§ 2.55 p.m.
§ Report received.
§ Then, Standing Order No. 43 having been dispensed with, pursuant to the Resolution, Bill read a third time.
§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Elton)
My Lords, I beg to move that this Bill do now pass.
§ Moved, That the Bill do now pass.—(Lord Elton.)
§ Baroness Jeger
My Lords, we have examined this mean little Bill thoroughly and today I do not propose to take up your Lordships' time unreasonably. But we must put on record at this stage our continuing opposition to and anxiety about it. We deplore the increase in contributions that come from workers only at a time of mounting pressures on the lower paid. We regret the reduction in Treasury contribution be- 1204 cause this is a further tilt away from central funding towards higher dependence on contributions, and this is a most regressive form of taxation. We oppose the innovation in this Bill which for the first time in history compels workers to contribute to the redundancy fund, even though many of them will not be able to benefit because like many workers, for example at De Lorean, they will not have been able to fulfil the condition of two years' employment in the same job.
Our debates have been strongly actuarial, thanks partly to my noble friend Lord Bruce of Donington. They have also been very numerate. In reality this is a Bill about people, not figures. It is about the millions of men and women at work whose take-home pay is being deliberately reduced by this Bill unless they earn more than £220 a week. The Minister confirmed to me that a man being paid £500 or more a week will pay the same contribution as somebody earning £220 a week. We think the minimal earnings for Class 1 contributions of £29.50 is too low, and we also think the upper limit of £220 is too low.
Many of the matters raised within debates on this comparatively narrow Bill indicate the need for fresh thinking about the whole question of national insurance. The present system was not designed to cope with 3 million unemployed, many of them long-term unemployed, and with increasing numbers of retirement pensioners. I say in no party sense that we all need to consider these things and I hope that our debates on this Bill may have triggered some deeper thinking on the wider question.
It cannot be right to accept indefinitely that the present mixture of earnings-related contributions up to weekly incomes of £220 with an arbitrary cut-off, and then to take a reduced Treasury contribution, is immutable. After what the Leader of the House of Commons had to say last night about the future prospects for this country and his blunt, bleak words about the standard of living of our people, it is all the more essential for the House, and all parties in this House, to be looking at the relation of social insurance to the living conditions of our people. The House must be concerned about the impact that this Bill is making. It is, as I have said, a small Bill-basically a Treasury Bill—and it shows no original thought at all. That was made clear by the noble Lord, Lord Cockfield, who told us in his usual riveting tones and engaging honesty, at col. 1087 of 28th January:As my noble friend Lord Boyd-Carpenter said … this is not essentially a matter of principle: it is simply a matter of arithmetic. We feel on this that we have the arithmetic right".In our view, the Government have neither the principles nor the arithmetic right. We deplore the passing of this mean little Bill.
§ 3 p.m.
§ Lord Banks
My Lords, I regret the fact that we are going to pass this Bill through the House without any amendment, although I admit that it is difficult to amend this Bill without destroying its substance. I made it clear in the Second Reading and Committee stage that we on these Benches are opposed to its substance. We also are opposed to an increase in the contribution for employees without any increase for employers, believing that a reduction in the national insurance surcharge is the way to help employers. 1205 We are also against the reduction in the Treasury supplement, which is one of the reasons why there is an increase for employees.
I believe the case against the reduction in the Treasury supplement which I gave during the Committee stage is sound in terms of the figures set out in the 1981 White Paper on Expenditure. I think it is necessary to compare the cost of family allowances and tax allowances for children in 1975–76 and the cost of child benefit today in terms of constant prices, if we are going to get any kind of meaningful comparison at all. It is of course possible to argue, as the noble Lord, Lord Cockfield, argued during the Committee stage, that the cost of tax allowances might have gone down if the old system had remained; but that of course must be speculation and I think it is irrelevant to a comparison of the position in 1975–76 and the position in 1980–81.
So far as determining the items in the social security list which have increased the most, which have increased their proportion more than others, I would have thought that actual and constant prices should throw up the same result. There is some difference, it seems to me, between the figures in the White Paper—which of course were not final—and figures which have been supplied to me very kindly by the noble Lord, Lord Cockfield. I shall wait with great interest to see the White Paper on Government Expenditure which should appear next month. It should throw some interesting further light on this matter.
