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'provided that, in respect of employees of pension age or over at the beginning of the year of assessment, the secondary percentage shall be 11.8 per cent.'.
The Second Deputy Chairman of Ways and Means (Sir Michael Lord): With this it will be convenient to discuss amendment No. 11, in page 3, line 14, at end insert—
'provided that, in respect of employees of pension age or over at the beginning of the year of assessment, the secondary percentage shall be 11.8 per cent.'.
Mr. Chope: During the earlier part of the debate, the Government said that it would not be fair if pensioners were penalised as a result of the Bill. The amendment would ensure that pensioners would not by being employed attract an additional 1 per cent. levy for their employers. It would also—I hope hon. Members on both sides of the Committee will support this—give a modest but important encouragement to employers to employ people of pensionable age.
There is an increasing feeling that age discrimination operates in the employment market. We know that those who are of pensionable age wish—[Interruption.]
The Second Deputy Chairman: Order. There are general conversations throughout the Chamber. It is important that the Committee listens to the hon. Gentleman.
Mr. Chope: Thank you, Sir Michael.
It is important that the Committee should address seriously discrimination in the employment market. It is increasingly necessary for many pensioners to try to obtain employment to make ends meet. It is a separate hobby horse of mine, but as a result of successive increases in council tax far in excess of inflation, an increasing number of pensioner households are in financial difficulties. To an extent, people below pensionable age who are in financial difficulties can use the labour market and change jobs, or at least get themselves in employment, but that option is not so easily available to pensioners. The amendment would give a modest incentive to employers to take on people of pensionable age.
In the past, when this issue has been raised the Government have been dismissive. They have argued that the income from employers' national insurance contributions pays for many other services, including—but not exclusively—pensions. They have also argued that the principle that people who are self-employed or not employed should not have to pay class 1 and class 2 contributions after they reach pensionable age should not be extended to their employers.
The Bill hypothecates the proceeds of such charges to the national health service, but elsewhere in the Bill the Government have accepted the argument that it would be unreasonable to expect pensioners to contribute to additional costs in respect of the health service. That is why the hon. Lady rejected the argument advanced by the Liberal Democrats, who wanted to raise the money through income tax—a move that would clearly affect pensioner income from investments. Such income is exempted under the terms of the Bill, because the insurance charge falls only on the earnings of employees below pensionable age.
When, on behalf of a constituent, my hon. Friend the Member for Bournemouth, East (Mr. Atkinson) raised the issue in correspondence with the Paymaster General last year, she replied:
- "The National Insurance scheme is a social scheme. Amongst other things, its purpose is to fund the payments of contributory benefits such as Retirement Pensions, widows' benefit and incapacity benefit."
In the letter to which I have referred, the Paymaster General says:
- "there is no comparable age restriction on employers contributions and the liability continues whilst the employee is working and earning over the threshold for paying contributions. I must point out that if the liability were removed, then younger people could be discriminated against and it could result in a situation whereby some employers may actively seek to recruit employees in this category."
Mr. Bercow: The hon. Member for Linlithgow (Mr. Dalyell) could be employed as a Minister.
Mr. Chope: My hon. Friend mentions a Member of the House who is of retirement age, and who could be employed by the Government. The provision could indeed provide a modest saving for the Government and the parliamentary authorities, but, with respect to my hon. Friend, that is not the strongest argument for it. Many pensioners would like to have jobs but cannot get them. The amendment would enable them to say to an employer, "If you take me on your books, you will save 1 per cent. of payroll." It is a modest measure, and I hope that it will find favour with the Government and with the House.
8.15 pm
Dawn Primarolo: It seems that the Conservative party's clarion call at the next general election will be, "Force pensioners to work after 65 by making them cheaper to employ than anyone else in the labour force." That is the only point that we could possibly glean from that rather potty introduction to the amendments.
The national insurance increases proposed in the Bill spread the burden of paying for the improvements in the health service that we all—or most of us—want as widely and fairly as possible across employees, employers and the self-employed. The amendments deal specifically with the contribution of employers, and propose that they pay a different national insurance contribution—even though the level of earnings is exactly the same—by using a definition of age. That proposal is made by a party that normally complains about increased complexities, form filling and difficulties in policing the borderline.
Under the proposal, an employer would pay a national insurance contribution of 12.8 per cent. on the earnings of a male employee aged 64, but in respect of a male employee aged, say, 65, the same employer would pay an 11.8 per cent. contribution on the same earnings. That appears neither logical nor fair, even when measured against the Opposition's apparent new objective of dealing with labour shortages in the British economy by forcing pensioners back into the labour market, even if they do not want to go.
Mr. Chope: The Paymaster General thinks that the proposition is unfair, but in what way is it fair to require an employee aged 64 to pay the additional contribution, but not an employee aged 65?
Dawn Primarolo: If the hon. Gentleman knew anything about the national insurance fund and the decisions that his Government took in 1995 on the movement in retirement ages and the complex link with the contributory system, he would understand exactly why such measures were introduced. If he was so concerned about the issue, why did he not deal with it when in government? Indeed, I think that he was even a Minister at one stage. As he well knows, under the agreement to phase in equality of age of retirement, the particular point that he identifies will move out of the system in respect of employees. However, he is in fact proposing that we add an extra layer of complexity to employers' national insurance rates.
The amount of secondary class 1 national insurance that employers are liable to pay is based on the level of their employees' earnings. Introducing a different secondary rate that depends not only on employees' level of earnings but on their age adds a complexity that simply is not necessary. It does not follow that excluding pensioners from paying national insurance means that employers should not pay their extra 1 per cent. national insurance on the earnings.
Under the existing structure of the national insurance fund, employers contribute at the same rate for all of their employees. The Bill maintains that principle. Employers recognise that it is in the interests of employers to have a healthy labour supply. They do not say, "Except when the person who is employed gets to 65, when we do not need to contribute to the health service through the national insurance system." Employers recognise that all their work force will benefit from the additional investment in the NHS.
I do not believe that the amendments would make pensioners more attractive to recruit. Even after the 1 per cent. increase in employers' national insurance, employers in the UK will still be paying less than employers in France and Germany towards their employees' health needs. Pensioners have demonstrated that they can, when they choose to and want to, compete in the labour market on equal terms and be judged on their skills and the experience that they offer the employer.
There is absolutely no basis in logic for saying that the employer has a lesser obligation to the contributions to the national insurance system simply because of the age of the employee. I ask the House to reject the amendment, not only because it would introduce complexity for employers, but simply because it is extraordinarily naive and wrong in the distinction it seeks to make about the obligations that employers have to employees, regardless of their age.
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