Mr. MacDermot
We have been debating these Amendments for over six hours and I hope that the Committee will not think that I am intruding unnecessarily if I seek to reply to some of the many points made in the debate——
Mr. Iain Macleod
Would the hon. and learned Gentleman then undertake to make a second reply when he has listened to the rest of the debate?
Mr. MacDermot
I give no undertakings at all. I have heard many arguments repeated already in this debate. [column 1947]That was one of the things which led me to think that this might be a proper time for me to intervene.
The right hon. Member for Enfield, West (Mr. Iain Macleod) set an admirable example of brevity when he opened the debate. He moved an Amendment which itself covers a very wide field and embraces the subject matter of a very great number of the Amendments which we are discussing with it. Although there are 16 Amendments, there is, of course, a great variety in the subject matter of the Amendments. They reduce themselves to certain broad headings with which I shall seek to deal.
One has a difficult task in seeking to reply to a debate of this kind. If one seeks to reply to every point, one is told that one is, and builds up a reputation for being, lengthy and tedious and wearisome—a reputation which tends to survive, I find. If, on the other hand, one speaks too shortly, one is treating the Committee with contempt. It is difficult to strike a balance, but one can start off with the confidence that whatever one says one will be told that one's speech is the most unsatisfactory inhuman and heartless ever heard, even from the Treasury Bench.
I would begin by reminding the Committee that the Bill provides for the collection of this tax with the National Insurance stamp. The basis of it is the stamp on the Insurance card. This is a necessary feature of the tax, so that it may be introduced this year. My hon. Friend the Member for Newcastle, East (Mr. Rhodes) suggested that we should have deferred the tax to next year so that it could be brought forward in a more refined form. I would ask him and any other hon. Member who thinks that way to answer the question which we have put many times, but which has not been answered. If we do not introduce this kind of tax, what sort of tax with a similar effect would people prefer us to introduce?
Dr. Winstanley
The hon. and learned Gentleman must be fair to hon. Members who have made specific suggestions for specific alternatives. I myself at some length put forward our proposals for an alternative, in pounds shillings and [column 1948]pence, and in detail. It is not that we have not put forward proposals. It is that they have not been answered by the Treasury Bench.
Mr. MacDermot
I did not hear any such argument from my hon. Friend the Member for Newcastle-upon-Tyne East, who is the one Member in this debate who raised that issue.
The result is that it is not possible administratively to—[Interruption]. would be grateful if hon. Members who wish to carry on conversations would do so outside the Chamber. It is not possible administratively to grant exemptions which are dependent upon the occupation of the employer or the employee. We cannot, for example, pick out theatrical employers, which was a case taken by my hon. Friend the Member for Putney (Mr. Hugh Jenkins) supported by my right hon. Friend the Member for Vauxhall (Mr. Strauss), or hotel proprietors or people in the catering trade, and give them special treatment, because they cannot be distinguished as a separate class within the National Insurance system.
We can only deal with categories of people who can be distinguished for the purposes of National Insurance. The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), supported among others by the right hon. Member for Thirsk and Malton (Mr. Turton), suggested that for this reason we should be able to give special treatment to retirement pensioners because, they pointed out, there is a different card for retirement pensioners compared with the card for other employees. Up to a point, that is true, but, unfortunately, the card which applies to them is not exclusive to them. It applies also to those married women and widows who do not elect to contribute. I think that the whole Committee will agree, on reflection, that it would be very undesirable to create an exemption which would result in pressure being brought to bear upon women to elect not to contribute and in that way to sacrifice their insurance cover.
Another of the main classes which we have discussed are the various categories of the disabled. My hon. Friend the Member for Bedwellty (Mr. Finch), who, of course, has enormous experience in the field of assisting the disabled, was the [column 1949]first to raise this matter, and many other hon. Members followed him. Again, there is no separate card for the disabled and there is no identification of disabled persons on their card. There is, of course, the disabled persons' register, which is a separate matter, not related to the National Insurance stamp and card system.
I do not say that it would never be possible under any circumstances to devise a system, if that was thought right and necessary, in order to distinguish other categories from those that exist at the moment within the National Insurance system. But I do say that it certainly is not possible to do that this year and in time for the implementation of the tax this year.
