all its aspects, in particular the technology route into jobs for disabled people.
Those of us whose earliest days at school were blighted by crossed nibs and dried-up inkwells as we strove to keep up with our teachers' dictation or their squeakily chalked notes on the blackboard, are astonished and a little envious of the latter-day pupils who are computer literate almost from the cradle, and whose access to technology has liberated them from so much repetitive drudgery.
This technology has also liberated many disabled people with astonishing facility from earlier years, none less than those with learning disabilities. One of my MENCAP colleagues who works with children with severe learning disabilities says that he uses speech, which they lack, to ask them to work information technology which is quite beyond him. That is a massive leap forward, I think your Lordships will agree. And if that applies to those with learning disabilities, it imposes no great strain on the imagination to project such advances on those with physical or sensory disabilities.
As chairman of MENCAP, I have been delighted to see MENCAP's Pathway Employment Service find paid jobs for people who only a short time ago seemed condemned to spend the rest of their lives doing nothing in particular, getting nothing for it and nothing from it either. Children with learning disabilities can now enjoy computer-assisted learning at school and thus cope with computer assisted jobs when they reach adulthood and
46
move into the wider world outside. Of course, they need some support and understanding from their future employers. But if that is forthcoming, as it should be for all disabled people—and will be once antidiscrimination legislation is in place and Access to Work is achieving its goals without let or hindrance—then anything is possible. Technology can supplement or replace muscle power, sight, hearing or verbal communication. It can also break down other processes into manageable parts for people with learning disabilities and should be as readily available as the knocker-up or alarm clock in days gone by to ensure that one got to work on time.
With your Lordships' permission, I should like to tell you of two cases reported by OUTSET, an organisation working with people with a range of disabilities. The first relates to 19 year-old Lisa, who has a learning disability. She successfully completed a two-year information technology course and is now taking one on food hygiene for her job with a large retail chain. Another example is 22 year-old Tracy, whose course on information technology and business skills has led to a job with a property firm. OUTSET would willingly supply noble Lords with many other shining examples if they were minded to contact it.
MENCAP's Further Education College at Pengwern in North Wales has led the way in developing technology to enable people with learning disabilities to process information for stock control and accounting. The system is already linking community units with the students in charge; and there is scope for a much wider development of this model. I trust that this well-motivated commercial will be noted by more than just those who read Hansard! Currently, community care plans show that many local authorities—which should read Hansard, but I have my doubts—are reviewing their day services. The Government could help by feeding into that process the experience of work schemes which use that new technology.
For instance, as we stand at the beginning of a new year, could we not commit ourselves to shifting many old-fashioned adult training centres away from the outmoded subcontracted work of packing goods into boxes towards a greater role of loading information on to disks, thus helping many more people with learning disabilities into open employment? Technology has shut some employment doors, but it can open far more that were formerly bolted arid barred by problems—some imagined, some real—posed by travel, access, disability and, above all, prejudice.
MENCAP would be delighted to help as a locksmith and cut the keys. I believe that we could indeed provide this service while you wait.
5.38 p.m.
The Earl of Liverpool: My Lords, I rise to speak in the debate today not as an expert in the field of information technology, flexible working, teleworking, telecommuting or call it what you will, but as one who is keen to embrace all the benefits of the so-called post-industrial technological age in which we find ourselves living.

47
Not all the effects of this new age have been beneficial but the opportunities which arise from flexible working are numerous and many of them are still to be discovered. Harnessing technology to enhance our quality of life is a cause in which I strongly believe. I venture to suggest that it is widely supported in your Lordships' House. I am therefore extremely grateful to my noble friend Lord Birdwood for raising this subject and for sharing the comprehensive knowledge that he has with us today.
Who is a flexible worker? I suppose that on one level he or she could be described as anyone who from time to time uses a fax machine and a telephone to work remotely from his office. Already many millions of us do that on an ad hoc basis, and they should not be underestimated for it has been estimated that if all of us worked just one day a fortnight from home it would do away with traffic jams at a stroke.
On another level, the teleworker or telecommuter is someone with computer knowledge who can utilise and work on data transmitted down a telephone line or bounced off a satellite. The enlightened privatisation of British Telecom by the Government, which was touched on by my noble friend Lord Torrington, has created one of the most advanced networks in the world, with most exchanges now being digital. That enables a system known as ISDN (Integrated Services Digital Network) reliably to transmit data at speeds of 64Kbits per second. Translated into language we can all understand, that means that the full text of Hansard, which I have estimated covers 44 pages on a typical seven-hour session, can be transmitted anywhere in 35 seconds and at the same cost as a normal telephone conversation. Information technology, therefore, has come of age.
The advances being made are staggering and it seems that the only limiting factor is man's imagination. We have come a very long way since the beginning of the last century. In the Napoleonic wars, when my great-great-uncle was Prime Minister, it took the best part of three days to receive news from the battlefields, and the messengers must have lived what can at best be described as a hazardous existence. The fact that the legendary Nathan Rothschild had a speedier messenger service than the Government, and was therefore able to use his knowledge of the victory at Waterloo to make investment decisions earning him a fortune, is now part of history books. This brings graphically to bear the importance of information and how we act and react to it. Information can now be both transmitted and received around the world in seconds, so we are now truly a global village.
