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Lord Hunt of Kings Heath: My Lords, my noble friend speaks with authority as a member of the royal commission. What he says is surely to the point. Some propose that we spend £1 billion extra on free personal care. Many of those people are better off. Is that really where the priority should lie? The Government say no, it should lie in rehabilitation, trying to ensure that as many people as possible are kept from entering homes in the first place.
Earl Russell: My Lords, did the Minister read in today's paper a report of an old lady of 108 who committed suicide by hunger strike because she was turned out of the care home in which she had lived because she could no longer afford it? Will he consider that there may be more concerns in heaven and earth than are dreamt of in his philosophy?
Lord Hunt of Kings Heath: My Lords, it is always dangerous to rely too much on newspaper reports. I am sure that we shall want to study the results of any review led by the local authority. My understanding of the case is that the council worked closely with the family to find new accommodation for that person. Of course, one's sympathy goes out to Mrs Knight's relatives. However, I understand that the owner was retiring.
The allegation is that the regulations set by the National Care Standards Commission were at too high a level. I must make the point that the National Care Standards Commission has allowed for flexibility and has allowed more time for new standards to come into operation. It was the care homes themselves who wished to see a national system of regulation.
Baroness Masham of Ilton: My Lords, if somebody living in a care home needs physiotherapy, occupational therapy or speech therapy, would that come under personal care or nursing care?
Lord Hunt of Kings Heath: My Lords, it depends on the individual. Many people in nursing homes receive continuing care, which is provided entirely by the National Health Service. The Government's commitment is to free nursing care. The assessment is concerned with care that is either provided or supervised by a registered nurse.
Identity Cards
3.1 p.m.
Lord Marlesford asked Her Majesty's Government:
- Whether they recognise the need for the introduction of an identity card incorporating biometric details to assist in the prevention of acts of terrorism and the fight against other crime.
The Minister of State, Home Office (Lord Falconer of Thoroton): My Lords, in the period after 11th September, my right honourable friend the Home Secretary made it clear that any debate around entitlement cards should not rest solely on issues of national security. The Government do not consider that an identity card incorporating biometric details would have a significant effect in preventing acts of terrorism.
One of the potential uses of a card scheme on which we will be consulting in the near future would be to help reduce the level of identity fraud. That is a growing area of crime and is estimated to cost the economy at least £1.3 billion per annum. It will be for the British people to indicate their support or otherwise for a more comprehensive system of personal identification, including for the task of eliminating illegal working and facilitating more convenient and effective access to services.
Lord Marlesford: My Lords, I thank the noble and learned Lord for that Answer. Does he recognise that the people of this country expect the Government to fight with vigour and effectiveness at least four battles: against terrorism, against crime, against social security fraud and against the abuse of our immigration rules? Does he also recognise that, so long as it is not possible to identify individuals who might be involved in such activities, the Government are fighting those battles with one hand tied behind their back?
Does the Minister remember that the Metropolitan Police Commissioner, who knows a thing or two about such matters, has advocated identity cards with full, state-of-the-art biometric details? The Minister talked about the British people, but is he aware that, in a MORI poll conducted in September, 85 per cent of the British people said that they would like a national identity card, and 72 per cent said that such a card would not infringe personal freedom? Will the Minister please take more comprehensive action?
Lord Falconer of Thoroton: My Lords, the noble Lord referred to four fights. We must, of course, engage in those fights. Would identity cards help? There must be full, detailed consultation about every aspect. As my right honourable friend said in another place, we will shortly produce a consultation document that will permit that debate to take place.
The noble Lord also referred to the views of the Metropolitan Police Commissioner's on identity cards. Those views will play a part in the debate. All the issues raised require a full debate. The noble Lord
is, obviously, a strong supporter of identity cards; others are not. We must have a properly informed debate, before a conclusion can be reached.
Baroness Gardner of Parkes: My Lords, how does the Minister define the phrase "biometric details"? I asked the Library what biometry is and I was told that it is a calculation of the average duration and expectation of life. Can the Minister assure me that no identity card that covers the expectation of life will be used for insurance or other purposes?
