Orders of the Day — National Insurance (Non-Participating Employments)

Part of the debate – in the House of Commons at 12:00 am on 8th November 1960.

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Photo of Miss Patricia Hornsby-Smith Miss Patricia Hornsby-Smith , Chislehurst 12:00 am, 8th November 1960

I am sorry I cannot give way to the hon. Gentleman, because his hon. Friend is anxious to say a few words and I have not much time left.

The complaint raised by hon. Members is about notifications required to maintain track of an employee's move- ments. I ask hon. Members to listen seriously to what I believe are fair answers to the points raised.

The basis of the complaint by local authorities is the notifications required. Local authorities have assumed, quite erroneously, that we have, or shall have, up-to-date records of all contracted out employees at the commencement of the scheme. We have not got them. We shall not have any kind of comprehensive record until the last of the returns for the first year's working come in in 1962. At present the Registrar is issuing certificates to contracted out employers covering certain groups of employees, but we have no individual record of the employees contracted out.

The local authorities appear to have missed the main point of the Regulations by their insistence on the soundness of the schemes. No one is disputing the soundness of the statutory local authority superannuation scheme, or of the other statutory schemes applying to local authority employees. What we are protecting are the rights of the employee, whose individual rights may from time to time be in question and dispute with his employer.

I confess that I find my hon. Friend's confident satisfaction with the statutory schemes in marked contrast to her persistent and passionate attacks on another statutory scheme, but, to make the checks which local authorities and hon. Members allege we can make, we would have to ensure that every employer returned a full list of all his contracted out employees, with appropriate details, before the start of the scheme next April, and thereafter keep us advised of any changes in it. That is the alternative to what we have put in these Regulations.

To save such a burden of work, and to save returning the names of all 750,000 local government employees, we have instead provided that employers shall be required to inform us only of the much smaller percentage of employees whose service or contracted out payments are interrupted by circumstances outlined in the Regulations.

I have read with great interest the many phrases quoted by hon. Members tonight from the paper put out by the local authorities. How great then is this "inordinate amount of administrative effort, out of all proportion to the objects to be achieved", as the local authorities describe it, likely to be?

When a man is off work, there is no certain method of calculating how long he will be away. Nor is there absolute certainty that he will return. Therefore a balance had to be struck between recording every absence, however short and temporary, which would be ridiculous, and of giving no notice at all. That balance has been struck at 13 weeks and, generally speaking, if the absence exceeds 13 weeks the employment is deemed to be terminated and the question of preserving the employee's pension rights arises. As hon. Members said, under Regulation 18 (2) this 13-week period can be extended to two and a half years.

We expect that overall something of the order of 3 million employees are likely to be contracted out. So far as local authorities are concerned, we have not the final number, but, with the teachers, policemen, firemen and their general staffs it is likely to be about 750,000. Whatever the figure may be, local authorities will have been saved that number of initial notifications, because the system of control has been devised in such a way as not to require a special notice for every member in contracted out service.

It is against that background that the complaint about having to notify sickness absences beyond 13 weeks should be considered. Our general experience with sickness benefit claims suggests that out of 750,000 employees, not more than about 15,000 a year, a much smaller number, would be likely to be away for spells of more than 13 weeks. The complaint, therefore, is based on the prospect of having to make about 15,000 notifications a year out of 750,000 employees—and that would be spread among some 1,800 local authorities, including Scottish authorities. It is likely to be a mere handful in the case of most local authorities although a larger number for the greater and more widespread authorities.

There are also about 1,500 authorities other than local authorities included in the local authority superannuation schemes. They include authorities such as the Belgrade Theatre Trust (Coventry) Limited, the Croydon Association for Moral Welfare, the White Fish Authority, the British Film Institute and the Welsh Tourist and Holidays Board. On the basis of the case put up by the local authorities as to the soundness of their schemes under local authority superannuation legislation, those bodies would be perfectly justified in claiming precisely the same exemptions as those for which the local authorities have asked.

