APPENDIX 5
Memorandum submitted by the Royal National
Institute for Deaf People (RNID) (CP 29)
EXECUTIVE
SUMMARY
Whilst the insurance character of contributory
benefits was a myth—it served an important role in legitimising
the post-war benefit system. The historic weakness of the contributory
principle has been that it has consigned disabled people and carers,
who have been unable to work, to second rate benefits.
The net effect of the plans to reform incapacity
benefits in the Welfare Reform and Pensions Bill will be to force
more disabled people onto means-tested benefits, thus reinforcing
their second class status.
We welcome the proposal to passport people incapacitated
in youth onto incapacity benefit (IB), which finally puts those
who have been unable to work due to severe disability on an equal
footing with those who have worked.
We oppose the abolition of severe disablement
allowance (SDA) for those who become disabled in later life. This
will primarily affect women who have been unable to establish
a contribution record due to caring responsibilities.
We oppose the proposals to restrict IB to those
who have recently paid contributions and to offset IB against
occupational and private pensions. It is wrong that many years
of paid contributions may count for nothing.
A system of disability benefits must serve the
following broad objectives:
— to enable disabled people to lead
dignified and independent lives;
— to maintain income for those unable
to work due to disability;
— to contribute towards the extra
costs of disability.
To achieve these objectives disability benefits
must satisfy the following criteria:
— benefit rates must be set at adequate
levels;
— the purpose of each benefit should
be easy to understand;
— the claims process should be as
accessible as possible;
— there should be no stigma attached
to claiming.
Means-tested benefits are complex, costly to
administer, and there is still some stigma attached to claiming.
Therefore, the dignity of disabled people may be better served
by a system which is primarily non-means-tested.
Disabled people face a "double whammy":
they are excluded from the labour market and left to subsist
on second class benefits because they have not been able to contribute.
The disability benefit system will not deliver security for disabled
people until benefits are paid on the basis of need, rather than
past contributions.
INTRODUCTION
1. The Royal National Institute for Deaf
People (RNID) is the largest charity representing the needs of
the 8.7 million deaf and hard of hearing adults in the UK. As
a membership charity, we aim to achieve a radically better quality
of life for deaf and hard of hearing people. We do this by campaigning
and lobbying vigorously, by raising public awareness of deafness
and hearing loss, by providing services and through social, medical
and technical research.
2. RNID welcomes the opportunity to contribute
to the inquiry into the contributory principle. In this submission
we will primarily consider the role of the contributory principle
in relation to incapacity and disability benefits. We will also
address our submission to the current plans to the reform incapacity
benefits through the Welfare Reform and Pensions Bill.
THE HISTORY
OF CONTRIBUTORY
BENEFITS
3. The classic Beveridge model of social
insurance was based on the primacy of contributory benefits to
insure against the risk of lost earnings at specific times: unemployment,
incapacity, maternity, bereavement and retirement. Means-tested
assistance was intended to play a residual "safety net"
role in the Beveridge scheme.
4. Commentators have pointed out that the
"insurance" character of the system was always
a myth. This is technically correct as benefit payments were always
funded through the tax system, rather than the National Insurance
Fund. In effect National Insurance contributions are a form of
hypothecated taxation. However, insurance benefits played an important
ideological role in legitimising the new post-war social
security system. The insurance contract was easy to comprehend
and capable of winning society-wide support. Entitlement-based
social insurance benefits removed the stigma of pre-war means-tested
"handouts". In this sense the social insurance
system served an important consensus-building function which helped
to cement the post-war settlement.
5. By the 1960s it had become clear that
the social insurance system was inadequate to meet new social
developments and changing social expectations. Social policy academics
influenced by Richard Titmuss "rediscovered"
poverty, particularly amongst pensioners who were forced to rely
on means-tested assistance. An emergent poverty lobby in the 1960s
and 70s pointed to poverty amongst families—particularly
amongst single parents—and disabled people as evidence that
the social insurance scheme was not working. The contributory
system, in its original form, was seen to be failing those who
were unable to contribute due to disability or caring duties.
MODIFICATIONS TO
DISABILITY BENEFITS
6. In 1968-69 the Government responded to
disability lobby criticisms by sponsoring an OPCS survey of disability.
It was estimated that there were 3 million people with impairments,
of whom 1.1 million had difficulties with daily living tasks[25].
A third of those people with care needs relied on means-tested
assistance. A series of measures were taken in the 1970s to tackle
the perceived deficiencies in the contributory scheme in respect
of disabled people. A range of new benefits were introduced in
the early 1970s to meet additional disability costs (attendance
allowance and mobility allowance); and to replace earnings of
those who were long-term sick and disabled, or caring for disabled
people (invalidity benefit, non-contributory invalidity pension,
and invalid care allowance).