Mr. Percy Grieve (Solihull)
That deals with the point so far as it goes, but surely it is not beyond the wit of the Government to devise a system this year which will avoid a gross and terrible injustice to the disabled.
Mr. MacDermot
I will come to the merits of individual cases in a moment and give reasons why I think the hon. and learned Gentleman is mistaken in thinking that this is a gross and terrible injustice. I am now pointing out the administrative considerations.
Equally, in the case of the deaf, I was asked particularly by the hon. Member for Essex, South-East (Mr. Braine) whether there is a separate register for them. There is no such register; but I am not pretending that even if there were it would solve the problem, because it would not.
My hon. Friend the Member for Wood Green (Mrs. Joyce Butler) suggested that we could make use of the fact that many, if not most, deaf people have applied for hearing aids and that one could identify them as a class on that basis. Again, this is not something that is married to the National Insurance stamp system.
Mr. J. T. Price
I put it to my hon. and learned Friend seriously that the House of Commons has never accepted the argument of administrative convenience as being an adequate or valid reason for refusing to deal with a patent injustice which has been well argued from both sides.
[column 1950]Mr. MacDermot
I know that the House of Commons has never accepted it, but I am now stating what the position is. I am coming in a moment to the merits of the arguments in particular cases. But I would ask all those who take this attitude about administrative difficulties to remember it next time they criticise the growth of the Civil Service, as so many hon. Members opposite do.
The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said that in subsection (2) of the Clause there is an exemption for the Armed Forces and foreign-going mariners and suggested that this showed that we could, if we wanted, exempt a particular class of person. But that can be done in these cases for the precise reason that the employers pay a reduced rate of contribution, related to the fact that their employees do not enjoy many sickness benefits which would otherwise be provided under the National Health Service. The point is that they are an identifiable class within the National Insurance system.
My hon. Friend the Member for Willesden, West (Mr. Pavitt) criticised the tax, because, he said, we are not selecting as we should between socially more useful and socially less useful services, between the socially desirable and the socially less desirable. All I can do is to repeat that this is not a differentiation that it is possible for us to make having regard to the form of the tax.
Sir L. Heald
rose——
Mr. MacDermot
I hope that the right hon. and learned Gentleman will allow me to go on. I think that it would be more convenient to let me pursue my argument and then seek to intervene later. I am making general observations now and will come to particular categories later. If I do not meet points put by right hon. and hon. Members, I will gladly give way and seek to do so.
My second general observation is to point out that provision is already made for refunds in certain of the categories referred to in Amendment No. 34. Indeed, that was acknowledged and welcomed by the right hon. Member for Enfield, West.
I would like, first, to deal with the question of charities and religious [column 1951]organisations. There is complete provision for refund to them. The right hon. Member for Enfield, West criticised us because we are limited to registered charities only under the legal definition of charities. But surely this is an inevitable consequence of the decision which my right hon. Friend took, with the agreement of the Committee, that it was not possible for him to distinguish between charities. Some of my hon. Friends would have felt that some bodies registered as charities were less deserving of special exemption than other bodies which are not registered as charities. This is not a distinction which my right hon. Friend can be expected to make, and it would be considered invidious if he tried to do so.
The right hon. Gentleman the Member for Enfield, West in moving that Amendment, referred to one body, the Hospital Savings Association, which I think is, in effect, a form of mutual insurance organisation that provides certain sickness and other benefits for its members. It does not have the status of a charity, and the right hon. Gentleman told us that it has investment income which has for many years been taxed. I assume that if it had been able to bring itself within the legal definition of a charity it would have had an obvious economic incentive to do so. But I suppose that because its benefits were confined to its members it did not qualify.
I do not know the particulars of that organisation. There is another organisation—I do not want to mention its name, because I have no authority to do so—which made representations, and said that it would have to pay a tax of about £12,000 a year under these provisions. When that was looked into, it was found that the increase in members' contribution that would be required to pay that sum, if the whole tax was passed on in terms of increased contributions, would work out at approximately 8d. per member, per year. I do not know the particulars in the case of the Hospital Savings Association to which the right hon. Gentleman referred, but that example perhaps illustrates the exaggerated fears which some people have had about the incidence of the tax. [column 1952]
The point was made that even the charities which receive the exemptions will have a bridging difficulty, in finding the money to make what has been termed the interest-free loan to the Government until they receive the refund. But when the deputation of the National Council of Social Service and the Churches Main Committee came to see my right hon. Friend this was not the point that they made. Their concern was not so much with the burden of the tax. They were more eager and anxious to establish, or re-establish, the principle of exemption from tax for charities in general.