It is for that reason that we must not let the grass grow under our feet. As has already been said by my noble friend Lord Birdwood, we have a two-year lead, or something like that, on our competitors and we must ensure that we do not lose out to other countries. I believe that there are already companies which employ people living in India to telework: processing data and doing programming itself. They have a particular talent in this field but one of the reasons the work is being
48
exported is because of the competitive labour rates and taxation arrangements which the Indian Government put in place.
Another reason that India and Pacific rim countries are benefiting from work exported from this country is the efficiency gained from utilising time zones to best advantage. As part of the global village, we can both import and export work to take full advantage of these time zones.
However, there is one area which has already been touched on and which is restricting our progress in flexible working. That is the taxation environment. If you hire a UK resident to do teleworking, it is usually difficult for him or her to qualify for Schedule D assessment. He or she has to go on to PAYE and then there is national insurance and other incentives such as the CGT penalty on which, again, my noble friend Lord Torrington touched. However, if the work is exported and simply invoiced there is, of course, no employers' liability when contracting foreigners work for UK companies. This is an area to which I very much hope the Government will give urgent consideration. If my noble friend the Minister can give some reassurance on the point I shall be most grateful.
We have already heard from other noble Lords about the benefits which can accrue from the expansion in flexible working and I should like to add my voice in support. If companies can fully grasp the concept of "outsourcing" and become comfortable with the idea that much of their in-house work can be done remotely from the office, then there is a veritable Aladdin's cave of benefits. It can bring employment back to the regions. I live in north Nottinghamshire where there is a high level of unemployment in some areas as a result of the mine closures. I am therefore particularly pleased to see the Government initiative taking place in Grimethorpe.
Further, it can improve local community life and bring disposable income into the communities themselves. It can give work to the handicapped. It can dramatically reduce wear and tear on the road system and infrastructure and, in that connection, for those fortunate enough to be employed in this way, it can do away with the need to commute to work, which is surely one of the most uncreative and at times frustrating activities ever invented by man. It can improve the quality of family life—and let us not forget that 1994 is the Year of the Family.
On that point, I wish to mention that I read an article in The Times dated 6th January with the caption "A million children are left at home alone" by working parents. That is a staggering situation and, of course, flexible working would do much to alleviate and minimise it.
Returning to the benefits of flexible working, it can dramatically reduce pollution. One man driving seven miles to work in an average car produces 1.2 tonnes of carbon dioxide gas per year. The Department of Employment estimates that by the year 2010 we will have 10 million flexible workers, so that the output of this greenhouse gas could be expected to be reduced by many millions of tonnes.
Another benefit is that work can be carried out when weather conditions would otherwise prevent people

49
from getting to the office. That was one of the many advantages identified by British Telecom when it carried out what has become known as the Inverness experiment.
So it goes on. Indeed, the only possible losers I can think of would be the office developers; but even here there is a shining example of the ingenuity of that marketplace. Only last week I read in Computer Weekly that a property company was building a televillage on the edge of a town in the Brecon Beacons National Park. The same article informed me that there are currently 75 telecottages operating in the UK.
We live in fast-changing times and informing ourselves and being brave enough to grasp the technology is perhaps the greatest barrier. In this connection, the Henley management college is doing excellent work in bringing about something called the Future Work Forum. This is being actively supported by the big players in industry and telecommunications itself, including British Telecom and Mercury.
On 9th December, The Financial Times carried an article written by my right honourable friend the Secretary of State for Employment. It was entitled "Flexibility is a friend of the jobless". I should just like to quote one sentence from it:
"It makes good sense to develop new and more flexible working patterns".
I therefore take heart that the Government broadly support flexible working and I shall look forward to receiving my noble friend's assurance that that is so.
5.48 p.m.
Baroness Annaly: My Lords, I should like to thank my noble friend Lord Birdwood for providing the opportunity for this debate today. A number of the things that he said came close to my own heart. I am certainly no expert in modern communications but, as I shall explain, I have learnt quite a lot in the past year on the subject.
I shall limit my contribution to the subject of network marketing which is relevant in all respects to the Unstarred Question which we are debating today. I must declare an interest to your Lordships at the outset: I myself have been involved in network marketing for some 14 months. That is not a long time, but after taking every available opportunity to read books and to listen to more experienced network marketers, I feel confident to speak in your Lordships' House today on the subject.
I expect that many noble Lords will have heard or read in the press something about network marketing. For those who know about it, I trust that they will forgive me if I briefly encapsulate the essence of the subject. It is all about a lot of people just doing a little bit each, and recommending to other people products which they believe in and from which they receive a benefit. While doing so they may also tell the other people about the business opportunities which network marketing offers.
