The Second Wilson Government made a major commitment to the expansion of the British welfare state, with increased spending on education, health, and housing rents. To pay for it, it imposed controls and raised taxes on the rich. It partially reversed the 1971 reduction in the top rate of tax from 90% to 75%, increasing it to 83% in the first budget from new chancellor Denis Healey, which came into law in April 1974. Also implemented was an investment income surcharge which raised the top rate on investment income to 98%, the highest level since the Second World War. In March 1974, an additional £2 billion were announced for benefits, food subsidies, and housing subsidies, including a record 25% increase in the pension. Council house rents were also frozen. That same year, national insurance benefits were increased by 13%, which brought pensions as a proportion of average earnings "up to a value equivalent to the previous high, which was reached in 1965 as a result of Labour legislation." In order to maintain the real value of these benefits in the long term, the government introduced legislation which linked future increases in pensions to higher incomes or wages. In 1974–75, social spending was increased in real terms by 9%. In 1974, pensions were increased in real terms by 14%, while in early 1975 increases were made in family allowances. There were also significant increases in rate and rent subsidies, together with £500 million worth of food subsidies.
An independent Advisory, Conciliation and Arbitration Service (regarded as very much the brainchild of the trade union leader Jack Jones) was set, which according to Robert Taylor continues to provide "an impartial and impressive function in resolving disputes and encouraging good industrial relations practice." A Manpower Services Commission was set up to encourage a more active labour market policy to improve job placements and deal with unemployment. The Pay Board was abolished, while the Price Commission was provided with greater powers to control and delay price increases. In addition, the Housing Rents and Subsidies Act of 1975 gave power over rents back to local authorities.
In 1975, a state earnings related pension scheme (SERPS) was introduced. A new pension, which was inflation-proofed and linked to earnings, was added to the basic pension which was to increase in line with earnings for the first time ever. This reform assisted women by the linking of pensions to the 'twenty best years' of earnings, and those who worked at home caring for children or others were counted as contributors. This scheme was later eroded by the subsequent Thatcher Government, and insufficient pension rights had been built up by that time to establish resistance to its erosion. The Sex Discrimination Act (1975) gave women the right in principle to equal access to jobs and equal treatment at work with men, while the Employment Protection Act introduced statutory maternity leave. That same year, the wage stop was finally abolished. In addition, differentials between skilled and unskilled workers were narrowed as a result of egalitarian pay policies involving flat-rate increases.
The Social Security Pensions Act of 1975 introduced equal treatment in pension schemes and eliminated the contributions test which limited state pensions for women. The Housing Finance Act (1974) increased aid to local authorities for slum clearance, introduced a system of "fair rents" in public and private sector unfurnished accommodation, and introduced rent rebates for council tenants. The Housing Act (1974) improved a renovation grants scheme, provided increased levels of aid to housing associations, and extended the role of the Housing Corporation. The Rent Act of 1974 extended security of tenure to tenants of furnished properties and allowed access to rent tribunals. The Community Land Act (1975) allowed for the taking into public control of development land, while the Child Benefits Act introduced an extra payment for lone parents. A Resources Allocation Working Party (RAWP) was also set up to produce a formula for a more equitable distribution of health care expenditure. Anthony Crosland, while serving as a minister during Wilson's second government, made a decision to reform the level of rate support grant, introducing a standard level of relief across the country to benefit poorer urban areas.
Circular 4/74 (1974) renewed pressure for moves towards comprehensive education (progress of which had stalled under the Heath Government), while the industrial relations legislation passed under Edward Heath was repealed. The Health and Safety at Work Act of 1974 set up a Health and Safety Commission and Executive and set up a legal framework for health and safety at work. The Employment Protection Act of 1975 set up the Advisory, Conciliation and Arbitration Services (ACAS) to arbitrate in industrial disputes, enlarged the rights of employees and trade unions, extended the redundancy payments scheme, and provided redress against unfair dismissal. The legislation also provided for paid maternity leave and outlawed dismissal for pregnancy. The Social Security Act of 1975 introduced a maternity allowance fund, while the Sex Discrimination Act of 1975 set up an Equal Opportunities Commission and outlawed gender discrimination (both indirect and direct). Despite its achievements in social policy, however, Wilson's government came under scrutiny in 1975 for the rise in the unemployment rate, with the total number of Britons out of work passing 1,000,000 by April of that year.
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