The Committee will remember that originally my right hon. Friend took the view that, this having the nature of an indirect tax, it should be equated with other indirect taxes, which charities pay. It is a matter for argument as to what is the true nature of the tax, whether it is to be regarded as direct or indirect. In any event, as is well known, my right hon. Friend has now decided that the refund should be made.
I do not believe that the bridging burden is the real concern to charities that has been suggested. The religious organisations will qualify for the refund, provided that they are ecclesiastical corporations under the Charities Act, and this will mean that all those ancillary employees about whom many hon. Members have received representations—the vergers and cleaners in local churches—will be employees in respect of whom the churches will be able to claim the refund.
This would seem to cover all the universities and university colleges. It would seem that all direct grant grammar schools should be able to claim the refund. Other grant-aided bodies will be able to have assistance of the kind which has been indicated, through the system of the grants. I shall come back to that. All the church schools which are not wholly supported already will be able to qualify, as will very many of the independent schools. As I have said, very many of those which have not done so already will, no doubt, take steps to have themselves formed into charities.
As regards those which do not, or do not wish to do so, there is a very real distinction in character between a body which is a commercial organisation and [column 1953]one which is a charity, It is a perfectly proper distinction to draw for the purposes of this tax. The same considerations apply to the various other health organisations referred to in item 4 of Amendment No. 73.
I come now to the class which has been the subject of the most discussion, the disabled. I have spoken of the difficulty in relation to the stamp. We have heard many speeches, some of them very moving, all speeches of great sincerity and many made by hon. Members with a great deal of knowledge and experience of assistance to the disabled.
Most of these speeches expressed very pessimistic prognostications of the effect of the tax upon the employment of the disabled. Speaking for myself, I feel that many of those fears will prove to have been unfounded, and I hope that I am right. But I say at once that my right hon. Friend will be watching and reviewing the working of this tax, particularly in its relation to the disabled, most anxiously and carefully. He will certainly not hesitate to take what steps he can to adjust the form of the tax if these fears prove to be better founded.
Turning to some of the points raised. I begin by answering the request that I should give what figures are known in this matter. There are about 600,000 registered disabled persons in employment. Roughly two-thirds of these, about 400,000, are either in the neutral sector, qualifying for the refund, or in manufacturing industry, enabling their employers to claim the premium in respect of their employment. This is a factor which has been overlooked in our debate. In the manufacturing industries there will be a positive incentive to employ these people, as also for the part-time workers, to whose care I shall come in a moment.
In effect, we are dealing with about 200,000 people, all of them still able to enjoy the protection of the quota of designated employment schemes, under the Disabled Persons (Employment) Act, where employers with 20 or more work-people are bound to employ a minimum number of 3 per cent. of disabled persons in their labour force.
In addition, it is right to remind the Committee that the most severely dis[column 1954]abled are nearly all employed in sheltered workshops, a kind of employment usually provided by the Government, or by Government agencies, which will otherwise attract the refund. Many of them are in the manufacturing sector and will attract the premium. Many hon. Members have taken a keen and active interest in the work of Remploy and they would apply to it.
Dame Irene Ward
Is not taxing the disabled the equivalent of taxing the sick, about which I thought hon. and right hon. Gentlemen opposite felt strongly?
Mr. MacDermot
No, we are not taxing the disabled. What we are doing is taxing employers. What I am seeking to do is to answer the argument that this tax will result in the employers being less willing to employ disabled persons, and inclined to dismiss them. I do not believe that it will. The effect of the tax, from the point of view of the employer, is the same as a wage increase. The employers of disabled persons have in past years faced many wage increases, considerably greater than this tax. The reaction of the employers has not been to turn round and dismiss disabled persons, or to say that they would not employ any more such persons.
