§ Mr. Maddenasked the Secretary of State for Social Services what basis there is for the claim that the self-employed should be refunded 37.5 per cent. of their total outlay on Class 4 national insurance contributions for the years 1975–76 and 1976–77 on the grounds that they will not be eligible for the benefits of the earnings-related pension scheme.
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§ Mr. OrmeThe claim is wholly misconceived. The Class 4 contribution was never intended to give entitlement to the earnings-related benefits of the new scheme: and there is no element in the contributions of the self-employed attributable to that purpose. The earnings-related Class 4 national insurance contributions were introduced in April 1975 as a supplement to the flat rate Class 2 contributions, not to give any additional benefit entitlement but to enable the liability of self-employed contributors to be varied according to their means, and to avoid the raising of the flat-rate contribution to a level which would have been excessive for low earnings. Nor is there any case for arguing that the contribution outlay of the self-employed since April 1975 has been excessive in relation to the benefit entitlement it gives. After allowing for the difference in the benefits available to the self-employed and the employed, it has been substantially less than the total Class 1 contributions paid in respect of employed people for the same benefits. There is, therefore, no ground for refund of any part of past Class 4 contributions. But from April 1978, when a lower rate of contribution is to be introduced for employees contracted out of the new State pension scheme, the contributions of the self-employed will also be reduced.