APPENDIX 17
Memorandum submitted by the Catholic Agency
for Social Concern (CP 15)
1. INTRODUCTION
The Catholic Agency for Social Concern (CASC)
has made responses to a range of Green Papers/Consultation Papers
on social security matters in the past 18 months. In a number
of these (notably the Welfare Reform Green Paper, the Disability
Consultation and the Pensions Green Paper) we have emphasised
our support for principles of the National Insurance scheme. In
the main Green Paper response (July 1998) we said:
CASC believes that the National Insurance
scheme, through which those in work contribute to a common fund
and can call on this fund when they are unable to work, is based
on sound principles of solidarity and mutual responsibility .
. . National Insurance or an equivalent scheme should play a key
role in the future welfare state.
2. POINTS OF
IMPORTANCE ON
THE CONTRIBUTORY
PRINCIPLE AND
THE NATIONAL
INSURANCE (NI) SCHEME
2.1 First, we support the contributory principle
in its broad application. In our response to the Green Paper we
quoted from a publication of the Catholic Bishops' Conference
entitled "The Common Good":
"The common good . . . implies that every
individual, no matter how high or low, has a duty to share in
promoting the welfare of the community as well as the right to
benefit from that welfare".
A contributory scheme, such as National Insurance,
to which all workers contribute, whether high paid or low paid,
is one important way in which this duty to the common good is
carried out. Moreover, such arrangements promote social cohesion,
while means tested benefits tend to be socially divisive.
2.2 Second, we support a scheme which offers
benefits drawn by right of contributions, provided reasonable
rules attached to the particular benefit are met. We think it
important that, unlike means tested benefits, contributory benefits
can be claimed without substantial invasion of privacy or loss
of human dignity.
2.3 Third, contributory benefits, not subject
to a test of means, do not require that reserves of savings are
run down before benefit can be claimed. Even with benefits by
right, their relatively low level means that it is inevitable
that the financial reserves of the family or individual will gradually
be used up. But there will be time for adjustments to be made
and if there is a return to earning, it is possible to recover
more rapidly from the period of non-earning. Poverty and indebtedness
are less likely to be the outcome of this type of benefit.
2.4 Fourth, we support a scheme which does
not discriminate against married women. Benefits that can be earned
through contributions by working women meet this requirement;
means tested benefits do not. Given the substantial role that
women now play in the labour force, a role that is being strongly
encouraged by government, it is right that they should have access
to benefits by right during earnings interruptions.
2.5 But while we support the enduring principles
which stem from the Beveridge Report, and are in favour of the
contributory principle and the National Insurance scheme, we are
in no doubt that changes are needed to the scheme and the way
it is allowed to function by government.
3. THE NEED
FOR CHANGE:
THE ATTITUDE
OF GOVERNMENT(S)
3.1 It has to be said that the attitude
of this and the previous government to the National Insurance
scheme has in many ways been unsatisfactory.
— successive governments have talked
of National Insurance contributions as if they were simply another
form of taxation and spoken of government or public expenditure
on National Insurance benefits. But this is not "government
expenditure", apart from a small government subvention. There
is an important difference between tax, which for the taxpayer
is open ended, and contributions which are buying specific benefits
rights; a difference which is valued by contributors but often
ignored by governments;
— the former government used the National
Insurance Fund—the sum of the people's contributions for
benefits payable under the scheme—to provide incentives
to buy private insurance in the shape of personal pensions. Not
only was this questionable on eithical grounds, but there was
a serious danger that the financial health of the Fund would be
threatened (HC 124, 1991). To offset this, a sacrificial victim
was needed—so the Industrial Injuries Scheme was excluded
from National Insurance on the spurious grounds that since it
had no contribution conditions, it was not a contributory scheme.