Mr. Grieve
rose——
The Temporary Chairman
Order. If the Financial Secretary does not give way, the hon. and learned Gentleman must resume his seat.
Mr. MacDermot
Those employers, and there are many of them, who employ more than the legal requirement of 3 per cent. do so out of an acute sense of social responsibility. I know that many hon. Members on both sides of the Committee have taken an active part in promoting this movement among employers. I do not believe that the introduction of this tax will suddenly make them change their attitude. The idea that disabled workers are people who need special help if they are to hold down jobs is a mistaken one which ought to be discouraged. The great bulk of them are able to perform a perfectly normal job. It is a matter of ensuring that they get the right job, which is within their more limited capacity by reason of their disablement. But having found the right job, the majority of them [column 1955]do that job equally as well as the next man, who is not disabled.
Dr. Winstanley
We have heard from the hon. Member for Sheffield, Brightside (Mr. Winterbottom) that, in the catering industry, under the Catering Wages Act there is specific provision to pay disabled persons at a rate yower than the standard rate. If this is not a concession, to induce these employers to employ disabled persons, what is it? The hon. and learned Gentleman said that wage increases have not had this effect——
The Temporary Chairman
Order. An interruption should be short.
Mr. MacDermot
The hon. Member has great experience in this matter as a doctor, and he knows that the great majority of these disabled persons who find work do it as well as a normal man. Special provision is made to enable disabled persons to find jobs. The argument which we have used about full employment is a valid one. A full employment society is the greatest protection and security to the disabled person in finding employment.
I repeat that my right hon. Friend will watch this position most carefully, and if it is found to be right and possible, he will consider what special treatment can and should be made in a more refined scheme to help the disabled.
Lieut.-Commander Maydon
The hon. and learned Gentleman has given an undertaking that his right hon. Friend will watch this; but, assuming that he is right and his right hon. Friend is wrong, will he tell us what he will then do? Can he immediately reverse what has been decided once the Bill is passed? What can he do?
Mr. MacDermot
Not immediately. The assumption he suggests is not one which we are prepared to make; but we will watch this to see how far the assumption is right and, if so, to see what elaborations and refinements can be made in the administrative machine.
Sir L. Heald
I apologise for interrupting, but this is a matter about which many hon. Members are deeply troubled. On 4th May last, my right hon. Friend, talking about the disabled, said: [column 1956]
“I do not believe that these matters—I put it as charitably as I can—have been thought out” .
The Chancellor replied:
“Yes, they have.”
and added:
“I can tell him now—I am sure that he will accept what I say—that I thought very carefully and am thinking now about the position of the disabled. It is an obvious point which occurs to anybody as soon as he considers a matter of this kind” .—[Official Report, 4th May, 1966; Vol. 728, c. 1651–2.]
Does the hon. and learned Gentleman realise that the fact that the Chancellor is not prepared to address the Committee this evening on this subject is one which causes us deep concern?
Mr. MacDermot
I have not a copy of the relevant Hansard here at the moment, but I think that the Chancellor was speaking of disabled employers, and they have been provided for in the Selective Employment Tax Bill. However, be that as it may——
Mr. Iain Macleod
I was speaking on the day after the Chancellor had presented his Budget—the 4th May. I was talking of the disabled, and not disabled employers. The context is absolutely clear.
Mr. MacDermot
I assure the right hon. Gentleman that the Chancellor has considered the position of both as carefully as he can and thought it right to take the action he has in the case of the disabled employers.
The last part refers to scientific, literary, and artistic organisations. This is not a class which is easily identifiable within either the National Insurance scheme or within the tax system. My hon. Friend the Member for Putney (Mr. Hugh Jenkins) has referred to the position of those bodies assisted by the Arts Council and other grant-aided bodies, but I can only refer the Committee again to the specific assurance which was given during the Second Reading of the Bill. Right hon. and hon. Members will find it in Hansard for 25th May, where my right hon. Friend the Chief Secretary made the position quite clear.
There is also the question of theatrical people, but I will not detain the Committee by elaborating on that point; it can all be found in Hansard. My right [column 1957]hon. Friend the Member for Vauxhall (Mr. Strauss) and my hon. Friend the Member for Putney spoke about commercial organisations, mostly in the provinces, which are not covered by Arts Council grants. I cannot answer the specific question raised about the scope of the Arts Council grants being extended to full-time theatrical organisations, but I will draw the attention of my right hon. Friend the Under-Secretary of State, Department of Education and Science, who has special responsibility for the arts, to that point.
