Orders of the Day — National Health Service Contributions Bill

– in the House of Commons at 12:00 am on 23rd April 1970.

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Order for Second Reading read.

4.2 p.m.

Photo of Mr David Ennals Mr David Ennals , Dover

I beg to move, That the Bill be now read a Second time.

We had the advantage the other day of a debate on the Ways and Means Resolution as a prelude to this debate. During that debate, we heard some of the arguments which may well be deployed again today. I find it difficult to understand why the Opposition are seeking to divide the House on this Motion, but no doubt we shall discover the reason from the hon. Member for Hertford (Lord Balniel). I am tempted to think that there is no more significant reason than that of the Opposition's trying to keep up their spirits as they see their support dwindling in the country.

The purpose of this short Bill is simply to bring the flat-rate National Health Service contribution up to date—to restore in part the falling proportion of the cost of the health and welfare services which it meets. We are not here to discuss the earnings-related social security scheme, for that is being dealt with upstairs by the Standing Committee on the National Superannuation and Social Insurance Bill. But it is relevant to note that an earnings-related scheme does ensure that contributions rise as earnings rise. So long as we have a flat-rate contribution, the yield is more or less constant each year and we have to come back to the House for an increase from time to time.

But while the yield of contributions remains static, the cost of health and welfare services is constantly increasing. There are several components to this increase. First, population is rising and the greater proportion of older persons makes heavy calls on these services. Then there are developments in medical treatment and improvements in standards, particularly in standards for the mentally handicapped and the old, which need the use of more resources. This entails the need to increase the rate of contributions.

These improvements amount to an increase in real terms in the expenditure on health and welfare services over the years. Since 1964–65, public expenditure has been rising in real terms at an average of 3·9 per cent. per year and it is planned to continue at 3·5 per cent. for 1970–71 and 4·3 per cent. for 1971–72. In addition, of course, we have to meet the effect of increases in pay and prices. These services—the hospitals service, especially—are labour intensive. In the hospital service, about 70 per cent. of the cost goes on staff. We have to meet pay awards. I am sure that no one will begrudge the nurses the pay increases they have had, but, inevitably, others follow from them.

I ask the House to accept this Measure for an increase in contributions to raise about £53 million in a full year. I have no difficulty in producing figures to show that this is no more than a reasonable offset to some of the increase in the cost of the health and welfare services. In 1960–61, the last year before the employers' contribution was effectively increased, a total of £961 million was spent on health and welfare services. Last year, it was £1,973 million, an increase of more than double the amount.

Let us consider some of the constituents of this expenditure. The largest is hospital running costs. In 1960–61, they were £492 million. In 1969–70, they had risen to £1,020 million, much more than double. In 1960–61, £30 million was devoted to hospital capital—that is, to buildings and equipment; in 1969–70, we spent about £130 million, or four times as much. It is interesting to note that, in 1960–61, only about Is. 3d. was spent on hospital capital for each £spent on running the hospital service, whereas in 1969–70, it was 2s. 7d. for every £.

Another area in which we have increased expenditure faster than average is local authority health and welfare. Here, the increase has been from £114 million in 1960–61 to £274 million in 1969–70, an increase of 140 per cent. This reflects our intention, of course, to continue to build up the community services.

The yield of the contribution in 1960–61 was £113 million. In 1969–70, it was £176 million, an increase of £63 million, or about 56 per cent. But it compares with an increase of £1,012 million, or 105 per cent., in the cost of the service, so the cost of the service has been increasing much more rapidly than have the funds drawn by means of the contribution.

In 1960–61, the yield as a percentage was 11·8 per cent. It rose to 14·9 per cent. when the increases of the 1961 Act took effect, but since then it has fallen steadily, with a small interruption after the 1968 increase, until last year, 1969–70, it reached as low as 8·9 per cent. It is already lower, as a proportion of the total cost of the service, than it has ever been since 1957, when a separate contribution was first brought in and it would go on getting lower year by year, of course, unless we introduced a Bill like this.

Because the cost of the health services has risen and the yield of the National Health Service contribution is static, the proportion is continually falling. This is not a new situation, nor is the means which we are providing for it. Since 1948, there have been three increases by the party opposite, in 1957, 1958 and 1961, and one by the present Government in 1968. It is very difficult to say what exact proportion the N.H.S. contributions should be of the total cost of the Health Service. We have never had an exact formula to compute this.

The hon. Member for Farnham (Mr. Maurice Macmillan), in the debate a few days ago, made the proposition inherent in the proposed increase, I think, 11·3 per cent. In fact, it will be 10·3 per cent. in the current and following year, but, even if his calculation were right and it was 11·3 per cent., the proportion would still be well below the 14·9 per cent. which it reached in 1962–63.

So we knew that there had to be an increase. Having decided this, the issue to be decided was whether the increase should be on the employees' side or on that of the employer. Perhaps—we shall hear from the noble Lord the Member for Hertford—the party opposite would put it on the employee. They would be wrong to do it that way. We are sure that the employer should pay more to reflect his interest in having a Health Service which ensures the health of his own employees.

The employer has a direct interest in the success of the Health Service in ensuring that his work people are ready and available in good health for their work. Maintenance of production depends on the labour force being fit and able to work. If a Health Service was not provided, the best employers would have to think about providing one themselves, and it would be much more costly for them.

With the proposed increase, the National Health Service levy paid by an employer will be only about £4 7s. a year for each employee, a remarkably low sum. It is actually less than a day's pay which a good employer would pay to an employee if he were away for a day of casual sickness. Under the new earnings-related scheme, we intend to put the main burden of the Health Service contribution where it belongs, which is basically on the employer. The employer will pay 0·6 per cent. and the employee 0·3 per cent. The present Is. increase will go some way towards that, but will still leave employers paying about half of what the employees do, so we are going only part way towards this new proportion.

Even though the whole increase will this time be put on the employer, it will only bring his share of the cost of the service up to about the same proportion as it was after the 1961 increase, the last one which was made by the party opposite.

Photo of Lord  Balniel Lord Balniel , Hertford

On this specific point of the proposal in the National Superannuation and Social Insurance Bill to set the employers' contribution to the Health Service at 0·6 per cent. of his payroll, I understand that this Bill, with this increase, raises £230 million, but, according to the Government Actuary's report, the 0·6 per cent. employers' contribution will, in fact, raise only 198 million. Does not this show that the 0·6 per cent. will raise less than is being raised in this Bill and that the figures in the other Bill are not correct?

Photo of Mr David Ennals Mr David Ennals , Dover

No, that is not so. The noble Lord will see that the Government Actuary's report is based on constant earnings at April, 1969, figures. Clearly, by the time we reach April, 1972, there will already have been an increase in earnings. Even if we took it at the present position, the figure would be more in this current year, because of increases in earnings than the figure shown in the Government Actuary's Report, which as I said, is based on constant April, 1969, earnings.

Concern seems to have been felt in the debate on the Ways and Means Resolution last week that the proposed increase would seriously affect the cost of living. I showed that it would have negligible effect—less than one-tenth of 1 per cent. in the Index of Retail Prices—even if the whole were passed on as increased labour costs. I sometimes wish that people would recognise that, even with this increase in cost, small as it is, we are also trying to bring about an improvement in standards of living, and not just in the cost of living—improvements which people expect of their Health Service.

In the debate last week, hon. Members seemed to think that it would be necessary to justify the levying of about £53 million per annum more either by showing exactly how the money would be spent or by showing how the cost falling on the Consolidated Fund or the rates or charges would be reduced. On the first proposition, I have said enough to show how the cost has risen and what we would expect it to do. The Government's decision on public expenditure for future years was set out in the White Paper on Public Expenditure, 1968/69 to 1973/74. That set the pattern of the expansion of public expenditure on the Health Service and the yield of this increase will not affect the allocation to health and welfare already defined in the Government's White Paper.

The question is whether an increase in the levy will affect the other resources from which the expenditure is made. I was asked specifically whether it would affect the charges. Of course, reducing or abolishing charges amounts to an increase in public expenditure on the service. This increase in the levy does not mean any departure from the plans of the White Paper on Public Expenditure. Decisions on the level of public expenditure for individual services must be made against the general background of the overall resources available, the state of the economy, the needs of other elements of the public sector, and, of course, it is still necessary to control the level of public expenditure and charges for health services play a part in this.

The charges anyway provide less than 5 per cent. of the total cost of the Service, and, together with the increased contribution brought about in the Bill, they would provide 15 per cent. of the cost. The balance of 85 per cent. falls on taxation, central and local. In a sense, one can regard the increase obtained through the levy as restricting to some extent the amount financed by taxation. It is not practicable or meaningful to try to say precisely what effect this would have on rates or payments from the Consolidated Fund separately.

The Bill has one main Clause and requires little explanation. Clause 1(1) substitutes is. 8d. a week for the present 8d. a week falling on the employer for each employee for whom the Health Service contribution is paid. Clause 1(2) provides for this to be modified in decimalising the rate. Clause 1(3) covers the fact that, in paying over to the Governments of Northern Ireland and the Isle of Man for members of Armed Forces and seamen, who are normally resident there, we shall have to pay over the higher contributions.

As shown in the Explanatory and Financial Memorandum, the total yield in a full year of the contribution will be raised to £231 million, that is, after allowing for the cost of collection and administration. The hon. Member for Farnham was puzzled, as, I think, is the noble Lord the Member for Hertford, by the comparison between this figure and the estimated yield of 198 million from the earnings related scheme. As I said, his figure was based on earnings at April, 1969, levels, that is, a year ago.

At a rough approximation, allowing for the increases since then, the yield on current earnings would be about £210 million. Clearly, by the time the scheme comes into operation, the yield will be further increased by increased earnings, so the yield which we propose for the flat rate scheme will be very much the same as initially under the new scheme.

It is right that both employer and employee should make their payment towards the cost of the Health Service—the employer because it is very much in his interests that the health of his employees should be maintained, and the employee, because, although there are, in the minds of some, misconceptions about how much of the service is financed in this way, it is right that he should, from his pay, make a direct contribution. The Bill makes a modest change in the current flat rate to bring it up to date, and I accordingly commend it to the House.

4.18 p.m.

Photo of Lord  Balniel Lord Balniel , Hertford

The House will wish me to express its thanks to the Minister of State for the thoughtful and careful way in which he introduced the Bill.

As is so often appropriate, it is right on this occasion, too, to begin the debate with a quotation from the Prime Minister. Writing in the New Statesman in March, 1961, he said: Year by year, the case is becoming stronger for taking the Health Service and its contributions under the general Exchequer system. In fact, for the second time now, the Government are following a totally different course and, far from taking the financing of the National Health Service under the general Exchequer, they are raising the flat-rate contribution.

To understand the scale of the proposed increase which is to be levied on industry, we must first look at the existing level of contributions. In the 20 years since the inauguration of the Service, the employer's contribution per employee per week has increased from l½d. in 1948 to 8d. today. It is proposed by the Bill to increase this contribution from 8d. to 1 s. 8d. a week, an increase of well over 100 per cent. It is correct, as the Minister said, that when we were in office we also increased the employer's contribution, by 2d. in 1957, by 2d. in 1958, and by 2d. in 1961. The Government now propose an increase of 1s.

In the past, Governments have always been cautious about increasing the industrial contribution because, unless it is done in a context of reducing taxation or it is done in a society in which there is a low level of industrial taxation, it means that there will automatically be price increases following such an increase in contribution. Neither of those two conditions—reducing taxation or a low level of industrial taxation—can by any stretch of the imagination be said to obtain today. The increase in contributions will certainly be added to prices.

Industry has had such burdens imposed on it in the past few years that there is not a chance in heaven of its being able to absorb these additional burdens. They will be passed on in prices as inevitably as night follows days. They will be passed on to the consumer, and this will have its impact on the poorer sections of the community, who were not helped in the Budget and about whom there is a fair amount of concern in the country today. Academically, as politicians or as economists, we shall see the effects of the Bill in the cost-of-living indices, but the people will see the effects of the Bill in higher prices when they purchase goods in the shops.

What is more, this additional contribution is being proposed, and the consequential price rises will follow, at a time—as the Retail Price Index, published the day after the Budget, indicated —when prices are rising faster than at any time in the past 20 years. Wage inflation and price increases are the great engines of social injustice. They are the cause of real hardship to people living on fixed incomes, to pensioners, to housewives, to all those who cannot take part in, let alone win, that battle in which might is right and the big battalions always seem to gain their way.

I concede that there are strong arguments, in financing the Health Service, for placing emphasis on the industrial contribution, but, however we describe it, whether we call it a contribution, a health levy, an earmarked tax or a payroll tax, it constitutes a straightforward increase in taxation. It must be considered as part of the overall taxation levied in the country. The Bill is an exercise in raising taxation simultaneous with the Budget, and it is wrong to undertake this exercise without reference of any kind to it in the Budget speech. Of course, the Budget looked far more immaculate without the inclusion of this increase in contribution. It had far better headlines, but it was misleading to the general public.

Photo of Mr John Vaughan-Morgan Mr John Vaughan-Morgan , Reigate

I hope that my noble Friend appreciates that the argument which he is now deploying is exactly the one which the Labour Party employed in voting against the Bill in 1957.

Photo of Lord  Balniel Lord Balniel , Hertford

I am grateful to my right hon. Friend of reminding me of that. History has an odd way of repeating itself. The Government party, then in opposition, voted against all similar Bills when we were in office. It repeats itself in another rather interesting way. This bad habit on the part of the Chancellor seems to be developing. Happily, we shall be able to break his bad habit for him when the next General Election comes. But it is rather unkind of the Chancellor of the Exchequer

Photo of Mr David Ennals Mr David Ennals , Dover

I should have expected the noble Lord, in taking on board the point made by his right hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan), to feel some embarrassment in realising that he was advancing some of the same arguments which had been put by us in opposition a few years ago. But he did not seem to show embarrassment.

Photo of Lord  Balniel Lord Balniel , Hertford

My right hon. Friend could not conceivably embarrass me, and I am sure that, if he has the good fortune to catch the eye of the Chair later, he will show that the point strengthens the argument which I was deploying.

The behaviour of the Chancellor of the Exchequer is rather unkind to the Department of Health and Social Security. The Secretary of State for Social Services is invariably left by the Chancellor holding the dirty end of the stick. The Chancellor did the same last year. He increased taxation by 340 million. He announced that there would be increases in social security benefits and the pension. But he failed to inform the House by how much the weekly contribution would be increased.

