Consequential Amendments

Schedule 1 – in the House of Commons at 7:30 pm on 17 December 1981.

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Photo of Mrs Lynda Chalker Mrs Lynda Chalker , Wallasey 7:30, 17 December 1981

I beg to move amendment No. 5, in page 5, line 22, after "Act", insert and of the reduced primary class 1 contribution specified in regulation 104 of these regulations". This is a purely formal amendment. Once upon a time there were very few opted-out women mariners, but times have changed. Stewardesses are now likely to be opted-out women mariners. The mariners have their own redundancy scheme, and their employers are exempted from the employment protection allocation and pay an abated rate of contribution.

Clearly it is similarly fair to exempt mariner employees from the employment protection allocation in their contribution. That is achieved by paragraph 3(2)(b). Unfortunately, it did not cover mariners who were opted-out women and widows. I hope that the Committee will therefore see fit to accept the amendment, which will repair that omission and put opted-out women mariners on the same footing as their male and opted-in women counterparts.

Photo of Mr Brynmor John Mr Brynmor John , Pontypridd

As this affects women mariners. I should not dream of making waves.

Amendment agreed to.

Schedule 1, as amended, agreed to.

Schedule 2 agreed to.

Bill reported, with an amendment.

Photo of Mr Norman Fowler Mr Norman Fowler Secretary of State for Health and Social Security 7:34, 17 December 1981

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

On Second Reading, I set out the five main aims of the Bill. They were, first, to fund the increase of £2½billion extra spending next year on social security benefits; secondly, to make a contribution to the growth in spending on the National Health Service; thirdly, to broaden the financing arrangements of the redundancy fund by asking employees to contribute to it; fourthly, to reduce the size of the Treasury supplement; and, fifthly, to protect as far as possible employers and the self-employed from the changes necessary to increase the national insurance and redundancy funds. I emphasised also that these changes were entirely consistent with the principles of social insurance.

I think that increasing contributions to pay for increased benefits, or the aim of minimising the cost borne by employers, are objects of policy that many hon. Members would welcome. In the same way, as I said at an earlier stage, I believe that the contribution towards the National health Service is worthy of the House's support. it must be emphasised once more that the Government have not cut health spending. We are increasing health spending and paving the way for a further increase in spending in 1982–83.

On the level of benefits, I re-emphasise the fundamental point that benefits to one group in society can be made only through the contribution of the rest of society. There is no other source. That is why we have repeatedly said that the improvement of the living standards of those most in need ultimately rests on the capacity of the nation to create wealth and to compete in the world market. It is also the reason why we have asked for a greater contribution from those in work for those who are retired, without employment, sick or disabled.

With regard to the changes in the financing of the redundancy fund, I do not accept the argument that this is an unfair additional charge on the employee, nor that it in any way departs from the main principles of social insurance. Similarly, I do not think that an objective appraisal of the limited reduction to the Treasury supplement could conclude that this is unfair or a fundamental change in the funding arrangements.

Photo of Mr James Dempsey Mr James Dempsey , Coatbridge and Airdrie

Perhaps the Minister will clarify one point. I understood that the redundancy fund was funded on the basis of 41 per cent. from Treasury and 59 per cent. from the employers. Is that not being altered by asking for a contribution from the insured person?

Photo of Mr Norman Fowler Mr Norman Fowler Secretary of State for Health and Social Security

That is indeed the purpose and that is what we have debated, but I think that would take us back not just to the Committee stage but to Second Reading.

The first point to make clear about the Treasury supplement—this has been emphasised from the Dispatch Box—is that the proportion of benefit expenditure met from general taxation is not being reduced. The proportion is estimated in 1982–83 as 45 per cent.—the same proportion as this year—compared with 37 per cent. in 1975–76. Every Government must decide the right balance, giving due weight to the economic circumstances of the time, the planned level of public expenditure, the position of employers and the cost borne by employees.

I believe that we have achieved a balance that will be seen by the public to be fair. I also believe that we have adhered fairly to the principles of the "pay-as-you-go" system of financing benefits. I commend the Bill to the House.

Photo of Mr Brynmor John Mr Brynmor John , Pontypridd 7:39, 17 December 1981

I suspect that if we were to debate for an hour longer we should not find many new points to raise. I shall therefore do as the Secretary of State has done and briefly reiterate the old points.

We do not intend to divide the House on Third Reading. Lest that be misunderstood, I place it on record that we have voted against two of the three main props of the Bill. We have made our opposition clear. I briefly put on record once again why we oppose the Bill.

First, despite the honeyed words of the Secretary of State, I do not believe that the Bill is within the Beveridge concept. It undermines the tripartite concept of funding insurance because it makes employed persons solely responsible for bailing the Government out of their present difficulties. Instead of looking to the whole of society to pay for the additional benefits, they are placing the burden on one segment of society—the employed person.

I warn the Government that this is fundamentally an unsound principle because employed persons will be a declining percentage of the population and the number of retired people and other people out of work will increase. The Government will have to place more and more burdens on fewer and fewer people in employment unless a radical—I hate to use the word that the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) used, but it has been used so often from a sedentary position that I thought it would be a novelty to use it from an upright position—change is made. The Government will have to take a fundamental look at the national insurance principle in order to make sure that the strain upon the scheme is not too great for the country to bear.