The fact that Contributions for the scheme had been paid by employers
and employees for the previous 40 years was simply set aside as
irrelevant;
— the contribution rates have been
manipulated to serve purposes wholly unrelated to benefits—for
example in the recent Budget, a cut in employers' contributions
was given as a trade off for a new energy tax;
— new contribution rules have sought
to exclude contributors from the right to benefits, no matter
how substantial their contribution record. The former government
introduced tougher contribution rules for Unemployment Benefits,
which as an immediate effect was expected to exclude 350,000 claimants
(Hansard, 2 November 1987, col 670). Later, the duration
of the insurance benefit (in the renamed Jobseeker's Allowance)
was cut from 12 to six months. The present government is engaged
on a similar exercise in relation to Incapacity Benefit, producing
tougher requirements which over time will exclude an estimated
170,000 people from the right to the National Insurance Benefit
because they become incapacitated during a period of unemployment
(Cm 4103, p 21). In both cases, people who have contributed to
National Insurance for 20, 30 or 40 years, and then meet the contingencies
for which the scheme provides, find they have no insurance benefit
rights and will recive means tested benefits at best;
— the exclusion of the self employed
from unemployment benefits, is not only unsatisfactory in itself,
it also rebounds on employees who have been long time contributors,
who are made redundant, are encouraged to try self employment
but fail and they pay for their additional efforts to be self
supporting by losing any right to a National Insurance benefit
in unemployment;
— In 1980 and again in 1988, rules
were introduced by the former government to reduce the National
Insurance Unemployment Benefit for people 60 and over, and later
55 and over, where occupational benefits were being drawn. The
present government is engaged in introducing similar provisions
to cut NI Incapacity Benefit where an occupational ill health
or other pension is being drawn. In neither case was/is the government
prepared to acknowledge that the NI benefit has been earned by
right of contributions.
3.2 Underlying these kind of problems is
the fact that there is no mechanism for action on behalf of contributors
to the National Insurance Fund, or the exercise of control over
or even influence on policies towards to Fund and its management.
In many other European countries, representatives of employers
and trade unions, together with independents are, with government,
part of the governance of such schemes. Occupational schemes have
their bodies of Trustees, often representative in nature. But
the National Insurance Fund is in the hands of the Treasury and
the Social Security Ministers, often taking decisions without
prior consultation or, as in the case of the changes to Incapacity
Benefit now before the Commons, consulting and then ignoring the
weight of opinion of the large number of organisations who responded.
3.3 If it is the case, as is sometimes claimed,
that there has been an erosion of support for the National Insurance
scheme and the contributory principle, it cannot be a cause for
surprise. The persistent breaches of trust by governments in the
past 20 years could hardly fail to erode confidence in the present
arrangements. Indeed if some of these actions had been carried
out by private insurance, the companies would have been "named
and shamed". But the solution is not to abandon a sound principle.
Instead we have to consider how best the National Insurance scheme
can be adapted to present day needs.
4. THE NEED
FOR CHANGE:
THE TASK
OF THE
SCHEME
4.1 At its inception in 1948, the National
Insurance scheme was built on certain (sometimes unspoken) assumptions:
— that there would be a policy of full
employment;
— that the labour force would be largely
made up of men and single women who, in the great majority of
cases, would be in full time, long term jobs, and if unemployed,
could find work again without much delay;
— that a National Health Service would
provide free health care to all and that this would, in time,
reduce the incidence of sickness and disability;
— that married women would be content
to be economically dependent on their husbands, and would in most
cases be at home engaged in caring for children and with other
household tasks;
— that most marriages were stable and
divorce rates would remain low;
— that retired people would, on average,
live around five to 10 years after retirement.
4.2 These assumptions cannot now be made.
What is needed now is a scheme designed for the modern labour
force and for today's society. In the modern labour force:
— life long employment is likely to
be increasingly rare. Full time secure employment is still part
of the pattern, but part time work, temporary employment, employment
on short or medium term contracts, and self employment both full
and part time are also major features of the labour force. We
need a scheme which can respond adequately to the "flexible"
employment patterns in today's labour force.
4.3 In today's society:
— far more women are working. Women
no longer resign themselves to economic dependence. Indeed, the
increase in divorce, as well as in cohabitation makes it important
that they make provision for their own future as far as they can.
This raises questions about the periods when they try to combine
caring with part time work but earn such low wages that they are
excluded from the National Insurance scheme, and about the periods
they spend out of the labour force altogether caring for children
and for adult disabled and infirm people, usually family members;
— the number of elderly and of very
old people has increased, while the hoped for reduction in sickness
and disability did not eventuate. These factors raise issues for
pension policy, for provision for incapacity, for the cost of
community care and, as just suggested, for the social security
needs of family carers.
5. THE NEED
FOR CHANGE:
THE APPROACH
OF GOVERNMENT(S)
5.1 Reform is certainly needed, but National
Insurance has been modernised only to a limited extent. And the
task of reform is not made any easier by the contradictory messages
coming from governments.