I will turn now to the next major class of workers, namely, those who are employed part time. This has been the other main topic which has occupied our attention. I can see that there is a difference, and very special force in the argument on part-time workers. It is not like the argument in the case of the disabled and others: I appreciate that the effect on employers cannot be exactly equated with that of an ordinary wage increase for the reason that this tax, relatively speaking, bears more heavily in relation to the part-time worker than it does in relation to the full-time worker. This is the strength of the criticisms and arguments adduced under this heading.
There is already an exemption in relation to the part-time workers employed for not more than eight hours a week in the sense that they do not come within the National Insurance Scheme and, therefore, their employers do not have the stamp or pay the tax. There would be very strong objections to trying to exclude from the scheme part-time workers who work for a greater period—say, up to 21 hours—because they would lose very many of their National Insurance benefits. I am sure that no one would want to press for that.
It was suggested, particularly by the hon. and gallant Member for Wells (Lieut-Commander Maydon), that if it was possible administratively for the National Insurance scheme to distinguish between people working only up to eight hours and those working more, it should be equally possible administratively to distinguish between, say, people working over or under 21 hours. That is not [column 1958]right, for this reason. If an employer were to try to show a worker who is working for more than eight hours as a worker working fewer than eight hours and not return any insurance card for him, the protest would come from the worker, who would be deprived of his National Insurance benefits.
No such check would exist if we tried to draw a distinction, say, at 21 hours. The worker would have no reason not to agree to his employer falsely showing someone who was employed for more than 21 hours as being employed for less. There is no machinery in the present card system by which the National Insurance officials could know from the card the number of hours for which a person was employed or who his employer was in any particular week. Therefore, this is not a matter which is administratively simple, as has been suggested.
Nor would it be a matter merely of adding one extra category of stamp, as my hon. Friend for Willesden, West (Mr. Pavitt) suggested. Any alteration of this kind would involve at least 10 additional classes of stamp to deal with the existing different categories of employee.
Mr. A.P. Costain (Folkestone and Hythe)
The hon. and learned Gentleman claimed that people would lose their benefits. Would he explain what a married woman whose husband was in full employment would lose by not having a stamp?
Mr. MacDermot
The case of the woman who has opted out and deprived herself of benefits is different. We are being asked to consider a different form of exemption covering the whole field of part-time employees. For the reason I have given, that would not work.
As has been said many times, 90 per cent. of part-time employees are women. It is because of this, and because of the level of contribution which has to be paid, that the tax which has to be paid is related to the average earnings. This lower rate for women takes into account the very large incidence of part-time employment among women. [Laughter.] The hon. Gentleman may laugh, but this is the fact. I do not see why he should find facts so humourous. Perhaps he prefers prejudice to fact. I agree that the scheme is only based on averages and [column 1959]averages have a crudity about them, but this is one of the ways in which the rates allow for the fact that 90 per cent. of part-time workers are women.
Mrs. Margaret Thatcher (Finchley)
I gave some figures about this yesterday. The average earnings for men are about £20. The average earnings for women are £8 a week. The average earnings for women working part time are roughly £5 a week. If the argument the hon. and learned Gentleman is advancing now is correct, the rate for women should be a good deal lower than 12s. 6d.
Mr. MacDermot
I think that the hon. Lady's figures certainly for average earnings for men, are taken from earnings in industry. Of course, those people qualify for premium.
Mr. Eric Lubbock(Orpington)
rose——
The Temporary Chairman
Order. The hon. Member must remain seated if the hon. and learned Member who has the Floor does not give way.
Mr. Lubbock
The hon. and learned Member did not see me, Mr. Steele. I am most grateful to him for giving way now.
I was going to ask him, if this is a good argument for charging the lower rate for women, that a large number are employed only part time, why does not the same argument apply to retired people, who are also, in many cases, employed only part time?
Mr. MacDermot
I am coming to the retired people in a moment. I am dealing with the part-time classification as such.
