§ Mrs. BrowningTo ask the Secretary of State for Social Security whether he has yet completed his review of national insurance contributions for 1993–94.
§ Mr. LilleyI have completed the annual review under section 141 of the Social Security Administration Act 1992. My proposals will take effect from 6 April 1993. The levels of contributory benefit expenditure I am maintaining will mean a shortfall in the national insurance fund between income and outgoings. I propose to meet this shortfall by introducing legislation to make an Exchequer grant available; in 1993–94, the first year, this would be up to 20 per cent. of contributory benefit expenditure. This legislation will also introduce the 1 per cent. additional rebate for appropriate personal pension holders aged 30 and over.
Employers and employees
There will be no change to the standard rates of contributions for either employees or employers, which remain at 9 per cent. and 10.4 per cent. respectively.
In line with the Social Security Contributions and Benefits Act 1992, the lower earnings limit for class 1 contributions is to be raised to £56 a week, which is the nearest whole pound to the basic retirement pension rate for a single person from April 1993. The upper earnings limit is to be raised to £420 a week, which is slightly less than seven and a half times the new basic pension rate as provided by the Social Security Contributions and Benefits Act. These new earnings limits will replace the current ones of £54 and £405 respectively.
Under the current structure employees whose earnings reach the lower earnings limit will continue to pay an initial contribution of 2 per cent. of that limit and standard rate contributions of 9 per cent. on that portion of their earnings which exceeds the lower but not the upper earnings limit. For employers the reduced contribution rates of 4.6 per cent., 6.6 per cent. and 8.6 per cent. for the lower paid will continue unchanged. However, the thresholds for these rates will be raised so that from April 1993 they apply to weekly earnings which fall below the ceilings of £95, £140 and £195 respectively, compared with £90, £135 and £190 at present.
Not contracted-out employees and their employers
Neither the employee nor his employer will have to pay any contributions if earnings are less than £56 a week. Those whose earnings do not exceed £405 (the former upper earnings limit) will pay 14 pence a week less in contributions than at present. This is because a further £2 of their weekly earnings will be subject to a deduction of 2 per cent. rather than 9 per cent. For employees with earnings above £405 a week the maximum possible increase will be £1.21 a week. Employers' contributions will generally be unchanged although some will pay less where employees' earnings which were above the former thresholds fall below the new thresholds. There will be no increase for employers of the higher paid since there is no upper earnings limit for employers' contributions.
Contracted-out employees and their employers
The statutory review of the contracted-out rebate for employees and employers, the result of which was announced last February, resulted in a reduction in the rebate from April 1993. Although the main rates of 923W contributions remain unchanged the effect of the reduced rebate is that many employees will pay a little more. Those with earnings between £110 and £405 (the former upper earnings limit) will pay up to 59p a week more. Those who earn more than £405 will pay contributions on the next £15 of earnings from next April (ie up to £420 a week, the proposed upper earnings limit), a maximum increase of £1.67 a week. Contracted-out employees who earn £110 or less will pay the same or slightly less.
Because of the fall in the rebate employers will generally pay more although some will pay less where employees' earnings which were above the former thresholds fall below the new thresholds.
Self-employed people
The flat rate class 2 contribution will be raised by 20p to £5.55 a week.
There will be no increase in the rate of class 4 contributions, currently 6.3 per cent. The annual limits of profits between which class 4 contributions are paid will be raised to £6,340 and £21,840 from £6,120 and £21,060 respectively. Self-employed people who pay only class 2 contributions will pay an extra £10.40 a year in 1993–94.
For people with profits between £6,340 and £21,060 (the former upper profits limit) class 4 contributions will be reduced by £13.86 per year assuming an unaltered level of profits. For those self-employed people with profits at or above the new upper profits limit the annual charge for class 4 contributions will be £35.28 higher.
Class 3 (voluntary) contributions
The rate of class 3 contributions will be raised by 20p to £5.45 a week.
National health service allocation
The allocation to the national health service, currently 1.05 per cent. from employees and 0.9 per cent. from employers, remains unchanged.
As usual, I shall be laying a draft order before Parliament together with a report by the Government actuary describing the effects of my proposals.