All noble Lords will be au fait with certain forms of retailing: traditional retailing; namely, things that we buy in the shops, and how they got to those shops through a myriad of different middlemen. We are all au
50
fait with mail order; we probably received a massive bunch through our letter-boxes before Christmas. And of course there is direct selling.
Network marketing comes under the category of direct selling, but is quite different from direct selling in the accepted sense. Proof of that is to be found in the fact that 95 per cent. of the people who become involved in network marketing neither are, nor want to be, trained sales people in the accepted sense. People from all walks of life, of all creeds and all colours, can take part on a full- or part-time basis—hence the flexibility. It offers an equal opportunity to everybody, as I have come to discover. At this stage I will add that it is my dear hope that we can perhaps somehow bring in people who are handicapped. I have a handicapped sister who is deaf and cannot speak, and I should like to make this opportunity available to people like her.
People can earn a small or a part-time income to supplement their other job; or if they want to, they can build up a long-term passive income. Anyone who has ever set up his own business will know that there are considerable overheads: rent for the office; staff, if one is to have them; investment in stock; equipment, and so on.
We are all also au fait with franchising. It has become part of our life over the past 15 years. Franchising may cost many thousands of pounds, but it is an accepted way of starting up a business. Such cost is beyond the reach of many people. In network marketing there is no expensive start-up cost, and there should be no necessity for a large investment in the product. In the direct selling industry, according to the Direct Selling Association, there are some 470,000 people. In 1992, sales were achieved to the tune of £832 million (the latest available figure). Twenty-three per cent. of that total, £189 million, was attributable to network marketing. That figure was up 21 per cent. from 1991, and three years ago the network marketing figure was only 10 per cent. of the whole.
The number of people involved in the industry is steadily increasing. According to the DSA the most up-to-date information suggests that some 239,000 people are involved in network marketing, which is over 50 per cent. of the number in the direct selling industry, and that accounts for about a quarter of the total sales. By way of background to that, the November 1993 employment figures from the Employment Gazette show 23,918,000 people in employment, which included 2,877,000 in self-employment, of which 2,402,000 were full-time and 475,000 were part-time.
I close by asking the Government to recognise that network marketing makes an important contribution to the economy—something under 2 per cent. of GNP. ask the Government, in future, to look at people who are running small businesses in a favourable way. I use one instance. At the moment people who do not achieve a VAT turnover have to register for VAT, otherwise they suffer a penalty because they buy the product with VAT on the retail price from the manufacturer. The rules are somewhat different in France and Germany.
5.54 p.m.
Lord Rochester: My Lords, I have learnt a lot from this discussion. I am so glad that the subject has been treated so positively and that it is not a matter of party political dispute.
I suppose the most startling indication of the way in which the labour market is changing came with the publication last month of the news that eight out of every nine jobs created since June 1993 have gone to women. In contrast, as the noble Lord, Lord Birdwood, said, employment among men has barely begun to recover after a four-year decline. Most relevant to the Question that the noble Lord has asked is the fact that the growth in women's employment has been strongest in flexible, often part-time, jobs which are largely in the services sector and are in many cases suitable for older people. Employers needing to recruit and retain skilled staff will simply have to adapt to these changing conditions if they are to remain competitive. As the director general of the CBI said recently, companies need the best people available, not just the best of half the population. In other words, the cost of having flexible work patterns must be calculated against the greater cost of not having them.
Nor is this situation a temporary phenomenon. Demographic changes mean that over the next decade an increasing proportion of the workforce will have caring responsibilities for children, elderly dependants or disabled relatives. Already, individuals seeking a more balanced life are making demands on employers to change the way in which working time is organised. Indeed, although full-time jobs are still widely perceived as the norm, a striking fact recorded in Patricia Hewitt's book About Time is that even today only one in three UK employees is working the standard nine-to-five week. As for disabled people, the low pay and unsuitable working conditions of conventional part-time employment can make it an uneconomic alternative to state benefit. No doubt that is why a recent report concerning disabled workers states that the need to work restricted hours must be viewed in the same light as the need for special equipment or adaptation of premises.
More positively, flexible working, particularly that which enables employees to spend some or all of their working week at home or working from home—so-called teleworking, to which the noble Lord, Lord Birdwood, referred at length—gives people who have mobility or sight problems the opportunity to contribute to improved productivity by undertaking high quality information processing work.
The Question of the noble Lord, Lord Birdwood, refers to the quality of life. A CBI survey has found that family responsibilities are one of the main factors that are commonly thought to be behind absenteeism. That affords an added reason for making use of flexible working, thus reducing absenteeism brought about by stress and enabling staff to pursue their careers on a flexible basis rather than losing touch by having to take an enforced break in their employment.
In seeking information relevant to the Question that we are discussing, I have been struck by the number of
52
options that allow flexibility in the management of working hours: flexi-time; academic term-time working; annual hours; a flexible working year; employment and career breaks; job sharing, and so on. I shall take just one of those options, namely job sharing, where two people voluntarily share a full-time job, dividing pay and benefits between them according to the number of hours which they each work. It is a form of employment dear to my heart because I have a daughter who shares a job in local government community work. The Industrial Society has found not only that job sharing works but that it has proved a positive success from the point of view of both the employer and the participants.