Lord Falconer of Thoroton: My Lords, I did not understand the phrase to refer to expectation of life until the noble Baroness pointed that out. I understood it to refer to a means of measuring a part of one's body or anatomy that is unique to oneself and could provide a unique identifier. I do not think that life expectancy falls within that description.
Lord Hylton: My Lords, does the noble and learned Lord accept that far and away the best method of achieving the prevention mentioned in the Question is having good intelligence? Money should be spent on that, rather than on harassing law-abiding citizens with further regulations.
Lord Falconer of Thoroton: My Lords, I am not sure whether the noble Lord was referring to intelligence on unique identifiers. Intelligence is vitally important to the fight against crime, illegal immigration and benefit fraud. The question is whether other things should be available to help in that fight. That is what we must debate.
Baroness Sharples: My Lords, is the Minister aware that each government department has a different card? Last week, I met a lady who had six different cards—all with different photographs. She had to go through a security system before she got the cards. Would not the most sensible approach be to have one card?
Lord Falconer of Thoroton: My Lords, I see the force of that argument, although that does not mean that I am expressing a view on identity cards or entitlement cards. Access to services that the Government provide through one source of identification would be of great convenience to receivers of those services. That is an important argument, and it should be considered in the debate.
The Earl of Erroll: My Lords, does the Minister think that the problem is in detecting and arresting criminals committing violent crimes or burglaries or in identifying them after they have been caught?
Lord Falconer of Thoroton: My Lords, I do not know whether that is a question about the criminal justice system or about identity cards. The role of identity cards or entitlement cards with regard to crime—organised crime, terrorist crime or any other sort of crime—must be fully examined. We must
consider the issue from the point of view of prevention and of detection. Both factors must be considered in the debate.National Insurance Contributions Bill
3.7 p.m.
Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time. The National Insurance Contributions Bill will put in place the main source of funding for the Government's planned increase in investment in the National Health Service. In his Budget of 17th April, the Chancellor of the Exchequer announced the results of the Wanless review of funding for health services and set out plans for the biggest ever increase in National Health Service investment. He repeated the Government's commitment to a world-class health service for the British people that was free at the point of use and funded by general taxation.
Derek Wanless's report came at the end of a period of debate on alternative methods of funding health services. It examined in detail the alternatives of private insurance and continental-style social insurance schemes. It confirmed the Government's belief that general taxation, including national insurance contributions, remains the fairest and most efficient method of providing the resources necessary for the health service. Private health insurance would fail to help those most in need, would provide coverage that was often inadequate and would be more bureaucratic and expensive. Social insurance schemes such as those used in France, Germany and the Netherlands tend to be regionally based, do not provide full cover for everyone and often place a disproportionate burden on employers. We have rejected those alternatives.
The National Health Service has been partly funded from national insurance contributions since it was established in the 1940s. That is consistent with the principle underlying the Beveridge reforms, which was that people should contribute, when they are working, to the cost of benefits and services that they may need when they cannot work. National Insurance contributions are paid by those who work and by their employers. It is right that employers should contribute, since absence due to sickness is a major cost, amounting to around £12 billion a year according to a CBI survey in 2001. Everyone who has a stake in the National Health Service will contribute while they are in work, when they can best afford to. But there will be no additional burden on pensioners, who do not pay national insurance.
The Bill increases the contributions paid by employees, employers and the self-employed by 1 per cent. It also ensures that the additional contribution is paid on all earnings above the national insurance threshold, including earnings above the upper earnings limit and upper profits limit.
Clause 1 increases the primary Class 1 contribution paid by employees from 10 per cent to 11 per cent on earnings between the primary threshold and the upper earnings limit, as from April 2003. It also introduces a contribution of 1 per cent on earnings above the upper earnings limit. Only the rate payable on earnings below the upper earnings limit can be amended in future by secondary legislation. Because there is separate national insurance legislation for Northern Ireland, the Bill also makes equivalent changes to the Northern Ireland legislation throughout.
Clause 2 applies a similar 1 per cent increase to secondary Class 1 contributions paid by employers so that the rate will be 12.8 per cent next year, compared with 11.8 per cent this year. Because there is no upper earnings limit for employers' contributions, the 12.8 per cent rate will apply to all earnings above the secondary threshold. The rates paid by employers on benefits in kind and PAYE settlement agreements—Class 1A and Class 1B—will also be 12.8 per cent.