It was only when, on a Motion of censure, we summoned the Secretary of State for Social Services to the Dispatch Box, that we discovered that the increased contributions which would have to be imposed as a result of the Budget were greater than had been borne at any time in the country's history—and, alas, it was only to restore the purchasing power of the pension to where it had stood two years previously.

This time, the Chancellor of the Exchequer has used exactly the same gambit. He was quite categorical in his speech, saying: I therefore propose to introduce a Budget which will in no way, either directly or indirectly, do anything to raise prices." — [OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1243.] The young Sir Galahad of the Labour Party has become the Artful Dodger.

That statement was made on 14th April. On 15th April, late at night, when the murky deeds of the Government are usually undertaken, the Ways and Means Resolution for the Bill was debated, and we discovered that the weekly stamp contribution would be increased and additional taxation to the tune of £53 million would be imposed.

Technically, the right hon. Gentleman is right; it was not in his Budget. But it was a little too artful and, perhaps, a little misleading for the general public.

Photo of Mr David Ennals Mr David Ennals , Dover

The noble Lord really cannot get away with all this. I know that he is trying, but it is no good. First, he knows that the announcement about the Bill, without giving the exact amount which would be raised, had been made months before. Second, he knows that the Ways and Means Resolution giving the precise figure was published several days before the Budget. Third, he knows that it was the Government's original intention to introduce the Resolution on the Monday before the Budget, but, following representations from his right hon. and hon. Friends, we moved it, at their request, to the Wednesday. In the light of that, the noble Lord must not rake up all this rigmarole.

Photo of Lord  Balniel Lord Balniel , Hertford

I most certainly can, and, what is more, I know a good deal about it. I know that the Secretary of State said in January that a Bill of this nature would be introduced. Equally, I know that on 1st July 1969—this is column 265 of HANSARD—he said that a Bill of this nature would not be introduced. It is true that we objected to the Resolution being debated a day before the Budget, because it is our view that a Bill of this kind, which increases taxation, should be considered in the light of overall taxation, so we asked that it should be debated after the Budget.

But let us see what the Bill means in practical terms. The flat-rate employer's contribution to the Health Service is only part of the overall flat-rate contribution which is paid by the employer. In 1964, the overall industrial flat-rate contribution was 9s. 8d. How far we have travelled in these five and a half years and how sad the journey is. Today, the overall flat-rate contribution is not 9s. 8d. It is 65s. 11d. —and the Bill puts it up to 66s. 11d.

Photo of Mr David Ennals Mr David Ennals , Dover

Mr. Ennals indicated dissent.

Photo of Lord  Balniel Lord Balniel , Hertford

The hon. Gentleman says that it is not so, so I shall give a breakdown.

The breakdown is of 15s. is paid for national insurance; Is. for industrial injuries; 8d. for the Health Service; Is. 3d. for redundancy; and 48s. is paid in selective employment tax. So, between 1964 and 1969, the employer's share of the flat-rate contribution went up by no less than 56s. 3d., an increase of about 620 per cent. In addition, the graduated contribution has also been increased twice.

Putting weight and emphasis on the industrial contribution is a perfectly valid means of financing the Health Service provided that it is in the context of reducing taxation or at least with a low rate of industrial taxation. The Minister referred to the increases which we undertook when we were in office. In 1957, we increased the contribution by 2d. a week, but we had already reduced taxation by more than £1,000 million from the Socialist level which we had inherited on taking office.

In 1958, we again increased the flat-rate contribution by 2d. a week, but a further £100 million had been reduced in taxation. In 1961, when we increased the contribution by another 2d. a week, we had already reduced taxation so that it was £1,500 million lower than the Socialist rates which had applied when we came into office. This is a totally different pattern from that which is being followed at the moment by the Government.

Photo of Mr Jim Sillars Mr Jim Sillars , South Ayrshire

Could the noble Lord give us a breakdown of the benefits which accrued from the 2d. increase and relate them to the benefits which accrued to working people by the increases which he told us about earlier, which bring us up to 65s. 11d. a week?

Photo of Lord  Balniel Lord Balniel , Hertford

I could not do so offhand, but I very much doubt whether there are many people who regard many benefits as having flowed from selective employment tax, which is the main contributory element to the increase in the flat-rate contribution.

Photo of Mr David Ennals Mr David Ennals , Dover

The noble Lord's argument does not make sense—to include selective employment tax as if it were a contribution. He knows perfectly well that it is a direct form of tax, raising more than £600 million, and that if it were not raised by that means it would have to be raised in some other way. To pretend that it appears with a Health Service and industrial injuries contribution, is absolute nonsense.

Photo of Lord  Balniel Lord Balniel , Hertford

First, the presumption that this money has to be raised in some other way is a presumption which we do not accept. Second, this selective employment tax is a flat-rate contribution. It is one of the major reasons for the increase in prices. It is a burden on industry which reflects itself in prices.

As I was saying, this pattern which the Government is developing is a totally different pattern from that which we followed when we were in office. They are proposing to increase the contribution by Is. per employee per week. This is over and above the increase in taxation from the levels which they found when they came into office—an increase of taxation of more than £3,000 million.

Frankly, I find when talking to members of the public that their minds simply boggle when one talks in terms of millions. In everyday terms it means that the rate of taxation today is equivalent to £3 10s. per week per family higher than it was in 1964. A very large part of this extra taxation is imposed directly on industry—corporation tax, selective employment tax, the petrol tax, which certainly falls heavily upon industry, the fuel oil duty, the national insurance contribution and the redundancy fund.

I often feel that hon. Gentlemen opposite in proposing an increase in this contribution, because it is called an employer's contribution, have a kind of pleasure in feeling that once again they are bashing the bosses.

This is very far from the case. This is a direct tax on industry which will be passed straight on in prices. For example, when the contributions were increased last November the ratepayers of London alone had to pay an additional Eli million. A similar problem met the ratepayers of every council throughout the country.

The pattern which we surely want to re-establish is a pattern of expanding social services where they are needed; the encouragement of people to stand on their own feet where they can through, for example, the encouragement of occupational pensions or the encouragement of home ownership—this is the pattern we need—combined with reduced tax.

Photo of Lord  Balniel Lord Balniel , Hertford

I will not give way now.

There is nothing abnormal about this pattern. There is nothing Utopian about it except that we have not seen it for the past five and a half years. This is the pattern of the past and it is the pattern which should be re-established today. But it is very far from the pattern which is being developed by the Government. The pattern of today is of continued expansion of the Health Service. I certainly concede this point to hon. Gentlemen opposite.

The growth in the Health Service during the last four years of Conservative government was at a rate of 14·2 per cent. The rate of growth of the Health Service during the first four years of the present Government was 15·7 per cent. But it has been accompanied by a massive increase in taxation and it has not been achieved —and this is the tragedy—by the buoyancy of taxation which flows from a growing economy. It has not been achieved—as the Prime Minister promised the day before we went to vote—without any general increase in taxation. With the opinion polls as they are today it is quite possible that the General Election will take place sooner than many of us had expected—

Hon. Members:

Hear, hear.

Photo of Lord  Balniel Lord Balniel , Hertford

I am glad that hon. Gentlemen cheer that—because the earlier the better for us.

Also, if the Prime Minister is to fufil his pledge he will have to undertake another Budget. There will have to be 6d. off income tax; 14s. off whisky; 3d. off beer; ls. ld. off cigarettes; ls. 9d. off petrol tax; £10 off a vehicle licence; and the abolition of selective employment tax. All this will have to be undertaken if the Prime Minister's promise is to be implemented before the next election.

Like many other hon. Members, I believe that too little is spent as a proportion of the gross national product on health. We probably spend less now than any other Western European country on health. Most of them are spending between 5½ and 6 per cent. of the gross national product and we certainly spend substantially less than the United States. There is at least a presumption that the method of financing the Health Service is faulty. We are as interested in good health in this country as any other Western European country is, but one cannot just draw out of the air the employer's contribution and more than double it.

We cannot ignore the fact that industry is half crippled by the level of taxation which is imposed upon it at the moment. The move will be self-defeating. It will mean either that these increased contributions will be passed on in prices—in which case the revenue will be washed away in a few months—or, alternatively, it will mean that industrial investment will be curtailed in which case, once again, the growth of the economy is hampered.

Photo of Mr Stanley Henig Mr Stanley Henig , Lancaster

This is all very interesting, but is it not the case that the levy made on industry in other countries, such as the E.E.C. countries, is even now, despite the increase mentioned by the hon. Gentleman, considerably higher than it is here? Ought he not, in all frankness, to take that into account?

Photo of Lord  Balniel Lord Balniel , Hertford

That is the point that I am making. I have said that there is a valid case for industry bearing a higher proportion—perhaps half—of the contribution, but it must be looked at in the light of the overall tax situation. In the countries which the hon. Gentleman has mentioned the overall tax on industry is substantially lower than it is here. The hon. Gentleman may make signs of disapproval, but I am a director of a company based on the Continent and I assure him that the level of industrial taxation on the Continent is far lower than it is here.

It seems to me incredible that when one can find additional resources which could voluntarily be invested in health the Government positively discourage it. If people want to pay for private health insurance over and above the tax which they have to pay towards the Health Service, this is something to be encouraged, not discouraged. It seems sad that the Government have not been able to help the great voluntary organisations which can draw such enthusiastic and generous support from the public.

These voluntary organisations are big business, indeed, and they devote their resources to specialised fields of health. They are of the utmost value to the Health Service. When I travel round the country, almost invariably the units to which I am taken are those for which the finance has been raised by voluntary organisations, because there is a feeling of great pride in an ability locally to raise money for a local unit which serves the local community.

All these voluntary organisations face considerable difficulties, because charities have to pay S.E.T. We have said before that this tax is economically illiterate, but when applied to charities it is totally unjust. Why, as another example, for instance, cannot the Government re-examine the tax which they take from charity football pools? These are taxed at the full rate of betting duty. The Spastics Society alone last year lost £900,000 as a result of a court action, which means that its charity football pool has to pay the full betting duty.

Another suggestion which I put forward relates to seven-year covenants, which are a great source of revenue for the charities. The amount of tax recoverable is the standard rate. Could not this be rearranged to provide an incentive for surtax payers to take out seven-year covenants with the voluntary organisations so that the amount recoverable is not only at the standard rate, but at the surtax rate as well?

The Government seem to be wrong in allowing themselves to be locked in the rigid ratios of financing the Health Service which applied when it was established in the 'forties—85½ per cent. from tax, 5 per cent. from charges, and 9½ per cent. from contributions. Instead of topping up these ratios when they fall behind, or, to use the Minister's phrase, when they are " due for revision ", the Government should examine the possibility of medical care being financed partially by general taxation, and partially by insurance.

The contribution could become a real insurance so that the supply of finance would automatically meet the demand. It would be insurance not to cover those almost uninsurable risks such as long-term mental illness, chronic sickness, geriatric care, nor extremely expensive specialised cases such as transplants, or special baby units, but an insurance to cover the fairly easily defined elements of the Health Service such as the general practitioner service, in-patient care, outpatient care, and ophthalmic services.

There is a strong argument for at least considering very seriously whether one should not, as a system of financing the Health Service, have part which is borne by general taxation, and part which can be defined and met out of a contribution which would be a real insurance element. What the Government are doing seems to be singularly unimaginative, and in the context of a heavy increased burden of industrial taxation, unacceptable.

I also feel that the time is long past when the House should be asked to discuss the raising of revenue of this kind without what business would call any " output budget " being presented to us. We have not heard how this increased revenue will be used, what savings will be made, or what shift of resources there will be from one sector of the Health Service to another. We have not been told why it is better to raise revenue for the service in this way, instead of restoring the growth rate of the rate support grant which has been cut by half in the past year. It is the rate support grant which finances the hostels for the mentally handicapped, and the sheltered accommodation for elderly people.

Not having been told how this revenue will be used, it is at least significant for the House to consider that the employer's contribution is being raised by almost exactly the amount which is needed to finance the abolition, for the second time, of prescription charges.

Photo of Lord  Balniel Lord Balniel , Hertford

It is interesting that that suggestion evokes such a warm response from the hon. Gentleman.

We are told in Labour's " Social Strategy ", published in August, 1969, that in our view the removal of charges must be a clear and urgent commitment. That is where I believe this money will go before the election. It will be a bad use of the money, but our major objection is that what is being undertaken in the Bill is a budgetary exercise dictated by the Chancellor of the Exchequer, which perhaps would be acceptable in the context of a major reduction of industrial taxation, but is mistaken in the context of a Budget which does nothing to reduce industrial taxation, and is mistaken in that it will give a yet further twist to the price spiral which already is causing the utmost concern in the country as a whole.

4.47 p.m.

Photo of Dr Shirley Summerskill Dr Shirley Summerskill , Halifax

I have listened with careful attention to many speeches by the noble Lord the Member for Hertford (Lord Balniel), and, although he has an admirable bedside manner, I always end up by not quite knowing what the Opposition would do if they were in power. The noble Lord is very good at criticism, but not so hot at telling us clearly where his party stands with regard to charges on the individual patient. The noble Lord talked about part insurance, and part taxation. I should very much like to know how big each part will be if there is ever a Conservative Government, but we need not longer on that possibility for long.

I welcome the Bill. This money is obviously necessary, in that the more money the Health Service has, the better it is. We do not want to cut expenditure on the Health Service. We are not happy with the inadequate amount that is available to spend on it. As the Minister stressed at the beginning of his speech, there are enormous and urgent needs for expenditure in almost every sphere of the service, and these needs are increasing. Demand is increasing, the standard of treatment is increasing, and the cost of treatment is increasing.

Are we to assume that the Opposition would cut expenditure on the Health Service, or make do with the money already available? Neither of those views is acceptable. We should spend more, and every source should be tapped. Reference was made to the Bill on 19th January. I am not surprised that this provision was not included in the Budget, because it is totally separate. This Bill is about the National Health Service, and we knew that it was coming. Incidentally, the Chancellor of the Exchequer in his Budget Statement said that measures could be brought in at other times of the year. The Budget statement is not a sacred time when everything is done, so that nothing is done in the rest of the year.

The Opposition have not said much about charges on the individual, charges for visits by the general practitioner, for meals in hospitals and for long-stay patients in hospitals. I am totally against such charges, including prescription charges. We should not put upon the sick, who are the least able to pay, such a financial burden. None of us wants an increase in direct taxation so we are left with contributions. The Opposition have said that they will lower direct taxation. In this event, I do not see how they will raise money to finance the National Health Service as well as it is being financed at present, let alone more generously. During their term of office the Conservatives raised both the employees' and the employers' rates in 1957, 1958 and 1961.