The real point here is whether the failure in the scheme to make a distinction specifically for part-time workers is going to provide a disincentive to employers to employ part-timers in the service industries. Obviously, it will not provide a disincentive in manufacturing industry. On the contrary, it provides an incentive, because if an employer in manufacturing industry employs two or three part-timers in place of a full-timer he will get two or three times the premium he would get for the single employee. So there is a very real incentive for employers in the manufacturing sector [column 1960]to recruit and employ as many part-time workers as they can.
But I think that the real answer I would give on this question in relation to service industries is contained in the phrase my hon. Friend the Member for Sheffield, Brightside (Mr. Winterbottom), who has enormous experience in this field, repeated over and over again in his speech, that is that it is absolutely essential—absolutely essential, he said—in the distributive trades to employ part-time workers.
I agree with him. That reflects the pressure which there is for employment of part-time workers, and I believe that, with the development of our economy, that pressure will remain, and that that incentive to employ part-time workers will remain, and that is why I believe, again, that the fears which have been expressed, and widely expressed, are ill founded.
But, again, I would respond to the appeal of my hon. Friend the Member for Willesden, West and of other hon. Members who have spoken from both sides, and say that we shall consider most carefully whether or not this tax is having the effect which it has been suggested that it will have upon the employment of part-time workers, and introduce what ameliorations we are able to do which are necessary to meet any such situation.
Mr. Palmer
If this is so, if my hon. and learned Friend is to watch this, how can he get over the administrative difficulties which, at the moment, he says it is impossible for him to get over?
Mr. MacDermot
I have already said that this is something which, at the moment, is based on the National Insurance scheme. It has to be introduced with that scheme as it is. It is not possible to carry out this kind of refinement which has been suggested to the scheme within the limit of time which we have to introduce this tax.
I turn to the question of retired persons. I apologise for having taken so long, but I have given way a good many times and in many directions. It was the right hon. Gentlemen the Members for Kingston-upon-Thames (Mr. Boyd-Carpenter) and for Thirsk and Malton (Mr. Turton) who, in the first instance [column 1961]raised this problem, which has been discussed by many other hon. Members. I pointed out and dealt with a particular administrative problem. Again, I was asked to give what figures we have. There are about 438,000 men and 535,000 women retirement pensioners in employment, a strikingly high figure. Figures are not available of the numbers of those who are employed in the manufacturing sector and the number in services. If the assumption were made—I am not suggesting that it is necessarily the right one—that they are in the same proportions as for the total population, it would mean about 360,000 in the manufacturing industries, and, again, the employers of all those who are employed in the manufacturing sector will qualify for the premium. In conditions of full employment, there is little reason to think that the incidence of this tax will lead to their being at risk of losing their jobs.
If the Amendments were accepted, and we were to make an exemption for retirement pensioners, one of the side effects would be to lead to undesirable pressures being brought to bear on older workers to continue in employment but to continue as retirement pensioners and thereby forgo the extra pension which they would otherwise get on retirement.
Mr. Boyd-Carpenter
Surely the weakness of that argument is that for the younger ones the earnings rule would prevent that pressure being effective and the older ones could draw their pensions, anyhow.
Mr. MacDermot
The right hon. Gentleman has great experience in this field, far more than I have, but I think that he will find that there are still many of the older pensioners for whom such pressures could be effective. But I do not put this forward as a main point. I did not seek to. I described it as a side effect.
There is a difference of opinion within the Committee as to what the effect of the tax will be on the employment of retirement pensioners. As in the other cases, my right hon. Friend will watch the position most carefully and consider what, if any, action is necessary.
Finally, I would seek to answer the specific question put to me by the hon. [column 1962]Lady the Member for Plymouth, Devonport (Dame Joan Vickers), who spoke of the position of the single woman with a dependent relative, who would become entitled to a refund under Clause 6 of the Selective Employment Payments Bill. Strictly speaking, this is a matter to be dealt with on that Bill, which we shall consider shortly. But, if I might seek to answer the point, in order to establish their rights such people will have to show that they come within the provisions of that Clause to the satisfaction of the Special Benefits Commission, and the Commission will have power to grant a discretionary allowance in the kind of case which the hon. Lady described, where there would be real hardship in the bridging period.