§ The Minister for Social Security (Mr. Tony Newton)
I beg to move,That the draft Social Security Benefits Up-rating Order 1985, which was laid before this House on 5th July, be approved.I understand, Mr. Speaker that it would be for the convenience of the House to take with this the following motions:That the draft Supplementary Benefit (Requirements) Amendment and Up-rating Regulations 1985, which were laid before this House on 8th July, be approved.That the draft Supplementary Benefit (Resources) Amendment (No. 2) Regulations 1985, which were laid before this House on 8th July, be approved.That the draft Child Benefit (Up-rating) Regulations 1985, which were laid before this House on 5th July, be approved.That the draft Family Income Supplements (Computation) Regulations 1985, which were laid before this House on 5th July, be approved.That the draft Housing Benefits (Increase of Needs Allowances) Regulations 1985, which were laid before this House on 5th July, be approved.That the draft Pensioners' Lump Sum Payments Order 1985, which was laid before this House on 5th July, be approved.That the draft Vaccine Damage Payments Act 1979 Statutory Sum Order 1985, which was laid before this House on 22nd July, be approved.That the draft Social Security Benefit (Dependency) Amendment Regulations 1985, which were laid before this House on 22nd July, be approved.That an humble Address be presented to Her Majesty, praying that the Housing Benefits (Miscellaneous Amendments) Regulations 1985 (S.I., 1985, No. 1100), dated 16th July 1985, a copy of which was laid before this House on 17th July, be annulled.
§ Mr. Newton
The orders are accompanied by a report from the Government Actuary on the effects of the proposals on the national insurance fund and by a statement from my right hon. Friend, the Secretary of State, on the background to the uprating proposed for the mobility allowance.
The statutory instruments put into effect the uprating of social security benefits announced in the House on 18 June by my right hon. Friend the Secretary of State. They also provide for the payment of the £10 Christmas bonus, an increase in vaccine damage payments and other changes to which I shall come later in my speech.
As the House is aware, it is the Government's intention that this should be the last November uprating before the move to annual upratings which will take place from April 1987. To pave the way for that change, we have taken powers in the Social Security Act 1985 to enable us to undertake the 1986 uprating in July — four months earlier than usual. The result is that after November 1985 there will then be two upratings at eight-month intervals, in July 1986 and April 1987. That move has been welcomed as sensible on both sides of the House and well beyond it.
Rather than catalogue the details and technicalities of each of the orders, it will be more helpful if I merely remind the House of the main features of the upratings and then deal with some of the issues upon which it seems right to comment further.
1350 For the majority of benefits, including retirement pensions, unemployment benefit, widow's benefit and war pensions, the uprating orders provide for an increase of 7 per cent.—the full measured increase in the retail price increase in the 12 months from May 1984 toMay 1985. For a single person, the retirement pension will increase by £2.50 per week — from £35.80 to £38.30; for couples the increase will be £4 a week—from £57.30 to £61.30. The full rate widow's pension will rise in line with the single person's retirement pension.
Those increases, once again, clearly fulfil the Government's firm and continuing commitment to protect the value of the basic retirement pension. As the House is aware, since the Government first took office in 1979, that promise has been more than fulfilled. When this increase takes effect in November 1985, pensions will have increased by about 96 per cent. since November 1978— 10 per cent. more than the expected rise in prices over the same period.
I should emphasise, because it is a point that is not always sufficiently appreciated, that that improvement in the pension's real value has been achieved at the same time as the number of retirement pensioners has increased by about 800,000, taking the total number of retirement pensioners from 8.3 million to 9.1 million. Against that background, the Government's record of more than maintaining the value of retirement pensions is one of which my hon. Friends can be proud.
Alongside those increases in pensions and many other benefits, the supplementary benefit and the housing benefit needs allowances will also be appropriately increased by the orders. In the case of supplementary benefit, the increase is 5.1 per cent., in line with the increase in the retail price index between May 1984 and May 1985, less the element of housing costs. As the House is aware, that difference in uprating methods merely reflects the fact that for those on supplementary benefit housing costs are, for the most part, met separately through the housing benefit system.
With regard to housing benefit, the needs allowance generally will be increased by between 5.5 and 6.2 per cent., again in accordance with the usual rather complicated formula. The one exception is the child's needs allowance, which is being increased by more than the usual formula would have required.