In an ideal world there would be no charges, and the whole of the National Health Service would be financed out of taxation. I agree with what the Prime Minister wrote in 1961, that that is the fairest way of paying for the service. The employees' contribution was increased in 1968, but the employers' contribution has not been raised for nine years, during which time the cost of the service has doubled. Even now the employers will be paying only about half the contribution paid by the employees, which is less than in practically any other European country.

The onus is upon the Opposition, if they are not satisfied with the National Health Service provisions, to say how they would raise extra money, apart from the insurance scheme mentioned by the noble Lord, which would not cover the expensive items which he mentioned. Any other method is preferable to a direct charge upon the sick patient. The next most preferable way would be contributions by the employer, then by the employee and thirdly in direct taxation.

Out of the yield in a full year of £53 million, I hope that £25 million will go towards reintroducing free prescriptions. This would be a small amount in the total context of the service. The object of prescription charges is almost defeated by the high cost of administration. We should return to the Labour Party conception of a National Health Service if not only the treatment by the doctor or surgeon were free but also the drugs.

I congratulate the Government on having increased expenditure on the Service, and I hope that they will continue to do this. We still lag behind other countries. It is necessary from time to time to introduce Measures to provide for this increased expenditure and, having considered all the alternative methods, the Government are right in saying that the employer's contribution should be increased.

4.55 p.m.

Photo of Mr Tim Fortescue Mr Tim Fortescue , Liverpool, Garston

It is always a genuine pleasure to follow the hon. Member for Halifax (Dr. Summerskill) and it is an even greater pleasure to be called before the hon. Member for Willesden, West (Mr. Pavitt), instead of immediately after him, as I have been in the last three National Health Service debates. I shall look forward to hearing his speech on prescription charges, with which we are so familiar, and which I am sure he will make with his usual eloquence.

The hon. Lady said that she was not surprised that the measure was not included in the Budget. I call to her attention a speech made on a previous occasion in a similar debate by the right hon. Member for Lanarkshire, North (Miss Herbison), who was a most distinguished Minister of Social Security in this Government She said: It would have been much better if the Financial Secretary to the Treasury, or the Chancellor of the Exchequer himself, had introduced the Bill, because it is purely and simply a financial Measure. Indeed, instead of having a separate Bill brought before us today, it would have been very much better if these provisions had been in the Bill that we discussed yesterday, because in the Finance Bill the provisions would have been in their proper environment." — [OFFICIAL REPORT, 8th May, 1957; Vol. 569, c. 998.]

Photo of Mr David Ennals Mr David Ennals , Dover

Will the hon. Gentleman remind us on which occasion, when hon. Gentlemen opposite raised contributions, they did so in a Budget speech? Never, I suspect.

Photo of Mr Tim Fortescue Mr Tim Fortescue , Liverpool, Garston

I was just referring to what the hon. Member for Halifax said. If she was not surprised, at least one of her colleagues would be surprised at this method of doing it.

The hon. Member for Halifax asked us how we would provide the money. I hope to throw a few rays of light on what I personally would do if I were in this position. The Bill is one of the most unnecessary, anti-employer, class-conscious and malicious Bills that even this Government have introduced.

First, what is the object of the Bill? The sole object, as we have heard, is the attempt to restore the percentage of the National Health Service finance raised by contributions to approximately 10 per cent. There is no other object. The figure is at present 8·9 per cent. and the rise will bring it to 10·3 per cent. This is completely arbitrary and has no intrinsic merit. There is nothing better about 10·3 than about 8·9, 8·5 or 12·2. If this is the sole object, it does not seem worth doing.

Photo of Mr Brian O'Malley Mr Brian O'Malley , Rotherham

The simple merit, as the hon. Gentleman knows, is that it provides more money for the National Health Service, which he, I am sure, wants to see extended.

Photo of Mr Tim Fortescue Mr Tim Fortescue , Liverpool, Garston

If the hon. Gentleman will contain himself for a moment I will explain how this could better have been done.

We have just had a Budget in which the Chancellor of the Exchequer, after providing for the repayment of £1 billion worth of debts provided for an overkill, a surplus, of £244 million. He has £244 million there that he does not know what to do with. The country has been landed with extra taxation of £3,000 million a year, about half of which is paid by the employers. Already the employers are paying up to £1,500 million a year extra towards the finances of the country. The Government will this year repay £1 billion worth of debt and will have £244 million over. But the Government do not want to use any of that. They must clobber the employers some more, they must show what good Socialists they are and raise another £53 million for the National Health Service by putting a greater burden on the employers.

The Bill makes no attempt to reduce the burden on the individual contributor by shifting some of it to the employer. The individual's contribution will stay at 3s. 2d. a week, but the employer must pay an extra Is., without relieving the contributor, to raise £53 million, when the Government have already this year raised 1 billion and £244 million more than they need. Yet they come to the House, outside the Budget, and say that they must raise another £53 million from the employers because the Health Service needs more money.

The hon. Lady asks us where we would find the money. This £1 billion and £244 million are not being used for anything productive; and if we want to give another £53 million to the National Health Service, or even more, that money is there. The money has already been raised by other means, and there is no need to put an extra charge on the employers. Over the last six years the Labour Government have raised so much money in taxation that they do not know what to do with it. The surplus this year will in fact be far higher than £244 million, because Government surpluses always are far higher than expected.

To demonstrate that what I am saying is right I will quote what the Minister of State said recently in the House on the Ways and Means Resolution. He was discussing the complicated question of what is a contribution, what is a levy and what is a tax, and he twitted the Opposition by saying that he did not suppose that we would now prefer to see: … an additional burden on taxation. We contend that this contribution by employers is nothing more or less than taxation. It has been pretended up to now that it is an insurance contribution, but later the hon. Gentleman said: This brings us to this method—the National Health Service contribution. The hon. Gentleman said … He was referring to my hon. Friend the Member for Worthing (Mr. Higgins) — … that it was important to have a change from its being an insurance, but it never was an insurance. It always was a levy." [OFFICIAL REPORT, 15th April, 1970; Vol. 799, c. 1528.] The Minister is admitting that this is a form of additional taxation. He will have a difficult task to try to distinguish between a levy and taxation. He had a hard enough task distinguishing between a contribution and taxation, but a levy and taxation I believe to be indistinguishable.

My noble Friend the Member for Hertford (Lord Balniel) in his excellent opening speech said that he thought it was a bit hard that the Chancellor of the Exchequer always left the Secretary of State for Social Services with the dirty end of the stick. The Chancellor of the Exchequer pretends that he was not raising any more money, but, almost simultaneously, the Secretary of State for Social Services seeks to raise some. My noble Friend showed his normal compassion towards the Secretary of State for Social Services, but I believe that the Secretary of State for Social Services revels in this position, he loves every minute of it.

I remind the House of an interview given by the Secretary of State recently on television, which was quoted in the Budget debate. He said: Roy Jenkins, I think he raised about £350 million in his Budget. Do you know how much I raised just by a little small Bill? £460 million. He had endless debates in Parliament, he was on the television. There I was quietly raising contributions and when we got to the Third Reading of the Bill nobody was in the House at all." — [OFFICIAL REPORT, 20th April, 1970; Vol. 800, c. 65.] My noble Friend need not worry at all about the Secretary of State. He is in his element in such matters. This is the most tasteful part of his job—the raising of money on the quiet when no one is looking.

This time the Chancellor has had a give-away Budget. Instead of clobbering us again, we are to pay £200 million less in tax. But the Secretary of State for Social Services could not let him get away with that. He now comes along to raise another £53 million on the side so that he can claim he is a better tax-raiser than the Chancellor. He likes to do this and I have no doubt we shall see him doing it again before the General Election.

This is not a Bill that can be defended. The Chancellor of the Exchequer has lots of money. He has a billion pounds to give away for debt redemption and a surplus of £240 million. There is no reason to raise another 53 million for the Health Service at this stage. The money is there. I believe that the Bill is simply an excuse for hitting the employer over the head again, to show the right hon. Gentleman's supporters that his heart is in the right place, that the employer can always be expected to pay, and that it is right and proper to raise money from him whether the Department needs it or not.

5.8 p.m.

Photo of Mr Laurie Pavitt Mr Laurie Pavitt , Willesden West

The hon. Member for Liverpool, Garston (Mr. Fortescue) is most economical in his speeches and consistent. This is the second time he has made his opening remarks about my making a speech about prescription charges. He follows the rule that if something comes off the first time then it should be used again. But if he has many more years in this House he will not be able to use it again, because I hope that the guesswork of his noble Friend the Member for Hertford (Lord Balniel) and my hon. Friend the Member for Halifax (Dr. Summerskill) may be right and that it may not be necessary for me to speak again about prescription charges. I do not wish to rehearse the same arguments, this time, but I have a variation on a similar theme.

The hon. Member went on to talk about the Bill being class-conscious. He then made the most class-conscious speech in this debate. He spoke about the poor employers and how they are suffering and doing such a good job on behalf of the community. I welcomed some of his remarks since any speech that gives the House a few chuckles is to be commended. However, I very much prefer to hear him when he is talking purely about national insurance, about which he is perhaps the most knowledgeable hon. Member opposite, than when he seeks to be shadow Chancellor and moves into the whole sphere of revenue-raising and capital expenditure.

I should like to pick up one or two points made by the noble Lord. I say quite kindly that the noble Lord is a " parfit, gentil knight." When he tries to attack the Government for bringing in things in the murky dead of night in a clandestine manner he is never able to develop his theme with the same panache as his hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), who uses murky phrases with far more panache than does the noble Lord, who usually speaks far more constructively.

I want to deal quickly with the six points he made. I would prefer to follow the advice he quoted of the Prime Minister, that the most equitable and just way of having a comprehensive Health Service paid for would be out of Exchequer funds. Nevertheless, that is idealism which we cannot put into operation at this stage and therefore we have a number of other means by which we supplement taxation. I hope that one day we will be able to get to that particular state of affairs.

The noble Lord commented on the progress of the Health Service in the four years from 1961. I remind him that he was also serving on hospital committees in those years when his right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) introduced a 2 per cent. ceiling on administration charges in the hospitals. We never had it so bad as in hospital services administration from 1961 to 1965.

The noble Lord then chided us that we had increased income tax by 6d. but, in my view, that was one of the most courageous acts by any Government. Having arrived in office in 1964 with a majority of less than five when every newspaper in the country forecast a General Election within six weeks, with the Labour Party having promised to put up pensions which would cost the Exchequer some £300 million, the only way we could keep faith with the aged pensioners was to put 6d. on income tax. It took a good deal of courage to take that action at that time. I still think the Government were right to do so.

The most important part of the noble Lord's speech seemed to foreshadow the B.M.A's proposals for financing the Health Service. I wonder whether it was a curtain-raiser, since the B.M.A. is having a fanfare of trumpets tomorrow at a Press conference to tell us how best we can finance the service. I wondered whether the noble Lord had some kind of preview and was giving the House a hint of what was to happen. I shall read with even greater care the Press release tomorrow and compare it with the noble Lord's comments in HANSARD.

I have no doubt the B.M.A. will be in favour of one of the noble Lord's ideas, namely an extension of some contribution scheme. Last year the total amount of National Health Service contributions through insurance schemes was only 2 per cent. of the total. The total amount of premiums paid last year was £14 million and the total amount dispersed £12 million. Yet in the N.H.S. we are now working on a Budget of £1,700 million.

The Bill is right because the employers are getting a tremendous bargain from the National Health Service. The figures published recently show that 301 million days were lost in a year—in other words, an average of 15 days per year per injured person. I am grateful to the Office of Health Economics for some of the statistics it has produced. The statistics show that on bronchitis alone the cost in benefits paid by the Government amounts to £30·4 million to the insurance funds. The value of days lost to production in the period under review was £1,200 million. Any kind of health service which is able to keep people at work is to the direct benefit of employers.

I have said before and I say again that an occupational health scheme and the amount of money spent on health comprise one of the finest investments this country can make in terms of productivity. At the same time, one looks at the total days of incapacity and sees that respiratory diseases accounted for 22 per cent. of the 301 million days lost. In the whole of that sum the amount called for by this Bill, some £53 million, is small in relation to the tremendous amount spent by employers on personnel departments, on industrial relations and on various negotiations which go to the maintenance of the working force.

Photo of Mr John Vaughan-Morgan Mr John Vaughan-Morgan , Reigate

Could the hon. Gentleman explain why the Government do not transfer the responsibility for occupational health to the Department of Social Services?

Photo of Mr Laurie Pavitt Mr Laurie Pavitt , Willesden West

The right hon. Gentleman who is knowledgeable on these matters has anticipated the point I was about to reach. It is true that in the Green Paper, for the first time, the Government have looked at the problem and are to maintain the industrial health sector within the Department of Employment and Productivity. The whole matter is most important and the right hon. Gentleman is right to draw attention to it, and I would urge that there should be a Royal Commission on Occupational Health conducting a thorough examination of the problem. One must remember that that Department was first of all under the Home Office in 1920 and was then transferred to the Ministry of Labour. We now have a comprehensive Health Service and it is time we looked to bringing in the Occupational Health Service within the Department of Health and Social Security. It might be appropriate if a thorough examination was made of where occupational and industrial health matters should come in. This would be to the benefit of employees and employers affected by the Bill.

I am not opposed to the switch from taxation to contributions provided that contribution is graduated. I do not like a block sum of Is. 8d. Employers will now be paying that much per person. If there is to be a switch—and this is a trend in Treasury thinking away from direct to indirect taxation—I hope that this kind of National Health Service contribution will not be used as one of the means of reducing direct taxation. The Treasury is responsible for 85 per cent. of the service and this would have to be transferred to a contributory system.

Although I accept that there might well be a change of thinking to graduated contributions for the National Health Service in place of the principle of direct taxation, it would be folly if this were not preceded by a massive, tell-the-people campaign. I hope that this would be done not only at the time of any shift in contribution but as part of a more permanent and constant exercise in public relations, so that people know what they are paying for. When we pay our rates to local authorities, we have on the rates bill a complete breakdown of what we are paying for. The trouble with Health Service contributions is that the impression is that the public give money to the Government when in fact the Government are merely distributing the public's own money. We have not a free Health Service. We pay for it. If there is to be any increase in the contributions paid in the weekly stamp, then it is vital that there should be greatly improved communication to show why it is necessary. At present the fact is not known that we are paying for the greatest bargain in Europe.

