APPENDIX 21
Memorandum submitted by the Royal National
Institute for the Blind (CP 26)
1. Introduction
1.1 The Royal National Institute for the
Blind (RNIB) welcomes the opportunity to contribute to the Inquiry
into the Contributory Principle.
This is a particularly important issue for RNIB
as our estimates show that at least 90 per cent of the one million
people with serious sight loss in the UK are heavily reliant on
benefits.
1.2 The vast majority of people lose their
sight once they are over retirement age. They would therefore
have had the same opportunities to work, pay contributions and
save for their retirement as the population generally.
1.3 The minority, who lost their sight before
retirement age may have had intermittent work patterns and limited
opportunities to pay National Insurance Contributions.
1.4 There are a group of visually impaired
people, perhaps with multiple disabilities, who have never worked.
The provisions in the Welfare Reform and Pensions Bill will enable
young, severely disabled people to receive Incapacity Benefit.
The conditions are that the person must have claimed benefit and
been unable to work before their 20th birthday. The age bar has
been extended to the 25th birthday, if the person continues education
started before the age of 20.
AREAS CONVERED
BY THE
INQUIRY
2. What is meant by the contributory principle?
2.1 RNIB takes the contributory principle
to mean entitlement to benefits based on previous paid and/or
credited National Insurance Contributions (NICs). The benefits
would be for contingencies such as old age, widowhood, incapacity
for work, unemployment and pregnancy, but not poverty.
3. The role of the contributory principle,
origins and development since Beveridge
Key milestones would be:
3.1 Abolition of blindness allowance.
Beveridge could see no reason for continuing
the arrangements under the Blind Person's Act. This allowed Retirement
Pension to be made available to blind people at the age of 40.
Beveridge recommended that blind people should
be treated like any other sick and disabled persons for income
purposes. They could claim social insurance benefits if eligible
under the contribution conditions or (means tested) National Assistance
if not. National Assistance was also available to supplement the
earnings of blind people in sheltered workshops.
3.2 Sickness Benefit was introduced in 1948
and until 1966 was the sole benefit for both short-term and long-term
incapacity. In 1966 an Earnings Related Supplement was introduced.
This was abolished in 1982.
3.3 In 1971 Invalidity Benefit was introduced
to take over from Sickness Benefit after the first 28 weeks with
invalidity allowances related to the age of onset of long-term
disability.
3.4 A paper, which outlined the new policy
directions for social security said of those, excluded from National
Insurance benefits,
"It is for this group of people deprived
both of their normal role in the community and of the normal rights
that go with that role, that pressure is strongest for a non-means
tested benefit to confer the very important psychological advantage
of membership of the National Insurance community."
(Social Security Provision for Chronically Sick
and Disabled People, p13, HMSO, 1974.)
3.5 In 1975 a Non Contributory Invalidity
Pension (NCIP) was introduced as it was recognised that means
tested benefits, the only available support for those who had
insufficient NICs, were not being taken up sufficiently. NCIP
was replaced by Severe Disablement Allowance (SDA) in 1985.
3.6 Returning to Invalidity Benefit, in
1979 earnings related additions to Invalidity Benefit were introduced.
In 1995 Incapacity Benefit replaced Sickness and Invalidity Benefit.
Allowances related to age or onset of disability remained but
earnings related additions were abolished. The credited NIC condition
was tightened.
4. Current Developments affecting the Future
of the Contributory Principle
4.1 The Welfare Reform and Pensions Bill
abolishes SDA but allows young disabled people into the IB scheme
(see 1.4 above). The Bill tightens the paid contribution condition
for Incapacity Benefit to exclude people who have not paid sufficient
NICs through work done in the last two years before the claim.
The Bill proposes to means test Incapacity Benefit for those who
have an occupational pension.
4.2 The tightening of the NIC conditions
will exclude people who become incapacitated while long-term unemployed
even if they have paid contributions into the scheme for many
years.
4.3 The means testing of Incapacity Benefit
sends the message that the contingency that is covered by paying
contributions is poverty. Yet, people with incomes just over £6,000
a year are affected by the means test.
4.4 The abolition of SDA removes the principle
of social inclusion (see 2.2 above). While young, severely disabled
people will be included in the National Insurance scheme, the
abolition of SDA excludes low paid people (mainly women), who
subsequently become disabled, from receiving a non-means tested
benefit. They will not be able to claim Incapacity Benefit if
their earnings are below the lower earnings limit for payment
of NICs.
4.5 The Government recognises with reference
to Maternity Allowance, that low pay is a barrier to meeting the
NIC conditions. The Pensions and Welfare Reform Bill amends the
rules to ensure that all mothers to be, who earn at least £30
a week on average, will be entitled to Maternity Allowance (Hugh
Bayley, House of Commons Hansard Debate, 17 May 1999, columns
646-647). Curiously, the Government has not recognised the problem
of those excluded from Incapacity Benefit by low pay. This is
now an issue because of the abolition of SDA.
5. Public awareness and attitudes towards
National Insurance Benefits
5.1 RNIB is aware of DSS research that points
to the popularity of these benefits but is not in a position to
provide detailed comment, other than our perception that these
benefits are well taken up and popular with people with serious
sight loss.
6. Advantages and Weaknesses of the Contributory
Principle
6.1 Advantages:
— Cheaper to administer than means
tested benefits.
— Gives claimants a sense of inclusion.
— Not generally means tested.
— Groups who have not been able to
work can be credited in eg young, severely disabled people, carers.
— Can embrace low paid workers who
earn too little to pay NICs eg Maternity Allowance.
6.2 Weaknesses.
— Contributory benefits rates may be
below means tested benefit levels. This is not a weakness of the
principle.
— Means testing of Incapacity Benefit
changes its role from providing an income in the event of incapacity
to that of protection against poverty. Again this is not a weakness
of the principle.
— Lack of flexibility to provide partial
cover, eg partial incapacity, partial retirement.
7. Does the contributory principle have a
future? Are there other models of welfare delivery, for example
better integration of tax and benefits, which better reflect today's
realities?
7.1 RNIB would hope that the contributory
principle has a future but fears that the provisions in the Pensions
and Welfare Reform Bill such as the means testing of Incapacity
Benefit, the abolition of SDA without allowing more groups into
Incapacity Benefit, signal the decline of contributory benefits.
7.2 As far as blind and partially sighted
people are concerned the other models of welfare delivery are
tax credits, means tested benefits, "categorical" benefits
such as SDA (to be abolished) and Disability Living Allowance
and Attendance Allowance. These last two benefits are extremely
important to blind and partially sighted people and are the best
ways to help meet the additional costs of serious sight loss.
8. Could the contributory principle be modernised
to provide for the challenges of the next millennium?
8.1 RNIB does not regard means testing as
modernisation. RNIB is opposed to means testing of contributory
benefits. Contributory benefits are often paid at a level below
means tested benefits due to the abolition of the earnings related
components. A minority of claimants who are very rich may not
object to the means testing of contributory benefits. However,
the vast majority of those who will lose their sight after having
contributed into the system will not welcome means testing. They
will feel that their "contract" with the state has been
betrayed.
8.2 RNIB feels that the way forward for
the contributory benefits is by including more categories of claimants
into the scheme. The precedent of including low paid women into
Maternity Allowance and young, severely disabled people, who have
never had the chance to work, into Incapacity Benefit already
exists. RNIB would welcome research to determine if further groups
such as people with serious sight loss, low paid disabled workers
could also be included. RNIB would welcome the opportunity to
give oral evidence to the committee.
June 1999
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