Speeches, etc.

Margaret Thatcher

HC S 2R [National Insurance Bill]

Document type: Speeches, interviews, etc.
Venue: House of Commons
Source: Hansard HC [670/700-08]
Editorial comments: 2137-2200.
Importance ranking: Major
Word count: 2713
Themes: Public spending & borrowing, Social security & welfare
[column 700]

9.37 p.m.

The Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance (Mrs. Margaret Thatcher)

This has been an extremely wide-ranging debate, with many hon. Members putting forward a large number of different ideas, some differing in fundamental principle from one another and some differing in detail.

Many speakers have made play with General Election dates. May I, therefore, at the outset, point out that the last major increase in National Insurance benefits was in April, 1961, about 18 months after the last General Election, and that the previous major increase in National Insurance rates was in 1958, about 20 months before the Election.

[column 701]

Mr. Crossman

May we have the National Assistance increases, to complete the series? It was six weeks before the election.

Mrs. Thatcher

And the last National Assistance increase was as recently as last September. I do not think that anyone who is looking at the figures and trying to deduce a principle from them, rather than having deduced the principle before looking at the figures, will get very far.

As well as matters of general principle, hon. Members have raised a number of detailed points. The hon. Member for Sowerby (Mr. Houghton) raised the question of modified pensions, by which I take it that he means those people who were late into the old contributory pension scheme and, because of their shortened contribution records, had a modified rate of pension awarded. That is now a piece of history, as he knows. Most of these people were members of other pension schemes, which was one of the reasons why they were late into the old contributory scheme. They will, of course, benefit proportionately by the increases in the Bill. They will get their 17 per cent. or 18 per cent. increase rounded to the nearest suitable figure.

The hon. Gentleman also raised a technical question—one expects him to be very quick off the mark with the intricacies of the National Insurance Scheme—about those people who have not yet retired but are within the five years of retirement age group. He asked what happens when they are working, but come to claim sickness benefit. He said that under the ordinary rules the amount they could claim would be governed by the amount of retirement pension which they could get and if sickness benefit goes up before pension their benefit would, therefore, be cut down if they are within this retirement period.

I am glad to tell the hon. Gentleman that we propose to make special provision in the Commencement Order and Increase of Benefit Regulations under Section 26 of the National Insurance Act, 1946, to meet this difficulty. The provision we shall make is that for this group of people the retirement pensions shall, as it were, be deemed to come into action at the same rate as the sickness and the unemployment benefit. This follows the precedent of 1952. [column 702]

A number of hon. Members asked whether we could not get these increases in before 27th May. My hon. Friend the Member for Uxbridge (Mr. Curran) asked this. The hon. Member for Feltham (Mr. Hunter) drew rather unflattering comparisons between our schemes and that operated by the football pools. It takes quite a time. Eighteen weeks is a comparatively short time for the retirement pension and long-term benefit increases. There are about 6½ million order books to be up-rated. This has to be done on top of the ordinary work of the local offices. This is already swollen at this time of the year with extra sickness benefit claims. I must confess to the House that we live in fear of an epidemic affecting the staff at the offices when we are trying to work to as tight a margin as we are this time.

Various hon. Members suggested we could give up-rating directions to the Post Office. This would be quite impossible. After all, there are about 150 different rates of insurance benefit payable. The number of permutations and combinations of the allowances would render the compilation of a ready reckoner quite impossible. The sum of 57s. 6d. could be broken down into several different components. For example, it might be made up of 53s. 6d. flat-rate pension due to a contribution deficiency and increments of 4s., making a total of 57s. 6d. It might be made up differently, of a flat-rate pension of 51s. due to a contribution deficiency, increments of 6s., and a graduated pension of 6d., bringing the total up to 57s. 6d.

We cannot, in fact, say on any particular figure that this can have arisen from only one set of circumstances and therefore we could not provide the Post Office with a ready reckoner to up-rate.

Mr. Lawson

If every single adult is to be rated up by 10s. does not that make it easy? The Government could merely write 10s. more on to the books.

Mrs. Thatcher

That would be quite inequitable as between beneficiaries. There are varying needs of which the National Insurance Fund tries to take account. There are many things which can affect the rate—the different rate of dependency increase, the different number of dependants, contribution deficiencies, increments, graduated payments, adjustments for periods in hospital, advance adjustments for earnings. [column 703]All this means that the up-rating has to be done by skilled people in the local offices. It has to be done individually on each of the different books.