While talking about housing benefit, I should refer to the uprating of non-dependant deductions. That has been the subject of some comment. It is also provided for in the regulations before the House. The purpose of non-dependant deductions is to take account of the contribution towards housing costs which is assumed to be made by a non-dependant living in a beneficiary's household. The deductions are therefore uprated in line with changes in housing costs. That formula, which follows previous practice under the supplementary benefit scheme, has been in place since the introduction of the housing benefit scheme. The same formula is also applied to the supplementary benefit non-householder housing addition. The normal method of uprating the non-dependant deduction and that non-householder housing addition in supplementary benefit has been applied this year.
I am aware that anxiety has been expressed that the statement and schedule accompanying my right hon. Friend's statement on 18 June did not include the figures for those deductions. As I explained in a written answer to the hon. Member for Oldham, West (Mr. Meacher) on 1351 8 July, we were following previous practice. On this and previous occasions, the practice has been for the uprating statement to give details of increases in the main weekly benefit rates but not increases in the considerable number of minor benefit items.
It was solely for that reason that the increases in non-dependant deductions were not referred to. Clearly the House has the opportunity to consider them, as it does this afternoon, when the relevant statutory instruments are laid before the House. Nevertheless, having said that, I hope that I have made it clear, against the implications that the hon. Member for Oldham, West sought to establish earlier — that there had been some attempt to conceal, abnormally, what the proposals and the uprating methods were — that there was no departure from previous practice.
In view of the comments made on this occasion, we shall clearly have that matter in mind when considering what should be put in the scheduled list of the uprating of benefits next year. I am glad to see the hon. Member Oldham, West nodding, because we do not wish to convey the impression, which he evidently first gained, that we have in some way sought to conceal matters. That was far from our intention. [Interruption.] I am sorry to see the hon. Member for Birkenhead (Mr. Field) conveying some disbelief at that statement. I hope that I have made it clear that we were merely following normal practice.
Before leaving the issue of housing benefit, I should refer to the proposal contained in my right hon. Friend's uprating statement to increase the rates taper from 9 to 13 per cent., which does not feature in the orders before the House. That proposal is not contained in the orders because, unlike others in respect of housing benefit contained in the uprating, it is subject to consultation with the local authorities, and we wish to ensure that adequate time is allowed for that process of consultation and then for us to consider the responses that we receive. When we have considered them, we shall take the action necessary to implement the conclusions at which we arrive. No doubt the House will want to have the opportunity to debate whatever proposal is put forward when it resumes in the autumn.
I wish to deal with benefits for families. The House will be aware that the orders provide for an increase in child benefit of 15p — from £6.85 to £7. The Government have made clear their continuing view that it is right to maintain child benefit as a non-means-tested, non-taxable benefit normally payable to the mother, and the fact that it is inevitably necessary to make a judgment about the appropriate level at the time of each uprating decision and to make that judgment in the context of social priorities and the social security budget as a whole.
On this occasion—this is a subject that the House has already debated—we concluded that that increase to £7 was the appropriate increase for child benefit generally, and that it was right to make a special increase at the same time in those aspects of benefit which apply to lower paid families in work with children. I now come to those changes.
§ Mr. Frank Field (Birkenhead)
How much money will the Government save by not uprating child benefit in line with prices? As to the increases in the other benefits for families, how much of that money saved will be paid in 1352 benefit? When the new family credit comes in. will there be a commitment to use all the savings from child benefit to finance that?
§ Mr. Newton
The answer to the first half of the hon. Gentleman's intervention is that in a full year the saving from the uprating to £7, rather than a 7 per cent. increase to take account of the rise in prices over the full year from May to May, is £175 million. The cost of the various measures to which I am about to turn in respect of lower income families is about £26 million in a full year.
The answer to the second half of the hon. Gentleman's question is that, just as we must make a judgment in the context of this uprating about the appropriate level of child benefits, when we come to make decisions about the rates to be set in relation to such proposals as we may implement following the review, we shall also have to make a judgment on the balance of all considerations in the context of the social security budget as a whole.
§ Mr. Field
Does the hon. Gentleman realise that that is a change in the Government's position from the time of the uprating statement? The Secretary of State then said that the reason for this cut in child benefit was to enable money to be targeted on the poorest. Clearly he is now leaving the option for some of that money to be taken from families to be given in tax cuts to single people. That is hardly targeting.
§ Mr. Newton
I do not accept that there is any difference in meaning or emphasis from what I have said now and on previous occasions and what the Secretary of State has said on previous occasions. Our positon is quite clear. We believe in maintaining the child benefit system in the terms in which I have just presented it. We also believe that it is right to accord particular priority—in looking at the social security structure as a whole and, particularly, when considering the balance of benefits for families—to the needs of lower paid families, especially such families in work. The hon. Gentleman is straining a bit in suggesting that there is some major change in emphasis in what I have just said.
