Orders of the Day — NATIONAL INSURANCE (No. 2) BILL

Part of the debate – in the House of Commons at 12:00 am on 17th June 1969.

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Photo of Mr William Worsley Mr William Worsley , Chelsea 12:00 am, 17th June 1969

The right hon. Gentleman has said, for instance, that he would produce a scheme which would be very hard to get out of. That was before he got into office. I challenge him to deny this.

There is not only this, but those of us who have studied what has happened on the Continent have found that where schemes have been introduced, no doubt with the best of intentions, with a substantial contracting-out element, just this sort of difficulty arose as the fund became short of finance.

The first thing that happened was that the contracting-out arrangements were whittled away and then abolished. This has happened in Belgium and Germany, two countries which had contracting-out arrangements and have now abolished them, I understand. Therefore, since we have seen in Britain with the present Government, confronted with a financial crisis, a tendency to whittle away the contracted out element of the scheme, this is a very serious precedent and raises the gravest doubts about the rôle of private and occupational pension schemes in any scheme devised by the right hon. Gentleman.

Apart from the actual content of the Bill, there is side by side with it the proposal in the White Paper which has been widely referred to, though fortunately not in the jargon term of dynamising the bricks, whereby the actual terms of contracting-out in the 1961 scheme are proposed to be altered retrospectively.

Taking the two things together—what is in the Bill and what is proposed in the White Paper—we find confirmation of our original concern. This was the prime reason why, on a reasoned Amendment, we voted against the White Paper, because we fear that occupational schemes, the only sort of pension provisions which produce savings, are likely to be whittled away under any scheme put forward by the Government. We shall look with very special care at anything that is suggested in the future.

I have no doubt that for the general population what will be noted is not so much the subtleties of contracting-out as what is likely to happen in the future. It will not be long-term prospects, but current burdens. The Government have doubled the money taken annually in tax generally. The hon. Member for Rowley Regis and Tipton chided my noble Friend and asked what S.E.T. had to do with the Bill. What counts for the individual is the total burden of tax. Whether it is tax raised for this subject or for another is much less important than the total burden. Just taking the direct charges through the National Insurance Fund alone, under this Government the increase on the individual is between 50 per cent. and 70 per cent., according to income.

I said earlier that we accept the general principle of a graduated contribution, but we would accept it only as part of a general rearrangement of taxation which would give back incentives to the individual. This increase in graduated contribution is on top of a rate of direct tax which is biting increasingly hard, first, as a result of past Government action, and, secondly, and increasingly, through present inflation. This increase in the Bills adds to the disincentive effect of our total tax package, because it comes on top of these other direct taxes. It is yet a further discouragement to the man who seeks to do better.

I hope that the Secretary of State will say something about the relationship between national insurance contributions and income tax. Originally, as I understand, national insurance contributions were intended to be chargeable against income tax. It was only for administrative convenience that they ceased to be so allowable in return for an adjustment to the allowances to compensate. Once graduation is introduced, as the right hon. Gentleman is introducing it in the Bill, the compensation given in allowances is no longer effective. Has the Secretary of State considered this matter?

We believe that this graduated tax, in addition to the already excessive tax burden imposed by the Government, has such a severely disincentive effect that it needs careful Government attention.