Clause 3 increases the Class 4 contribution paid by the self-employed on their profits and gains, from 7 per cent this year to 8 per cent next year. As for employees, they will also pay a contribution of 1 per cent on profits and gains above the upper profits limit.
Clauses 4 and 5 ensure that the additional revenue raised from the increases will be channelled to the National Health Service rather than to the National Insurance Fund, which finances contributory benefits. The proceeds of the increased contributions are added to the existing allocation to the NHS. So, for example, this year an amount equivalent to 1.05 per cent out of the 10 per cent contribution by an employee will be allocated to the NHS. Next year, that increases to 2.05 per cent, plus the whole of any contribution payable on earnings above the upper earnings limit. Equivalent changes are made to the NHS allocation from employers' and self-employed contributions.
The schedules to the Bill contain consequential amendments and repeals. These include amendments to ensure that the changes to contributions do not affect anyone's entitlement to contributory national insurance benefits or any arrangements for contracting out of the state second pension. Contributory benefits will continue to be backed by the National Insurance Fund, which is not affected by this Bill.
The changes in the Bill, together with the freezing of the income tax and national insurance thresholds in 2003-04 announced by the Chancellor of the Exchequer in the Budget, will raise £8.6 billion next year. This makes possible an increase in spending on the NHS from £65 billion this year to £106 billion in 2007-08—an average growth of 7.4 per cent a year, in real terms, for the next five years. It will increase as a share of national income from 6.7 per cent in 1997, and 7.7 per cent this year, to 9.4 per cent in 2007-08.
That will mean 35,000 more nurses, midwives and health visitors, 15,000 more doctors and consultants, and 42 major hospital schemes to be opened by 2008. New targets have been agreed to reduce the maximum wait for an outpatient appointment to three months,
and the maximum wait for inpatient treatment to six months by the end of 2005. By 2004, the maximum wait for emergency treatment from arrival in accident and emergency to admission, transfer or discharge will be four hours.The new resources for investment are being matched by reform, to provide: more devolution of power to front-line organisations and new financial incentives to improve performance; increased choice for patients; improved standards of social services are for the elderly; and new independent regulators, with powers enshrined in legislation to audit and inspect local health services and scrutinise patients' complaints.
The Bill is short and simple. It delivers additional funding for the National Health Service which will allow it to deliver the standard of healthcare this country demands. It does so in a way which spreads the burden as widely and fairly as possible, using the mechanism of national insurance just as the first National Insurance Act did in 1946. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord McIntosh of Haringey.)
3.15 p.m.
The Lord Bishop of Derby: My Lords, I fully appreciate the reasoning behind the 1 per cent increase in the employer's national insurance contribution: it is designed to provide revenue for a most worthy cause; namely, the National Health Service. But I cannot help feeling that the Government may have seen it as an easy way of raising revenue. It is easily collected and businesses can set it off against corporation tax. Have Ministers really considered its implications for the voluntary sector—for charities in general and for the Churches in particular?
Here, I speak as chairman of the Churches Main Committee, representing the Jewish community and some 40 Christian denominations in their dealings with the Government. Churches and the voluntary sector are being left to bear the increase without any relief. In the case of the Church of England alone, we estimate that it will cost around £2 million a year.
In the past, governments have recognised the unfairness of imposing taxes on charities' payrolls. So charities were exempted from the selective employment tax in 1968 and the national insurance surcharge in 1977—on the same grounds as make them exempt from other forms of direct taxation. In its effect, the national insurance contribution increase is just like that surcharge. Given these precedents, why impose the increase on Churches and others in the voluntary sector? I have written to the Chancellor about this but have not yet received an answer. I await with interest what the noble Lord has to say.
3.17 p.m.
