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Sickness Benefit: Cost

Volume 413: debated on Wednesday 15 October 1980

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2.47 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what is their estimate of the extra cost to the private sector of paying eight weeks' sick pay at a minimum of £30 a week instead of the £18·50 previously paid from national insurance funds.

My Lords, sickness benefit is payable at a rate of £18·50 a week to people without dependants. Additions for dependants are payable on top of this. Paragraph 29 of the Green Paper Income During Initial Sickness: A New Strategy, states that, on the basis of the proposals put forward, employers' wage bills would rise by about £415 million, upon which they would have to pay national insurance contributions and national insurance surcharge. It is the Government's intention that employers, as a group, should be compensated for these extra wage costs by an appropriate reduction in their national insurance contribution. I would stress that the Government have not come to any firm conclusion on the shape of the scheme and that therefore any costings must be provisional and subject to a wide margin of error.

My Lords, is my noble friend aware that he probably will have public support for a measure which seeks to bring about a state of affairs where people are not better off when drawing untaxed benefits than they are when working? Is this not a bad time to add an extra financial burden to British industry and, more especially, to small firms who are already very seriously strapped for cash?

My Lords, we are talking about a Green Paper and we have had consultations with many organisations and individuals over the past six months. All representations had to come in by 30th September. The great majority of people approve what my noble friend referred to, the taxation of sick pay, so that people are not better off when sick than when they are at work. There were many criticisms in detail of the Green Paper proposals. All these proposals are now being carefully examined. There were many representations about small businesses and I know that my right honourable friend is very sympathetic to small businesses and will want to do all he can to help them.

My Lords, it is all very well for the noble Lord to say that the Government are sympathetic to small businesses. The record shows that they are lacking in compassion. So far as this scheme is concerned, why do not the Government drop it? It is stupid. It affects businesses; it affects the recipients of pensions. The whole idea is crazy. Drop it and forget it!

My Lords, the noble Lord is of course fully entitled to his views, but they do not happen to be shared by the very large number of people who have been giving their representations. I agree that they do not like many of the details, but in principle they agree.

My Lords, will the noble Lord say what the position will be regarding payments in respect of part-time workers?

My Lords, the scheme will only apply to those people who are paying national insurance contributions; that is, people earning over £23 a week. Those who are getting a small amount over £23 a week will not, of course, get the minimum of £30. There is a scheme being worked out by which small earners will get a proportion of their earnings. This might be 75 per cent. It would be absurd, for instance, if somebody earning £24 a week was paid £30 a week when sick.

My Lords, could the noble Lord say what is the estimated gain either to the Treasury or to the national insurance fund as a result of the scheme?

My Lords, the cost to the employers will be compensated by the Government. The total cost to the employers will be £415 million, and they will have an appropriate deduction from their national insurance contributions to cover that as a group. There may be some companies which will be better off and some which will be worse off; but as a group they will be covered by compensation. The present cost to the national insurance fund is £375 million. The reason why the cost goes up from £375 million to £415 million is because of the additional national insurance and national insurance surcharge payable by employers on paying wages when the employees were otherwise covered by sickness benefit.

My Lords, when the cost is criticised, could the Minister say how the sick pay compares with what is paid in Western Germany, Scandinavia and other Western European countries?

My Lords, would the noble Lord agree that under the proposed scheme the single man will be very much better off, whereas the married man with children will be worse off? Does he feel that such arrangements could be justified?

It is perfectly true that the single man will benefit on this basis. It is a complicated business because one of the proposals in the Green Paper was that there should be a premium payable to those with dependent children. This was not well received by employers because it complicates the position, in that they are not now paying wages to people on the basis of whether or not they have children. This way they would be paying differently to different people when they were away sick—people who were getting the same salary in the firm.

My Lords, would the Minister consider that the scheming suggestion is absolutely a breach of contract in respect of the people who pay their national insurance stamp and expect to get their benefits from the state? If any insurance company did this, there would be trouble.

My Lords, I do not think there is a breach of contract. This is sick pay for the first eight weeks, and the recipient will get his money in that way rather than from the national insurance scheme. After that he will be on the national insurance scheme in the ordinary way.

My Lords, would my noble friend consider whether, if the Government come forward with a White Paper or a draft scheme, they ought not to exempt entirely firms with 20 or fewer employees? If they cannot be exempted, could the Government consider whether such firms might be entitled to deduct payments made under this scheme from their monthly PAYE and national insurance payments?

My Lords, a great many suggestions have come with the representations that we have received, but whether the particular suggestion put forward by my noble friend was included in them, I do not know. However, I will certainly see that his ideas are put forward.