I have been impressed by the evidence of Boots the Chemists, recorded in the excellent book produced by the organisation, New Ways to Work. Boots' staff relations manager says:
"When the organisation can bend to accommodate the individual, they will give that much more to the organisation. It is not simply the organisation doing what the individual wants. There are mutual benefits".
The same company's personnel director commented:
"We believe that job sharing is essential if you genuinely want to keep women in managerial and supervisory level jobs".
One of the women involved in such a job tellingly observed:
"Because I don't have tomorrow at work, I have to be more efficient because I have to get things done today".
For me, that is convincing anecdotal evidence of the productivity referred to in the Question of the noble Lord, Lord Birdwood.
Sadly, long hours spent at work rather than work output are still all too often seen as indicators of performance. On that point I like the comment of Mr. John Collins, the chief executive of Shell UK:
"The quality of the time is much more important than the quantity. I would much rather see a manager who had visited an off-shore platform and made an impact there than someone who had helicoptered round 10 in a day".
Having once been responsible in a large industrial organisation for giving training in the management of change, I have been particularly interested in learning how those best qualified to judge think that inertia and resistance to less conventional working arrangements can be overcome. For a number of reasons, I have great respect for the opinions of Professor Charles Handy of the London Business School. In considering the position at work of carers, he believes that the most practical thing that can be done by an organisation which wants to help those who have responsibilities for caring for others is to ask them what they need, mainly in terms of flexibility, control over their own time and the kinds of rights and privileges that ordinary full-time workers receive.
In that connection, it is encouraging to know that an Industrial Relations Services survey of 68 organisations last year found that employers were increasingly treating part time workers on an equal pro rata basis for a wide range of employment terms and conditions. However, in a significant number of organisations part-timers continued to lose out, particularly in the case of pension entitlement. In my view, it is high time for others to follow the lead of the National Westminster

53
Bank, which is reported to give part-time staff exactly the same benefits as full-time workers pro rata, provided that they work for at least eight hours a week.
That was the aim of the noble Baroness, Lady Lockwood, when last May she introduced an amendment to what is now the Trade Union Reform and Employment Rights Act 1993 to extend employment protection rights to employees working between 8 and 16 hours a week. I supported that amendment. In resisting it, the noble Viscount, Lord Ullswater, acknowledged that in this field there was a need to create a balance between the protection that legislation should provide for employees and the commensurate burden that employers should be required to bear. He said then that the Government had drawn the line at the point which they considered right; but he was careful to add that he was not saying that that line was immovable.
I do not wish to place the Minister who is to reply to the Question in a position in which he feels that he must now say the same. However, I hope that when the noble Lord, Lord Henley, replies, he will offer such words of comfort as he can to those who hold another view. There is no doubt that that difference stands in the way of the political consensus concerning the growth of flexible working that I am sure we all desire. More widely, I hope that the noble Lord will respond positively to the point made by my noble friend Lord Dahrendorf, with which I strongly agree; namely, that we must be careful to ensure that, in encouraging the practice of flexible working, we avoid a return to that casual working which was so damaging to society in the last century.
6.6 p.m.
Baroness Turner of Camden: My Lords, I am sure that the House is grateful, as indeed I am, to the noble Lord, Lord Birdwood, for introducing a debate on this important subject and for the manner in which he introduced it. The terms of the Unstarred Question are extremely wide, since one cannot look at the question of flexibility without looking at employment policy generally.
It is true that work patterns are changing. To my knowledge they have been changing for the past 20 years and no doubt will continue to do so. Much of the employment in the last decade has been in part-time employment rather than in conventional full-time employment. A great deal of that part-time employment, as a number of noble Lords have said, is done by women—perhaps as much as 89 per cent. to 90 per cent. of it. There has been a growth in short-term contracts as well.
In some instances there has been a development of a core workforce surrounded by casually employed people on short-term contracts or in part-time employment. The noble Lord, Lord Birdwood, referred to that development, as did the noble Lords, Lord Dahrendorf and Lord Rochester. We are often told that lifetime employment is a thing of the past. I can well recall during discussion of possible Civil Service reorganisation or new schemes for the police that it almost seemed that the expectation of a lifetime job was rather reprehensible and we should all be happy to be exposed to the hazards of the labour market. I can well
54
understand that such an approach may have some attraction for employers, although not all of them by any means. Some regret the loss of company loyalty which is a feature of some of the new job patterns.
Therefore, while welcoming a greater degree of flexibility if it can contribute, as the Unstarred Question indicates, to improved productivity, we must examine carefully what the effect is likely to be for the majority of the working population. First, let us accept that unemployment is an unmitigated social evil. Most people want to be gainfully employed. Employment itself has a social function, That can be seen only too clearly when people who perhaps have been over-committed to their work face retirement. Many may find retirement a liberating experience—that is, if their financial resources are sufficient—but others are unhappy and disoriented by it. The noble Lord, Lord Birdwood, referred to the "tyranny" of the workplace. But that does not always seem to be a fact to some of the people involved.
