Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Higgins: The noble Lord is reading extremely quickly. It was very difficult indeed to follow the last two paragraphs. I do not know whether he would care to read them again. I had a great deal of trouble in following the relationship between the contributions and the national insurance pension.

Lord McIntosh of Haringey: I am sorry about that. We will do a words per minute count. I did not think that I was reading particularly fast. My noble friend Lord Dormand understood it perfectly well. I was very content with the way I described it and Hansard will no doubt record it. If the noble Lord has any problems, when we come to the amendments, I shall certainly deal with any points raised.

I want to go on to the point he raised about people below the lower earnings limit. It is right to recognise an earnings level for contributory benefits. If the lower earnings limit were to be reduced or abolished, it would be possible for people who paid very small amounts of national insurance contributions to gain entitlement to pensions greater than their normal earnings from work. The cost of those pensions would be additional administrative and non-wage costs for employers. We are not changing the current position for those people, which is exactly the same principle as that which was adopted by the previous government. I hope that the noble Lord will be reassured on that basis.

Our reforms simplify the structure of national insurance. They help to bring it into line with the tax system. They reduce the contributions burden paid by three quarters of the workforce--around 16 million people. They give particular help to low earners who are currently liable for national insurance contributions. We are ensuring that no one will lose benefit rights while we are still maintaining the clear link between work and entitlement. I hope that the noble Lord will not persist in his opposition to Clause 68.

Lord Higgins: These are complex issues. I was seeking to follow what the noble Lord said. It would have been helpful if he had repeated what he said in his own form of words. When one has Treasury briefs on these subjects, it is frequently the case that they are over-concentrated. I am inclined to agree with the noble Lord that, on reflection, it would have been as well to have taken the clauses and the schedule together. Perhaps I may ask him one simple question and then we can come back to the other points on the next set of amendments. Why could not the Chancellor say last year when he made his Budget speech and when the noble Baroness was discussing the matter at great length

20 Jul 1999 : Column 907

on the Floor of the House during proceedings on the Social Security Bill that he was going to protect the position of the people between the two bands by a simple process of providing that there would be a notional payment?

9 p.m.

Baroness Hollis of Heigham: At the time I anticipated that this might be proposed but it had not yet been finally determined. Therefore, it would have been imprudent of me to suggest to the House that that was intended. Until the Chancellor of the Exchequer had clearly determined his policy on this matter, to indicate my own views on how the situation might be resolved would have misled the House.

Lord Higgins: That comment brings out two points which have run throughout our debates: first, that the department is being taken over by the Treasury; and, secondly, that it is extremely difficult to get decisions out of the Government--this may also be true in respect of other matters--because the department cannot say what the position is until the Chancellor has expressed a view. That is not unusual. Surely, at the time that we debated this matter last year the Chancellor should have known that he did not have a sophisticated solution--which was the impression given at the time--and we would simply end up with what is now in the schedule; namely, notional payments of contributions. It would have saved a great deal of time last year if, instead of constantly saying that there was no need to worry because there would be a splendid solution to sort out the problem, the Government had simply said that there was no solution but they would ensure that people got the benefits anyway.

Lord McIntosh of Haringey: It would save a lot of time this year if we concentrated on the legislation before us rather than delved into past history.

Clause 68 agreed to.

Clause 69 agreed to.

Schedule 9 [New threshold for primary Class 1 contributions]:

The Deputy Chairman of Committees (Lord Dean of Harptree): If Amendment No. 129 is agreed to I cannot call Amendments Nos. 130 to 136.

Lord Higgins moved Amendment No. 129:

Page 128, line 43, leave out paragraph 3

The noble Lord said: We have tabled a number of specific amendments. However, as the noble Lord pointed out in the previous debate, effectively this amendment knocks out the crucial point in the schedule. Therefore, it is appropriate to debate it in that way. This part of the schedule proposes that there should be notional payments of primary Class 1 contributions where earnings are less than the lower earnings limit. Perhaps we may return to the point made by the noble Lord a moment or two ago about the relationship between that level of contribution and, if I heard him

20 Jul 1999 : Column 908

correctly, the national insurance pension. I was not aware that there was such a relationship. It would assist if he could spell out that point.

The noble Lord has said that a contributions record will be kept for those who have not contributed. That is a situation which has not existed before. Effectively, people will receive contributory benefits even though they have made only a notional payment of contributions. How does that square with the basic problems which arise in regard to national insurance pensions as far as concern those people with deficient records? There are people who over the years have made contributions to the national insurance system and have some entitlement, for example to a national insurance pension, but none the less do not receive the full amount. I am not clear why they should not receive the full amount whereas in future people who do not contribute, but who are deemed to have made a payment, should get that benefit. It seems that there is unfairness between the two groups of people. Many people are deeply concerned that they do not have a full pension because they have not contributed, but it is now said that others are to get it. I beg to move.

Lord McIntosh of Haringey: I am grateful that the noble Lord has not sought to defend his amendments. If one considers them together, they take away the benefit entitlement of nearly 1 million vulnerable people on low incomes. They remove all elements of the new Section 6A which protects the benefit entitlement of low earners. Amendment No. 129 would take out the entire section, whereas Amendments Nos. 130 to 136 would remove different provisions within it.

To remove Section 6A as suggested by Amendment No. 129 would penalise nearly 1 million people who currently pay contributions but who earn below the level of the new threshold that we are to introduce. I am sure the Committee agrees that it would be wrong to increase the take-home pay of those lower paid employees while excluding them from contributory benefits. That would reduce the incentive for people to take up work at all. On the basis of what has been said perhaps I can be forgiven for not going into the detail of the effects of Amendments Nos. 130 to 136.

I find it extremely difficult to understand the argument of the noble Lord. He referred more than once to "national insurance pension" which is not a phrase with which I am familiar. If he means the state contributory pension I understand that, but "national insurance pension" is not a phrase that means anything to me. What we are doing is incredibly simple. I find it difficult to know where to start with the amendment moved by the noble Lord. To encourage people to go into work we propose that the lower level of national insurance contributions should be the same as the lower level of income tax. That is to be done over two years because it is an expensive proposal, and it is also complicated. However, it can be done, and we are doing it. As a result, 1 million people on low incomes will be substantially better off in their take-home pay, and a very considerable number of people who are not now in

20 Jul 1999 : Column 909

work will no longer suffer the tax and national insurance contribution disbenefits of going into work. Everything that we do is with that in mind.

The Government also say, simply, that if that happens they do not want people to lose out on contributory benefits. Therefore, we are doing what we have done with the stakeholder pension; namely, if people have not paid in, as would be the case if they were unemployed or were carers, they are deemed to have paid in. I do not understand the difficulty of the noble Lord. Where is the unfairness? Everybody is better off under that proposal.

Lord Higgins: The noble Lord apparently says that people who are not contributing will now receive what were previously contributory pensions. At that point the concept of contributory pensions seems to fail. These people will receive what I referred to as the national insurance pension--I think that it is clear I meant the basic state pension--even though they have not contributed. I ask him again: how is that fair on the people who did not contribute previously and are now told that they have a deficient contributory record?

In the noble Lord's earlier remarks he seemed to indicate that there was some relationship between the level of contribution and the national insurance pension--or state pension. I was not clear what he was saying at that point.

Next Section Back to Table of Contents Lords Hansard Home Page