Lord Newby: My Lords, we on these Benches support the Bill for two principal reasons. First, we agree that the NHS needs a substantial and sustained increase in funding from general taxation. Secondly,
we support the principle of hypothecating tax increases to specific areas of expenditure. I shall return to both those points.However, we have several reservations about the situation in which we now find ourselves in terms of taxation and spending and the way in which the money is being raised. The Chancellor is truly the son of the manse. He was clearly influenced in his youth by biblical descriptions of years of famine followed by years of feast. On newly entering his post, he perpetuated and intensified the famine in public expenditure which the previous government had imposed, and we saw continuing under-funding of the NHS during the majority of the previous Parliament.
The Chancellor then had something of a change of mind—a contagion which spread to the Prime Minister, who in a panic attack on a TV programme, said that we were going to bring health expenditure up to European levels. We then had a reverse panic about how on earth this was to be funded—and in the run-up to the election, and indeed in the Labour Party manifesto, it was made clear that income tax would not rise during the course of this Parliament. The implication was that taxes were unlikely to have to rise during the course of this Parliament. But, of course, this was always a mistaken perception. It is an indictment of the Chancellor and of the Government more generally that they allowed the perception to remain, during and immediately beyond the election, that it was possible to have something for nothing in the shape of substantially increased public expenditure but without substantially increased levels of taxation to go along with it. In our view it would have been much more honest to say during the election that, in order to reach the targets set by the Government for health expenditure, general taxation would have to rise. There was nothing to be ashamed of in doing that, and they should have done it.
Having had the election and, unsurprisingly, deciding that tax rises are necessary, the Chancellor is now being forced by his manifesto commitment not to increase income tax and is looking elsewhere to fund the additional health expenditure. He has chosen national insurance contributions.
National insurance contributions in their current form are a somewhat curious relic of the Beveridge report. The contribution rules are complex and opaque. Funds reach the National Insurance Fund for pensions, incapacity and other benefits—the benefits that people assume the fund is for—only after more than 10 per cent of all national insurance contributions have been siphoned off for the NHS. The Bill will move NICs further from their original purpose and will mean that a much smaller proportion of national insurance contributions find their way into the National Insurance Fund.
We also believe that it is unsatisfactory to choose NICs rather than income tax. The NIC system is much more aggressive than income tax. It does not cover unearned income or that of pensions. A pensioner with an income of £50,000 will pay no more as a result of the Bill, whereas a part-time worker earning £5,000 will do so.
At this stage in the economic cycle, it is also disappointing that the Chancellor has chosen to place an additional burden on employers. The NIC increases will be particularly unwelcome in the manufacturing sector which has lost an incredible 500,000 employees in the past four years, and which, as we saw from Massey Ferguson's decision last week, continues to suffer because of the Government's inability to take the lead on British membership of the euro. As the right reverend Prelate the Bishop of Derby made clear, other employers, including local authorities and NGOs, will be hit by this tax increase. NIC increases may be a stealth tax to individuals, but they will certainly have severe economic consequences for many employers.
I said that we supported the Bill for two reasons. The first is the need for additional resources for health. We unreservedly support that purpose, but it is equally important that those additional resources are spent as effectively as possible. At present, the NHS is a monolithic organisation. To be more effective, there needs to be more scope for local discretion. As no hospital or primary care group operates in isolation from other parts of the health service in the region where it is based, much more strategic discretion should be exercised at regional level. The White Paper on regional government is a major missed opportunity in that respect.
The detailed health targets set in Whitehall are inappropriate for many communities. If the NHS is to be more responsive and efficient, the vice-like grip of Whitehall needs to be relaxed.
I said that we also supported the Bill because we support the principle of hypothecation of tax increases. We do so because it is more transparent and one can see where the money is going. Secondly—this is an argument that I suspect would not have been used 20 years ago—people do not trust politicians to spend money in the way that they want. Those of us who believe that additional expenditure is necessary for the health service are more likely to win the popular argument by seeking hypothecation so that people will know of the specific benefit that they will get from a tax increase. Indeed, we believe that there is now a strong argument for hypothecating a whole income stream from taxation for the NHS to give long-term certainty and transparency. I suspect that we shall return to that issue another day.