§ Lord Molloy
My Lords, if one wanted to take a brutal partisan line with regard to this Bill, one would encourage the Government to proceed with similar Bills in the future, because this is a Bill which is looked on as mean, nasty and totally unnecessary, particularly in the one field in which I honestly believe the Government wanted to be successful more than in any other—in the field of industrial relations. That desire I would applaud. The probability is, too, that the members of the Government are too inexperienced in industrial relations to know precisely what this Bill will mean and what this Bill is going to mean when, for example—and I hope this will be regarded as important—there are branch meetings of those of our countrymen and women who labour by hand and brain, when they meet to defend their standards of living. The only thing that can be held against them—we moved rather near to it, I think, in Question Time—is that it is an offence for the British working man and woman to defend his or her standard of living. If that is not pressed, they will need to have to take some form of action to make good what the Government are taking off them. Therefore, the spiral will be given an unnecessary and vicious twist.
The sadness about this completely unnecessary, mean measure is that it will only contribute really to souring industrial relations—something which only an enemy of this country would want to see inflicted on our nation. It is amazing to think that has been carried out by this Conservative Government.
§ Lord Boyd-Carpenter
My Lords, I would make only one point on the Motion that the Bill do now pass, and that is to remind your Lordships that, as is brought out in the Financial and Explanatory Memorandum, one effect—I think I am right in saying one side-effect— 1206 of the Bill is to increase by £47 million a year the surcharge paid by employers with their national insurance contribution. As your Lordships will know well, this surcharge in the present employment situation in this country has been widely condemned in all quarters, on both sides of industry and in both Houses of Parliament. It hardly needs repeating that at a time when we are all desperately anxious to see employment improved, actually to tax the giving of jobs has a crazy air about it.
The noble Lord, Lord Cockfield, winding up at an earlier stage, gave what seemed to me a broad hint that in the forthcoming Budget some relief will be given in this direction. I profoundly hope that this is so. Meanwhile, one can only ask your Lordships to mark, and to ask public opinion outside to mark, that so far from reducing this tax on employment, this Bill—which has a quite modest effect compared with others—has the effect of increasing that tax. I hope that my noble friend will convey to his right honourable friend the Chancellor of the Exchequer the point that when the Chancellor of the Exchequer looks at this tax he is not looking at it even from the basis of his present level but from the basis of his present level plus the £47 million which in a very short time will be additionally imposed.
I realise, particularly from my own experience, that at this time of the year my noble friend on the Front Bench can say very little about this; but I can express to him, as strongly as I express anything, the wish that he will convey to his right honourable friends the need to do something really drastic about a tax which imposes an additional burden on British industry, diminishes its competitive power, increases its costs and makes it more difficult for it to give employment.
§ 3.7 p.m.
§ Lord Elton
My Lords, throughout the passage of this Bill through the House, certainly in the earlier stages—the noble Baroness, Lady Jeger, has returned to the theme this afternoon—noble Lords and noble Baronesses on the other side have sought to treat it as if it made a significant departure from the accepted philosophy on which our system of social security rests. I hope I have by now convinced your Lordships that it does not. In every respect but two the Bill treats with matters sufficiently minor to be disposed of by subordinate legislation. These matters were only brought into the Bill as a matter of convenience so that the whole of the Government's proposals for this annual adjustment could be dealt with together. It avoided the necessity of dealing with separate parts of the same complex whole upon two separate occasions. That simplified the business of your Lordships' House, but it did not add an iota of importance to the matters themselves. Nor, I might add, does the Bill set out to regulate the level at which benefits are set, though some noble Lords would have us treat it as though it did. Nor does it interfere, as has several times been suggested, with the character of national insurance in such a way as to make it anything other than it now is—a national insurance scheme in the original sense of that phrase. Indeed some of the suggestions we have heard from across the Chamber would have altered it a good deal more than we ourselves are proposing to do.