The Minister should use the medium of television to get information across to the people. I know one case involving a member of a family in the United States, where, within 12 hours of being born, a baby had to have three and a half months of hospitalisation at a cost of £5,000. A similar young married couple in this country do not realise just how great a service is provided to them by the National Health Service. The great benefits of this bargain should be put over by the Government much more clearly. We pay less for our family in health matters over 12 months than we pay on two items on our car, namely our tax and our insurance. It is time people realised the bargain they get.

I regret that mention has not been made either by my hon. Friend in opening or by other hon. Members that the money which is now being raised could be used to relieve the tax on the chronic sick and others in regard to prescription charges. I regret that there has not been a clear statement on this matter. In my view, this was the greatest mistake that my Government ever made, although I recognise that at that time they were under great economic pressure. But the fact remains that last year the chronic sick paid a total of £270,000. This was in prepayment certificates, 30s. for six months or 55s. for a year. It is such a small amount and represents only 0·15 per cent. of the total pharmaceutical bill and it is a disgrace that people coping with angina from coronary thrombosis have this additional burden. Therefore to carry on with this niggling and ridiculous little tax is unjustified. Surely this £53 million could relieve the chronic sick of this burden.

My hon. Friend the Member for Halifax (Dr. Summerskill) talked about £25 million being needed out of the £53 million if we are again to abolish prescription charges. Financially this is not so. The figures given by my hon. Friend were £16½. million in one year. I estimate that in real terms it would cost no more than £5 million to £7 million to abolish prescription charges. The scheme was clumsy in operation. It was medically and clinically wrong; it was grossly unjust. It was economic nonsense. If international bankers see prescription charges as an earnest of our careful financial acumen, they are even dafter than I thought.

The machines that we put into hospitals to take the stamps cost £210 each. In an acute hospital of more than 200 beds a clerk was usually put in to collect it. The House will recall that in the Inner London Executive Council last year we employed nine clerks at a cost of £8,400 and at the end of the period they were able to get back a total of £46. By all economic terms this is nonsense. This is apart from the on-cost we have given for dispensers. The result is that the total drugs bill, instead of going down as was anticipated, went up. In 1967–68 we spent £172·1 million on pharmaceutical services. In 1969–70 it had gone up by £9 million to £181·1 million. The estimate for next year is 189·7 million. So the idea that this would save money has been shown again, not for the first time in history, to be a nonsense.

The Bill is a contribution to increasing need. I accept the point made by the hon. Member for Hertford that to spend next year 5·3 per cent. on the gross national product is inadequate. We need to get that nearer to 6 per cent. But we cannot argue for increased pay to nurses, increased facilities in hospitals, more home care, more domiciliary services, more home helps, more incontinence pads for old people, extension of the mental health service, the complete reorganisation of hospitals for the mentally handicapped, many of which should have been pulled down 25 years ago, and the whole question of health services to the community if we do not provide the means to carry them out. I believe that the Bill will make only a small contribution towards this increasing expenditure, but nevertheless it will be a worth-while effort.

This is part of the general pattern. Unfortunately, the newspapers govern a good deal of our thoughts today and we are all election-conscious. In the headlines and in debates from now on, especially Question Time on Tuesdays and Thursdays, we see all kinds of little skirmishes before the General Election is founded. Following the tradition of this week, in my view the greatest achievement of the Labour Party was the inception of the Health Service and the fact that now both parties accept most of its provisions. I am not too worried about what will happen if, by some mischance. right hon. and hon. Members opposite are elected to office, because the hon. Member for Hertford from time to time has indicated a good deal of the thinking, which is fairly bipartisan across these benches. about what we want to do to improve it. I submit that in this pre-election run-up one of the greatest boosts to restore the faith of our supporters would be to get back to the principles of the National Health Service so well enunciated in the recent Green Paper, and the sooner the better.

5.25 p.m.

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

I thoroughly enjoyed the speech of the hon. Member for Willesden, West (Mr. Pavitt). I particularly enjoyed his assertion that it was an act of great courage on the part of the Government when they increased the standard rate of income tax in 1964 shortly after being returned to power. Most people would agree that if that is the way that a Labour Government behave when they are being courageous, we vastly prefer them to remain cowardly.

Another point made by the hon. Gentleman, on which I should like to make one comment, related to his well known views about prescription charges. I have little doubt that before the election campaign begins it will be announced that prescription charges are being abolished. I also have little doubt that, if the Labour Party are returned to power, shortly after the election it will be announced that prescription charges are being restored. That is what happened before. Therefore, the public are entitled to fear that it will happen again.

I revert again to the act of this Government, described by the hon. Gentleman as a rare act of courage—namely, the increase in income tax in 1964. Some of us are not so foolish as to have forgotten that in the weeks immediately prior to the 1964 election, with full knowledge of the state of the country at that time, the Prime Minister said on television that if the Labour Party was returned to power he would not increase taxation.

Photo of Mr Laurie Pavitt Mr Laurie Pavitt , Willesden West

Will the hon. Gentleman explain that that was in order to give £300 million to the old age pensioners, which we promised and gave?

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

I am sure that the hon. Gentleman hopes to belong to a party which is honest in its dealing with the electorate. If, prior to the 1964 election, the Prime Minister intended to increase the old age pension he must have known that it would mean an increase in taxation. If so, he had no right to go on television and make the kind of pledge that he did. It is scarcely surprising, in those circumstances, that people have little respect for his integrity.

I have not taken part in many debates on the Health Service. I do not pretend to be an expert on the matter, but I hope that it is sometimes useful for the non-expert to give his views, because he may possibly more nearly reflect the views of the ordinary citizen.

My view of this proposal is that, if looked at in isolation, it can be justified. But it should not be looked at in isolation. It should be looked at in the context of all the various imposts which have been placed on industry since this Administration first came to power five years ago.

The Government seem to imagine that the public are so naïve as to believe that when taxes on industry are increased the public do not pay. I do not believe that the average citizen is really so naïve. The Government seem to imagine that every time there is an increase in taxation on industry the average citizen will say, " Whoopee! Another sock in the teeth for the wicked employers." But again I do not believe that the average citizen is so naïve and stupid. He is now sufficiently well educated to know that when taxes on industry are increased prices go up and that in the long term, if not in the short term, our competitive position in world markets is weakened.

It is worth pausing for a moment to look at the increases in taxation on industry which have occurred since 1964. We start, first, with the change to the system of corporation tax. Taking the rate of corporation tax today and comparing it with the old system of taxation on industry consisting of income tax then at the standard rate of 7s. 9d., plus profits tax at 12½ or 15 per cent., nobody in this House will deny that there alone there has been a vast increase in the burden placed by the State on industry.

Secondly, there is the increase in the redundancy contributions which now have to be made by industry and the increase in national insurance contributions.

The Minister scoffed when my noble Friend the Member for Hertford (Lord Balniel) referred to S.E.T. We must not forget that S.E.T. is still an enforced interest-free loan by industry to the Government and in industry other than manufacturing, it is yet another tax. On top of that is the vast increase in the cost of borrowing with which industry must deal as the result of Labour Government policies. On 15th April this year, the Financial Secretary said: My right hon. Friend said that it was anomalous that the employee's National Health Service contribution was 3s. 2d. a week whilst that of the employer was only 8d. per week." — [OFFICIAL REPORT, 15th April, 1970; Vol. 799, c. 1518.] Of course, there is nothing anomalous about it. There is no reason in logic why contributions should be equal between employer and employee or why the contribution of the employer should be in a ratio of two-to-one or three-to-one to that of the employee. There is only one real criterion—what taxation can industry stand without that increase being immediately passed on to the consumer and without it immediately affecting the competitive position of industry?

When I consider this increase not in isolation but in the context of all the other increased costs which industry has had to bear in recent months and the last few years, I fear that we have reached the stage when, every time a tax like this is increased, the public suffers in the long run in increased prices and by the weakening of our competitive position.

It has already been said that this is an increase in taxation. I will not go over the ground already covered or point out that this increase was not dealt in the Budget statement, but it should toe put on record that the Chancellor did not hand back to the public £200 million this year: as a result of this little Bill, he has handed back to the public £150 million. The public will remember that, in a Budget before an election, the Chancellor handed back £150 million, while the Labour Government, since they came to power, have increased taxes by no less than £3,300 million.

Photo of Mr Bob Mitchell Mr Bob Mitchell , Southampton, Test

Would the hon. Gentleman describe the Budget as an electioneering Budget, then?

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

I did use that phrase: if the hon. Gentleman wants to use it, he may. I would describe it as a mouse of a Budget, which is hardly likely to raise a cheer from the hard-pressed taxpayer, who may have become punch-drunk as a result of the activities of Ministers, but is not so foolish as to forget this rise in taxes of £3,300 million.

I was driven nearly to despair by one comment of the Minister which exemplifies the attitude of hon. Members opposite. He said, in effect, " If S.E.T. is abolished, we will have to find £600 million somewhere else." One throws up one's hands in horror. The public are sick and tired of the massive increase in Government expenditure, the increase in civil servants and bureaucracy and the rest of it. I read only today in the papers that the change from investment allowances to investment grants alone has meant the recruitment of well over 1,100 civil servants. Goodness knows how many people are employed in a quasi-Governmental capacity to run this scheme. It is nonsense for Ministers to say that there is no scope for reduction in Government expenditure.

Photo of Mr David Ennals Mr David Ennals , Dover

Would the hon. Gentleman explain why his party is working so hard on the value added tax, if not to find some other means to raise revenue so as to fulfill their irresponsible claim to abolish S.E.T.? In the course of that study, how many extra civil servants does the hon. Gentleman think that they would require?

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

We have always said that we believe in shifting the emphasis from direct to indirect taxation. The Chancellor has sometimes expressed similar views, but we also believe that the overall burden of taxation must be reduced. It has never been part of Tory Party policy to work on the same massive Budget merely by changing the form of taxation.

Photo of Mr David Ennals Mr David Ennals , Dover

Here we have from the very back benches a pre-election commitment that there will be drastic cuts in taxation—come what may to the Health Service, come what may to the other social services which are required. It is very interesting to have this on record.

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

The Minister knows that that is a grossly unfair intervention. I quoted one example where I thought expenditure should be cut. I could quote many more. But it is no part of Tory policy to cut essential expenditure on the Health Service, as has been made perfectly plain by my noble Friend the Member for Hertford (Lord Balniel), with whose speech I entirely agree.

Photo of Mr Jim Sillars Mr Jim Sillars , South Ayrshire

Would the hon. Gentleman define for us essential and inessential expenditure on the Health Service, so that people can know clearly which aspects will be cut and which will not?

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

I am not saying that any aspects will be cut. I made it plain to the Minister that I entirely agree with my noble Friend. I do not agree with hon. Members opposite, because I do not accept that there is no room for economies in Government expenditure, and I do not adopt this flabby approach that, if one form of taxation, like S.E.T., is abolished, exactly the same amount of money must be raised by another form.

There is scope for economies in Government expenditure. I do not want to detain the House, but I could give many examples. I gave one from industry and I could give others in development area policy and in investment grants. There is a great deal of waste in the present incentives to industry, but I should be out of order—let alone hon. Members if they encouraged me—to make a speech about the scope for reductions.

I merely wanted to point out that it drives the average taxpayer to despair when Ministers give the impression that this problem simply cannot be tackled, when they simply sit down and say, " Nothing can be done about it; there is no scope at all for getting rid of waste or reducing bureaucracy. We have lost the battle before we start ". We do not believe that. In the Tory Party, we believe that something can be done to tackle this problem, which is acknowledged to be very real by the vast majority of people.

I have made the points. This increase has to be considered in the context of all the other burdens placed on industry. If it were looked at in isolation, it might be thought to be a small thing, but when one remembers the increases in national insurance contributions, corporation tax, redundancy payments levy and all the rest, I fear—in fact, I know —that the increased cost due to this increased taxation will very soon be passed on once again to the consumer, who has had more than enough to bear with in recent months, let alone the last few years, as a result of the various price increases in the shops.

5.40 p.m.

Photo of Mr Jim Sillars Mr Jim Sillars , South Ayrshire

One does not know whether we are taking part in an extension of the debate on the Budget or a debate on this Bill. The hon. Member for Nelson and Colne (Mr. Waddington) castigated the Prime Minister for a television broadcast he made in 1964 on the ground that in his view the Prime Minister was well aware of the economic state of the country in October, 1964. I remind the hon. Member of the election address of the right hon. Member for Enfield, West (Mr. Iain Macleod) in the 1964 General Election, which said that we should Study the true position of our country and contrast it with the gloomy grumbles of our Socialist opponents. These are the facts. I ask the hon. Member if at the time when, the hon. Member says, our Prime Minister misled the country, the Tories, in the midst of their election campaign, stated clearly that we were within a week or ten days of the £800 million deficit on balance of payments.

Photo of Mr David Waddington Mr David Waddington , Nelson and Colne

Does the hon. Member not know that in September, 1964, the Prime Minister appeared at the Trades Union Congress and forecast a deficit of those proportions? Will he answer this question? Even if there were some excuse in 1964 for the Prime Minister promising not to increase taxation, how does the hon. Member justify the Prime Minister's support of a statement of one of his Cabinet Ministers, who in the 1966 General Election—by which time the Prime Minister certainly ought to have known the state of the country—made a statement that there would be no general increase in taxation?

Photo of Mr Jim Sillars Mr Jim Sillars , South Ayrshire

I think the answer is perfectly clear. There has been a constant problem over the years of getting a balance between the need for growth and a balance of payments surplus. This has been a constant problem before every Government since 1945. One of the reasons why we are now about to shoot ahead in opinion polls is that we have mastered the basic economic problem. [Laughter.] It is touching to hear hon. Members opposite laugh at this stage. They were not laughing this afternoon at 3·15, but they had a remarkable opportunity to do so when their Leader came into the House.

Perhaps now we can get back to debate on the Bill. The Opposition spokesman, the noble Lord the Member for Hertford (Lord Balniel), gave a long-winded, gloomy detail of the amount of money paid in contributions, but he could not give a balanced objective picture of the benefits given to the people through an increase in contributions. As a member of a Socialist Party, I have no hesitation in going on to any public platform and defending increases in National Health Service contributions when I can point to the benefits involved for the working people whom we represent.

I listened very carefully to hon. Members opposite speaking on behalf of industry. They painted a picture of British industry with its backside hanging out from its trousers, of Rolls-Royces with flat tyres being discarded for minis. To some extent I regret that the Labour Government at the moment are pouring aid into British industry at the rate of £3 million a day. If hon. Members opposite accept the logic of their argument that raising National Health Service contributions is taxation of industry, they must accept as a corollary that the granting of aid at £3 million a day amounts to a tax rebate. British industry is doing all right out of the deal.