7. Invalidity benefit (IVB) was introduced
in 1971 for long term sick and disabled people. It comprised an
"invalidity pension" and an age-related allowance,
which depended on the onset of incapacity, and "was based
on the assumed greater loss of those giving up work at an earlier
stage in their working life".[26]
8. Non-contributory invalidity pension (NCIP)
was introduced in 1975 to compensate those who were unable to
pay contributions due to severe disability. In 1977 the scheme
was extended to disabled housewives, and in 1985 NCIP was replaced
by severe disablement allowance (SDA). From its inception NCIP
was conceived as second class incapacity benefit and set at a
lower rate. This discriminatory policy was carried over into SDA.
SDA rates are also set below the current income support (IS) threshold,
which explains why 70 per cent of SDA recipients receive an IS
top-up.
9. The disparity between contributory and
non-contributory incapacity benefits reveals the limitations of
the contributory system. People who are unable to contribute as
a consequence of severe disability have not been adequately compensated
for lost earnings capacity.
THE DECLINE
AND FALL
OF CONTRIBUTORY
BENEFITS
10. The Beveridge model was founded on the
belief that economic growth could sustain rising welfare spending.
The social insurance system in particular was designed in an age
when full employment was seen as both possible and desirable,
underpinning the long term viability of the system. The Beveridge
model could only work if the Government was committed to "the
maintenance of a high and stable level of employment".[27]
11. The end of the post war boom and the
return of mass structural unemployment resulted in a collapse
in Keynesian economic thinking and the loss of faith in the efficacy
of full employment policies. Throughout the 1980s and 1990s welfare
has been viewed as problematic, and has become the prism through
which wider concerns about social and economic breakdown have
been expressed, eg through discussions about "dependency
culture", the emergence of an "underclass",
and the growth of "social exclusion".
12. The current debate over the future of
the contributory principle must be situated within the context
of these shifts in political and economic thinking. The current
Labour Government has a substantially diminished conception of
its own employment role, ie to "provide people with the
assistance they need to find work" and to "make
work pay".[28]
Consequently, the requirement to contribute is far more onerous
when jobs are harder to find, and when the Government no longer
believes it can restore full employment.
13. The consequence of the new political
and economic thinking is that contributory benefits have been
systematically eroded during the 1980s and 90s with a significant
shift to means-testing. Spending on means-tested benefits as a
proportion of total benefit expenditure rose from 16 per cent
in 1979-80 to 35 per cent in 1996-97.[29]
During the same period the proportion of benefit expenditure allocated
to contributory benefits declined from around two-thirds to less
than a half. Both the previous Conservative Government and the
present Labour administration have encouraged people to make private
provision for their own futures, particularly in the form of private
pension provision.
WELFARE REFORM
TODAY
14. The current Government has set itself
an ambitious programme of welfare reform. The first major legislative
initiative has been the introduction of the Welfare Reform and
Pensions Bill. The Bill continues the previous administration's
policy of eroding insurance benefits whilst, paradoxically, claiming
to do so in the name of the contributory principle.[30]
IB contribution rules are to be tightened to exclude people who
have not recently worked. IB will also be means-tested by taking
occupational and personal pension payments into account. At the
same time non-contributory SDA is to be abolished, although people
incapacitated in youth will be passported onto IB.
15. RNID has welcomed the proposal to passport
people incapacitated in youth onto IB (previously this group would
have claimed SDA). It is wrong that people who have never been
able to work due to severe disability should be expected to live
on lower levels of benefits to those who had become incapacitated
during their working lives. RNID welcomes this implicit recognition
that the contributory system should not accord second class status
to disabled citizens who cannot pay contributions.
16. However, we also believe that, by this
same principle, people who become severely disabled in later life,
should not be expected to live on lower levels of benefits, because
they have failed to make contributions. The abolition of
SDA will predominantly affect women who make up 60 per cent of
the SDA caseload.[31]
The Government justifies the abolition of SDA on following grounds:
"There are now almost as many women as men in the labour
force. The number of women is increasing all the time, which is
reflected by the proportion of women claiming incapacity benefit
on the strength of their national insurance contributions. Twenty
years ago there were 84,000 such women, now there are more than
500,000".[32]
Whilst more women have entered the labour force and could qualify
for IB, it is still the case that women are primarily responsible
for caring for children, or disabled relatives. Women who become
disabled after having contributed to society outside the labour
market, will invariably be disadvantaged by a system which gives
primacy to paid contributions. Many of those who do work are in
low paid, part time jobs which they have to fit around caring
responsibilities. The Government itself accepts that 1.8 million
women in work are earning below the lower earnings limit for contribution
liability.[33]
17. RNID opposes the proposal to change
the IB contribution conditions which require claimants to have
paid contributions in one of the two previous tax years. The Government
argues that the contribution rules are outdated so that now "the
link with work can be tenuous". The new contribution
rules seek to "ensure that Incapacity Benefit serves as
a replacement income for people who have recently been in work".[34]
It is difficult to view this measure as a strengthening of the
contributory principle or a restoration of its original purpose.
Many people who have contributed substantially in the past, but
have recently been unemployed, will be potential losers. If there
is insufficient demand for labour, it is unjust to penalise those
who become incapacitated when they are out of work.