1207 I must stress yet again that this Bill provides the means of extending and preserving benefits. It will mean that we can increase our spending on national insurance benefits by £1.6 billion in the coming year. It will also enable us to earmark an extra £104 million directly for the National Health Service. I am grateful that, on this point at least, noble Lords opposite have not seen fit to place obstacles in the way of what the Government propose. Certainly, we take the view that it is fair to ask people in work to make a small extra contribution towards the £12 billion that we shall be spending on the National Health Service.
But by far the greatest interest, both in the debate on Second Reading and in your Lordships' consideration of this Bill in Committee, centred on the proposal to include an employment protection allocation in the employee's contribution for the first time. Employers as a group at present carry alone the burden of redundancy payments—and, despite what noble Lords opposite would have had us believe, employers do not court redundancies. That burden has grown, inevitably, in recent years and it will still be heavy—though, reassuringly, not quite so heavy—in the coming year. I think that the case for sparing employers an addition to this burden is widely recognised, both in your Lordships' House and in the country at large. I am sure that my noble friend Lord Boyd-Carpenter would support me in that view. I can undertake to bear his messages to the destination which he has placed upon them, but, as he has rightly said, it is not open to me, particularly at this stage of the year, to say anything further in that respect.
The new allocation spares the employer in a way which is no more than a logical application of the principle already extant in social insurance. Your Lordships will forgive me if I remind you of the analogy between helping to finance redundancy payments and helping to finance unemployment benefit: the latter has been an integral part of the national insurance scheme for many years, and no one has yet questioned its propriety. So the new provision is simply a step on a familiar path.
Of course, we cannot protect employers entirely from the results of change. Both the higher earnings limits and, even more so, movements in earnings themselves, will mean higher contributions; and movements in earnings are no part of this Bill's effects. But total protection could be achieved only at the cost of distorting the national insurance scheme. I believe that most people would agree that this would be too high a cost, and would serve the interests of no one in the long run.
Certainly, the Government's first priority must be to bring down the tragic total of unemployed people and to help employers climb out of the recession: these are, of course, parts of the same and indivisible aim. This is why we have shielded employers, as far as we reasonably can, from the effects of changes in the contribution arrangements, and I do not believe that to reduce this protection by increasing their contribution rates, as the noble Lord, Lord Banks, suggested that we should do, would have served anybody's interests. This Bill aims to strike the right balance by going as far as we can to keep the burdens on both employers and the self-employed to a minimum.
1208 Balance—but in this case redressing it—is, again, the Bill's fundamental aim in redistributing the burden of financing social security benefits between people in work and the general taxpayer, which was another subject of contention during our exchanges. Of course, the general principle of collective social responsibility for funding benefits is important—as is the principle of collective social insurance on a pay-as-you-go basis for people in work. But a balance must be struck between them. If we were to give undue emphasis to either, the result would again be distortion.
The noble Baroness, Lady Jeger, suggested at Second Reading that the Bill,increases … the inequitable switch from income tax financing to individual insurance contributions.With the greatest respect, I still disagree. The Bill strikes the balance which we have sought all along: even with the reduced Treasury supplement for which it provides, the proportion of social security benefit expenditure financed from general taxation will not fall next year below the level at which it stands today.
I conclude by reminding your Lordships that this is not a dramatic piece of legislation, in spite of what the noble Lord, Lord Molloy, has said; nor, though it is little, would I agree with the noble Baroness, Lady Jeger, that it is mean. All but two of the changes for which it provides are ones which would not normally require primary legislation. The balance which we seek is that of simple good housekeeping. It is only because the total increase in employees' contribution rates is greater than ¼ per cent., and because there is to be an employment protection allocation in their contributions, that a Bill is needed at all. Those two provisions in themselves are needed to spread the burden of financing benefit expenditure more equitably. It is the Government's belief that we have achieved that equity, both as between employee and employer, and as between contributors and the general taxpayer at large.
I am obliged to my noble friends who have supported me both wholeheartedly and, sometimes, with reservations throughout the process of this Bill, and to noble Lords for taking our, sometimes, heated exchanges in the good heart which is always the custom in this House.
§ On Question, Bill passed.