Select Committee on Social Security Minutes of Evidence

Examination of witnesses (Questions 120 - 126)



Dr Naysmith

  120. In your written submission it says "... the contributory principle continues to have a role, but changes are required to reflect employment patterns and unpaid roles...". Presumably CPAG wants to see the contributory benefit scheme modernised so it shows wider participation. I think you mentioned things like self-employed people, people participating in training or education, carers of course, recognised voluntary work and people in low paid work earning below the Lower Earnings Limit. Can you explain in more detail how you think this should be done and keep more or less the same system? What changes would you introduce?
  (Mr Barnes) I think one of the key ways is looking at the system of credits. That has been extended in recent years, there are still gaps. For example, Jobseekers Allowance, you do have to have actually paid through employment sufficient National Insurance Contributions and that does exclude, therefore, some people who simply cannot get sufficient record to get an entitlement. I think primarily the mechanism will be looking at some kind of extension of the credit system and primarily it is building on the strengths of the contributory system, i.e. the link with employment but also recognising that forms of employment that are not necessarily paid, such as caring, voluntary work and also recognising as well that part-timers—we have seen the increase in part-time work—are sometimes excluded from the scheme. So in terms of updating it, building on the strengths but updating to reflect different roles and contributions to society as a whole in the wider picture.

  121. Really it has to involve almost everyone. How are students going to realise because they are getting credits this is something they are entitled to, as we were talking about earlier on?
  (Mr Barnes) For example, clearly the Government recognises the value of education in terms of supporting employment opportunities later on. For many people going into education it is a risk, particularly for people in older age groups. To mitigate that risk factor, that anxiety about taking further education, to know that you are protecting your safety net perhaps with a system of credits, I think would add value to that wider strategy.

  122. Of course accumulating credits involves extensive bureaucracy keeping a record of all this. We had Professor Alcock in front of us and he suggested that it would be simpler just to have a hypothecated tax and not bother about keeping this bureaucracy and keeping account of all the credits paid. What do you think of that?
  (Mr Barnes) I think there are dangers with a hypothecated tax approach because it can make the principles of redistribution, for example, vulnerable. In terms of identifying where the money is going it becomes politically unpopular to continue to fund that service or that benefit in that way. I think if it is more exposed in terms of the contribution there are risks in that. In terms of the administrative difficulties, what we are seeing at the moment is a removal of the barriers between Government Departments and again I think it is a context that we need to see these wider reforms in. The fact that Inland Revenue will be delivering in effect what is a benefit payment, the Inland Revenue has taken over responsibility for collecting contribution payments. The Child Support Agency and the Inland Revenue will be working together much more closely. That Information Technology provides opportunities to collect information much easier. I think the administrative difficulties are perhaps less than a few years ago because of IT and the fact that it is much easier for Government to work in a seamless way.

  123. You talk also in the written submission about funding social security through taxation and suggesting that might risk alienating the better off. What would you suggest is the better way to try and make that popular or at least acceptable?
  (Mr Barnes) It comes back to one of the core strengths of the contributory principle that everybody in employment is paying in. If you are a higher rate taxpayer at least you know that there is also some entitlement that is not going to be means-tested. That is a real strength and I think that is why it is important to look at these values of inclusiveness and how the operation of the benefits system can support value to society. If you fund benefits through taxation my concern would be that it would lead to a greater drift than towards means-testing where you do start to target those lower paid but at the risk of letting those benefits ripen on the vine because there is less of an acceptance that everybody puts in and therefore takes a share out. It is much easier for governments to marginalise and cut back and isolate.

  124. How would you deal then with the fact that most people are totally confused about what they are paying for? They do really not know what the National Insurance Contribution pays for as opposed to general taxation. Is it worth making the idea of a difference clearer?
  (Mr Barnes) Coming back to the issue of administration, I do not think it would be difficult, for example, to provide every person paying into the National Insurance scheme with an annual account. Why should that be difficult? It is giving a summary of payments that have gone in and giving an indication as to the likely entitlement. The difficulty with the benefits system is even if you have paid sufficient contribution there is no guarantee you will get a benefit because of the other qualifying positions that have to be met as well. Some form of annual account, I am sure, is not beyond the realms of the IT systems that are currently being introduced.

  Dr Naysmith: It has been suggested to us.


  125. Finally, I wonder if can take you back. You mentioned in passing that you were slightly concerned about the issue of housing costs and some of the perspective changes that we may see in the Housing Green Paper later in the year. We are concerned about this ourselves in the Committee. In my own constituency, the level of housing costs in rural Roxburgh if you compare it with Andrew or Karen's case load evidence of the private sector and public sector rents in constituencies in inner city London, the disparities are enormous.
  (Mr Barnes) Yes.

  126. Can you really expect to have a comprehensive universal system of social contributory based benefit that deals with these huge differences in housing costs? As an organisation, do you have a view on that?
  (Mr Barnes) I do not think CPAG has ever suggested that housing costs should be met through the contributory benefit system. It is not something we have looked at and I would quite obviously raise the issue of affordability. The issue of housing costs at the moment is within the context of the means-tested benefit system. Housing Benefit is complicated. It is not the case that everybody gets paid their Housing Benefit regardless of the level of rent, which is what you hear in the press at the moment. This is an opportunity to review the support for housing costs, and there are opportunities, and the Chancellor has said that he is interested in providing support for people in low paid work with mortgages possibly to be funded by the abolition of MIRAS. Again it is this good news/bad news picture that we would welcome. The indications are, however, that the Government wants to provide housing support primarily through the tax credit system and the danger there is if you do that to try and simplify it or to link it into paid employment, are you therefore basing it on flat rates, are people missing out and this idea of social engineering, that somehow you can encourage people to try and find cheaper accommodation is, I think, a cruelty, to believe people have that ability to negotiate with landlords and the accommodation is there. I think the issue of housing costs is obviously a difficult one. We are waiting for the Green/White Paper whenever it is due, some time later this year. For us because the picture is complex, because it is not yet clear where the Government is going, we have to recognise and welcome the good stuff, and there is a lot of good stuff but equally the dangers and pitfalls in the system. One of the biggest dangers is this gradual move towards means-testing. That is primarily what is informing our contribution to this debate at the moment.

  Chairman: Martin, thank you very much. We could spend the rest of the morning, indeed the rest of the week probably discussing some of the finer points but your evidence this morning has been very helpful, as has your written submission. Thank you very much for your help.

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