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National Insurance Fund

Volume 486: debated on Tuesday 10 April 1951

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Before I leave the subject of expenditure there is one other matter to which I must refer. It is complicated and technical and has no bearing on the main budgetary problem, so that hon. Members who are feeling exhausted can relax and go to sleep for a bit. I refer to the National Insurance Fund. The Government Actuary's Report on the Fund shows that because it is financed on an assumed average rate of unemployment of 8½ per cent.—far above anything we have had since pre-war days, and also above anything we are likely to have in the near future—it would, under present conditions, go on increasing by about £140 million a year. This surplus of income in the Fund is, of course, a very necessary addition to the nation's savings, and is always taken into account in calculating the size of the Budget surplus required, and therefore the amount of taxation to be levied. Nevertheless, as I am sure the Committee will I am sure agree, it is not satisfactory that a separate Fund intended to remain roughly constant, should be increasing at this rate.

The increased pensions and other benefits which I have just announced will reduce the surplus income by £39 million in a full year and £19 million in the first year. This would still leave a surplus income to the Fund each year of about £100 million. It is desirable, in my view, to eliminate this. I therefore propose to reduce the Exchequer contribution to an amount which will leave the Fund at about its present level. The precise basis of this arrangement, which is somewhat technical, will be explained in detail when my right hon. Friend has introduced the Bill dealing with pensions.

I must at once remind the Committee that this reduction in the Exchequer contribution to the Fund will not, of course, in any way ease the budgetary problem, for as I have explained already, the disappearance of the remaining surplus means a corresponding drop in savings. It will have to be balanced by a larger Budget surplus, which in this case is automatically achieved by the lower Exchequer contribution. It is really no more than a bookkeeping matter and makes no difference one way or the other to the gap which has to be covered by taxation.