§ Mr. Meacher
My hon. Friend the Member for Birkenhead (Mr. Field) has raised an important point. The Minister has said that in real terms the cut in child benefit is about £175 million. As my hon. Friend pointed out, the Secretary of State said that the motive was to concentrate resources on families in greatest need. Will the Minister confirm that the value of the improvement in family income supplement and housing benefit child needs allowance together comes to about £23 million, which is about only 13 per cent. of the cut in child benefit?
§ Mr. Newton
Had the hon. Gentleman been listening about three minutes ago he would have heard me give the figure, which is around £26 million, but I do not seek to build too much on that.
As the House is aware, these orders propose an increase in family income supplement prescribed allowance by more than 7 per cent. and introduce an element of age relation into the scheme by setting new higher prescribed amounts for families with older children. The new prescribed amounts for a one-child family will be £97.50 a week where the child is under 11; £98.50 where the child is 11 to 15 years old; and £99.50 where the child is 16 to 19 and still at school. For each additional child the prescribed amount will increase by £11.50, £12.50 and £13.50, again depending on the age of the child.
1353 As well as targeting help more effectively, this measure will help mitigate the effects of the unemployment trap, which is a matter of concern to hon. Members on both sides of the House, by aligning more closely the rates paid to low-income working families with children and the rates paid to families who are unemployed and receiving supplementary benefit. To the same end, we are increasing the housing benefit child needs allowance by about £1 a week more than a normal uprating would require.
I should also emphasise that we are increasing one-parent benefit by the full extent of the 7 per cent. general uprating from £4.25 a week to £4.55 a week. The children's scale rates within the supplementary benefit scheme—which apply to the least-well-off families out of work—are also increased by the full supplementary benefit uprating percentage.
Taken together, those measures targeted to low-income families, and especially to low-income working families, are of very significant additional help to such families, especially when taken with the changes in national insurance contributions that were announced in the Budget and that are due to come into effect in October this year.
To give some idea of the importance of those changes taken together, if I compare what we are proposing, including the national insurance changes, with what would have happened had a normal uprating been carried out, it shows that a married couple, with one child aged 3, with gross earnings of £80 a week will be £2.02 a week better off than they would otherwise have been; a married couple on the same earnings with two children aged 4 and 6 will be £2.43 a week better off than they would otherwise have been; and a married couple with three children aged 3, 8 and 11 will be some £3.18 better off. I know that on this at least I shall carry the hon. Member for Birkenhead with me in regarding those as useful improvements for a group of the population for whom in the past we have perhaps not done enough through the social security benefits system or in other ways.
§ Mr. Field
The Minister certainly carries me with him on that point, but are not his considerable debating skills yet again being used in the Chamber to disguise a significant change in Government policy? Until very recently the Government were concerned with two objectives—the living standards of poor families and the living standards of all families. Is there not now a marked change? While there is concern for the very poorest—although some of us may debate how effective the changes are — the Government have gone back on their commitment to ensure that living standards and the tax burden are shared equally between those with children and those without. Is not that a very significant change indeed?
§ Mr. Newton
I do not believe that the Government have gone back on their commitment, although I accept that in the context of this uprating there is a difference of opinion between the Government and the views held by the hon. Gentleman about how that commitment is best fulfilled. He will have read what has been said in the social security review Green Paper and will be well aware of the emphasis placed in that paper on the needs of families with children. But particularly—and we do not run away from the word "particularly"—the emphasis is on the needs of low-income families with children, not least on low-income families in work who have children. That is a sensible reflection of sensible social priorities.
1354 I wish to turn to the questions arising from these orders relating to benefits for disabled people. I remind the House that, in line with the general uprating figures, mobility allowance will rise from £20 to £21.40 a week. That means that it has far more than doubled since the Government took office. The higher rate of attendance allowance will rise from £28.60 to £30.60. The lower rate of attendance allowance will rise from £19.10 to £20.45. The rate of severe disablement allowance—the replacement for noncontributory invalidity pension—will go up from £21.50 a week to £23.
I wish to draw particular attention to the fact that those on the contributory invalidity pension will receive an uprating well beyond the rate of inflation at 7 per cent., and in all that will amount to an increase of 12 per cent. That will be worth more than £4 a week to single beneficiaries and £6.50 a week to married couples. That is because, as the House is aware, we are restoring the 5 per cent. abatement of invalidity pension, despite the fact that at present there are no immediate plans to bring the benefit into taxation, even though we have always said that that is the intention in the longer term.
