HC Deb 16 January 1985 vol 71 cc163-4W
Mr. Frank Field

asked the Secretary of State for Social Services why, when the Government Actuary recommended in paragraph 5.3 of House of Commons Paper No. 451 that the working balance of the national insurance fund should be about one fifth of a year's benefit expenditure, the report by the Government Actuary on the draft of the Social Security (Contributions, Re-Rating) No. 2 Order 1984 (Cmnd. 9386) is based on a working balance of 23 per cent., 25 per cent. and 27 per cent. for the respective years 1983–84, 1984–85 and 1985–86; and what proposals he has for expending the surplus of £1.5 billion on social security benefits in 1985–86.

Mr. Newton

In House of Commons Paper No. 451 of Session 1981–82 (July 1982) the Government Actuary indicated that, in the prevailing circumstances, about one-fifth of a year's benefit expenditure would be an adequate working balance. In his report on the draft Social Security

Benefits Up-rating Order 1983 (Cmnd. 8969, July 1983), he reported that he had recommended to the Department a minimum target balance of one-sixth of the year's estimated benefit expenditure. The main aim, under the pay-as-you-go system of financing national insurance benefits, is to ensure that taking one year with another. the income of the national insurance fund is sufficient to cover its expected expenditure, and also to keep a prudent reserve to cover operating margins, fluctuations in income and expenditure, and a risk margin against unforeseen contingencies. It has to be recognised however that these decisions have also to be set in the context of wider fiscal policy.

The Government's Actuary's estimates of 23 per cent., 25 per cent. and 27 per cent. respectively for the Aprils of 1984, 1985 and 1986 do not depart from established standards. During the 10-year period from 1976 to 1986, for example, the proportion of annual benefit expenditure will have fluctuated between just over 20 per cent. (1983) and just over 40 per cent. (1978).

Neither the size of the balance in the national insurance fund, nor adjustments to it resulting from individual years' surpluses or deficits, have been regarded as relevant in taking decisions on benefit expenditure.