It is no doubt true that some structural unemployment was inevitable because of the changes wrought by the advance of technology. Jobs which once required the employment of large numbers doing routine work can now be done by machines, often much more effectively. Advances in information technology have affected office workers, resulting in redundancies in employments hitherto regarded as comparatively secure. But the combination of the technological revolution plus the continuing recession has produced levels of unemployment which are unacceptable in a civilised society.
Unemployment among young males is particularly destabilising for the rest of the population. A. recent study indicates that there is a close association between joblessness and the offending rates of young men. A number of noble Lords have already referred to that matter in the debate. Therefore, if a more flexible approach to employment patterns could assist in reducing the numbers of the unemployed, it should be welcomed.
However, from the point of view of the employees themselves, care must be taken to ensure that flexible working does not bring with it anlooked for disadvantages. I remember way back in the 1970s that a number of leading City companies and the banks introduced flexitime—flexible working arrangements. The number of working hours a week was not reduced but the employee had a greater say in the manner in which those working hours were arranged. When first introduced it was normal to have a pilot scheme. I myself was involved in the negotiation of many such schemes. If the employees liked the scheme, then a more permanent arrangement was introduced. It was found that in most cases employees liked the new arrangements and they therefore became more permanent. That was one instance where flexibility proved an all-round advantage. But that was negotiated against a general atmosphere of job security. There was not then the fear of unemployment that now exists.
The increased amount of part-time employment, however, is not always to the advantage of the employee. Often, it is the only type of employment that women with domestic responsibilities can accept. There

55
is, as the noble Lord, Lord Rochester, pointed out, reduced employment protection and often no access to the benefits which are available for the "core" workers—such as access to pension and sick pay schemes.
I was a member of your Lordships' committee which reported several years ago on EC draft directives on part-time and temporary employment. The EC was proposing to extend employment protection to part-time workers. The Government were opposed to the draft directive on the usual ground that it would constitute a burden on business. The committee agreed with the Commission and recommended that part-time employees should have access to pension schemes and pro rata entitlement to annual holidays, redundancy pay and seniority allowances. It is clear that without access to such employment rights "flexibility", entailing the employment of larger numbers of part-time workers, advantages the employer much more than the employee, who often has to take the only employment available which will fit in with her domestic and child-minding responsibilities. As I said earlier, it is mostly women who are affected. At this point perhaps I may say how much I welcome recent announcements by the Government concerning the need for child support services to be provided. That was a very positive statement for which I believe the Prime Minister was responsible.
Another EC directive which has some bearing on the subject is the directive on working time. It stipulates that all workers should have a statutory entitlement to at least three weeks annual holiday and that the working week should not exceed 48 hours, including overtime. At the time, and probably still, 16 per cent. of all UK workers were working in excess of 48 hours a week. The Government were also opposed to that directive, predictably, and in regard to the 48-hour provision negotiated for the UK a 10-year opt-out provision. That is shortsighted. In other EC countries—notably Germany—where the levels of unemployment are causing concern, negotiations have been entered into with the main unions for the purpose of reducing the number of hours worked by those in employment. No one suggests that that would be the whole answer, but it indicates that other countries in the EC are willing to encourage negotiations between employers' and employees' organisations to try to deal with employment and the situation in which some people work unacceptably long hours while others have no work at all and are being socially marginalised.
The question asked by the noble Lord, Lord Birdwood, is addressed to the Government: what steps are being taken to recognise the critical importance of flexibility in working arrangements? It presupposes that there are benefits for productivity and also for the quality of life. I do not disagree with that, but from the standpoint of employees there are some crucial questions that must be answered. Unemployment has a dire effect not only on those who are themselves unemployed but also on those currently in employment. It brings about a general feeling of lack of security. In
56
those circumstances employees are less likely to co-operate willingly in the introduction of new working patterns.
Short-term contracts, in place of the continuous employment to which it was once possible to look forward, means that there is a lesser degree of company loyalty because towards the end of the contract employees begin looking around to see whether or not they might do better elsewhere. If they have seen colleagues made redundant after many years' service, they are less likely to give loyalty to the employer than they might otherwise have done. The sense of insecurity spins off into the economy, creating a situation in which people are unlikely to spend as much as they might have done, holding back the anticipated recovery. Insecurity at work can lead to stresses and sometimes to actual illness. People can become more competitive with each other in a destructive and destabilizing way.
Of course, there could be great benefits for all in greater flexibility, but it must be undertaken in an environment in which there is voluntary agreement, rather than one in which people are compelled to accept the only kind of employment available, without regulation and without employment protection, because that is all there is. Training of the right kind is critically important. I shall say no more about that because my noble friend Lord Desai has already referred to it in some depth. I await with interest what the Minister has to say in answer to this interesting and important question posed by the noble Lord, Lord Birdwood. I hope that we shall hear a positive response from the noble Lord.
