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Baroness Hollis of Heigham: Oh dear, my Lords! I shall try to respond to the specific point made by the noble Lord, Lord Higgins. He asked about Contributions Agency issues, which are a matter for the Inland Revenue and are not part of the regulations under discussion. However, I shall have a go, basing my remarks on the Government Actuary's report, which I just happen to have in my back pocket. Perhaps I may respond in two ways. I shall talk about the implications for the National Insurance Fund and then talk about the baseline figure for national insurance contributions. If the noble Lord wants additional information beyond what is in the Government Actuary's report, I shall have to write to him. He will understand that.

The surplus balance in the fund over the minimum recommended level is projected to remain at its current level of 11 billion until 2005 or 2006. Thereafter, it will fall. By 2009 or 2010 it will need either a Treasury grant or an increase in national insurance contributions to bring it back up again. That is under a prices uprating scenario, which is the one on which we are currently operating.

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In terms of the baseline figures on national insurance contributions, the joint employer/employee national insurance rates are currently 20.25 per cent, excluding the 1.95 per cent in respect of the NHS. In 2001-02, that will fall to 19.95 per cent, because the employer rate is due to fall by 0.3 per cent. In 2002-03, it will be 19.85 per cent, because the employer contribution rate is due to fall by a further 0.1 per cent. With price upratings in 2010-11, the joint employer/employee rate would have to be approximately 21 per cent as opposed to the baseline rate of 19.85 per cent; that is with price upratings. I could go on into 2030 but that is too far ahead. I have not given our assumptions about earnings because we are not intending to earnings link benefits, but I can give that information if the noble Lord wishes. I hope the noble Lord thinks that I have met my point and that he can see the size of the fund, what the baseline figure would be, and therefore what the potential shortfall could be.

Lord Higgins: My Lords, I was really making a much simpler point. The effect of paying higher benefits is to lead to an increase in contributions. At the same time as the Chancellor announced an increase in benefits, he did not refer to the increase in contributions but left it to other people in a more obscure way. What happened this year is that the increase in contributions for a substantial number of people, as a result of the way in which the system works, was about three times the rate of inflation. I am still not clear why the Government did that. It is a cause for concern for those people. I have not yet heard any justification for it.

Baroness Hollis of Heigham: My Lords, is the noble Lord referring to the contributions of the self-employed?

Lord Higgins: My Lords, I am referring to employee contributions.

Baroness Hollis of Heigham: My Lords, it is no longer a DSS matter but I shall follow up the noble Lord's question and seek to answer it in writing. If he finds that unsatisfactory, perhaps he will put down a Question for Written Answer. The information I have is what I might call the global information because this matter is now one for the Treasury and the Inland Revenue.

I turn to the election speech of the noble Earl, Lord Russell. He said that after looking at the record of the existing Labour Government the prospect of a future Labour Government filled him with dread because the CSA was worse as a result of our reforms. I have to say that the noble Earl cuts me to the quick. When we took over, only about 65 per cent of parents received what they should have been receiving. The figure is now well over 70 per cent. As a result of these reforms I hope to push the figure beyond 85 per cent. There are 1 million kids out there not getting money basically because some fathers do not wish to pay, even though, by any test or formula, they can pay. I have been responsible for trying to change the system, as your Lordships have been kind enough to acknowledge, in order to ensure

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that children who are poor and needy are not denied the money. The noble Earl suggests that making any change to that system is somehow to worsen the CSA. I just think that we are living in different worlds.

I am concerned about the wellbeing of the child and not about fathers who, in their anger, want their day in court. That may be the difference between the noble Earl and myself. We shall have to disagree on this issue, but the record of 1 million children denied on average 30 a week of the money they should be receiving, which would make all the difference in floating them out of quite severe hardship into a higher degree of comfort, is deplorable. I had hoped that the noble Earl would be joining us in fighting for the child against some fathers--some non-resident parents, including women--who have sought in the past to walk away from those responsibilities. We are making it easy for them to pay in future and therefore there should be no problems about the obscurity of the formula as a device or alibi by which to avoid responsibility.

The noble Earl's second charge was that the lone parent situation is worse. Again, I do not know where the noble Earl has been in terms of what we have been doing on the New Deal. Around 200,000 lone parents have joined the New Deal. One lone parent said to me the other day, "I am off to work and free at last". She now feels that no longer is life happening to her; she is running her life. The combination of the New Deal, the working families' tax credit, the childcare arrangements, the national childcare strategy and the training and skilling opportunities we are offering means that no longer will lone parents be given a giro cheque, be asked to endure on that amount for 16 years and then be kicked out into the labour market. We are seeking to work with their choices as to what they do. We are seeking to make those choices deliverable for them and on the terms they want.

The noble Earl said that the JSA is worse because of our policy of policing the unemployed. The number of jobs available is up and unemployment is at its lowest since the late 1970s. Youth unemployment has fallen by 75 per cent since 1997 and is at its lowest rate since 1974. I know that if youngsters have not had a job by the age of 21 they find it very difficult to enter the labour market. Long-term unemployment, particularly of older men, is down by 50 per cent. The noble Earl says that the situation of the Child Support Agency and of lone parents is worse. I say that we do not live in the same world--either the same mental world or the same practical world. I see people out there, going into work, increasing their income and taking control of their lives to the benefit of themselves and their families.

The noble Earl made a second major point and I understand his approach here. We need uprating above prices, not to deal only with poverty on benefits, but also to reduce inequality, a point which the noble Earl perhaps did not spell out in exactly those terms. I accept that argument. However, again, I would ask the noble Earl to look at the record. In practice, our increases for pensioners, our benefits increases for children, in particular younger children, our increases for disabled people who are entitled to the disability income guarantee and our increases for those with children who

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are in low paid work, receiving WFTC, have well exceeded even the increases that would have accrued from an earnings link. In practice, although we have had uprating by prices as the baseline, those groups which, in my view, are those most in need, have received increases in their real incomes not only well above prices but, in many cases, well above the levels that would have accrued had their benefits been earnings related. I dispute the noble Earl's assertion to the contrary.

The noble Earl went on to make the distinction--which I would accept--between those who are economically inactive as opposed to the claimant count. He is right to say that the problem facing all of us--including taxpayers--is not those people who are on benefit and seeking work and thus part of the claimant count, but those who have not been brought into the labour market. This comprises a large number of people--those with disabilities, in some cases lone parents and those on income support. These groups have been beached on to benefits which are low in comparison with wages in today's society. Obviously, people fare better in work. However, some are beached on benefits and can see no way of getting off that beach. What we are seeking to do is to provide the opportunities, support and skills for those who can and who wish to work to be able to do so. That includes disabled people, 1 million of whom say that they wish to work but are unable to do so. It applies also to lone parents, 90 per cent of whom have told us that they wish to work as and when they have child support arrangements in place.

I believe that, as a government, we are working with the grain of what people want. I refer not only to taxpayers, but those who are themselves the recipients of benefits. If I am wrong in that judgment, then the electorate will tell us as and when we come to the election. If the electorate believes instead the noble Lord's reading that the next Labour Government would fill them with dread, he will be vindicated at the ballot box. However, this is a record with which I am proud to be associated and one as regards which I hope to have the support and confidence of my department as well as my government in a forthcoming general election.

On Question, Motion agreed to.


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