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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 am always glad to be helped by the hon. Gentleman, whom we have now lost from social security. His advice was always helpful to me on these occasions, but he does not seem to recognise gratitude when it is offered to him. We are living in sorry times.

I come now to the self-employed. I do not know whether the hon. Gentleman comes into that category. Members will be aware that self-employed people pay their contributions in two parts, the flat-rate class 2 contribution and the profits-related class 4 contribution. As it is not proposed to increase the class 1 rate, it follows that no increase is needed in the class 4 rate, which is derived from it. The profits limits for class 4 contributions rise automatically each year like the earnings limits for class 1 contributions. The figures proposed for next year are £3,950 and £13,000, the latter figure being 52 times the upper earning limit.

The formula for determining the class 2 rate gives a figure of £4·80 a week. However, for the last two years we have set the rate at a figure 20p below that given by the formula and we propose to continue this practice this year with a weekly rate of £4·60. The small earnings exception from class 2 liability also rises automatically —in this case from £1,775 to £1,850 a year.

The proposed voluntary class 3 rate is, as usual, 10p below the class 2 rate, giving a figure of £4·50 a week from next April.

The last change which is being proposed is the reduction in the Treasury supplement from 13 per cent. to 11 per cent. The Government Actuary's report shows the estimated effect of this and the other changes under discussion on the national insurance fund. The Government Actuary estimates that the balance in the fund at the end of 1983–84 will be £4,280 million and that this figure will increase to £4,480 million by the end of 1984–85 if we make the proposed changes. In other words, the balance at the end of 1983–84 will represent 21·7 per cent. of benefit expenditure during the year and a year later the equivalent figure will be 21·6 per cent. Both those figures are comfortably above the minimum level, of one sixth of the benefit expenditure, recommended by the Government Actuary.

The reduction in the Treasury supplement will also mean that national insurance contributors will bear a slightly increased proportion of the cost of contributory benefits. This I stress, because it was a point made by the hon. Member for Birkenhead (Mr. Field) in the debate last year. I believe that he will speak for the Opposition this year, his hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) having moved to become Treasury spokesman to keep an eye on him.