6.15 p.m.
Lord Henley: My Lords, the noble Lord, Lord Rochester, stressed that the quality of time was more important than the quantity of time. I hope that this short debate is a concrete example of exactly that. I should like to congratulate all noble Lords on their commendable brevity in speaking on what I believe is an important issue. I hope that I can to some extent reciprocate.
I start by thanking my noble friend Lord Birdwood for having put down this Question and initiating this debate and for stressing the social and economic changes that changing work practices are likely to bring us over the years and the necessary analysis that must go into that. Like the noble Lord, Lord Rochester, I should like to say that I learnt a great deal from the debate, not least, for example, from the contribution on network marketing from my noble friend Lord Annaly.
The value of a properly functioning labour market is of national importance. It contributes to job creation by firms; it adds to productivity just as importantly as do investments in machinery or infrastructure; and it enhances the quality of life by breaking down barriers to employment and by offering better access to all the labour market has to offer—career choice, better wages, higher skills and suitable hours of work, to name but a few. I cannot stress too much the importance of a properly functioning labour market. Of course the labour market cannot solve all economic problems nor meet all human aspirations, but it is of crucial

57
importance, as stressed by my noble friend Lord Birdwood, that it plays its part, fulfils its roles and changes, as all have made clear, as technology changes. That will require careful analysis of the effects of that change.
We in the Government are committed to creating a flexible, efficient and competitive labour market—one that is capable of providing jobs and rising living standards while remaining competitive in the ever-changing international market place. But flexibility, as the noble Lord, Lord Dahrendorf, stressed, must largely in the end be a matter for the employers and employees. I should like to spell out exactly what policies have been followed and why, and I wish to lay down one or two markers for the future. Above all, I wish to rectify one or two common misunderstandings of the present labour market.
First, I believe that we should reflect a little wider than on our own national situation. As has been remarked on occasions, Britain is not alone in suffering high levels of unemployment. We are though, I am glad to say, in a growing company in finding solutions. The benefits of labour market flexibility are now widely recognised and have become of central importance to our European colleagues as they grapple with high unemployment—on average throughout the Community it is now 10.8 per cent.—and, in the rest of the Community, unemployment that is rising. At the European level we can see something of a sea-change in the way that the Commission approaches these issues. I note that the Delors White Paper Growth, Competitiveness, Employment as well as Commissioner Flynn's Green Paper on social policy contain many references to the advantages of deregulation and flexibility. Continental Europe—the Community—has made itself rigid with labour market restrictions and regulations to the extent that private sector employment growth has been all but zero for almost 20 years. The noble Baroness, Lady Turner, might care to take on board that point and take note of it as she sings the praises of such things as the working time directive. I believe that that is a shocking reality resulting from not freeing up the labour market. The United Kingdom, alone of our European Union partners, is enjoying job growth because we are creating a flexible and efficient labour market. We are now the only Community country with unemployment below the Community average and declining at the same time.
At the wider international level, both the special Group of Seven meeting—sometimes dubbed the "Jobs Summit"—to be held in March, and the OECD employment study, will share experiences and solutions. The United Kingdom does have an upbeat story to tell at these international gatherings. There is growing interest in our methods. I am confident that they will endorse the United Kingdom method. If labour markets are allowed to function properly and flexibly, I believe that the new GATT accord, for example, can be a launching pad for the growth in job opportunities worldwide.
My noble friend Lord Torrington posed the question: what exactly is flexible working? In the United Kingdom we are committed to as few barriers as
58
possible for the creation of flexible forms of employment. Employers and individuals are best placed to decide which working patterns and employment relationships suit their needs and circumstances. Perhaps I may quote from the noble Lord, Lord Dahrendorf. Individual wishes and institutional needs should be matched, if possible. But as the noble Lord, Lord Rochester, put it, citing I believe the example of Boots, they can be beneficial to both sides and not a mere matter of beneficence from on high to the employer. There are benefits to the employee as well.
Our job in Government must be to ensure that the widest possible choice exists, that participation in the labour market in all its multifarious ways is maximised, and that employers and employees are aware of the benefits of flexible work. No one should be discouraged from participation in the labour market due to inappropriate regulations, whether old or young, men or women, able or people with disabilities, and no matter what ethnic background.
There is a wide variety of flexible working arrangements. Obviously, the best known are part-time and temporary work involving 5.8 million and 1.3 million employees respectively. Variations of these include job sharing, term-time working, flexitime and annualised hours schemes, which allow more choice about when hours are worked. Home based and teleworking schemes make it easier to work in a different place and not just in a different time. Of course, there are the 3 million self-employed who also form an important category of people working in a flexible manner.