§ Mrs. Margaret Beckett (Derby, South)
Will the Minister confirm that nevertheless the changes in the offset of the additional component in the invalidity allowance mean that the Government are making a net saving?
§ Mr. Newton
I was about to come to the other changes that I would not wish to disguise from the House. One of them is covered in the regulations, and I wish to make particular reference to it. The hon. Member for Derby, South (Mrs. Beckett) has already referred to an aspect that is not covered in these regulations but which is covered in the Social Security Bill that was passed earlier this week, and that is the measures we have taken in relation to the invalidity allowance addition, which is paid at a higher rate to those who become sick and disabled at an early stage in their life, as against the earnings-related additional component.
I wish to refer to another aspect, the way for which was paved in the Social Security Bill. It is also reflected in the Social Security Benefit (Dependency) Amendment Regulations which are part of the package that we are debating. It provides for a new form of earnings rule for adult dependants of recipients of certain long-term benefits. As the hon. Lady knows from my replies to parliamentary questions, we intend to set the level of the new earnings rule—which is an equal treatment earnings rule that extends our provisions for equal treatment under the social security system—at the rate of unemployment benefit, which is now £28.45 a week. It will be increased to £30.45 a week from November.
We intend to apply the earnings rule to the wives of invalidity pension husbands and also to the husbands of invalidity pensioner wives. 'The net effect is to create a more generous rule for the husbands of women who are in receipt of long-term benefit, in particular invalidity pension, but it is a rather less generous rule than the present one for the wives of men who are receiving a similar range of benefits. By linking the level of the earnings rule to the rate of unemployment benefit, we ar adopting a common sense position. By the time people are earning more than they could achieve on their own contribution record if they were out of work, it is hardly sensible to regard them as any longer dependent upon 1355 somebody else who is receiving social security benefit. We shall also ensure that the earnings rule is regularly increased. It will be increased in line with changes in unemployment benefit.
I should emphasise that this measure will come into effect on 16 September but that there will be no cash losers. It will apply only to new claimants after that date.
The hon. Member for Derby, South has already expressed interest in the last point I wish to make on this subject. Originally we said that as part of a series of changes that would affect invalidity pensioners we intended to move to fortnightly payment of benefit in arrears. The hon. Lady has been probing me about the Government's intentions. She will by now be aware that, in the light of the general proposition in the social security Green Paper to seek more consistency and greater alignment between the payment mechanisms and other forms of rules affecting a whole variety of social security benefits, we have thought it right to defer the implementation of that proposal and to give further consideration to it in the wider context of the Green Paper.
I turn to a number of particular supplementary benefit issues other than the general uprating of supplementary benefit with which I have already dealt. We propose to make two changes to the supplementary heating additions which will be uprated generally by the rise in fuel prices. This was 4.4 per cent. between May 1984 and May 1985. First, we intend to limit the central heating additions. They were introduced in the early 1960s when the few claimants with central heating undoubtedly spent more than other claimants on fuel. The position has changed markedly. About half of all claimants now have central heating. Central heating is more efficient than most other systems of heating houses. Claimants with gas and electric central heating systems spent less, on average, on heating than claimants without central heating.
In these circumstances, we have decided to make no further awards of such additions in this category to claimants after 5 August. Claimants who were entitled to central heating additions before 5 August will receive them while they are still on benefit and remain eligible under the current rules, but from that date no new central heating additions will be awarded to new claimants. I want to emphasise that other heating additions will continue under a variety of headings. I re-emphasise the point I made at the beginning: all heating additions are being uprated to the full normal extent—that is, by the price index that measures the increase in fuel costs.
Mr. Bruce Milian (Glasgow, Govan)
The Minister has not provided figures for the savings on central heating allowances. However, in a full year they amount to about £55 million. No fewer than 1 million families will be affected. Is he aware that a number of hon. Members disagree fundamentally with his statement about central heating costs? In many cases they are a burden to families. I have received representations on this point from a number of constituents. If expenditure upon this kind of heating allowance is not as high as it might be, it is because people feel that they cannot afford to turn on the heating. This causes widespread concern among the elderly, especially since this rule has been introduced at such short notice. Many hon. Members are anxious about a saving of 1356 this kind being slipped through in what appears to be a rather surreptitious way, although large sums of money are involved.
§ Mr. Newton
It can hardly be said to be surreptitious when my right hon. Friend the Secretary of State for Social Services devoted the best part of a paragraph of his statement on 18 June to this point. Savings are involved. The figure for a full year will be about £38 million. It will increase in future years because claimants who are already on benefit and in receipt of a central heating addition will continue to receive it. So the effects are not quite the same as they would be with a normal social security change.