If we are to have greater hypothecation, we need to counter some of the criticisms of the concept. It is argued, for example, that people object to paying a particular tax if they do not like where it is going. People object to paying taxes for all kinds of reasons, whether or not they know where they are going. It is argued that it would be impractical to hypothecate everything; we could not have a tax for police, for defence or for every slice of Government expenditure. That is probably true, but no one is arguing that every on-going government commitment should have an earmarked tax either now or in the future.
It is also argued that hypothecation is just a form of tokenism. It makes no difference whether one says that a certain pot of money is for a certain purpose; in reality, people would not understand how money was being spent, even if it were hypothecated. Some people may not, but hypothecation would make it much easier to explain. Within the National Insurance Fund, one can see the strengths of hypothecation. The NIF in many people's minds is still the fund into which they pay for specific purposes and out of which they draw benefits at a time of need. The on-going popularity of the national insurance principle is a strong argument for the hypothecation principle.
Possibly the most substantive argument is that hypothecation makes expenditure vulnerable to the vagaries of the business cycle. That is true to a certain extent, but no more so than for government expenditure as a whole. All taxes are linked to economic activity. Many are much more volatile than NICs and income tax. The Government smooth their expenditure by planning for the long term. In good years they build up a surplus and in bad years there is a deficit. The same could apply to hypothecated tax.
It is interesting and instructive to note that the National Insurance Fund has built up a surplus of almost £30 billion in this financial year. We should compare that with a surplus of less than £10 billion only a decade ago in order to deal with expected future drawings on the fund. The argument that one cannot make a hypothecated fund recession proof is no stronger than arguing that we cannot make government expenditure as a whole recession proof.
We support the intention behind the Bill, which is to strengthen the NHS. We support the principle of hypothecation and it is now up to the Government to show that they can spend their additional resources as effectively as they raise them.
3.28 p.m.
Lord Saatchi: My Lords, as this is the first Money Bill to come before your Lordships' House since the noble and learned Lord the Leader of the House introduced his report of the working practices group, I shall take this opportunity to thank the Leader of the House, my noble friend Lord Strathclyde, and the other members of the group for their bold new approach to Finance Bills.
Noble Lords from all sides of the House have said that there is an expertise in this House on financial matters that can help to hold the Government to account on finance and to produce better legislation as a result. The Leader of the House deserves our praise for taking this historic step in that direction.
Like the right reverend Prelate the Bishop of Derby, I am not completely sure whether the Bill has come to the House in error. It appears to have been sent to the wrong place. Would it not have been more appropriately received perhaps by a seminar of public relations consultants—perhaps in one of its sessions, entitled, "How to bury bad news"?
I shall take your Lordships back to the Chancellor's Budget speech, or even the Minister's speech a moment ago. They both described the proposed
national insurance increases in the Bill as being intended to fund "the biggest ever increase in health spending"—I think that is what the Minister said. The Chancellor said much the same. As I hope to show, the Bill has little to do with insurance and nothing whatever to do with health.We were all touched by the thought of higher health spending and considered it a fine and worthy use of our money. As the Minister said, the Bill aims to provide world-class care in the National Health Service, and who can possibly deny the need for that? Let us put aside all carping about the loss of income to various groups; let us not worry about the nurses, or the policemen, or anyone on average earnings who will be worse off; and let us not distress ourselves about the irony that the increase in employer's national insurance contributions, provided for in the Bill, will hit the public services hardest of all—an extra £1.2 billion cost to our public services. Let us put aside all doubts about whether more tax will give people the standard of healthcare that they deserve; let us forget that in the past five years in Scotland health spending has risen by 28 per cent in real terms, while waiting times have risen by the same amount; and let us not dwell too long on the way in which voters were misled about the Government's intention in relation to the Bill, as mentioned by the noble Lord, Lord Newby. We shall also repress the memory of the Prime Minister saying during the election campaign:
- "We have not the slightest intention of hammering people in the higher income brackets",
- "I utterly repudiate"—
- "We've got no plans to raise the ceiling on national insurance contributions",
- "It is not going to happen".