The noble Lord said that in his view there were other ways in which the necessary contributions for expansion of the National Health Service could be raised, and he mentioned private insurance. I ask hon. Members opposite in which country anywhere in the world there is a scheme operated on the basis of private insurance in which the citizen is given the same degree of comprehensive cover as he gets from the Health Service and for problems relating thereto in this country. It happens nowhere else.

In National Health Service hospitals in Britain it can cost £100 a week to treat an ordinary patient. No working-class family in this country could face a bill for even half that amount. The proposition put forward by the noble Lord was appalling and abhorrent. I should be very pleased if the Conservatives put forward that proposition at the coming General Election, because it would put the last nail in their electoral coffin.

The Government are to be congratulated on the expansion of the National Health Service since we came to power. We on this side all recognise, even though we have had differences about how we should deal with the economic situation, that there have been difficulties in the last five years. We are cognisant of the fact that, despite those difficulties, there has been a massive expansion in hospital provision and in health centres, which is one of the finest concepts ever brought forward in community health care. The Government deserve congratulation on that.

In expenditure on the National Health Service we have given very fair treatment to those who render the greatest humanitarian service—the nurses. The people of the country will not have missed the implication in the Shadow Chancellor's contribution to the Budget debate that the Government should be very restrictive in their treatment of public servants' wage increases. Nurses are concerned there.

I have congratulated the Government, but there is another side to this problem. I make no apology for following what was said by my hon. Friend the Member for Willesden, West (Mr. Pavitt) about prescription charges. I hope that they will go, but I am not so certain that they will. The Minister said that they make a contribution to control of public expenditure. That is a fair point, as one has to concede, but we should look for alternatives to prescription charges for making a contribution to control of public expenditure. The Minister should look in another direction and consider drugs. The drug industry unnecessarily milks the National Health Service of a great deal of money. The Government are more likely to find the money which they require in terms of containing public expenditure in that direction than from prescription charges.

I also refer them, and again make no apology for doing so, to the need at this time to hearken to the voice of the whole Labour movement on something which is extremely important to us, not only socially but politically. Prescription charges have long been recognised as one of the basic battlegrounds between us with our Socialist philosophy and hon. Members opposite with their Conservative philosophy. One of my greatest regrets is that this Government have not abolished prescription charges. Their imposition demolished a barrier we erected to preserve a free service.

One could respect the Government's argument when they said that because of economic difficulties the charges were necessary. One can respect the argument without necessarily agreeing with it. But now, in a period of basic growth of 31 per cent. in the economy, there is no excuse whatever for retention of the charges. I urge the Government to recall that the Labour Party annual conference was unanimous in wanting these charges removed. I urge the Government to abolish them as soon as possible.

5.47 p.m.

Photo of Mr William Worsley Mr William Worsley , Chelsea

When he opened the debate, the Minister of State said that he could not understand why we intend to vote against the Bill. I think that now he knows He will realise from speech after speech made from this side of the House that we object to a Bill which increases costs for industry without compensating adjusment.

The speech of the hon. Member for South Ayrshire (Mr. Sillars), although I admired its conciseness, showed, as many hon. Members opposite have shown, that there is in the Labour Party a strong feeling that if we want to raise more money we should do it by imposts on industry. The hon. Member's remarks about Rolls-Royces with flat tyres was typical of that attitude. If we put this additional charge on industry it will come out in higher prices That is the fundamental truth of everything that has happened in recent years with prices, and it is why the coming election will be about prices.

I want to confine my remarks to the financing of the Health Service. The Labour Government always remind me of the nursery story of Little Johnny Head-in-Air. They are always full of marvellous plans about the financial burdens they will lay on the next Government and the commitments they will impose on our grandchildren to pay to us in our old age. In their short-term financing of the insurance scheme and the Health Service they totter from one expedient to another. A series of Bills on the insurance scheme has been produced at the shortest of notice.

Photo of Mr David Ennals Mr David Ennals , Dover

The hon. Gentleman seems to ignore the fact that under the Labour Government there has been a vast increase in expenditure on the Health Service, there has been a vast improvement in the service, and there has been a tremendous increase in the hospital building programme. The speeches made by hon. Gentlemen opposite are about everything except what we are trying to do to improve the service. Will he give some little attention to that?

Photo of Mr William Worsley Mr William Worsley , Chelsea

If the Minister of State had been listening more carefully, he would have heard me mention the financing of the Health Service and of the National Insurance scheme. I said that, far from there being any long-term or carefully thought out plan, the Labour Government have tottered from expedient to expedient. They have put additions —small or great—on to the stamp, without any premeditated thought. They have great pipedreams for the future.

But in their day-to-day administration of the financing of National Insurance and of the Health Service they have tottered from expedient to expedient. The Bill is yet another expedient.

What is the Government's long-term thinking about the financing of the Health Service? The Government apparently intend that when a scheme of National Insurance based on a graduated contribution is begun a similar proportion of Health Service expenditure will be borne on a graduated basis. What is the rationale for this? What is the logic of this 10–15 per cent. proportion?

When talking about this great service, it is not sufficient to say " We have had this proportion since the beginning. We will accept that sort of proportion and merely put it on a graduated basis." There must be coherent thinking to enable us to finance the Health Service in a way which will put more resources into it and provide a better service. Britain puts fewer resources into health than other countries. There is nothing to be proud of in this. The system we have chosen for financing the service has proved to be restrictive.

We should all be looking for a system of financing which would encourage Britain to put more into health, similar to that done in other countries. This is not a party point, because it was a Labour Government which started this curious system of financing a proportion of the service by the stamp. We carried it on. Now, about 20 years after the original scheme, this Government propose to carry it on into the future. They have no thinking about any alternative system of financing. Has the present system been such an enormous success that it should be perpetuated for ever?

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

The hon. Gentleman, in making comparisons between our Health Service and health services in other countries, has suggested that the health provision of other countries is better than ours. We on this side would like to know something about such countries.

Photo of Mr William Worsley Mr William Worsley , Chelsea

The great majority of developed countries devote a higher proportion of G.N.P. to health than Britain does. I am not saying that there are no ways in which our health provision is better than that of other countries. There is a better spread in Britain. Nevertheless, in terms of total resources going to health many other countries have a much better record. We should not kid ourselves that this is not so.

One of the extraordinary anomalies as the result of the bizarre system of financing we have chosen is that almost everybody thinks that the stamp pays for the Health Service. People often refer to the stamp as " the National Health stamp ". Informed people say that because they have paid their stamp they are entitled to certain benefits from the Health Service.

Only a small proportion of the service is paid for out of contributions. The great part of expenditure on the service must compete with that for the Army, the Diplomatic Corps and other matters which are paid for out of taxation. The service is borne upon the general tax fund.

One of the disadvantages of the present system is that it is misunderstood by almost everybody. This in itself is an argument against it and one in favour of change.

The present system has another enormous disadvantage, as the hon. Member for Willesden, West (Mr. Pavitt) said; namely, its flat-rate nature. It shares with S.E.T. the appalling disadvantage that it bears most heavily upon the lower-paid and the part-timers; it is a general disincentive to the employment of the very people whose employment a State policy should encourage. Thus there is little to commend about the present policy, and I am sorry that the Government's only idea for the future seems to be blandly to continue into the future but with a graduated contribution system.

Photo of Mr Bob Mitchell Mr Bob Mitchell , Southampton, Test

I agree with much of the hon. Gentleman's interesting argument about financing, but will he tell us what he thinks should be the alternative system?

Photo of Mr William Worsley Mr William Worsley , Chelsea

One should never give way: it nearly always wastes time, because in nine cases out of ten the person who intervenes merely anticipates one's next point. I was about to give the House the benefit of my views.

The objective of financing the Health Service should be that it should have a buoyant and separate source of finance. Therefore, as part of a general review of taxation —I underline that about three times, because it is the exact opposite of what is happening under this Government —a percentage payroll tax for the Health Service would be the right answer. I stress that this is only my opinion; I am not laying down a party attitude. This would be tolerable if the whole burden on industry and on individuals was considered to see what the general effect would be. Our great criticism of the Government's policy is that they have not looked at the whole pattern: they have just added burdens indiscriminately.

If a payroll tax were used for this purpose—hypothecated, to use the Treasury phrase—people would understand whence the money came and where it went to. This would encourage an increase of Health Service resources in a way which perhaps no other would. Were we to have such a system we could not only arrange payment of the receipts from it to the Department of Health, that monolith across the river, but give the local health boards an independent source of finance. We should carefully consider a system which would give the local health boards an independent source of finance so that the scheme is not State run.

I should like to hear from the Government—I do not expect to hear it in this debate—some long-term thinking about how the Health Service should be financed.

6.1 p.m.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

I wish to take up the point with which the hon. Member for Chelsea (Mr. Worsley) started his speech and the point with which he ended.

The hon. Gentleman said that he wanted to hear some long-term thinking on financing the Health Service. The Health Service has been in existence since 1948. It was introduced by the Labour Government. Unfortunately, the Labour Government lasted for only three more years, until 1951. For 13 years from 1951 the hon. Gentleman's party had a great deal of time to devote to what he calls long-term thinking about the financing of the Health Service. But nothing came from his Government.

The hon. Gentleman spoke about financing national insurance. For 13 years we had very little from his party when it was in power in the way of new means of financing national insurance. We had one measure, the graduated pension, which even the hon. Gentleman's colleagues now agree was a very bad measure. For 13 years we had no long-term thinking from the Conservative Party about how to finance the National Health Service and national insurance.

The hon. Gentleman said that we put less into the Health Service in this country than many other countries do. That is true. The amount per capita spent on health in the United States is much higher than it is in this country. But the service which the vast majority of the people in the United States get is much poorer than anybody gets in this country. I can speak from experience. Like most Scots, I have part of my family living in the United States. For over 30 years my brother worked in a medical group in America. I know something of the trials and tribulations which can hit families in the United States when illness comes into the home.

One of my hon. Friends spoke about the working class. I do not know whether there are such things as working class, middle class and better-off people in the developed world. However, in the United States people who would otherwise class themselves as middle class sometimes find themselves in almost abject poverty if illness hits their homes. I should hate to see the service in the United States come to this country.

People in the United States take out private insurance. They have Blue Cross and other schemes. Those who are lucky are covered by industrial schemes paid for by the employers of America. It has always seemed to me that the employers of this country should bear a bigger share of the cost of the Health Service.

When I was Minister of Pensions and National Insurance, for the first time the contribution taken from the employer was made greater than the contribution taken from the worker.

Photo of Mr Laurie Pavitt Mr Laurie Pavitt , Willesden West

Is my right hon. Friend aware that in America, not only do the employers pay more than here, but recently negotiations resulted in all employers in the motor industry, like the Ford Motor Company and other large motor manufacturers, paying the prescription charges for all of their workers as part of a trades union agreement?

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

It is not unlike the situation which obtained in this country before we had the National Health Service. The man who had paid his insurance was covered for prescriptions and other things, but his wife and other members of his family were not covered. Even in the United States, families are not covered by many of the industrial schemes. I have a deep knowledge of the situation which obtains in the United States, and I would not wish to see it come to pass here.

Photo of Mr William Worsley Mr William Worsley , Chelsea

I do not know why the right hon. Lady seems to think that her remarks follow from my remarks. Is she saying that she does not want a system of financing the Health Service which does not increase the resources going into it?

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

Of course I do. That is why I support the Bill. In my philosophy, the place from which those resources should come is very different from the place from which the Opposition believe they should come.

We had a long diatribe from the noble Lord the Member for Hertford (Lord Balniel) about the increase in contributions. He was referring to the National Insurance contribution, and he added S.E.T. to it, which is the biggest part of the employer's contribution. The noble Lord knows that S.E.T. has nothing whatever to do with the contribution for financing the Health Service or national insurance. It was added when I was Minister because at that time is was the only suitable vehicle for easily collecting S.E.T. It was nothing to do with insurance or with the National Health Service.

I admired the speech of my hon. Friend the Member for South Ayrshire (Mr. Sillars). How right he was! We have not heard a word about the benefits from the Opposition. Earnings-related benefits have been a boon to many people. We have not heard about redundancy payments. If we want social justice, we must be ready to explain to people that these benefits must be paid for.

6.10 p.m.

Photo of Mr Keith Campbell Mr Keith Campbell , Oldham West

In what I promise will be but a brief intervention, I want to make only two points. No one criticises—I certainly do not—the expansion in the National Health Service. No one says that there should not be further expansion. I have in my constituency a hospital 100 years old. I had a look at it a few weeks ago and was appalled by the conditions in which the staff have to work and in which the patients have to be treated. Anything that can be done to bring a new hospital to Oldham will have my support, whatever the cost may be. One understands also that there have been other increased costs, such as the higher pay for nurses, and as one of those who fought hard to get the nurses higher pay, I make no complaint about that.

But, although I understand perfectly what the Minister has said about the causes of the greater cost of the National Health Service, appreciate the fact that we have a growing population which increasingly consists more and more of older people who are more frequently ill, and understand that this accounts to a large extent for the increased costs of the National Health Service, we must not forget that by far the largest cause of the increased cost is galloping inflation—the fact that everything costs more, that wages are higher, that prices generally are so much higher and have gone on rising during the last five years and are rising faster now than ever before. That is the major cause. If we were to break down the figures I think that the Minister would have to agree that the increased cost of the National Health Service is to be attributed in the main to the increased cost of everything—in other words, to inflation. So the Government must not claim that all this increased cost is just due to expansion. I applaud the expansion but they must also agree that, to a very large extent, the rise in cost is due to their mismanagement of the economy.

Photo of Mr David Ennals Mr David Ennals , Dover

The greatest proportionate increase has been in capital expenditure. We inherited a situation in which the building programme over the years when the Conservatives were in office had been very small indeed. We are now spending five times as much on the hospital building programme as was spent ten years ago. It is in this sort of thing that we have had the greatest proportionate increase. The hon. and learned Gentleman is quite wrong in his statement.

Photo of Mr Keith Campbell Mr Keith Campbell , Oldham West

I hear what the hon. Gentleman says, and I listened to his speech, in which the figures he gave related more to current than to capital expenditure. If I am wrong, then I accept that I am wrong.