The 1 per cent. increase in national insurance contributions will be an increased burden. It has risen from 6½ per cent. to 8¾ per cent. under this Government, and it will rise further. At the same time, the Treasury contribution has fallen. If we have established anything, it is the completely arbitrary nature of the Treasury contribution and the completely Pavlovian desire of the Treasury to claw back money every time that it can do so, whether or not it is right in the prevailing economic circumstances. We do not believe that it is right.

I come back to the point that was made by my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) about the redundancy payment. We believe that the scheme that has proceeded well for the last 16 years should continue and that if there is a shortfall or if the borrowing requirement of the redundancy fund needs to be changed no economic harm will come to the country. More economic harm has come from the Government's belief that if they increase this country's borrowing at a time of depression it will bring the house down around our ears. It will not. The failure to recognise that will itself gravely weaken the fabric of our country.

People should know that this is a fundamentally unfair Bill which places the burden on employed persons alone. For that reason, we shall continue our opposition to it.

Photo of Mr James Dempsey Mr James Dempsey , Coatbridge and Airdrie 7:43, 17 December 1981

The present system is unfair to the employed person. I hear in the business reports on the radio of the grand profits being made by employers in different aspects of business—manufacturing, distribution, and so on. It is extremely unfair, if we are to relieve the employers of a part of their national insurance contribution, to pass the burden to the insured employee who works hard to earn his wages every week. This is another form of income tax.

Because of the Government's policies, more and more of the burden of financing public investment and expenditure is put on working people. That is most unfair, especially from a Government who, in redistributing our national income, wickedly reduced taxation on the wealthy from 83p to 60p in the pound. In money value, that means a creaming-off by the wealthy of about £1,500 million per annum. To give those people such a handout and then to ask the insured employee to pay more in order to protect himself against redundancy is an unfair and inequitable way of distributing the wealth of the country.

I come from an area that has one of the highest rates of unemployment on the mainland of Scotland. This is the festive season in bonnie Scotland. We are coming up to new year's day—called Ne'erday in Scotland—and 200 workers are being laid off. That is their new year's present. They were not consulted. The mandate was posted up in their workplace, and that was it. Why should people who are subject to that sort of merciless treatment be asked to make a contribution towards their redundancies? They are first sacked, and then they are asked to pay for being sacked. That is immoral. I am glad that my hon. Friend the Member for Pontypridd (Mr. John) said that we shall continue to oppose this mean Bill.

Photo of Mr Andrew Bennett Mr Andrew Bennett , Stockport North 7:46, 17 December 1981

All hon. Members who have spoken, except Ministers, believe that this is a mean and squalid Bill. The Secretary of State gave five misleading reasons for supporting the Bill. He emphasised that the extra £2½ billion in contributions is required to pay for increased benefits. He, more than anyone else in the House, should know that we do not have any increased benefits. In almost every area benefits have been cut. He should use the English language to make it clear that we are paying £2½ million not for extra benefits, but because increased numbers of people, particularly pensioners, are eligible for the benefits.

The Secretary of State said that the extra contribution to the National Health Service is to pay for an expansion of the Service. Most people are not aware that the service is improving. In fact, they are worried that it is not improving sufficiently to keep pace with the demand from the growing number of people of pensionable age who need to use the Health Service. Instead of proudly claiming that the Government are spending more money on the National Health Service, the Secretary of State should concentrate his attention on whether the Service is improving. Most of the evidence suggests that it is not.

The Secretary of State stressed that it was a useful principle that employees should pay for their redundancies. The Government are admitting their own failures by saying that we shall need more money for the redundancy fund. They are saying that there will be more redundancies. They say that employees must make a contribution, but that involves all employees. Many, who are in the lowest-paid jobs, will never benefit from the redundancy fund. If they work for one employer for less than two years, they will not qualify. They are continually asked to make contributions but, because of the nature of their work, the areas in which they work, and the fact that they have to change jobs frequently, they receive no benefit. We are therefore asking the least well paid to make contributions to a fund that tends to benefit workers who have secure jobs—at least for a period of more than two years. That does not seem equitable.

The right hon. Gentleman justified the Bill by saying that it was a good idea to require a smaller contribution from the Treasury. As we have already said, it depends how the Treasury plans to spend the money. If it were to use it to increase child or, supplementary benefit, we could possibly reach a deal, but I can think of many other areas in which it is more likely that the Treasury will spend the money. Even if the right hon. Gentleman were merely fighting for his own Department, I doubt whether he would really believe that it was a good idea to reduce the Treasury's contribution.

The Secretary of State also argued that the Bill was necessary to protect employers and the self-employed. I wonder whether that is true. Someone on average earnings will find an extra £1·50 stopped from his earnings. The natural reaction is to get that money back, and that encourages people to ask for more in their pay packets. Of course, they will ask not for £1·50, but for £2, because, by the time income tax and other stoppages have been deducted, they know that they will need £2 to compensate for the £1·50. Human nature being what it is, if people need £2 to stand still, they are likely to ask for £2·50. Therefore, the pressure on the employer may be greater than if the £1·50 had been taken off him in the first place. Instead of asking for £1·50, workers are likely to ask for £2·50, and the employer will be under pressure to pay it.

It may be that over 12 months many employers will find that, in addition to making a contribution towards the money that the Government are demanding, they will have to pay out even more. That may help the Government to get extra in taxation, but it will not help the employer.

This is a disastrous Bill. That view is summed up by the fact that not one Conservative Back Bencher had a good word for it.

Question put and agreed to.

Bill accordingly read the Third time and passed.