§ Mr. Millan
The figure I was given in a parliamentary answer relates presumably to savings which take into account the fact that present recipients will continue to receive the addition, unless they come off benefit, however temporarily. The figure that was given in a parliamentary answer was £55 million for a full year.
§ Mr. Newton
I suspect that the difference between us is that the figures I have in front of me relate to 1986–87, whereas the right hon. Member is referring to 1987–88. That ties in with my point that this builds up a little, because existing claimants are protected. To pick up the main thrust of the right hon. Gentleman's point, those who are already in receipt of supplementary pension will be protected in the way that I have already stated. Moreover, any householder over the age of 65 will receive a heating addition.
§ Mr. Newton
No, not necessarily at a lower rate. Anybody who is over the age of 85 will receive a heating addition at a higher rate than this. That would nullify any central heating addition to which they were entitled. We give the claimants the highest heating addition to which they are entitled. A significant number of pensioners below the age of 85 may be in receipt of higher heating additions under other provisions, including those that are directed to the need of the long-term sick and the disabled. Although I understand the right hon. Gentleman's point and the point that no doubt the hon. Member for Birkenhead is burning to make, I would ask them not to overplay their hand when considering the effect of these proposals.
§ Mr. Frank Field
As the Minister for Social Security is anxious that I should not overplay my hand, and as he therefore thinks that the point I am about to make is not very important, may I ask him whether I am right in saying that after 5 August people will cease to be eligible for a heating addition on the ground that they have central heating? As the point I am making is so unimportant and as the costs involved will, presumably, also be unimportant, can the Minister say 'what steps he will take between now and 5 August to tell those of our constituents who are eligible for this benefit that they should put in a claim before 5 August because on 6 August they will cease to be eligible? Will he be appearing on the popular radio and television programmes to get that message across?
§ Mr. Newton
I shall not seek to conceal that information from anybody who wishes to have it. The fact that the hon. Gentleman has raised the point in that way will, I hope, be a helpful additional means of bringing this fact to the attention of those who may be affected.
1357 Another point, which is relevant to the point made by the right hon. Member for Glasgow, Goven (Mr. Millan), is that the central heating addition is paid at two rates. The lower rate of central heating addition is the same as the rate of heating addition for all pensioner householders over 65. There is sometimes a tendency to talk about this measure as if all central heating additions were paid at the higher rate rather than the lower, and therefore to assume an effect on pensioners beyond what the facts would sustain.
The other point about central heating additions. on which I would also hope to carry the right hon. Member for Govan and the hon. Member for Birkenhead, is that we have proposed to extend the lower rate of heating addition, which would be worth £2.20 a week from November for all sick and disabled householder claimants on the long-term rate of supplementary benefit. We expect that proposal, which will cost about £1 million—I accept that it is a modest cost—in a full year will benefit about 18,000 claimants.
An indirect effect of the approval of the Social Security Benefits Up-rating Order is that the specified sum—that is, the amount deducted in accordance with section 6 of th Social Security (No. 2) Act 1980 from the supplementary benefit payment payable for the dependants of strikers—will increase automatically at the time of the uprating by 7 per cent. which, rounded down in this case, would take the figure from its present level of £16 to £17 from 25 November.
That change happens automatically unless the Government lay regulations before the House to prevent the automatic application of the primary legislation, and we have decided not to do that. My right hon. Friend will, as usual, make a declaratory order before the effective date simply to put the change on the official record in the normal way.
I move now to the board and lodging regulations and payments under them. The limits on payments for board and lodging do not form part of the regulations before the House, but, when we announced the new limits in March, we undertook to review those limits within a year of their coming into effect in April and to give a further sign of our thinking at the time of the uprating. As the House knows, we have set in hand extensive arrangements for monitoring the operations of the revised board and lodging rules as well as commissioned further research. We hope, by the turn of the year, to have results that will enable us to conduct a comprehensive review of the limits. At the same time, we intend to review the level of the meals allowance for boarders and people of no fixed abode.
The hon. Member for Derby, South asked a parliamentary question today about my next point. We are not uprating the meals allowance in November. That allowance already stands at nearly £30 a week—£29.40 to be precise—which is more than the total benefit available to most non-householders for all purposes and not just for meals. We have had several representations about this anomaly and we think it right to give it further consideration in the context of the board and lodging system as a whole and of the review.
