§ Mr. Georgeasked the Secretary of State for Social Services whether she has yet completed her review of national insurance contributions for 1976–77.
§ Mrs. CastleYes. I am required under the Social Security Act 1975 to review each year the general level of earnings in Great Britain and to consider what changes in national insurance contributions need to be made in the light of movements in earnings and other relevant factors. In fulfilment of this obligation I have today laid a draft order, which requires the approval of both Houses, setting out revised rates and earnings limits to take effect from 6th April 1976. They are set out in detail below.
The Government are committed to put up pensions and other benefits at least once in each year. They have been up-rated twice in 1975. The second of these increases is due to come into force next month. The money has to be found to pay for these increases. It is also necessary to take into account the prevailing high level of unemployment, which reduces the income from contributions and increases the amount paid in benefit. These factors make substantial contribution increases for 1976–77 inescapable.
The upper limit of earnings on which contributions are paid by employees and employers is at present £69 a week. In view of the increase of about 30 per cent. in the general level of earnings in the period of 12 months up to April 1975, which is the period covered by the review, and in order to keep the National Insurance Fund soundly financed, the upper limit is being raised to £95.
237WThe Act also enables me to alter the rates of contributions within certain limits. It will be necessary on this occasion to increase the rate of contributions for employees and employers by 0.25 per cent. each.
For the earner on £60 a week the effect of these changes is to put up his contribution by 15p a week. For those with lower earnings the increases will be proportionately smaller. At the new upper earnings limit of £95 a week the increase will be £1.67 a week. There will be corresponding increases in the contributions payable by employers. During 1975–76, pay increases for people earning less than £69 a week—the present upper limit—will have been accompanied by corresponding increases in their earnings-related national insurance contributions. People earning more than £69 a week however will have escaped such contributions increases. The new upper earnings limit of £95 will mean that their contributions will now catch up.
As regards the self-employed, we shall again be helping the less well-off by holding down the rate of the flat-rate Class 2 contributions to £2.41 a week. As a counterpart the lower limit of the range of profits or gains on which the earnings-related Class 4 contributions become payable
DETAILS OF THE PRESENT AND PROPOSED NEW RATES OF CONTRIBUTIONS 1975–76 1976–77 Class 1(employed earners) Lower earnings limit … £11 a week £13 a week Upper earnings limit £69 a week £95 a week Employed earner's rate … 5.5 per cent. 5.75 per cent. Employer's rate … 8.5 percent. 8.75 per cent. Reduced rate for married women and widow beneficiaries … 2.0 per cent. 2.0 per cent. Class 2(self-employed, flat-rate) Men's rate … £2.41 £2.41 Women's rate … £2.10 £2.20* Small earnings exception—where earnings below … £675 a year £775a year Class 4(self-employed, earnings-related) Lower limit of profits or gains … £1,600 a year £1,600 a year Upper limit of profits or gains … £3,600 a year £4,900 a year Rate … 8.0 per cent. 8.0 per cent. Class 3 (voluntary contributions) … £1.90 £2.10 * Under the provisions of the Social Security Act 1975 to equalise the men's and women's rates over a transitional period.