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Social Security

Part of Ways and Means – in the House of Commons at 10:15 pm on 20th December 1983.

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Photo of Dr Rhodes Boyson Dr Rhodes Boyson , Brent North 10:15 pm, 20th December 1983

I shall not allow myself to be tempted to tangle with the hon. Gentleman.

As hon. Members will know, the Social Security Act 1975 requires my right hon. Friend to carry out a review each year of the general level of earnings. At the same time, he reviews the state of the national insurance fund, as he is empowered to do by the same Act. The purpose of this exercise in good housekeeping is to make sure that the money coining into the fund is sufficient to pay for benefits whilst maintaining an appropriate level of balance to guard against unexpected adverse contingencies. The report of the Government Actuary on the effect of the proposed changes was laid before the House by my right hon. Friend the Secretary of State on 17 November, as required by the Act.

The first changes that I will discuss are those to the lower and upper earnings limits for employees' and employers' contributions. The Social Security Pensions Act 1975 requires the lower earnings limit to be equal to, or no more than 49p below, the basic pension rate, and the upper limit to be between 6·5 and 7·5 times that rate. A pension rate of £34·05 next year therefore points unavoidably to a lower earnings limit of £34 per week, if we are to follow the usual practice of dealing in multiples of 50p. The upper earnings limit permits a little more discretion: a figure of up to £255 per week is possible. However, an increase to £250 would be more in line with the movement of earnings. This would be 7·3 times the basic pension rate, towards the top of the permitted range of 6·5 and 7·5 times. This is, therefore, what is proposed.

Of course, most people have earnings between the lower and upper earnings limits and so will be virtually unaffected by these changes; their contributions will rise only in so far as their wages rise. The contributions of employees with weekly earnings of over £235 per week will increase by up to £1·35 per week—up to £1·07 per week in the case of contracted-out employees. For married women and widows paying at the reduced rate on earnings of more than £235 a week, the maximum weekly increase will be 57p.

Similarly, employers will have to pay increased contributions for employees on high earnings; the maximum increase will be £1·71 in respect of not contracted-out employees and £1·17 for others.

It will be most convenient for hon. Members if I now deal with the No. 6 and No. 7 Amendment Regulations, the only other instruments which directly affect class 1 contributions. As hon. Members will know, lower contribution rates are payable for certain mariners and for serving members of Her Majesty's Forces because of the particular features of their employment which affect their national insurance position. For various reasons, including the falling numbers of claims to sickness benefit generally and the introduction of statutory sick pay from 1 April this year, it is proposed, through these instruments, to adjust the levels of abatement in the light of advice from the Government Actuary. I should add, in case any hon. Member should raise the question, that the social security advisory council is content with these changes.