§ Sir Anthony Meyer (Clwyd, North-West)
Can my hon. Friend give any comfort or reassurance to a constituent of mine who has written to me about her mother, who suffers from senile dementia, but is in a residential home rather than a nursing home because she does not require nursing? It looks as though she will be hit 1358 by the new limits. I understand that my hon. Friend will be reviewing this, but is there any immediate comfort for my constituent or does she have to await the outcome of the review?
§ Mr. Newton
I may be able to give some immediate comfort, and I shall return to that point in a moment. Before doing so, having referred to the meals allowance, I should also refer to the other half of the question asked by the hon. Member for Derby, South. I have answered her parliamentary question in rather terse terms in expectation of being able to fill out the information that I gave her. We intend to increase in the normal way all the personal allowances within the system. I shall not give the full list in the regulations, but I shall give the main representative examples.
The personal expenses allowance for residents in private and voluntary residential care and nursing homes will rise from £8.50 to £8.95 a week. The rate for people on the ordinary rate of benefit: in other circumstances who are single will rise from £9.25 to £9.70 a week and the long-term rate for a single person will rise from £10.30 a week to £10.85 a week. The other aspects of the personal expenses allowance, which constitute a list rather more than three times as long as that, will rise in the same way. I hope that the hon. Lady will welcome that.
I return to the point made by my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer). When we referred to our intention of reviewing the limits by April 1986, it was both our expectation and that of the House that it would be appropriate to make changes to the limits, probably in April 1986. Since then, there has been a significant new development in the proposals that we have put before the House in the social security Green Paper which is to change the uprating base, on our current plans, in July 1986. That will make it very difficult and undesirable for us to be conducting changes in the social security system affecting significant numbers of claimants in April 1986 because of the work, on which our officers are already engaged, to carry out the July 1986 uprating.
In those circumstances, we felt it right to consider whether we should make any changes as part of the general uprating of benefits this November, which had not been our original intention. We shall in any case keep these matters under continuing close scrutiny in the light of the monitoring to which I have referred and in the spirit of our willingness, which I have clearly demonstrated in recent weeks, to make appropriate changes in these regulations where the need is shown.
I can tell the House and my hon. Friend that we believe that it would be right, at the time that the uprating takes effect in November, to make some increase in limits for residential care and nursing homes. We intend to increase the limits for all types of residential homes by £10 a week so that the range for these limits will now run from £120 a week to £180 a week instead of from £110 to £170. We also intend to increase the supplement added to these amounts for nursing homes, which at present stands at £28.60 a week, to £50 a week. That means that the limits for nursing homes will be increased by nearly one quarter and will, after November, fall in the range of £170 a week to £230 a week.
We have already provided some scope for greater partnership between my Department and local authorities by allowing local authorities to add in some circumstances to the amounts that they can pay as topping-up provisions 1359 in board and lodging payments. Over the next few months, I propose to explore with the local authority associations and others who are concerned whether there is room for building on this beginning by making these arrangements still more flexible, and we shall have particularly in mind the position of people over pension age.
The order that does not run along with the normal social security and housing benefits orders is that concerned with vaccine damage payments. The order will double the amount paid in vaccine damage cases from £10,000 to £20,000 for claims made on or after 18 June. This matter was the subject of some discussion in the House when we debated Lords amendments on the Social Security Bill earlier this week and it was widely welcomed on both sides of the House as a move which improves the position of those unhappy families suffering from these problems. It takes the value of the payment beyond what inflation alone would have required since payments were introduced in 1979. I believe that this improvement will be warmly endorsed by both sides of the House.
§ Mr. Meacher
We welcome this increase, but there is a great deal of feeling that this method of payment is inadequate and that weekly payments, as is the case in New Zealand, and the Pearson proposals for strict Government liability would be preferable. Will the Government look seriously at those alternatives?
§ Mr. Newton
I made some comment about this in the debate on Monday and I do not wish to add to what I said. As the hon. Gentleman knows, and as I said on Monday, it is well within the knowledge of hon. Members that the Government have put in hand the largest ever survey of the extent of disablement and its effects with a view to reviewing a wide range of issues, and in particular social security benefits affecting disabled people.
That does not relieve us of looking at the scheme brought forward by the Labour Government in the late 1970s, under which the payment has undoubtedly been eroded by inflation. We are doing something about that problem within the context of existing legislation by amending the Social Security Act, and by bringing forward the regulations to provide for the increase from £10,000 to £20,000 which I have described.