Secondly, I criticise the Government for repeatedly increasing the flat-rate contribution by the employer. I can agree that it is in the employer's interest to keep his work people in good health and an advantage to him to have a National Health Service which serves that end. But the time will come, if it has not already come, when to go on increasing the flat-rate contribution will hurt the employee far more than the employer. In fact, it does not hurt the employer at all because, as other hon. Members have said, he will pass on the increase to the consumer. It is, in effect, just another form of taxation. But what it does mean—and this is what worries me—is that there is now a heavy penalty upon any employer engaging a new workman. The stamp which an employer puts upon the card of the workman is now 66s. lid. a week, and it will shortly be 67s. lid. Thus, before a man does a stroke of work on a Monday morning he has already cost the employer 66s. l1d.

That may not be too much of a burden with the able-bodied employee who is going to work a full week, but there are other employees who cannot work a full week, who, for health reasons, are unable to do so. But the employer still has to pay. I know that if the man works less than a certain number of hours—21, I believe—there are concessions, but we have to consider the effect of the penalty upon the employer for employing the part-time worker who works less than a full-time week or does less than a full day's work in a day.

The Minister may recall that I wrote to him recently about a constituency case of an employer who has in his employ a mentally backward man. This man is quite unable to do a full week's work or compete with other workmen, but he nevertheless is employed by the firm, which regards it as a bit of " do gooding ".

It is certainly in the man's interest to have his mind occupied with work. But that firm is under the penalty that it has to pay for the privilege, if one can call it that, of employing this subnormal workman by paying this heavy stamp and selective employment tax for him.

Photo of Mr David Ennals Mr David Ennals , Dover

But is it not important that the subnormal workman should be protected by unemployment pay, by sickness benefit and, on retirement, by his pension? Surely the employer has a responsibility, as does the rest of society, for that person almost more than for the able-bodied?

Photo of Mr Keith Campbell Mr Keith Campbell , Oldham West

Of course I agree that the employee must have these benefits, but let us be realistic. Do not let us sit in an ivory tower. Employers are in business to earn their living, not as philanthropists. They are not going to employ many people of this kind when other able-bodied men are available, and it would not be honest to their shareholders for them to do so. The employers who employ a certain number of such people do so, one may say, because of their public-spirited attitude, which one applauds, but there is a limit to it, and if the Government go on increasing the flat-rate contribution which they have to make for every employee, the time will come, if it has not already come, when they will no longer by ready to employ people of this kind.

Mr. Eunals:

It is precisely for this reason that we are getting rid of the flat-rate contribution. The hon. and learned Gentleman should bring himself up to date. The National Superannuation and Social Insurance Bill, now in Committee upstairs, will end the flat-rate contribution, and so the low-paid employee as well as the employer will pay less in stamps than at present. But it has taken a Labour Government to do it.

Photo of Lord  Balniel Lord Balniel , Hertford

My hon. and learned Friend the Member for Oldham, West (Mr. Bruce Campbell) represents a town which probably more than any other has furthered the interests of the mentally handicapped, and I am bound to tell the Minister that on a recent visit of mine there, when I saw the work done for the mentally handicapped, the officer in charge of one of the units told me of the problem of getting employment for the mentally handicapped outside the home but inside the community, which arises because of selective employment tax. The point which my hon. and learned Friend is making is worth serious consideration, and I am sure that the Minister will consider it.

Photo of Mr Keith Campbell Mr Keith Campbell , Oldham West

I am obliged to my hon. Friend the Member for Hertford (Lord Balniel) for assisting me. I confirm that in my constituency this problem is frequently brought to me. It may well be that in 1972 the problem will disappear, but we are still in 1970 with the Government making yet another increase in the flat-rate contribution, and I suggest that that is a mistake.

6.22 p.m.

Photo of Sir Brandon Rhys Williams Sir Brandon Rhys Williams , Kensington South

I rather regret that in the course of the debate a somewhat partisan note has crept in because there is so much in common between us. It would have been far more agreeable if we could have used the time to work together towards finding a solution to the long-term problems of financing the National Health Service. One is always delighted to hear the right hon. Lady the Member for Lanarkshire, North (Miss Herbison), but today I felt a certain disappointment in her remarks because it seemed to me that here was a case of the pot calling the kettle black. We did not hear from her what I hoped to hear—her solutions to the problems of financing the National Health Service in the long run. She rather dwelt on the failure of the Conservative Party to come forward with a solution when we were in power.

The Bill is raising money for the National Health Service, and all of us are preoccupied with the problem. If we on this side object to the Bill it is not because we object to the money being raised but because we feel that it is not just money that is needed but a philosophy, and there is no philosophy with the Bill. The Secretary of State has slipped his additional charge through the letter box of the employers rather like someone in despair getting rid of chewing gum in some unsuitable place. It would have been more seemly had we had some sketch of the five-year or ten-year programme of revenue and expenditure of the National Health Service as the Government see it. We agree that there are only certain sources that one can turn to for financing the National Health Service and I want to run quickly through them.

The first consideration is the patient. It is accepted on both sides that the patient cannot pay the whole cost of the N.H.S. There has been considerable controversy over whether he should pay anything. Personally, I feel a great deal of sympathy with hon. Members opposite who do not like the idea of charges being brought into the N.H.S. Nevertheless, whilst one accepts that the amount of money that can be derived from charges is never more than a fraction of the whole cost of the N.H.S., it seems to me that charges have a place if only as an administrative device for the prevention of waste.

When one moves on from the patient's contribution to costs, one immediately comes into some kind of money transfer system. In the twentieth century we have elaborated the insurance principle whereby assets or entitlements are transferred from the successful and the fortunate to the unsuccessful and the unfortunate as of right. I feel that national insurance is part of a civilised community's way of life. But the national insurance system as we think of it is concerned mainly with employment. The money is derived from work people, and the expenditure through the national insurance system mainly goes out again to people who have been engaged in employment in one way or another. The National Health Service, however, has to cover the entire population.

The employer particularly has been picked upon as a potential source of finance for the N.H.S., and I am not one of those who would wish to contest that idea in the long run but only in the short run. One can quote from the remarks of the Secretary of State himself in his Herbert Morrison Memorial Lecture in the middle of last year. The right hon. Gentleman said: it can be argued that the employers have much to gain from a service which promotes the health of their workers and it is therefore not unreasonable while financing the present level of the Health Service out of taxation, to finance the necessary future increase out of a levy on industry. Having said this, however, I must repeat my warning that if you step up the employers' Health Service contribution too drastically, or too suddenly, they might turn it into a levy on the housewife. Inevitably, when employers are staggering under the burdens which this Government have placed on them, this further burden must be passed on somewhere. The bill will end up in the housewife's basket. This is a highly unfortunate development when the cost of living is rising so fast in any event.

Whether the Health Service should be paid for wholly or largely out of taxation is possibly the principal consideration for the House. Unfortunately, the antiquated structure of direct taxation has brought us to the point where taxpayers revolt at the thought of any increase in their burdens. It is not because direct taxation is particularly high overall—it is higher in other countries—but because the way that we levy it is so unfortunate and out of date that the burden is felt acutely: the marginal rates are so high, whereas the initial rates are low or nonexistent.

I have argued before—this is not the time to repeat it—that we need to reconstruct our direct taxation system altogether so as to fit the burdens much more suitably to the taxpayer's ability to pay. Then it would be possible to derive more income from direct taxation without the disincentive effects which one feels. This would enable one to provide more money from direct taxation for the Health Service.

If one is listing alternative sources of finance, one must consider private insurance. I know that hon. Members opposite are hung up on this question, which they regard as anathema. The Secretary of State has delivered himself of the sentiment that private insurance is simply a system for enabling people to jump queues. He is also hamstrung by the fact that he has not resolved his attitude towards flat-rate contributions and earnings-related contributions.

In Committee we have had opportunities to go over the philosophy of the earnings-related and flat-rate insurance contribution. I feel strongly that the Secretary of State has wrongly adopted the principle that earnings-related contributions require to be matched by earnings-related benefits. As soon as one applies the concept that an earnings-related contribution to the Health Ser- vice means earnings-related benefits, one comes to an impossible point, because some people do not require benefits at all because they happen to be fortunate enough to go through life without serious illness. If they should fall ill, it is impossible to consider that they should have a totally different standard of service just because their contributions have been larger in absolute amount because the earnings-related contributions from them have added up to a larger figure.

It is sad that the party opposite should have lost touch with the great idea that we should pay for the social services on the principle "from each according to his contributions, to each according to his needs. "If they could only recover their balance and come back to that point of view, they would not find it difficult to link an earnings-related contribution to the financing of the Health Service, as is done in New Zealand, to which the Secretary of State alluded in his memorial lecture, where everyone has the same sort of treatment but pays towards the Health Service according to his capacity. While the Secretary of State is agonising with this problem, which he should never have run into, he must stick to flat-rate contributions, because a contribution arising from employment has either to confer super-benefits or to be limited in amount

The Minister of State tried to enlighten the House when we discussed this briefly last week on the difference between a contribution and a levy. This bit of verbal dexterity was an attempt to get round the problem of the earnings-related contribution one does not call it "earnings-related" because of the undesirable consequences. so one calls it a levy. Nevertheless, when all is said and done, under the National Superannuation and Social Insurance Bill Health Service contributions are to be paid for by a percentage contribution: employees are to pay 0·3 per cent. and employers 0·6 per cent. The employer's contribution will be exactly double that of the employee.

This is a complete reversal of the present situation, in which, even with the increase which the Government intend to impose on employers, they would pay only ls. 8d. against the employee's 3s. 2d. While I have been listening to the speeches I have made an approximation of what apparently will be the burden under the superannuation Bill. Employees, it seems to me, will have to pay from 9d. to 2s. according to their resources, against the present 3s. 2d., and the employers will have to pay Is. 6d. to 4s. against the Is. 8d. So the Bill might be said to be a move in the direction of the new system, whereby employers will pay twice as much as the employees—a complete reversal of the present situation.

The whole approach to the costing and finance of the Health Service is utterly unbusinesslike and haphazard. If only we could have much more accurate casting and get down to much greater detail than has ever been published, we should be able to consider this, and the right and proper method of finding the money would suggest itself. This is a commonplace technique in industry and it should be adopted in the Health Serice.

For instance, I should like to be able to see how the expenditure is split between the young and the old and between occupational health—to borrow a phrase from the hon. Member for Willesden, West (Mr. Pavitt), who made an interesting speech—and personal health. When we have been able to look at these figures closely, it will be much clearer to us where the money should be coming from to pay for the service.

I have often alluded to the fact that, in paying for the Health Service or all the social services, we must decide who is paying what to whom and why. [HON. MEMBERS: "Hear, hear."] I am glad that that point has now got home to hon. Members opposite. When right hon. and hon. Gentlemen opposite have mulled it over a little longer, no doubt they will come forward with their solutions. That will be very welcome.

I do not think that we shall find the final answers to the problem of financing the National Health Service until we embark on a total reconstruction of national insurance and income tax. Possibly the most constructive suggestion which one could make today is that the Government should either set up a Royal Commission to consider the entire dynamics of the welfare services or appoint a Select Committee to examine direct taxation and the social services as a single subject.

6.34 p.m.

Photo of Mr Maurice Macmillan Mr Maurice Macmillan , Farnham

What we are discussing tonight is an instalment of the Budget. It is an indication tonight of the attitude which we are now to face from the benches opposite throughout the remainder of their administration. We shall get our Budgets in instalments…The purpose of this new method of conducting our budgetary debates will be to prevent the people from understanding the new principles of taxation which are now coming into effect."—[OFFICIAL REPORT, 15th February, 1961; Vol. 634. c. 1545.] These are not my words. They were the words which the right hon. Lady the First Secretary spoke on Second Reading of the Bill, in very similar terms to this one, which we brought in in 1961.

There were certain other differences between the words coming from the Labour benches on that occasion and on this. The right hon. Lady went on to demand that there should be more direct taxation as an alternative to raising contributions. The present Secretary of State for Wales went so far as to prefer the rates as a method of providing the finance which we were seeking to raise from contributions. The right hon. Member for Greenwich (Mr. Marsh) regarded a Measure such as this as being entirely to redistribute the cost of the National Health Service and thought it a disgraceful shift to indirect taxation.

I am glad to see that opinion in the party opposite is changing a little since those days. The hon. Lady the Member for Halifax (Dr. Summerskill) thought that even the employee's contribution was preferable to any further increase in direct taxation, although her hon. Friends would extend their preference to the employer's side of the contribution only. The right hon. Member for Sowerby (Mr. Houghton), too, was one of those who expressed the view that this was an increase in indirect taxation.

There they were in 1961 demanding more direct taxation. When they asked for it, my God, they certainly got it. They may have had a moment's anxiety over the Prime Minister's pledge that Labour policies would never require in the life of a Parliament an increase in direct taxation, but they need not have worried—they got their increase, in indirect and in direct taxation, and now they have this increase, which is another increase in taxation on top of it all.

As the right hon. Lady the Member for Lanarkshire, North (Miss Herbison) reminded us on a much earlier occasion, on Second Reading of the equivalent Bill in 1957, It would have been much better if the Financial Secretary to the Treasury or the Chancellor himself introduced this Bill, because this is purely and simply a financial Measure."—[OFFICIAL REPORT, 8th May, 1957; Vol. 569, c. 998.] She went on to complain in no uncertain terms of the impropriety of raising health contributions outside the spectrum of a wider social insurance provision.

No one can say that we did not do our best to please the right hon. Lady. On the next occasion that the Health Service contribution went up, in 1958, we brought it in as part of a wider raising of insurance contributions and a change in insurance generally. We tried to please her in that respect, and, in 1961, although this was a precisely similar Measure to the present Bill, raising the National Health Service contribution and nothing else, the Measure was introduced by my right hon. Friend the then Financial Secretary and the debate was replied to by my right hon. Friend the then Chancellor of the Exchequer.

The purpose of the Bill is to put up the National Health Service contribution. Why has not the Chancellor dealt with it? To all intents and purposes, it is just a method of raising tax. There is little doubt about that. Even the speeches of hon. Members opposite have made that clear. It can be justified in all sorts of ways, but that is its true nature. I much admired the Minister of State for his presentation of the case. He used arguments very similar to those which my right hon. Friend used, he produced similar figures, he concentrated on improvements rather than on the question of cost in much the same way. He showed—we all know it—that costs are rising, demand is unlimited, and resources are scarce.

At one point the hon. Gentleman brought a new element into the thinking of the party opposite, acknowledging that there always will come a time, as there always has come a time, when it is necessary to increase the flat-rate contribution. But he did not indicate--it was certainly not clear to me—why he thought that it was necessary now, and why the Government have so far changed their basic thinking as to choose and perpetuate this method for Health Service finance.