For short-term benefits it is not quite so difficult. There are not as many books. There are about 200,000 for the long-term sick. The limiting factor there is getting instructions to the local offices in time for them to make the requisite calculations for benefits paid on a daily rate and not on a weekly rate, which may make quite a difference. We are, therefore, bringing those benefits into action just as soon as possible, for the benefit week beginning 7th March.

Mrs. Castle

In view of that, cannot the payments be made retrospective?

Mrs. Thatcher

Certainly not, because we should have to keep account throughout the whole of the interim period of the precise amount paid out in each week and the orders, in the meantime, would have been cashed.

A number of hon. Members have mentioned unemployment benefit and I want to make it clear at once that I think that the economic factors at any given time should not be used to determine the long-term policy of the National Insurance Scheme. They can change quickly. It seems only a short time ago since the House was thinking of the possibility of a pay-roll tax on employers' to stop them hoarding labour. Perhaps such a tax would have been peculiar to the circumstances of that time.

I wish to make it clear that the unemployment figures have not governed the increase to the beneficiaries of the National Insurance Fund. As hon. Members have said, we have over 5½ million retirement pensioners. Their claims are every bit as important as the other beneficiaries whose needs and requirements come to the fore at particular times.

The hon. Member for Bedwellty (Mr. Finch) mentioned the limitation on the number of days for which one can claim unemployment benefit, now varying with the contribution record up to a maximum of 492 days. This provision replaced the old transitional provision—Section 62—and I do not [column 704]think that it would be a good provision to bring back. It was a discretionary payment and I understand that it did not work very well.

In any case, I hope that we shall not need to think about extending the duration of unemployment benefit. There are other, far better, solutions to the problem and I hope that the steps which have been taken by Reginald Maudlingthe Chancellor of the Exchequer will have worked through the economy before that time.

Mr. William Ross (Kilmarnock)

Dear, oh dear.

Mrs. Thatcher

The hon. Member for Bedwellty also took the opportunity, as he always does, to reiterate his arguments which we went through—and he will remember them well—on the occasion of the last increase which came into effect in January, 1962. He used the same arguments and put forward the same views today as he did then. Some of the old workmen's compensation cases will benefit from the unemployability supplement and constant attendance allowance ans some will benefit as well from the National Insurance increases.

A good deal has been said about the Exchequer contributions. I agree that it was never laid down as a fixed and determined principle for all time and that it has varied very much. There are two methods of Exchequer contribution; one as a supplement to expenditure as under the old Health Insurance Scheme and the other as a supplement to contributions as under the old Unemployment Scheme. Neither on its own was completely successful in relation to those two schemes and when the new scheme came into operation a combination of the two methods was brought about.

The Exchequer payments took the form of a proportion of the contributions of employees and employers and an annual lump sum payment to cover the estimated deficit which was expected to materialise in the early days of the Fund. In fact, that deficit did not materialise and it is interesting to look at the accounts of the early days of the Fund, particularly in relation to the strictures made about the degree of benefits which are borne by contribution payments.

In the year 1948–49 the cost of benefits from the Fund was £252.7 million. The [column 705]employer and employee contributions together were £248.6 million. Thus, in that year the benefit expenditure was borne almost entirely by contributions. In the following year it was closer. The cost of benefits was £360.9 million, and employee and employer contributions amounted to £360 million. There was a similar relationship in the following year.

Because of this surplus in the Insurance Fund, the method of making Exchequer payments was changed under the National Insurance Act, 1951, and there was no provision for deficit payments. These were reintroduced in 1954 for a short time but, again, they were not used to the full extent, and in 1959 the scheme went over to the pay-as-you-go basis, and the Exchequer supplement was fixed in accordance with the proportions given by the hon. Member for Sowerby.

The absolute figures of Exchequer contribution to the fund are not inconsiderable. Last year, 1961–62, they were £187 million; the estimate for 1962–63 is £190 million, and for 1963–64 £212 million. This is an increasing amount as, of course, it is bound to be as the contributions go up, and it represents a substantial contribution by the taxpayer to the cost of National Insurance benefits.

One has also to remember that the taxpayer pays heavily towards the other parts of the Welfare State. One has only to look at the increase in Assistance expenditure—increased provision for those who are in need—where the extra money spent goes, by definition, to those in need. That expenditure has increased from £47¾ million in 1949 to £190 million in 1962. This is where the taxpayer is making his contribution.