5.2 The first is that we must return to
the "true nature" of the Beveridge provisions. When
making more stringent the contribution conditions for unemployment
benefit, the former government argued that it was re-inforcing
the original purpose of the benefit, which it defined as "to
insure those who are accustomed to earnings from employment for
short periods of unemployment while they seek work" (Hansard
2 November 1987, col 659). But Beveridge, in fact, recommended
indefinite benefit payment, though where unenployment was prolonged,
with additional conditions to be met (Beveridge report, p 57).
5.3 Similarly, the present government defended
its proposed changes to Incapacity Benefit as restoring its original
purpose of "helping people who lose their income when illness
or disability causes them to stop work" (Hansard,
23 February 1999, col 224). The Minister produced no proof of
his statement about the original purpose, but presumably was referring
to the Beveridge Report which said: "As regards insurance
against disability, this is proposed only for those gainfully
occupied and not for persons who, since they have no earnings,
do not lose income if sickness prevents them from earning"
(ibid, p 53). But Beveridge at that point was discussing the inclusion
in the benefit of self employed people. There was no reference
to the position of the unemployed, who in any case have always
been regarded as potential earners who continue to form a part
of the labour market.
5.4 The alternative argument is not that
we must restore the purity of the past—imagined or otherwise—but
we must recognise that social and other changes have occurred
since 1948. This one was used by both governments to justify the
benefit cuts in respect of private provision described earlier.
Here to quote Beveridge would have been inconvenient, since he
specifically left room for private provision to top up the flat
rate subsistence benefits which the National Insurance scheme
has typically provided (ibid p 143).
5.5 On a more positive note, the introduction
of the Home Responsibilities Protection by an earlier Labour government
has been an important factor in ensuring rights to the NI Basic
Pension for carers of children and of disabled or infirm adults.
The proposed extension of credits for the State Second Pension
to carers and to some long term disabled people is a welcome move
on similar lines (though we will be querying the child age limitation
later in this paper). Carers are also to be exempt from the proposed
new and more restrictive qualifying rules for Incapacity Benefit.
On the other hand, credits for unemployment benefits for carers
who have had to leave the labour force for a period were withdrawn
by the former government and have not been restored by the present
government. The fact that the New Deal is to be extended to carers
is good, but it does not overcome the lack of bridging income
when income related to caring ceases—due to the death of
the person being cared for, for example.
5.6 So at present we have a mixture of negative
and positive government attitudes to the National Insurance scheme
and the contributory principle, but it is difficult to discern
any coherent overall policy. In these circumstances it is not
easy to have full confidence that the contributory principle and
the related scheme is "safe" in the government's hands.
6. SOME NEEDED
FUTURE ACTION
6.1 Making the scheme as inclusive as possible.
6.1.1 As a general principle, government
should cease, and where necessary reverse, actions designed to
exclude groups from the scheme by the manipulation of contribution
conditions, usually as a means of saving money. Whenever this
is done, it not only withdraws rights from people who faithfully
carried out their responsibilities to contribute at whatever rate
had been set by the government of the day, but it directly descriminates
against married women. This is because the alternative means tested
benefit are based on the income of both partners and as a result
will typically exclude the women from benefit.
6.1.2 In recent decades, the labour force
has become more and more "flexible", while the National
Insurance scheme has become more and more inflexible. What government
should be doing is to devise contribution conditions which take
full account of today's working patterns and seek to provide benefits
by right of contributions which will tide people over the many
changes they must experience during their working lives.
6.1.3 We spoke at the beginning of this
paper about a scheme to which all workers contributed, whether
high paid or low paid. In fact it is necessary to qualify this
statement because at present over 2 million workers—mostly
part-time women—whose earnings fall below the Lower Earnings
Limit (LEL) are excluded from benefit rights. As seen earlier,
the carers among them may qualify for credits for some benefits,
but what is needed is a much more comprehensive approach to bring
this low paid group fully within the scheme. Two suggested solutions
have been put forward—the payment of very low contribution
rates or simply crediting them into the scheme (Brown, 1994, pp24-6
and Social Justice Commission Report p233). In the Pensions Green
Paper it was indicated that further study of this issue was planned
and this is welcome. We believe that government should be making
firm plans to bring very low earners into the scheme by one means
or another.