Much as I respect the Under-Secretary of State, I wish that one of the Treasury Ministers was to wind up tonight. It would be a little harder for the Chancellor to make the claims he did about his Budget and the level of taxation, hut, no doubt, he would have got away with it, and a Treasury Minister could have given the answers to which the House is entitled.

I suppose that it is too much to hope that this Government will ever practise what they used to preach. All that seems to have gone by the board, in wages policy and in so many other things, including Health Service finance. But why abandon the concept of financing the Health Service increasingly out of general taxation, as the hon. Member for Willesden, West (Mr. Pavitt) so eloquently pleaded; why abandon it just at the time when we have a large Budgetsurplus? It cannot be said that this method is necessary, unless the purpose be to divert the burden to the consumer because the surplus is required elsewhere. That is what it does; it is an indirect tax, a tax on the consumer which is concealed because it first goes on to the employer though inevitably thereafter it becomes a part of the costs forming part of our price structure.

I am well aware that the employer still carries a smaller burden in total contribution than does the employee. There have been several increases. as my noble Friend the Member for Hertford (Lord Balniel) and others of my hon. Friends pointed out in detail. In passing, I must say that it cannot be claimed that the selective employment tax is a direct tax. Any tax of that nature must inevitably work its way into the price structure.

The proposals in the Bill are part of a piecemeal turnover of taxation from various other forms to a form of indirect tax which operates initially through the employer. My hon. Friend the Member for Nelson and Colne (Mr. Waddington) put it in proper context with the resit of taxation. There is no plan or principle here.

The Minister of State, the hon. Lady the Member for Halifax, and the hon. Member for Lancaster (Mr. Henig) in an intervention, all referred to the fact that in other developed countries, notably in Europe and the Common Market, the share of social security tax and health tax paid by the employer is higher than it is in this country. But this is part of our main attack at this time. It is higher because it is part of a comprehensive system of social security tax fitted in with a tax pattern different from that which we have here, and fitted in in a way which does not muddle up insurance with tax, as my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) showed in his characteristic contribution. In the different countries, it is the social security tax or contribution to health, however it is classified, which is part of an entirely different pattern of taxing industry, a pattern which, incidentally, frequently includes the much discussed and much criticised tax on added value.

We could have had proposals before us forming part of a coherent planned reorganisation of tax and health and welfare finance, but here there is no such planned reorganisation. The party opposite is, therefore, to be criticised for so far departing from its basic principle for no apparently good reason. Not even the graduated contribution seems to fit in with any coherent pattern. It seems at best to perpetuate the errors of the past with a slightly altered bias, to perpetuate the confusion between tax and insurance, with the firm insistence that a graduated contribution must always produce a graduated benefit, leading to the ludicrous results which my hon. Friend pointed out.

This is no comprehensive plan. It is not even particularly original. These proposals are made without much thought for the increase in marginal rates of taxation and the disincentive effect of certain tax provisions, all of which have been referred to in the debate. One ought to have been able to expect better from this Government.

Hon. Members opposite, as they are entitled to do, ask what we would do instead. What would we do now? We should not have got into this mess. If we had found ourselves in this sort of situation, we should, perhaps, have been able to use the surplus in the Budget. There is no need for the extra money for purposes of financing public spending, and it is both naïve and disingenuous for hon. Members opposite to pretend that in the circumstances of a Budget surplus increases in Government spending or improvements in the standard of facilities provided by public spending can he made only by an increase in taxation. There may he other reasons why a surplus is required, but extra tax is not required for extra Government spending. So the extra tax is required for other purposes.

Perhaps the Prime Minister was right in saying that it would not be the Labour Party's programme which required extra taxation. Perhaps he knew all along that it would be economic mismanagement which required a high level of taxation and a large Budget surplus to afford some means of attempting to control inflation and to deal with the problem of internal debt and, at the same time. the problems of money supply; in fact, the management of the economy, in which this Government have so lamentably failed.

I suppose that it is their failure, after their steadfast defence of their principles in the past, which entails this switch not only through an increase in the employer's contribution but through the use of the contribution at all as an integral and permanent method of financing the Health Service. I suppose that, that is why we shall see the Labour Party voting for an increase in the employer's contribution, when the general level of taxation has been raised more than enough, when charges are still on, and when prices are still rising. I never really thought that I should see that.

Now, a word about prices. In our debate on the Ways and Means Resolution some doubt was expressed about whether these proposals would be inflationary, or to what extent. The Minister of State appeared to say that it was so small a rise that it would be ineffective. The Secretary of State for Social Services does not quite agree with him, because in the debate on the National Insurance Bill, which took place in November, 1957, he made two comments which I think are relevant to this Measure. Of the Health Service rise he said: It will also destroy the actuarial basis of National Insurance. National Insurance used to be a tripartite scheme; it will now be a bipartite scheme, because it is to be paid for mainly by employers and employees. I do not want to take up that point now.

He went on: The employer will be able to pass his contribution on. It is therefore inflationary. With that I agree. He added: …the Government are putting nearly two bob on their contribution. It will be passed on in increased prices."—[OFFICIAL REPORT, 13th November, 1957, Vol. 577, c. 1018-1019.] Indeed, it is only one bob or perhaps five new pence under the new dispensation but it must inevitably, I think, still be passed on.

I think that if one looks back at all the fuss over prescription charges, the arguments and the rows upstairs, the resignations and the failures to resign, the speeches in the House, the votes and the failures to vote, one can really only marvel at the difference between past and present. The 1961 Bill in which we introduced a similar rise in the total National Health Service contribution was fought bitterly. An attempt was made in the early hours of the morning to adjourn for further discussion. There was a Closure at just on 5 a.m. My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) wound up against such a barrage of interruptions that HANSARD for the debate looked like a report of Question Time. The debate on the Bill itself was preceded by a statement by my right hon. Friend the then Minister of Health announcing not only the contributions which were to be proposed in the forthcoming Bill but also some general increases in National Health Service charges. Despite what was said then, hon. Gentlemen who now form the Government have increased both charges and contributions.

In 1961 the contribution went up ls., and in 1970 it is still ls. although the proportions are slightly different. In 1961 we doubled the cost of amenity beds. I remember somewhat bitter arguments about the Labour Party's proposals to increase them. The charge for spectacles in 1961 went up by 5s. compared with a 3s. 6d. increase in 1969. The charge for dentures went up by between 5s. and 15s. in 1961 and by 25s. in 1969. Pre- scription charges were up to the then record of 2s. in 1961, but in 1969 they went up to 2s. 6d. It was that modest increase—since matched by the present Government—that led the then Leader of the Opposition to refer to this combination which we introduced in 1961, and which the Government have since introduced in 1968, 1969 and 1970, as a major assault on the National Health Service ".—[OFFICIAL REPORT, 1st February 1961; Vol. 633, c. 994.] and to give notice of tabling a censure Motion.

The right hon. Member for St. Pancras, North (Mr. K. Robinson) called on the Minister of Health to resign—and I think the hon. Member for Willesden, West was among many who castigated my right hon. Friend for his surrender to the Treasury. The hon. Gentleman has continued to castigate his own Front Bench on suitable occasions with equal consistency, and it must be a little sad for him now to hear the Minister of State finally abandon the idea of a wholly tax-financed Health Service. I see that he accepts, although reluctantly, the concept of a contribution, and perhaps in due course he will come to accept prescription and other charges.

The Government have turned away from their tradition and have turned nothing to nothing. This is just a revamp of the original idea. They have apparently over the years learned nothing and forgotten nothing, except that sometimes the chickens do come home to roost and sometimes it is possible that even this Government cannot escape the fact that they are doing now just what they castigated others for doing in the past. They must bear the responsibility for a change of heart, a change which they have made so far without any explanation why they have abandoned what used to be one of their dearest and most closely-guarded principles.

6.55 p.m.

Photo of Mr Brian O'Malley Mr Brian O'Malley , Rotherham

We have now had two debates to examine the case for this Bill. This afternoon in his opening speech my hon. Friend the Minister of State met the questions which had been raised on the debate on the Ways and Means Resolution and gave the case for the Bill. There have been brief moments during the debate when one thought that the Opposition were coming to the case against the Bill. But they have only been brief moments. It has certainly been a very wide-ranging debate. It has ranged through the£800 million deficit with which we were left in 1964 to the economic success story of the Government's policies and to the prospects for the next Election.

The debate for some hon. Members opposite was light-hearted. In particular, the noble Lord the Member for Hertford (Lord Balniel), spoke much of the time with a smile on his face, and one of the reasons was that he was presumably making a pre-election speech because he is worried at the latest trends in what is happening in the country and at the decreasing amount of support for his party.

My hon. Friend the Minister of State pointed out—this was recognised by every hon. Member who spoke—the problem of meeting the increasing cost of the health and welfare services. He pointed out the increased cost for hospital ser vices, for the maintenance of hospitals and for the welfare services throughout the whole of the country. Therefore, it is entirely legitimate and understandably right of the Government, at a time when the cost of the health and welfare services are rising and continuing to rise, should examine the present position and the present flat-rate contribution paid by both employer and employee.

I understand the points of view of my hon. Friends who have spoken from this side of the House when they said that they would have preferred that the whole of the cost should be met from the Exchequer. But without exception they realised the pressure on resources and accepted the principles underlying the increases contained in the Bill. It is the case that, while expenditure on the health and welfare services has been growing, the amount as a percentage which is being raised from the flat-rate contribution has fallen from 14·9 per cent. in 1962–63 to an estimated 8·9 per cent. in 1969–70.

Therefore, at a time when there is clearly pressure on resources for desirable Government expenditure, the Government were bound to lock at the short-term position before the introduction of the earnings-related system in the Bill which we are now discussing in Committee up- stairs. Therefore, in the short-term we have taken an entirely reasonable step to make the transition from the existing flat-rate scheme towards the earnings-related scheme in terms of both yield and formula.

The Opposition say that they want an improved health service, that they want a larger proportion of the g.n.p. spent on it. It is a pity that they did not do more about this when they were the Government for 13 years. In 1951, when the Labour Government went out of office, 4·1 per cent. of the g.n.p. was spent on the health and welfare services. When we came back in 1964, that figure had hardly moved. It was back at 4·1 per cent. But during the 'fifties it had dropped to 3·5 per cent. The Opposition say that they want an improved health service and a greater proportion of the g n.p. spent on it, but they did not do anything about it. We are doing something about it. In 1963–64, 4·1 per cent. of the g.n.p. was spent on the health and welfare services. By 1969–70 that figure had gone up to 5·1 per cent.

Our record shows that we have used the resources available to advantage. In 1963–64 £56 million was spent on hospital building. In 1969–70 we spent about £120 million, more than double the previous figure. Between 1965 and 1969 35 new hospitals were completed, against only 15 in the previous 16 years. In 1964 there were only 30 health centres in operation. There are now 160. We have instituted a new charter for general practitioners, encouraging more capital and supporting staff. More than twice as many refresher courses are provided for general practitioners as were provided when we came to office. We have increased the intake of medical schools to provide the extra doctors who are needed in the hospitals, and we want to see the improvement carried on.

The Opposition say that they want improvements, but when we introduced a Bill to provide the resources that we need they seek to deny them to us by voting against the Bill. If the Opposition are serious about opposing the Bill, they should spell out in some detail what their alternatives are. It is no good the hon. Member for Farnham (Mr. Maurice Macmillan) saying that they would have started not here but somewhere else. Not one serious alternative has been put forward.

The Opposition have a responsibility to tell us, whether they would put that increase on employees rather than on employers. I think that the noble Lord the Member for Hertford recognised—it is a pity that hon. Gentlemen opposite did not do something about it a long time ago—the inequity of the flat-rate system and the need for an earnings-related system. Hon. Gentlemen opposite did not recognise this before, but I think they do now. With an earnings-related system lower-paid workers will pay according to then ability to pay, instead of having to make what, for them, is a heavy flat-rate contribution. If we imposed a flat-rate contribution on employees the hardest hit would be the lower paid, the poorest section of the community, those about whom hon. Gentlemen opposite sometimes say they are concerned.

The Opposition, if they mean what they say, must put forward some kind of alternative. Would they put the increase on the employee instead of on the employer? Have they any intention of imposing massive new and extra charges? Hon. Gentlemen opposite talk about tax, and about using the Budget surplus. I listened with interest to the hon. Member for Liverpool, Garston (Mr. Fortescue). He knows that I have great respect for him. I know that part of his speech was lighthearted, knockabout, pre-election stuff. The hon. Member for Farnham is different. If I recollect correctly, he was at one time a Treasury Minister. He knows, as does every hon. Member, that a Budget surplus is an esssential tool of economic management, and one which any Chancellor must take into account.

Having said that they will oppose the Bill, the Opposition ought to put forward alternative suggestions, and it is interesting to look at the rag-bag of arguments which they have used to oppose this Measure. They say that it will put up prices. My hon. Friend the Minister of State dealt with that when he said that if the cost was fully passed on there would be an increase in prices of one-tenth of 1 per cent. Hon. Gentlemen opposite extol the virtues of competition. Are we to assume that they are saying—at least one hon. Gentleman did—that industry is unable to absorb any of this increase? The effect of the Bill will be to increase prices by 0·1 per cent. If hon. Gentle- men opposite do not believe that, they had better let us know what alternatives they propose. They gave no estimates of their proposals.

Hon. Gentlemen opposite expressed concern about the lower-paid sections of the community and about those receiving supplementary benefits. They do not seem to recognise that the Budget will help a large number of lower-paid workers and people on low incomes. This increase of 0·1 per cent. has to be set against an increase in real terms of 20 per cent. in supplementary benefits and retirement pensions. The Opposition are on very weak ground, and are grasping at particularly pitiful straws, if that is the best argument that they can use.

The Opposition say that this increase will put an enormous burden on employers. One of the biggest burdens on employers, on British industry, and on the state of the economy is the number of days lost through sickness. I should have thought that hon. Gentlemen opposite would have recognised that anything which led to an improvement in the health service would be not a burden but a real help to employers.

Only one hon. Gentleman opposite, the hon. Member for Nelson and Colne (Mr. Waddington), saw nothing anomalous in a male employee paying 3s. 2d. a week while his employer pays 8d. An employer has a responsibility for, and an interest in, the health of his workers. I should have thought that no hon. Gentleman opposite could have suggested that the present situation was anything but an anomaly which ought to have been rectified years ago.