Given the terms on which vaccine damage payments are made, it is virtually certain—I might say certain if I were not such a cautious man at the Dispatch Bax—that any child in respect of whom a vaccine damage payment has been made will automatically qualify for severe disablement allowance, which also operates on an 80 per cent. disablement test when the child reaches the age of 16. There is some controversy about whether weekly payments should be made before that age, but certainly a child who was subject to a vaccine damage payment would be likely automatically to qualify for a weekly payment of benefit on reaching school leaving age. That goes at least some way to meeting the point made by the hon. Gentleman.
The uprating of benefits, which is the main effect of this package, will cost over £2,000 million in a full year. As I have said, not only have we kept our pledge to maintain the value of pensions and linked long-term benefits, but we have also protected from inflation the great majority of other beneficiaries. At the same time, we have managed 1360 to direct help to low-income working families who need help most. That is a considerable achievement, and I invite the House to endorse the orders.
§ Mr. Michael Meacher (Oldham, West)
As the Minister said in outlining the broad intention of most elements of what is a farrago of uprating orders, there is no common theme behind today's debate. That does not mean that some important issues in the current development of social policy are not illustrated by these orders. Like the Minister, I want to concentrate on certain of those principles.
The uprating orders deviate substantially from the simple objective of compensating for inflation. The main reason for that is that they are a dry run for the Fowler Green Paper. In several important respects they anticipate and prepare the ground for it, even though that makes a travesty of the whole idea of the consultative process. Under this Government, consultation over social security is something of a sick joke, bearing in mind the number of times the Government have disregarded the advice of their review committees and their Social Security Advisory Committee.
These orders pre-empt the consultative process in at least three significant ways. They increase child benefit by only 2.2 per cent. instead of the full 7 per cent. required to maintain its value. The Green Paper does not specifically state that the real value of child benefit will be cut, but that is the clear implication of paragraph 4(49) which says:The Government believe that it will be right to give greater priority to assistance for families in the income range covered by family credit than to the assistance given to families as a whole through child benefit.The Government are already implementing that policy by raising the family income supplement prescribed limits by between 8.3 and 10.6 per cent. So much for the Green Paper charade. The Government obviously made up their mind on family benefit some time ago. The same applies to housing benefit where the tapers above the needs allowance for rates are to be increased from 9 to 13 per cent. This pre-empts any consideration of the Green Paper proposal in paragraph 3(56) which says:the income-related taper for rates should be steeper than underthe current schemeThe change under today's uprating order more or less exactly meets the Green Paper's aim, because a rate taper of 13 per cent. combined with a rent taper of 29 per cent., which is the current level, will produce a combined total of 42 per cent., and that is on gross income. It is surely hardly a coincidence that that is roughly equivalent to a 70 per cent. taper on net income, which just happens to be the illustrative figure used in the Green Paper.
Another example of this same pre-empting of what is misleadingly called a Green Paper lies in the abolition of the supplementary additions for central heating to which the Minister referred at some length. As the House knows, the Green Paper proposes the abolition of all additional requirements and their replacement by various client group premiums. We know that this is actually being implemented in respect of central heating additions for new claimants with effect from 5 August. In other words, it is being implemented six weeks before the consultation period is completed. So much for the Green Paper. I suggest it is a hard shade of white, and for many thousands of claimants it will be somewhat tinged with black edges. 1361 What is the point of a so-called Green Paper if it is followed not only by a consultation period which is absurdly short, but one which is foreclosed by action taken to implement policy proposals?
§ Mr. Frank Field
Is it not sensible for the Government to have a short consultation period? After all, they appear unwilling to pay much attention to what we have to say. Surely it would be worse for them to lengthen the process.
§ Mr. Meacher
My hon. Friend has made explicit what was implicit in my argument. Not only have the Government disregarded in the review exercise their own Social Security Advisory Committee, but they have disregarded the opinions of almost all the pressure groups. A short consultation period extending over two summer months is entirely consistent with that. The Government are not listening to any of the acknowledged experts in the field of social security. Moreover, they are not listening to public opinion, which is more important. Successive opinion polls and a recent Mori poll show that people are not behind the sort of cuts in the Green Paper, and most people want to see the welfare state preserved, even restructured, but not cut back and they want to see an increase in expenditure, particularly in the Health Service.
It is not just a matter of the niceties of consultation, because there is another underlying motive in the Government now pre-empting the Green Paper's objectives and that needs to be brought out. It is that it enables the Government to reduce the losses at the time of changeover in April 1987. By making cuts now of £175 million a year through a lower child benefit uprating, cuts of £38 million by ending new awards of central heating additions, and cuts of £57 million through increasing the rates taken for housing benefit, we have a total cut of £270 million a year. I know that it is offset by about £20 million of increases, but that is a net loss of £250 million.
