Examination of witnesses (Questions 127 - 139)
WEDNESDAY 7 JULY 1999
127. Can I welcome Lorna Reith who is the Director of Disability Alliance. Good morning. Welcome, Lorna. As you know, we are looking at the whole question of the contributory principle. I wonder if I can ask you the same question that I asked Martin Barnes about definitions, what you understand by the underlying concept of contributory principle and really whether you think it still has a role and does it matter in this day and age? Could you say a few words about that from a disability point of view? If you could crystallise those points I would be grateful.
(Ms Reith) Thank you. I think in terms of a definition of the contributory principle, the most helpful way to look at it is to see it in terms of rights and responsibilities, that individuals gain entitlements by having paid in but have responsibilities to pay into that system. There is a responsibility on the part of society to make sure that it honours that contract. It is really a contract between the individual and society. Because of that I think it is a very helpful and a very positive principle which fits in very well with the way in which the current Government views the whole range of Government policy.
128. Are there particular amendments and modernisations that you think people in the disability lobby would be looking for in terms of how this evolves in the future?
(Ms Reith) Certainly. One of the criticisms we have of the contributory system as it has been inherited is that it is based on a world which no longer exists, the system of male employment. It is interesting that in the past women who were not earning were still regarded as part of the contributory system through their husbands and the system never really had a problem with that. The whole world of the labour market has changed, women are now in work, part-time work, but are now excluded from the system and therefore people who raise questions about how can we include people who are not in full-time work or are not earning enough, well the system used to have a way of dealing with that, surely it is going to be possible to look at how the system can deal with that in future. In terms of disabled people obviously the traditional problem would be disabled people who were not able to work at all. Disabled people who became disabled while they were in work clearly were covered by the system because they would move on to Invalidity or Incapacity Benefit. It was people who had disabilities throughout their working lives or who were never able to enter the labour market who got left out of the system. I think it is interesting that one of the things in the Welfare Reform Bill that the Government is doing that we very much welcome is to say "Okay we recognise that for young people who have been disabled since childhood and we are going to bring those people into the contributory system although they will not be obliged to pay contributions". That seems to me an imaginative and a very positive way of using that notion of social inclusion to bring in a group of people much in the way that wives were brought in in the past without the necessity of having to pay those contributions. There are ways in which the system can be made to work for groups of people who are currently excluded.
129. The Chairman has touched on an area that I was going to bring up with you about the relevance of that work based Beveridge principle. Do you think it is relevant or are we now in a situation where we are looking at artificial divides between contributory benefits and means-tested benefits. You have just highlighted one with the new benefit for young disabled people where they are getting a contributory benefit without having contributed through work. What is the relevance of it all and is it now an artificial divide? Should we therefore be saying the contributory principle is an excellent principle, we are going to back it up but knowing that according to Beveridge it was based on work and payments you made?
(Ms Reith) It was and it was not because married women were included without making those payments. The main way was you paid into the system when you were in work but it was not something that was limited to people who did that. I think it has always had a slightly broader scope as a system of social insurance rather than taking out a private policy where you pay in and you get out and it is very individual. I think it is possible now that more things are recognised as being valuable work in their own right like caring for children, caring for adults, and there is home responsibility protection built into that system to credit people in when they are doing that. The system has already broadened beyond just the concept that you have to be in paid work. It is beginning to recognise that you can contribute to society in other ways. That is how I would see the system being modernised, to take a more flexible look at how that is done as well as a more flexible look at the modern labour market and people who are in and out of work or earning very low amounts of money or working very few hours and seeing if there is not a way of including those people into the system because that pattern of work is something that was not a feature of Beveridge's time and it is a feature of our time and is likely to continue to be so. The system has got to modernise itself to protect people in the modern labour market. That affects a lot of disabled people many of whom are going to be working part-time, have intermittent work records, be on low earnings, maybe working very few hours. I think it is important the system finds a way of including those people.
130. How can the system also be amended to include the comments made earlier about one of the principles of Beveridge was that the contributory benefit was supposed to be more desirable and therefore by implication means-tested benefits less desirable? We are now in the ironic situation of many people on contributory benefits having them topped up by means-tested benefits because they are not adequate.
(Ms Reith) Yes.
131. How do you think that that aspect of the original contributory based benefits principle can also be modernised and taken into account?
(Ms Reith) Part of the reason, as you say, that people on contributory benefits have to top up with means-tested benefits is the way in which the value of those benefits has fallen over the years following the break with the link with earnings. Obviously one of the things that needs looking at is correcting that and making those benefits more generous so that fewer people have to top up with means-tested benefits. The argument that means that is extra money for people who are better off can be dealt with at the other end, through taxation, because those benefits are all taxed. I think that has been part of the problem. It is an even worse problem if you look at the benefits that are available that are not contributory benefits, something like the Severe Disability Allowance or Invalid Care Allowance, which are paid at even lower rates and therefore far more people on SDA have to top up with Income Support. It is because the value of those benefits has been systematically depressed.
