§ Mr. Stanbrookasked the Secretary of State for Social Services whether he has yet completed his review of national insurance contributions for 1983–84.
§ 2. Mr. FowlerI have completed the annual review under section 120 of the Social Security Act 1975 and I have today laid a draft order—the Social Security 45W (Contributions, Re-rating) Order 1982—which requires the approval of both Houses, providing for revised contribution rates and profits limit to take effect from 6 April 1983. I have also laid the Social Security (Contributions) Amendment Regulations 1982 which set out new earnings limits for employees' and employers' contributions and Social Security (Contributions) Amendment (No. 2) Regulations 1982 which set out revised contribution rates for certain married women and widows paying reduced rate contributions. A report by the Government Actuary (Cmnd. 8742) which accompanies the order and regulations explains the effect on the national insurance fund.
We need higher contributions to meet the income outgo from the national insurance fund for benefits as a result of this year's uprating, and expected changes next year.
As my right hon. and learned Friend the Chancellor of the Exchequer said in his statement earlier today, I propose to raise the rate of contributions, excluding national insurance surcharge, by 0.25 per cent. for both employees and employers. Within the employees' contribution my right hon. Friend the Secretary of State for Employment has decided to make the reduction of 0.1 per cent. in the employment protection allocation. The effect of this will be to increase the amount going into the national insurance fund. In line with the requirements of the Social Security Pensions Act 1975, the lower earnings limit for class 1 contributions is to be increased to £32.50 a week, just below the new basic retirement pension rate, and the upper earnings limit is to be raised to £235 a week, which is just over seven times the new basic pension rate. These new earnings limits replace the existing ones of £29.50 and £220 a week, respectively. The effects of these charges are as follows:
Not contracted-out employees
Neither the employee, nor his employer, will have to pay a contribution if his earnings are less than £32.50 a week. For people earning between £32.50 and £220 increases will range from 8p to 55p a week both for employee and for the employer. For those earning more than £220 the increases will be greater rising to a maximum at the new upper earning limit—£235—of £1.90 a week for the employee and £2.42 a week for the employer. However, these figures take no account of the lower national insurance surcharge which will substantially reduce employers' extra liability.Contracted-out employees
Contributions payable by contracted-out employees and their employers will rise, not only on account of the increases outlined above, but also because of the reduction of in the abatement of contributions on earnings between the lower and upper limits previously announced by me in March. The reduction of the abatement from 2.5 per cent. to 2.15 per cent. for employees and
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1979–80 1980–81 1981–82 1982–83 Standard Rates Not contracted-out rate: Employee 6.5% 6.75% 7.75% 8.75% Employer 10% 10.2% 10.2% 10.2% Contracted-out rate: Employee 6.5% of first £19.50 pw plus 4.0% between £19.50 pw and £135 pw 6.75% of first £23 pw plus 4.25% between £23 pw and £165 pw 7.75% of first £27 pw plus 5.25% between £27 pw and £200 pw 8.75% of first £29.50 pw plus 6.25% between £29.50 pw and £220 pw Employer 10% of first £19.50 pw plus 5.5% between £19.50 pw and £135 pw 10.2% of first £23 pw plus 5.7% between £23 pw and £165 pw 10.2% of first £27 pw plus 5.7% between £27 pw and £200 pw 10.2% of first £29.50 pw plus 5.7% between £29.50 pw and £220 pw from 4.5 per cent. to 4.1 per cent. for employers reflects the changes in the cost to occupational pension schemes of providing guaranteed minimum pensions.* Taken together, the changes will mean increases of from 15p to £1.27 on earnings between £32.50 and £220 respectively for the employee and from 21p to £1.43 for the employer. The maximum increase payable at the new upper earnings limit—£235—will be £2.30 a week for the employee and £2.68 a week for the employer. Again, these figures take no account of the lower national insurance surcharge which will substantially reduce employers' extra liability.
* The Social Security (Class 1 Contributions—Contractedout Percentages) Order 1982 S.I. 1982/No. 493.
The reduced class 1 contribution rate payable by certain married women and widows is going up from 3.2 per cent. to 3.85 per cent. to take account of their eligibility from April 1983 for statutory sick pay. The flat rate class 2 contribution will be raised to £4.40. Strict application of the formula for calculating self-employed contributions which has operated since 1977 would have meant a class 2 rate of £4.60. But I have thought it right to continue with a modest relief to the small business man, while remaining within the broad framework of the formula. The rate of the class 4 contribution is being increased from 6 per cent. to 6.3 per cent. and the annual limits of profits between which class 4 contributions are paid are being raised from £3,450 and £11,000 to £3,800 and £12,000.
The effect of these changes is that for self-employed people who at present only pay class 2 contributions there will be an annual increase of £33.80 or 65p a week, but for those with profits between £3,450 and £3,800 the increase will be generally less—between £12.80 up to the maximum of £34.40 at £11,000. For those with profits of £12,000 or higher, the new upper profits limit, the maximum increase will be £97.40 a year.
The rate of class 3 contributions is be raised from £3.65 to £4.30.
I am conscious that these changes will leave the national insurance fund with an income somewhat below the expected outgo for 1983–84. There is still a sizeable balance in the fund although this has reduced in the last two or three years. The appropriate level of the balance is being reviewed with the advice of the Government Actuary.
§ Mr. Rookerasked the Secretary of State for Social Services how the national insurance contribution rates, excluding the surcharge on employers, have changed during the present Administration for (a) employees and (b) employers.
§ Mr. NewtonThe information is as follows:
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1979–80 1980–81 1981–82 1982–83 Reduced rate for married women and widows with valid certificates of election Employee 2% 2% 2.75% 3.2% Employer As for standard rates