Hon. Gentlemen opposite have not stressed the fact that in three-and-a-half years they were responsible for a 400 per. cent increase in employers' contributions. There has been no increase since 1961. The hon. Member for Farnham talked about the position in other countries. In the Netherlands, the employer pays 4·9 per cent., and Belgium 3·1 per cent. Compared with Continental practice, British employers are getting off lightly with their contribution.

It simply will not do to use the argument that our taxation system is different from that on the Continent. That argument is a minefield, and a difficult one to get out of. Hon. Gentlemen opposite do not talk about the substantial financial assistance given to industry by way of investment grants, allowances and grants in aid to the development areas. The figures published by O.E.C.D. put the case advanced by hon. Gentlemen opposite in a very poor light. They show that in the United Kingdom current Government revenue is 37·4 per cent. of the g.n.p. This is almost identical to the figure for France and Germany, but lower than that for the Netherlands and Sweden.

The last complaint made by hon. Gentlemen opposite is that the proposed increase was not included in the Budget. There is no reason why it should have beeen. It was announced as long ago as January of this year, and the Ways and Means Resolution would have gone

through the House earlier than it did had it not been for the Opposition's wish. In doing what they did the Government were following the practice adopted by the party opposite in 1957, 1958 and 1961, when increases in the levy were announced before the Budget, although they came into effect afterwards.

To the question about what one proposes to do with the money, one naturally replies that it is to continue the improvements in the health and welfare services that the Labour Government have already made. I commend the Bill to the House as a measure to maintain the progress of the expanding health and welfare services.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 237, Noes 159.

Division No. 106.]AYES[7.8 p.m.
Abse, LeoDunnett, JackHughes, Hector (Aberdeen, N.)
Albu, AustenDunwoody, Dr. John (F'th & C'b'e)Hughes, Roy (Newport)
Allaun, Frank (Salford, E.)Eadie, AlexHynd, John
Allen, ScholefieldEdelman, MauriceIrvine, Rt. Hn. Sir Arthur
Armstrong, ErnestEdwards, Robert (Bilston)Jackson, Colin (B'h'se & Spenb'gh)
Ashley, JackEdwards, William (Merioneth)Jackson, Peter M. (High Peak)
Ashton, Joe (Bassetlaw)Ellis, JohnJanner, Sir Barnett
Atkins, Ronald (Preston, N.)English, MichaelJay, Rt. Hn. Douglas
Atkinson, Norman (Tottenham)Ennals, DavidJenkins, Hugh (Putney)
Bacon, Rt. Hn. AliceEvans, Fred (Caerphilly)Johnson, Carol (Lewisham, S.)
Bagier, Gordon A. T.Evans, loan L. (Birm'h'm, Yardley)Jones, Rt. Hn. Sir Elwyn(W.Ham,S.)
Barnes, MichaelFaulds, AndrewJones, J. Idwal (Wrexham)
Barnett, JoelFernyhough, E.Jones, T. Alec (Rhondda, West)
Beaney, AlanFitch, Alan (Wigan)Judd, Frank
Bidwell, SydneyFletcher, Ted (Darlington)Kelley, Richard
Binns, JohnFoley, MauriceKenyon, Clifford
Blackburn, F.ford, BenKerr, Dr. David (W'worth Central)
Blenkinsop, ArthurForrester, JohnKerr, Russell (Feitham)
Booth, AlbertFowler, GerryLatham, Arthur
Boston, TerenceFraser, John (Norwood)Lawson, George
Bottomley, Rt. Hn. ArthurGardner,Tony
Bradley, TomGarrett, W.E.Leadbitter, Ted
Bray, Dr. JeremyGinsburg, DavidLee, Rt. Hn. Frederick (Newton)
Brooks, EdwinGolding, JohnLee, John (Reading)
Brown, Rt. Hn. George(Belper)Gordon Walker, Rt. Hn. P. C.Lestor, Miss Joan
Brown, Hugh D. (G'gow, Provan)Gray, Dr. Hugh (Yarmouth)Lever, Rt. Hn. Harold (Cheetham)
Buchan, NormanGreenwood, Rt. Hn. AnthonyLewis, Arthur (w, Ham, N.)
Buchanan, Richard (G'gow, Sp'burn)Gregory, ArnoldLipton, Marcus
Butler, Herbert (Hackney, C.)Griffiths, Eddie (Brightside)Lomas, Kenneth
Butler, Mrs. Joyce (Wood Green)Griffiths, Will (Exchange)Luard, Evan
Carmichael, NeilGunter, Rt. Hn. R. J.Lubbock, Eric
Carter-Jones LewisHamilton, James (Bothwell)Lyons, Edward (Bradford, E.)
Castle, Rt. Hn. BarbaraHamilton, William (Fife, W.)Mabon Dr. J. Dickson
Corbet, Mrs. FredaHamling, WilliamMcCann, John
Crawshaw, RichardHarper, JosephMacColl, James
Cronin JohnHarrison, Walter (Wakefield)MacDermot, Niall
Crossman, Rt. Hn. RichardHart, Rt. Hn. JudithMacdonald, A. H.
Dalyell, TamHaseldine, NormanMackenzie, Gregor (Ruthergien)
Davidson, Arthur (Accrington)Hazell, BertMackie, John
Davidson, James(Aberdeenshire,W.)Heffer, Eric S.Mackintosh, John P.
Davies, G. Elfed (Rhondda, E.)Herbison, Rt. Hn. MargaretMcMillan, Tom (Glasgow, C.)
Davies, Rt. Hn. Harold (Leek)Hooley, FrankMcNamara, J. Kevin
Davies, Ifor (Gower)Hooson, EmlynMacPherson, Malcolm
Dell, Rt. Hn. EdmundHorner, JohnMallalieu, E. L. (Brigg)
Dewar, DonaldHoughton, Rt. Hn. DouglasMallalieu,J,P.W.(Huddersfield,E,)
Diamond, Rt. Hn. JohnHowarth, Robert (Bolton, E.)Marks, Kenneth
Dobson, RayHowell, Denis (Small Heath)Marsh, Rt. Hn. Richard
Doig, PeterHowie, W.Mason, Rt. Hn. Roy
Driberg, TomHoy, Rt. Hn. JamesMaxwell, Robert
Dunn, James A.Hughes, Rt. Hn. Cledwyn (Anglesey)Mendelson, John
Mikardo, IanPavitt, LaurenceSteele, Thomas (Dunbartonshire, W.)
Millan, BrucePeart, Rt. Hn. FredStrauss, Rt. Hn. G. R.
Mitchell, R. c. (S'th'pton, Test)Pentland, NormanSummerskill, Hn. Dr. Shirley
Moonman, EricPerry, Ernest G. (Battersea, S.)Thomas, Rt. Hn. George
Morgan, Elystan (Cardiganshire)Perry, George H. (Nottingham, S.)Thomson, Rt. Hn. George
Morris, Alfred (Wythenshawe)Prentice, Rt. Hn. Reg.Tinn, James
Morris, Charles R. (Openshaw)Price, Christopher (Perry Barr)Tomney, Frank
Morris, John (Aberavon)Price, William (Rugby)Tuck, Raphael
Moyle, RolandProbert, ArthurUrwin, T. W.
Mulley, Rt. Hn. FrederickRees, MerlynWainwright, Edwin (Dearne Valley)
Murray, AlbertRoberts, Rt. Hn. GoronwyWalden, Brian (All Saints)
Neal, HaroldRoberts, Gwllym (Bedfordshire, S.)Walker, Harold (Doncaster)
Newens, StanRobertson, John (Paisley)Wallace, George
Noel-Baker, Rt. Hn. PhilipRobinson, Rt. Hn. Kenneth(St.P'c'as)Watkins, David (Consett)
Norwood, ChristopherRodgers, William (Stockton)Watkins, Tudor (Brecon & Radnor)
Oakes, GordonRogers, George (Kensington, N.)Weitzman, David
Ogden, EricRose, PaulWhite, Mrs. Eirene
O'Halloran, MichaelRowlands, E.Willey, Rt. Hn. Frederick
O'Malley, BrianShaw, Arnold (llford, S.)Williams, Clifford (Abertillery)
Oram, BertSheldon, RobertWilliams, Mrs. Shirley (Hitchin)
Orbach, MauriceShinweli, Rt. Hn. E.Willis, Rt. Hn. George
Orme, StanleyShore, Rt. Hn. Peter (Stepney)Wilson, Rt. Hn. Harold (Huyton)
Oswald, ThomasShort, Rt. Hn. Edward(N'c'tle-u-Tyne)Wilson, William (Coventry, S.)
Owen, Dr. David (Plymouth, S'tn)Short, Mrs. Renee(W'hampton.N.E.)Winnick, David
Padley, WalterSilkin, Hn. S. C. (Dulwich)Woof, Robert
Page, Derek (King's Lynn)Sillars, J.Wyatt, Woodrow
Paget, R. T.Silverman, Julius
Palmer, ArthurSlater, JosephTELLERS FOR THE AYES:
Pannell, Rt. Hn. CharlesSmall, WilliamMr. Neil McBride and
Parker, John (Dagenham)Snow, JulianMr. J. D. Concannon.
Parkyn, Brian (Bedford)Spriggs, Leslie
NOES
Allason, James (Hemel Hempstead)Farr, JohnMaydon, Lt.-Cmdr. S. L. C.
Amery, Rt. Hn. JulianFisher, NigelMiscampbell, Norman
Archer, Jeffrey (Louth)Fletcher-Cooke, CharlesMitchell, David (Basingstoke)
Astor, JohnFortescue, TimMonro, Hector
Atkins, Humphrey (M't'n & M'd'n)Foster, Sir JohnMontgomery, Fergus
Awdry, DanielFrasar, Rt. Hn.Hugh(St'fford & Stone)Morrison, Charles (Devizes)
Baker, Kenneth (Acton)Fry, PeterMott-Radclyffe, Sir Charles
Baker, W. H. K. (Banff)Gibson-Watt, DavidMunro-Lucas-Tooth, Sir Hugh
Balniel, LordGilmour, Ian (Norfolk, C.)Neave, Airey
Batsford, BrianGlover, Sir DouglasNoble, Rt. Hn. Michael
Bennett, Sir Frederic (Torquay)Glyn, Sir RichardNott, John
Bennett, Dr. Reginald (Gos. & Fhm)Goodhart, PhilipOnslow, Cranley
Biggs-Davison, JohnGoodhew, VictorPage, John (Harrow, W.)
Birch, Rt. Hn. NigelGrant, AnthonyPercival, Ian
Black, Sir CyrilGrieve, PercyPeyton, John
Blaker, PeterGurden, HaroldPowell, Rt. Hn. J. Enoch
Boardman, Tom (Leicester, S.W.)Hall-Davis, A. G. F.Prior, J. M. L.
Body, RichardHamilton, Michael (Salisbury)Quennell, Miss J. M.
Bossom, Sir CliveHarrison, Col. Sir Harwood (Eye)Rawlinson, Rt. Hn. Sir Peter
Braine, BernardHarvey, Sir Arthur YereRees-Davies, W. R.
Brewis, JohnHawkins, PaulRenton, Rt. Hn. Sir David
Brinton, Sir TattonHiggins, TerenceRhys Williams, Sir Brandon
Brown, Sir Edward (Bath)Hill, J. E. B.Ridsdale, Julian
Bruce-Gardyne, J.Holland, PhilipRoyle, Anthony
Buck, Antony (Colchester)Hornby, RichardRussel, Sir Ronald
Campbell, B. (Oldham, W.)Howell, David (Guildford)Scott, Nicholas
Carr, Rt. Hn. RobertHunt, JohnSharples, Richard
Channon, H. P. G.Hutchison, Michael ClarkSilvester, Frederick
Chataway, ChristopherIremonger, T. L.Sinclair, Sir George
Chichester-Clark, R.Jenkin, Patrick (Woodford)Smith, Dudley (W'wick & L'mington)
Clark, HenryJoseph, Rt. Hn. Sir KeithSmith, John (London & W'minster)
Clegg, WalterKershaw, AnthonySpeed, Keith
Cooke, RobertKing, Evelyn (Dorset, S.)Stainton, Keith
Cooper-Key, Sir NeillKing, TomSummers, Sir Spencer
Cordle, JohnKitson, TimothyTapsell, Peter
Corfield, F. V.Knight, Mrs. JillTaylor, Sir Charles (Eastbourne)
Costain, A. P.Lambton, AntonyTaylor, Edward M.(G'gow, Cathcart)
Craddock, Sir Beresford (Spelthorne)Lane, DavidTaylor, Frank (Moss Side)
Crowder, F. P.Langford-Holt, Sir JohnTemple, John M.
Dalkeith, Earl ofLegge-Bourke, Sir HarryThatcher, Mrs. Margaret
Dance, JamesLewis, Kenneth (Rutland)Tilney, John
d'Avigdor-Goldsmid, Sir HenryLloyd, Rt. Hn. Selwyn (Wirral)Turton, fit. Hn. R. H.
Dean, PaulMcAdden, Sir StephenVaughan-Morgan, Rt. Hn. Sir John
Dodds-Parker, DouglasMaclean, Sir FitzroyWaddington, David
Doughty, CharlesMacmillan, Maurice (Farnham)Walker-Smith, Rt. Hn. Sir Derek
Douglas-Home, Rt. Hn. Sir AlecMcNair-Wilson, MichaelWalt, Patrick
Draysort, G. B.McNair-Wilson, Patrick (NewForest)Walters, Dennis
Elliot, Capt. Walter (Carshalton)Marples, Rt. Hn. ErnestWard, Christopher (Swindon)
Elliott, R.W.(N'c'tle-upon-Tyne,N.)Marten, NeilWard, Dame Irene
Errington, Sir EricMawby, RayWeatherill, Bernard
Wells, John (Maidstone)Wolrige-Gordon, Patrick
Whitelaw, Rt. Hn. WilliamWoodnutt, MarkTELLERS FOR THE NOES:
Wiggin, JerryWorsley, MarcusMr. Jasper More and
Wilson, Geoffrey (Truro)Younger, Hn. GeorgeMr. Reginald Eyre.

Bill accordingly read a Second time.

Motion made, and Question proposed, That the Bill be committed to a Committee of the whole House.—[Mr. Harper.]

Photo of Lord  Balniel Lord Balniel , Hertford

May I ask why the Bill is being committed to a Committee of the whole House?

Photo of Mr David Ennals Mr David Ennals , Dover

We simply thought, in our wisdom, that it would be the wish of the House.

Question put and agreed to.

Committee Tomorrow.