132. Given the changes you have outlined and we have heard in these submissions, do you think we have moved therefore well away from a notion of one set of benefits being more desirable than another set of benefits that are somehow associated with not only themselves being undesirable but associated with undesirable people if that makes sense?
(Ms Reith) I would think they are both.
133. Should we be moving away from that sort of split?
(Ms Reith) I think it would be helpful to move away from a split like that so that you cover more people in a contributory system. By contributory I meant something that was broader than just you paid in in paid work, an inclusive system. I do not think you ever get away from the need to have some sort of fall back means-tested system for some people. I think there will always be people who fall through, partly because you cannot predict the changes that might take place in society. Beveridge was not able to predict the rise of lone parenthood and so on as features. You have to keep revisiting the system and make sure that it meets the requirements of modern society. It would be possible, I think, to reduce the number of people who have to have recourse to means-tested benefits. I think yes those people are seen as undesirable but it is certainly the case that for people on those benefits, claiming those benefits is undesirable. Most people would much rather not have to go through the indignities that you have to go through to claim a means-tested benefit.
134. You have used two phrases repeatedly throughout the session so far. One is an inclusive system and the other is the contributory principle, contributory benefit. You have talked about the need to try to modernise the National Insurance system by making it more inclusive and bringing in groups that might not be included simply on the basis of their contribution records. Are we not talking therefore about social insurance but perhaps without the contributory principle? Is it possible to have something like that? Are we really chasing a myth in trying to pretend this can still continue the contributory principle, especially when it affects people with disabilities?
(Ms Reith) It is partly terminology, is it not? I think it is helpful to talk about a contributory system because you are telling people that they are valuable, that they have made a contribution. For some people that is a contribution through a payment and for other people it is a contribution through unpaid work like caring. I think that is quite important. I think if you call it a social insurance system that will become the new word for social assistance or something. It is a concept that we might understand and feel attracted to but I think in general people tend to see things much more in a contractual way and therefore the rights and the responsibilities' concept fits better with calling something a contributory system.
135. Okay. Then the logical and I assume the ideal extension of this would be to say eventually you want all groups to be covered by the contributory system. If they are not able to make contributions themselves they will be credited in and therefore you will be saying effectively everybody is making a contribution. That will be one ideal. The danger is if you do not make it that far you will leave groups who are not able to make that contribution outside of the system. If you say those groups receiving contributory benefits are receiving them because they have made a contribution, financial and non financial, what are you saying to those groups who are left outside the system?
(Ms Reith) I can see that is a danger. I think what you do is you look at groups of people and you look at why is it that they are not in the contributory system. You look at women working part-time for example. Why are they not in? Well, it is partly because the system is not designed to cope with part-time work. That work is valuable, why are they not in, they ought to be. I think there would be other groups like young disabled people who the Government decided to bring in on the understanding that this is a group who are not able to work and that is no fault of their own and so on. You could bring in a whole number of groups. The hope would be that the people who were left outside were people who fell through the net but only for short periods of time. The person who voluntarily gave up a job because they did not like it very much I think is in a very different position from the person who is made redundant. You do not want that person to starve, you want a system that will offer a level of protection to people who maybe make wrong decisions or unwise decisions in the course of their lives. You want to offer a form of protection but you might not want to bring them into the contributory system. I think there will always be groups who for one reason or another fall outside of that but the aim would be to try and have a basic system that was as all encompassing and as inclusive as possible.
136. I have just got one last question and that is why not just call it a social dividend type of system? Instead of pretending it is contributory why not just say it is universal social security system in which almost everybody is included?
(Ms Reith) Because dividend is about paying out and contribution is about paying in. What partly I think Government should be looking at is how do you increase the feeling of belonging in society and a feeling that you are contributing for the good not just of yourself but for others. If you call something a dividend then there is much more of a sort of: "Well it is a paid out". I think there are values in keeping the word contributory there though interpreting it in a broader way.
137. Can I follow up the last but one answer you gave to Chris about the example of somebody giving up a job or being made redundant. The logical conclusion you are coming to is there is some difference between deserving and undeserving people. That is a clear example. The logic of that conclusion must be to extend that principle further.
(Ms Reith) I think there is always going to be something of that. You protect people against things which are clearly not their fault. People who make an unwise decision or a wrong decision or whatever will end up slightly worse off. What you want to make sure is that nobody is left without some form of protection and is able to get back in.
138. Let me give you a hypothesis. Supposing the person who gives up his job has been paying his contributions for ten, 15 or 20 years, he gets a new boss who he cannot get on with and jacks his job in having paid 20 years of contribution. Contrast that with the redundancy situation, somebody who just started a job, the factory loses an order, first in/last out and they are out within a month.
(Ms Reith) The current system penalises the person being made redundant and may well pay money to the other person.
139. What I am getting from your answer is that you think perhaps it should be the other way round?
(Ms Reith) Yes.