I want to draw your Lordships' attention to table A1 in the Red Book on page 154. It is a helpful table which shows the impact of the Budget changes. In lines 1 and 3 one duly finds the increases brought about as a result of the Bill. Personal tax is up by £4.6 billion, which is fine, and we are ready to forgive, to forget and to pay the £4.6 billion for a good cause. However, where will that money go according to table A1? It will not go to the NHS. Instead in lines 18 and 19 and in note K we find that personal tax is down by £4.6 billion. As the Minister knows, that is the effect of the changes to the Government's tax credits regime. So all the money raised by this Bill will pay for tax credits and will not go to the NHS.
Perhaps we can relax. If the money is not spent on health, perhaps it will be spent on insurance. Like the noble Lord, Lord Newby, I shall reflect on the contributory principle of social insurance that underlies the National Insurance Fund. As the
Minister has said, the essential element of the contributory principle is eligibility for certain benefits—mainly retirement and widows' pensions—based on compulsory contributions from employees, employers and the self-employed.Looking at the latest report of the Government Actuary on the National Insurance Fund, published last May, we find a familiar figure of £58 million of receipts from national insurance contributions and £55 billion paid out in age-related benefits of one kind or another. It seems that the National Insurance Fund does not operate as insurance in the normal sense of that word; it operates on a pay-as-you-go basis, so that today's contributions by today's workers cover and finance the current outgoings paid to today's benefit recipients.
The problem is that there is little direct financial relationship between what an individual pays in over a lifetime and what an individual may or may not take out by way of benefit. That point was exposed in the fifth report of the Select Committee on Social Security in June 2000. The committee was worried about the contributory principle and what it would mean for the public in accounting terms. It was pointed out that we now have a mish-mash in respect of what is paid into the fund and what is received from it. It was said that they were not transparent transactions.
If asked about the Bill and about the contributory principle, how many voters would understand that the bulk of national insurance does not go to the National Health Service? The noble Lord, Lord Newby, raised the same point. Research undertaken by Dr Stafford in 1998 for the then Department of Social Security concluded:
- "the respondents believed that through their contributions they had secured a contract with the state that gave them a 'right' to contributory benefits. In some instances, respondents thought, incorrectly, that their contributions were paid into a 'personal kitty', which was available when needed".
The TUC giving evidence to the Social Security Committee also complained about the lack of transparency in the national insurance contribution system. It was surprised by the public's complete lack of understanding about the working of the contributory system, which I believe the noble Lord, Lord Newby, called complex and opaque. The TUC's evidence spoke of,
- "the complexity of national insurance and the widespread ignorance of its main features".
The Government know the situation well and plan to take full advantage of it. As the right reverend Prelate said, the Bill is merely a device for raising money painlessly because people dislike the idea of paying income tax. Although the idea of contributory benefits as a right may be popular with some members of the public, I hope that I have shown that it does not have any basis in economic or accounting reality. Therefore, we should give up the myth that the national insurance regime is insurance and admit that it is a straightforward tax.
The Minister will say that I am being unfair or irrelevant. He will say that, "Everything goes into one pot. Who cares about the labels? We, the Government,
take in the money and pay it out as we wish. What is in a name?" Perhaps there is not much in a name, but as the accountants at WorldCom discovered, calling an item by a different name can change the way in which that item is viewed, which means that one can change the way in which it is treated in the accounts. By changing the name one can achieve a different result, as the Government know well. They are experts at it. That is why they classify "spending" as "investment"; "means testing" as "targeting"; "benefit" as "credit"; and that is why they stop us using the phrase "tax burden" and require us to use the phrase "tax and social security contributions as a percentage of gross domestic product" instead. By calling "costs" "capital" one increases the profit; by calling "tax" "insurance" one reduces the pain, as the right reverend Prelate said.The very existence of the Bill conforms to Professor Liekerman's views about the way in which public accounts are dealt with. He says:
- "There is an enormous need for much greater clarity of presentation",
- "Reader understanding (of financial reports in the public sector) is sometimes felt by those who compile them to be a disadvantage".
- "Such reports should . . . not be unduly distorted"—
- "by public relations considerations".
The Institute for Fiscal Studies is in no doubt about what we are talking about in the Bill. It says that it is a back-door increase in income tax, as the right reverend Prelate said, rather than any form of contribution. It says that the increase in national insurance is,
- "for somebody whose sole source of income is from paid employment exactly like increasing the starting, basic and higher rates of income tax by 1 percentage point".