Perhaps I may say a word or two about teleworking because that has been the focus of much of what my noble friend Lord Birdwood had to say. It has been underlined by many other noble Lords. Obviously, it can bring many benefits to both employees and employers. I hope that my Department of Employment, and Her Majesty's Government as a whole, will not lag behind the technological changes that teleworking can bring and the technological changes that lie ahead. I hope that all of us will be aware that the effect of all these technological changes must be looked at most carefully. They obviously require the most careful analysis. I do not believe that we should immediately assume that all of them, like some magic wand, will solve all the problems which noble Lords have put forward. They will not necessarily solve all the traffic problems such as those to which my noble friend Lord Liverpool referred, or the problems of pollution. One must obviously consider what changed travelling arrangements will amount to if they take up teleworking.
Obviously, many jobs could be done by means of teleworking. Perhaps I may take a lighter note and look at this particular problem. I look with somewhat mixed feelings at a future when debates in this House are conducted by means of a video-link. I trust that at least one member of the usual channels will take on board my desire that debates in this House will continue to take place in this House rather than by means of some advanced form of teleworking.

59
I also wish to stress the value of teleworking. That was stressed by my noble friend and by the noble Lord, Lord Rix, who brought his considerable experience of these matters to this debate. I refer to the value of enabling severely disabled people to participate in the labour market. My department certainly recognises that fact. We are able to provide equipment to allow teleworking under the Special Aids to Employment Scheme. I can reassure the noble Lord—we were discussing access to work earlier today—that that will continue to be available under the Access to Work Scheme.
Flexible working is not just for women and mothers looking after children. Men and women of all ages are finding it more attractive and convenient than the traditional pattern of nine-to-five, Monday to Friday. Neither do I believe that the growth of flexible work, in particular, part-time work, can be linked to any alleged feelings (possibly implied by the noble Baroness, Lady Turner) of insecurity. I believe that surveys show that forms of works such as part-time working, are increasingly popular. I refer the noble Baroness to the labour force survey made in the summer of last year. That showed that only 13.5 per cent., which is a very small percentage of those involved in part-time work, wanted to take up full time employment but were unable to do so.
Perhaps I may now say a word or two about the noble Lord, Lord Dahrendorf, and I believe the noble Lord, Lord Rochester, who expressed concern about casualisation. It is important not to get this out of proportion. At present I understand that something of the order of 1.3 million employees (about 5.9 per cent.) in the United Kingdom are in temporary work. That has been roughly stable over the past decade. We have fewer temporary workers than France, Germany, Japan and Australia. Surveys show that employers generally use temporary workers to provide short-term cover for absentees to match staffing levels to peaks and demands—for example, seasonal peaks—and to provide specialist skills. I also believe that temporary work can be a very useful entry or re-entry point for people who have been unemployed. One-third of the temporary workers in 1991 were not working at all in 1990.
I shall now say a word or two about employees' rights, which is a concern both of the noble Baroness, Lady Turner, and the noble Lord, Lord Rochester. I am sure that I do not need to remind the House of our full commitment to employees' rights in a flexible labour market. Many employment rights such as those relating to health and safety, race, sex discrimination, trade union membership, and time off for antenatal care, apply to all employees regardless of hours of work or length of service. I refer to part-time employees who work 16 hours or more. The noble Lord, Lord Rochester, was referring to 18 hours, but I believe that his figures were muddled and he meant between eight hours and 16 hours; no doubt he will find time to correct that. Those workers who work 16 hours or more a week, do qualify for the other main employment rights after
60
completing two years' service. Part-timers who work between 8 and 16 hours a week qualify for those rights after five years.
I have to stress, as the noble Lord, Lord Rochester, mentioned, the words of my noble friend Lord Ullswater, in responding to an amendment during the debates on last year's Bill. Quite obviously, we need to strike a balance between employees' rights and the burden on employers. I believe that we have got the balance about right. I also believe—and this is just as important—to get the balance wrong would be to reduce the total number of job opportunities on offer. That would serve nobody's interests whatsoever.
I appreciate the other anxieties raised by a large number of noble Lords; namely, the tax and fiscal points. They were raised by the noble Lord, Lord Desai, my noble friend Lord Birdwood, the noble Lord, Lord Dahrendorf, and my noble friends Lord Torrington and Lord Liverpool. Obviously, there was some criticism of the tax structure and various other points. I was asked to make sure that my honourable and right honourable friends in Her Majesty's Treasury took on board the various points they made about the tax structure adapting to the times and making a flexible labour market possible.
I believe that it was the noble Lord, Lord Desai, in particular who said that everything he said would be ignored. Everything he says will be taken notice of by my honourable and right honourable friends, but whether those arguments are accepted is quite another matter. I will ensure that points made by noble Lords about the need for fiscal changes—if we are to continue keeping a flexible working market—will be taken on board. The noble Lord would not expect me to comment in any greater detail.
Let me conclude by saying that pay realism and flexibility, though imperative, are not the whole story. There is little point in having job vacancies if there are not the right type of people to take advantage of the available opportunities. We are keenly aware that the quality of the labour force determines the long-term sustainability of employment growth.
