HC Deb 07 December 1976 vol 922 cc156-9W
Mr. Robin F. Cook

asked the Secretary of State for Social Services whether he has yet completed his review of national insurance contributions for 1977–78.

Mr. David Ennals

Yes. 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 1977. A report by the Government Actuary (Cmnd 6688) accompanies the order. The contribution adjustments proposed are set out in detail below.

No increase is proposed in the rates of contributions payable under the Social Security Act by employees and employers. The effect is that employees who earn less than £95 a week and their employers will pay no greater contributions as a result of the order.

The upper limit of earnings on which contributions are paid by employees and employers is at present £95 a week. This is to be increased by about 10.5 per cent. to £105 a week. The effect will be that employees earning £95 or more a week will pay higher contributions, with a maximum increase of 58p a week for those earning at least £105 a week. There will be corresponding increases in the contributions payable by employers. This new upper earnings limit of around seven times the basic pension rate will be in conformity with the requirements of the new State pension scheme which is to start in April 1978; in consequence, those requirements will be satisfied without any further upward adjustment in 1978 apart from whatever may be needed to take account of next year's annual increase in pension.

The Government Actuary's estimates of income and outgo for the National Insurance Fund, based on given assumptions about unemployment and earnings, show a substantial surplus; this favourable balance will be of advantage in view of the economic uncertainties and in moving towards the higher contributions needed

DETAILS OF THE PRESENT AND PROPOSED NEW RATES OF CONTRIBUTIONS
1976–77 1977–78
Class 1 (employed earners)
Lower earnings limit £13 a week £15 a week
Upper earnings limit £95 a week £105 a week
Employed earner's rate 5.75 per cent. 5.75per cent.
Employer's rate* 8.75 per cent. 8.75 per cent.
Reduced rate for married women and widow beneficiaries 2 per cent. 2 per cent.
Class 2 (self-employed, flat-rate)
Men's rate £2.41 £2.66
Women's rate† £2.20 £2.55
Small earnings exception—where earnings below £775 a year £875 a year
Class 4 (self-employed, earnings-related)
Lower limit of profits or gains £1,600 a year £1,750 a year
Upper limit of profits or gains £4,900 a year £5,500 a year
Rate 8 per cent. 8 per cent.
Class 3 (voluntary contributions) £2.10 £2.45
* Apart from the 2 per cent. surcharge from 1977–78 for which provision is made in the National Insurance Surcharge Bill.
† Under the provisions of the Social Security Act 1975 to equalize the men's and women's rates over a transitional period.

45. Mr. Onslow

asked the Secretary of State for Social Services if he will discontinue, in the interests of economy, his Department's non-statutory practice of advising NHS contributors of any

from April 1978 under the new pension scheme.

With regard to the self-employed, we continue to seek—within the confines of a mixed flat-rate and earnings-related contributions structure—to be fair both to the self-employed as a whole and as between those with different levels of profits. On this occasion the increase in contributions is being shared between the flat-rate Class 2 contributions and the earnings-related Class 4 contributions.

The Class 2 contribution is being increased from £2.41 to £2.66 a week. The rate of the Class 4 contribution remains at 8 per cent. but the range of profits or gains on which it is levied will be from £1,750 to £5,500 a year in place of the present limits of £1,600 to £4,900 a year. The effect of these changes in the Class 4 contribution will be to reduce or leave unchanged the amount of Class 4 contributions payable on any particular level of profits or gains up to £5,050 a year and only to increase the Class 4 contributions payable where profits or gains are above this level—by a maximum of £36 a year where the profits or gains are at least £5,500 a year. This is the new upper limit of profits or gains and corresponds to the new upper earnings limit of £105 a week for Class 1 contributors.

deficiency in their annual contribution records.

Mr. Orme

My Department has a duty to take steps to secure compliance with the contributions provisions of the Social Security Act. I shall keep under review the arrangements for protecting the benefit cover of contributors by issuing reminders about deficiencies but I have no changes to propose at present.