- "We note this departure from previous practice which could be viewed as a move of the national insurance contribution system towards that of general taxation".
We are moving towards a national insurance system in which there is no relationship between what individuals pay in and what it pays out. In my opinion, the Bill deliberately further blurs the distinction between general taxation and national insurance contributions.
In Committee in another place, the Financial Secretary said that the Government have given us a tax system that is like a television set—so complicated that no one understands it but that did not matter because people only had to turn the switch. That is utter nonsense. What switch has to be turned to discover that not one penny of the extra £4.6 billion of national insurance contributions will go on health?
3.40 p.m.
Lord McIntosh of Haringey: My Lords, I am grateful for some of the contributions to this short debate. A Bill that does nothing but raise revenue from the public is not going to be the most popular Bill in the parliamentary year. The paradox is that the Chancellor's Budget has been popular because people recognise that our arguments about National Health Service funding are right. The Budget has been popular because the public recognise that if one wants a world-class NHS, one must pay for it. There are no cheap and easy ways out. As Derek Wanless has pointed out, there are no solutions in individual or social insurance alternatives.
I knew that our policy would have the support of the Liberal Democrats but I am fascinated by the silence from members of the Conservative Front Bench. I understand that the Conservative Party has been searching Europe, and perhaps the world, for alternatives to funding the NHS from general taxation. Perhaps the silence from the noble Lord, Lord Saatchi, is an indication that is about to change. I hope so. That would be most welcome.
The right reverend Prelate speaks with authority from his position in the Church of England and as a representative of Churches and faiths more generally. I acknowledge the force of his complaint that the voluntary sector, charities and Churches will be treated in the same way as businesses and individuals—which we have never sought to conceal. I am sorry that the right reverend Prelate has not received a reply after writing to the Chancellor two or three weeks ago. I shall make sure that a response is expedited. Such delay is not satisfactory in respect of anyone who writes to the Chancellor—still less someone who writes in such an important representative capacity.
The voluntary sector, charities and Churches are affected by the Bill as employers—just as all other employers are—by the problem of ill health among people of working age. We rely on the CBI estimate, not our own, of the cost of ill health to employers—including charities, the voluntary sector, charities and Churches—totalling £12 billion a year. An improved health service will bring benefits to employers, regardless of who they are.
There is general agreement that the health service is defective in many ways. The voluntary sector, charities and Churches need the service to be improved and will benefit when it is—so they will get something back for the money they pay.
The public services as a whole ought not to be treated differently from the private sector in respect of taxes from employees and employers, as that would give rise to an anomaly that would present difficulties to begin with and make things impossible as time went on. How could one distinguish between public and private services? Would private companies that supply only the public services also be exempt? No one can justify discrimination in employment taxation as between the public and private sectors. Instead, we have to ensure that the money going to public services
and to the voluntary sector, Churches and charities is sufficient to allow them to bear the burden, which they must, together with other employers.We need to examine the cost of public services in the wider context of increased spending on pubic services in 2003-2004, when the measure will come into force, of £19.5 billion and of £6.7 billion on the National Health Service. Under those circumstances, the relative importance of the figures takes on a different aspect.
Parts of the voluntary sector and charities do contribute to publicly funded public services. I assure the right reverend Prelate that as part of the current spending review, which will be reported later this month, there will be a cross-cutting review of the role of the voluntary sector in delivering and assisting the delivery of public services. That review will take account of the issues that the right reverend Prelate raised.
The noble Lord, Lord Newby, made an interesting speech about hypothecation—which appeared to be based in part on the thinking that the measure is hypothecation. It is no such thing. Our objection to hypothecation is as strong as ever and it stems not just from the answers that the noble Lord gave to his own questions about extending the principle to prisons, the Armed Forces or other less popular areas of public expenditure. Our objection is also that ways of raising money for public services are subject to variation, whereas the needs of the public services are not. We would not subject the National Health Service to a hypothecation that would put at risk its long-term financial planning, which must be based on a commitment to expenditure from all sources of revenue.
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