Can it be seriously suggested that the protection of their employees as outlined in the Regulations amounts to a "considerable and exorbitant burden of work," or that, in order that we can have the records of all the employees, local authorities would prefer to return 750,000 names? Even if they did we should still have to obtain extra returns from the employers. Let us suppose that a man has a 20 weeks' gap on his card in his contracted out stamps; we shall not know whether the gap is in the same employment or not and we shall not know whether he has changed his employment or not. We should have to write to the employee and ask him and he would probably have to check as to payments and dates with his employer before we could obtain the information which we required. There would then have to be three or four communications and not one, whereas the employer terminating employment, or dealing with sickness, has the records to hand for the purpose of stamping the employee's card.

May I now deal with the question of the termination of employment? We are under an obligation to ensure that persons contracted out have pension rights at least as great as could have been obtained over the same period of employment had contributions been paid to the State on earnings of £15 or more a week. Hon. Members will know of the three methods of dealing with that—transfer to another scheme, freezing of pension or making a payment in lieu.

Local authorities have suggested that to reduce the number of separate notifications, the returns made to the Income Tax authorities could be used for this purpose. Inspectors of taxes get about 9 million changes of employment notices a year under the P.A.Y.E. scheme. It can hardly be thought that it would be an economical system for the inspectors to have to sift those 9 million notices to identify those relating to contracted out local authority or other authority employees in local government superannuation schemes, particularly as the inspector of taxes would not necessarily know, without special inquiry, whether the particular employee was currently contracted out or not. When the inspector had identified the relevant cases, he would have to send a special notice about that to the Ministry, something which could have been done more easily by the employer in the first place at the time the employment terminated and when he had up-to-date information.

Hon. Members have made a great point about the equality or the parity of the two schemes, but they are not wholly in parity. One suggestion has been that the employees' rights to pension are adequately covered on termination by the auditor's certificate. It is the duty of the auditor to satisfy himself as to the correctness of financial payments, but under the local authority scheme there may be a 10-year waiting period before a man is entitled to any payment, and the auditor's duty will be discharged by ensuring that the terms of the local authority scheme have been met.

But under the provisions of these Regulations we have to ensure that, if an employee terminates his employment and at that time would not be in a position to receive a frozen pension from the local authority, a payment in lieu is made, in relation to that employee—unless he transfers to other local authority work—to the Government fund. Therefore, the provisions are not exactly in parallel, as I am sure hon. Members appreciate, and it is necessary for us to have this information and for the employee to be aware of it. Within a local authority, if a man leaves contracted out employment he is safeguarded either by transferred rights or a payment in lieu to the Government scheme. To that extent it would be quite beyond the terms of reference of the auditor to give certificates—disregarding the fact that the employee would have to wait possibly until the end of the year before such a certificate was completed.

With regard to a local authority objecting to having to give the employee a certificate of insurance which will include a statement that he has been contracted out of the scheme, and showing details of the pension he should receive, hon. Members would agree that it is an employee's right to know where he stands, and for local authorities to suggest that this would serve no useful purpose and would involve additional calculations of no value is an oversimplification of a very necessary safeguard. The local authorities object to having to obtain employees' agreement under regulation 2 (5). Why not? It is the right of the employer to choose whether he contracts out or not. But it is surely the right of the employee to know the terms on which his pension stands when he leaves his employment.

I know that I have not dealt with every point raised, but I promised the hon. Member for Sowerby (Mr. Houghton) that I would leave a few minutes for him to speak. I know that he will appreciate my difficulty. I have had many interruptions.

Overall, I would say that local authorities are claiming preferential treatment which would avoid the necessity for their making returns which are in the interests of their employees. My right hon. Friend will closely follow the whole of the working of the Act, and it may well be that in the course of its working amendments may be found necessary. But at the moment he cannot do other than put before the House the Regulations which have been approved by N.I.A.C., which we genuinely and sincerely believe are in the interests of the employees.