6.1.4 The Pensions Green Paper also found
itself wrestling with issues related to the self employed. For
too long, the best self employed people could expect of Green
and White Papers was to be dismissed in a footnote or a few throwaway
lines. The last substantial examination of their social security
needs was almost 20 years ago. There are now more than three million
self employed people. There ought to be a specific and full examination
of their situation with the objective of bringing them into the
National Insurance scheme to the maximum extent possible, starting
with rights to benefits in unemployment. This may require an increase
in contributions and/or a restructuring of their contribution
arrangements. This could be acceptable, provided there are compensating
gains in benefit rights.
6.1.5 We need a scheme which recognises
the range of roles through which people contribute to the common
good of our society and which may prevent them from taking full
or even part time paid work. In particular we need to protect
the parenting role and the task of caring for disabled and infirm
people, usually family members. To a considerable extent this
is now being recognised (as seen earlier), but the cut off point
of five years of age for children who act as qualifiers of credits
for the State Second Pension is a backward move. It fails to recognise
that there are times when full time parenting even for over fives
may have to take priority—after bereavement, after family
breakdown, when the child is going through a difficult period
are all examples. We expect parents to take full responsibility
for the actions of their children. We should not punish them by
depriving them of social security rights if they decide that full
time parenting is essential for a period of time.
6.2 Paying for Being Inclusive
When the National Insurance scheme was founded,
a State subvention (then 20 per cent of the total) was seen to
be necessary so that an early start could be made to paying pensions
and other benefits under the scheme to people without a long contribution
record. For similar reasons, a pay as you go approach was seen
as appropriate for a social insurance (as opposed to commercial
insurance) scheme. The subvention was largely withdrawn under
the previous government and it remains fairly marginal now. But
there is a case for re-examining the role of a State subvention.
If we want to bring people into the scheme because we value the
parenting or caring role or for any other valid reason, we can
take one of two views. The first is that, since most of those
involved will usually be contributors and only sometimes will
be receiving credits, it is not unreasonable for the contributors
as a whole to carry the "cost" of the crediting arrangements.
The second is that since specific provisions for crediting in
are usually related to a recognition of roles through which people
contribute to the common good in our society, then it is appropriate
that society as a whole should meet the cost through taxation,
in this case through the State subvention. It is an issue that
needs to be fully examined.
6.3 The Governance of the Scheme
We referred earlier to the matter of the governance
of the National Insurance Fund. At present it is wholly in the
hands of government. Clearly government must have a strong role
to play, because of any State subvention and because in the event
of financial difficulties government, through taxes, would have
to come to the rescue. But there is a good case to be argued for
the inclusion in the governance of the Fund representatives of
the contributors—employees, self employed and employers—as
well as independents who would represent the community. It would
be important that both on the employees/self employed side and
in choosing the independents, that the outcome would be fully
representative of today's labour force and today's society. We
would like to see the Social Security Committee examine this question
and the extent of influence on that scheme that would be desirable.
7. FINALLY
We look for social security provision which
offers predictability, reliability, the maximum personal privacy
possible, the avoidance of any form of discrimination and respect
for human dignity. We think this is most likely to be found through
the full development of the contributory principle and a reformed
National Insurance scheme. This is a goal worth striving for.
13 May 1999
REFERENCES
Beveridge, Sir William, Social Insurance and
Allied Services, Cmd 6404, HMSO, London, 1942.
Brown Joan C Escaping from Dependence: Part-time
workers and the self-employed: the role of social security, IPPR,
London 1994.
Catholic Bishops' Conference/CASC. Presentation
to the Pensions Review, October 1997.
CASC, Response to the Green Paper: "New
Ambitions for our Country. a New Contract for Welfare" July
1998.
CASC, Response to the Consultation Paper "A
new contract for welfare: Support for Disabled People", December
1998.
CASC, Response to the Green Paper, "A new
contract for welfare: Partnership in Pensions", March 1999.
Commission on Social Justice, Social Justice:
Strategies for National Renewal, Vintage, London 1994.
House of Commons Hansard
House of Commons, Committee of Public Accounts,
The Elderly: Information requirements for Supporting the Elderly
and the Implications of Personal Pensions for the National Insurance
Fund, HC 124, HMSO, London, 1991.
GENERAL REFERENCES
Brown, Joan C, Social Security for Retirement,
Joseph Rowntree Foundation, York, 1990.
Brown, Joan C, Victims or Villains: Social Security
in Unemployment, Joseph Rowntree Foundation, York, 1990.
Brown, Joan C, A Policy Vacuum: Social Security
for the Self-employed, Joseph Rowntree Foundation, York, 1990.
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