The taxpayer contributes also to the National Health Service, where the amount met by the Exchequer has increased from £366 million in 1949–50 to an estimated £730 million in this year. Therefore, the taxpayer as such is making a very substantial contribution to the Welfare State, but one has to remember that taxpayers and contributors are not necessarily different people, and the two together represent the total contribution of the community towards the National Insurance scheme and towards the Welfare State.

I want now to turn to the many suggestions for changes that have been made today. My right hon. Friend the [column 706]Member for Reigate (Sir J. Vaughan-Morgan), my hon. Friend the Member for Uxbridge and many other hon. Members have put forward the principle of greater selectivity in National Insurance benefits. Others, taking the contrary view, have said that what is wanted is a larger, massive flat-rate increase.

If one adopts the principle of greater selectivity, one must remember that the very scheme itself is based on a selective principle; the principle being that those who earn should take upon themselves the responsibility for their own welfare, and that only when they cease to earn, or cannot earn, do they get substantial benefits. That operates as a fairly powerful principle of selection in the first place in regard to older people, who are regarded as having retired in any event at 70 for men.

This, at least, would be an insurable contingency, as my right hon. Friend the Member for Reigate pointed out, but it is a difficult, and, in some ways, a distasteful job to have to select which misfortune is worst under the scheme. If one were to say that being without a job should attract a higher rate of benefit, one would be saying that the man on short time, who can get two days' unemployment pay in six, should have the preference over, say, the man with wife and family who has for many years been chronically sick. There are many degrees of misfortune, and I myself would not like to say that the unemployed should have preference over the chronic sick, or to choose very wide variations between other groups of beneficiaries.

We have, of course, agreed upon one preference which, as long as I stay here, I am firmly determined shall be maintained and that is the preference given to the widowed mother. This is a different kind of benefit. It is one of the few long-term benefits before retirement age. This is a different kind of misfortune and I think that the preference we have given to the widowed mother should be abundantly maintained.

Other people have suggested different directions for different developments. The hon. Member for Sowerby and the hon. Member for Sowerby and the hon. Member for Coventry, East have suggested varying forms of graduated benefits. As I understood them, the two [column 707]schemes put forward were very different, and the scheme of the hon. Member for Coventry, East seemed rather different from the T.U.C. scheme which was put to Niall Macphersonthe Minister the other day.

It is not my privilege to reveal what was said at a particular deputation, but certain references have been made to what was said at that deputation. I am making no comment, except to say that the scheme of the hon. Member for Coventry, East, which seemed to me a completely wage-related scheme based on percentage contributions giving percentage benefits, did not seem to bear a great deal of relationship to the scheme put forward by the T.U.C., which, I understand, was a graduated scheme as applied to the short-term benefits.

There is no lack of directions in which change could be made, but there is a wide difference of view about the direction we should take. It is not necessary to have an outside inquiry in order to decide the direction of change. The scheme which we have now has shown itself susceptible to quite a number of changes introduced in the ordinary business of Government in the past, as for example the graduated scheme. In the ordinary course of events we shall continue to change the scheme in the direction which we decide it should go.

Nothing that has been said should mask the fact that the Bill will bring greatly improved cash benefits to about 8¼ million people. [An Hon. Member: “About time, too.” ] An hon. Member accused my right hon. Friend of waffling on a previous occasion. This has been no waffle. He has produced very large benefits indeed, which will benefit a very large number of people, 8¼ million under the National Insurance provisions and another ¾ million under the Royal Warrants and the war pensions provisions. I think that the country will hail this as a further advance in National Insurance.

Although the hon. Lady the Member for Lanarkshire, North did not wish me to give statistics I can only reiterate those that my right hon. Friend gave in his opening speech and point out that since the 1960 Act was presented as a Bill we should need, on the basis of the Retail Prices Index, an increase of 5s. 1d. to bring the single rate up to what it [column 708]was then, whereas, in fact, the increase is 10s. On average earnings we should need 5s. 3d. to bring the single rate back to its value in November, 1960, whereas, once again, we are getting 10s.

This is a great advance in relation to the cost of living and to average earnings. It is a greater advance for the married man with family commitments and that, we think, is a very desirable feature of our scheme.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Commitee of the whole House.—[Mr. Peel.]

Committee Tomorrow.