There are fewer and fewer jobs available for under-qualified people. We must therefore target our active labour market policies to best effect—to re-equip and remotivate those who are in danger of being excluded from participating fully in the labour market, and to encourage the private sector to invest more in the skills and initiative of their employees. I believe—and here I think that I can speak for all parties—that the noble Lord, Lord Desai, and others, were right to stress the vital importance not just of training but of continuous training throughout any individual's career in the changing world in which we live.
The £1.4 billion annual budget of the Employment Service has a target of placing 1.47 million unemployed people in jobs during the current year through a host of schemes. Employment Department expenditure on a variety of training, enterprise and vocational programmes is set currently at some £2.8 billion. The Prosperity through Skills document, which I am sure many noble Lords have seen, which was published last month by my

61
right honourable friend the Secretary of State, sets out what is to be achieved. I recommend that document to all noble Lords who have spoken today.
Together with the modem apprenticeships announced recently, and the commitment of the private sector, those measures are intended to be a
62
cost-effective means of preparing the UK labour force for the challenges of a future in which skills and productivity will be essential ingredients of global competition and technological advance.
House adjourned at twenty-eight minutes before seven o'clock.

  FOREIGN AFFAIRS COUNCIL, 6–7TH DECEMBER
  FOREIGN AFFAIRS COUNCIL, 6–7TH DECEMBER
  FORMER YUGOSLAVIA: UN WAR CRIMES TRIBUNAL
  FORMER YUGOSLAVIA: UN WAR CRIMES TRIBUNAL
  TURKEY: UN COMMITTEE AGAINST TORTURE
  TURKEY: UN COMMITTEE AGAINST TORTURE
  UN COMMITTEE AGAINST TORTURE: REPORTS
  UN COMMITTEE AGAINST TORTURE: REPORTS
  EC VOTING SYSTEM
  EC VOTING SYSTEM
  EUROPEAN CONVENTION ON HUMAN RIGHTS AND UK LAW
  EUROPEAN CONVENTION ON HUMAN RIGHTS AND UK LAW
  EUROPEAN COMMISSION OF HUMAN RIGHTS: "FRIENDLY SETTLEMENTS"
  EUROPEAN COMMISSION OF HUMAN RIGHTS: "FRIENDLY SETTLEMENTS"
  EC DOCUMENTS AND LEGISLATION: STATISTICS
  EC DOCUMENTS AND LEGISLATION: STATISTICS
  EC LEGISLATION AND SUBSIDIARITY: REVIEW
  EC LEGISLATION AND SUBSIDIARITY: REVIEW
  EDUCATION BILL: DRAFT REGULATIONS
  EDUCATION BILL: DRAFT REGULATIONS
  MOTORWAY CHARGING: HYPOTHECATION
  MOTORWAY CHARGING: HYPOTHECATION
  A.34 PEARTREE HILL/WENDLEBURY SECTION: SURFACE NOISE
  A.34 PEARTREE HILL/WENDLEBURY SECTION: SURFACE NOISE
  INSHORE FISHERIES REGULATION: CONSULTATION ARRANGEMENTS
  INSHORE FISHERIES REGULATION: CONSULTATION ARRANGEMENTS
  SMOKING RELATED DISEASE DEATHS
  SMOKING RELATED DISEASE DEATHS
  MR. JOHN GIBSON
  MR. JOHN GIBSON
  RESIDENTIAL CARE FOR THE MENTALLY HANDICAPPED
  RESIDENTIAL CARE FOR THE MENTALLY HANDICAPPED
  PRIMARY HEALTH CARE CAPITAL SCHEMES AND VOLUNTARY SECTOR PROJECTS, LONDON
  PRIMARY HEALTH CARE CAPITAL SCHEMES AND VOLUNTARY SECTOR PROJECTS, LONDON
  VOLUNTARY PROJECTS APPROVED BY Liz
  VOLUNTARY PROJECTS APPROVED BY Liz
  OFFICIAL REPORT: ANNUAL COSTS
  OFFICIAL REPORT: ANNUAL COSTS
  PRISON SERVICE: FUNDING OF PROPOSED ADDITIONAL ACCOMMODATION
  PRISON SERVICE: FUNDING OF PROPOSED ADDITIONAL ACCOMMODATION
  PRISON SERVICE: ADDITIONAL ACCOMMODATION AND STAFF
  PRISON SERVICE: ADDITIONAL ACCOMMODATION AND STAFF
  PRISON ACCOMMODATION: OVERCROWDING
  PRISON ACCOMMODATION: OVERCROWDING
  PROBATION SERVICE
  PROBATION SERVICE
  REGINA V SECRETARY OF STATE FOR THE HOME OFFICE EX PARTE DUGGAN
  REGINA V SECRETARY OF STATE FOR THE HOME OFFICE EX PARTE DUGGAN
  POLICE REFORM PROPOSALS: PUBLIC RESPONSE
  POLICE REFORM PROPOSALS: PUBLIC RESPONSE