18. The Bill also seeks to reduce IB by
50 per cent of any occupational or personal pension payments in
excess of £50. RNID opposes this measure which we see as
akin to a breach of contract. People who have been contributing
in good faith to two pension schemes—the state scheme and
a private or occupational scheme—will find that they will
have no entitlement to IB if their private or occupational pension
exceeds £9,500 a year.
19. The current Government argues that incapacity
benefit, which replaced IVB in 1995, was "never intended
as a top-up to early retirement income".[35]
However, the very fact that the core component of the old IVB
was called the "invalidity pension" suggests
that it was indeed designed to compensate those who were forced
to retire early as a result of long-term sickness or disability.
It is true that that IVB was not designed as a top-up income.
However, in the Beveridge scheme, insurance benefits were intended
to provide a basic level of earnings replacement, with private
provision as a top-up.
20. The measures in the Bill to reform IB
and abolish SDA will lead to increased reliance on means-tested
benefits amongst sick and disabled people. Hugh Bayley justified
this discriminatory policy during the Parliamentary debate: "One
of the benefits of working is that entitlement is built up to
better rates of benefit under the contributory principle than
are available under the means-tested safety net. That is one of
the rewards of work and it strengthens the importance of work".[36]
A policy of better benefits for those in paid work effectively
reinforces the second class status of disabled people who cannot
work and pay contributions.
THE FUTURE
OF BENEFIT
PROVISION FOR
DISABLED PEOPLE
21. A purely contributory system invariably
disadvantages people whose earnings capacity is limited or disrupted
by disability or caring responsibilities. Consequently, we think
that any system of benefits for disabled people should, first
and foremost, meet the needs of disabled people. The disability
benefit system must, therefore, serve the following broad objectives:
— to enable disabled people to lead
dignified and independent lives;
— to maintain income for those unable
to work due to disability;
— to contribute towards the extra costs
of disability.
22. In order to achieve these broad objectives
disability benefits must satisfy the following criteria:
— benefit rates must be set at adequate
levels;
— the purpose of each benefit should
be easy to understand;
— the claims process should be as accessible
as possible;
— there should be no stigma attached
to claiming.
23. Benefits which are designed to meet
the additional costs of disability—disability living allowance
(DLA) and attendance allowance (AA)—are both non-contributory
and non-means-tested. We think that this is the appropriate way
for an extra costs benefit to work. Benefits for extra costs should
not be treated as income.
24. Should income maintenance be achieved
through contributory or means-tested benefits? At present this
objective is served by a combination of both contributory and
means-tested benefits. DSS research has found that there is "little
enthusiasm for the principle of means-testing".[37]
There is evidently still some stigma attached to means-testing.
Means-tested benefits are, moreover, complex to understand and
costly to administer. This suggests that the dignity of disabled
people may be better served by a scheme which is predominantly
non-means-tested.
25. A DSS commissioned study of attitudes
towards the contributory principle found that, whilst people have
a "hazy perception of structure of the National Insurance
scheme", they nonetheless retain a strong commitment to the
contributory principle.[38]
There is also support for a minimum level of social protection
for those unable to contribute, though not necessarily through
the National Insurance scheme.
26. As the contributory principle still
retains considerable public support one solution may be to fully
credit disabled people and carers into a contribution-based system.
This requires a contributory scheme which accords equal status
to those who have been unable to pay contributions due to disability
or caring responsibilities. The Government has made a small but
valuable step in this direction by admitting people incapacitated
in youth onto IB. However, the abolition of SDA for those disabled
in later life, and the restriction of IB to recent paid contributors
can only reinforce the unequal position of disabled people overall.
27. The current Government's welfare policy
is: "Work for those who can: Security for those who can't
work". However, this goal cannot be achieved if the benefit
system gives better rewards to those who are able to work. Disabled
people could face a "double whammy": they are excluded
from the labour market and left to subsist on second class benefits
because they have not been able to contribute. The disability
benefit system will not deliver security for disabled people until
benefits are paid on the basis of need, rather than past contributions.
June 1999
25 OPCS survey findings cited in Ogus, Barendt and
Wikeley, The Law of Social Security, 4th edition, 1995. Back
26
Ogus, Barendt and Wikeley, 1995. Back
27
White Paper, Employment Policy, 1944, cited in Ogus, Barendt
and Wikeley, 1995. Back
28
New ambitions for our country: A New Contract For Welfare,
1998, Cm 3805. Back
29
Department of Social Security, Welfare Reform Focus File No.
1, 1998. Back
30
HoC Official Report, Standing Committee D, 20 April 1999, col
875-6. Back
31
Department of Social Security, Social Security Statistics
1998. Back
32
HoC Official Report, Standing Committee D, 22 April 1999, col
967. Back
33
Hoc Official Report, Standing Committee D, 22 April 1999, col
950. Back
34
A new contract for welfare: Support for Disabled People, Cm
4103, October 1998. Back
35
A new contract for welfare: Support for Disabled People, Cm
4103, October 1998. Back
36
HoC Official Report, Standing Committee D, 20 April 1999, col
876. Back
37
DSS press release, 26 March 1999. Back
38
B Stafford, National Insurance and the Contributory Principle,
DSS Social Research Branch, In-house report 39, August 1998. Back
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