The Government will announce losses to claimants through the Green Paper changes in April 1987, when they finally get around to doing that, that are much less than they would be otherwise able to claim. That is why the cuts are being made now, although, in all fairness, they should have been included in the overall evaluation of Green Paper cuts, when they finally emerge in 1987.
Another myth surrounding the upratings that must be exposed is the boast, made belligerently by the Secretary of State in his uprating statement on 18 June, that the overall cost of increases in the upratings—£2 billion in a full year—demonstrates the Government's generosity. He was clear about that and belittled me when I suggested otherwise. The fact is that it does nothing of the sort. The Government are doing little more than the bare minimum required by the law on national insurance benefits, or by practice and pledges in the case of supplementary and housing benefits.
The fact that there was leeway for generosity if the Government wished it is revealed by the contrast—I often point out this contrast—with the Budget of 19 March this year. The Chancellor of the Exchequer increased the principal income tax allowances by almost 10 per cent., which was more than double the 4.6 per cent. required by the statutory indexation formula at the time. The cost of increasing the tax thresholds according to that formula would have been about £800 million, yet the Government chose to spend no less than £1.6 billion on them. They did so despite the fact that tax reliefs are 1362 indiscriminate, contrary to the Government's repeated insistence that expenditure should be focused on those in greatest need.
The contrast between the Government's willingness to spend on increasing tax thresholds and their reluctance to spend on benefits is especially stark in the case of child benefit. Child benefit was intended to be a replacement for child tax allowances at the end of the 1970s, and was seen as a first step in the introduction of a tax credits scheme, which the Tory party favoured throughout the 1970s. Indeed, in 1975, the present Minister for Health, who held a different portfolio then, said on behalf of the Conservative Opposition in a debate on the Child Benefit Bill that we should have index-linking on precisely those grounds. How bedraggled and miserable that Tory promise on child benefit, so proudly made 10 years ago, looks today.
Another theme runs through the uprating orders. Benefits are uprated according to the barest minimum that is legally required, but deductions in benefits are being increased far faster than any inflation formula could justify. The Minister frowns, but I am sure that he knows what I mean. The 18 per cent. increase in non-dependant deductions is, by any standards, exceptionally severe. The Minister glided over his justification for that extremely quickly. I thought that he was merely telling us that the method by which he communicated it to the House was in accordance with normal custom. He did not seem to defend it.
§ Mr. Newton
Nothing will stop the flow of the hon. Gentleman's rhetoric, but he suggested that no conceivable uprating basis could underlie the figures. The fact is that they are the measured increases in the retail price index element for housing costs, which was 18 per cent. Similarly, we have uprated heating additions in accordance with the increase in fuel prices; clothing additions by the increase in clothing prices; diet additions by the increase in food prices; and supplementary benefits by the increase in the retail price index, less housing costs. We have uprated the non-dependant deduction and the non-householder housing additions, which are specifically related to housing costs, by the increase in housing costs.
§ Mr. Meacher
That sounds reasonable until one remembers that the bulk of the increase in housing costs between May 1984 and May 1985 was caused by the huge increase in mortgage rates. During that period, the mortgage interest element of the retail price index increased by no less than 50.8 per cent. I should ask the rhetorical question: how many housing benefit claimants with non-dependants are paying off substantial mortgages? The Government are using an index that is wholly inappropriate and unreasonable and which produces an extremely harsh effect.
§ Mr. Field
Is not the Minister using some Alice-in-Wonderland logic? He says that housing costs have increased by 18 per cent., but the main effect of changes in housing benefit is to cut the number of people eligible and the amount that they can claim. He turns the argument the other way when it comes to this deduction, saying that the deduction has been increased only by the amount that housing costs have increased. At the same time, he is reducing the amount of money for housing benefit.
§ Mr. Newton
While we are talking about people trying to have it both ways, will the hon. Gentleman or the hon. Member for Birkenhead (Mr. Field) give me a reasonably straight and simple answer to the question whether they would apply similar logic to the non-householder housing addition, and whether they would have increased it by less than 18 per cent.?
§ Mr. Meacher
We are talking about this non-dependant deduction, which has been increased substantially over a short period.
Under the heavily camouflaged title of the Housing Benefit (Miscellaneous Amendment) Regulations 1985, the Government have chopped benefit on the assumption that a working 18-year-old who lives at home with his parents contributes £7.80 a week to rent and £2.60 a week to rates, making a total contribution of no less than £10.40 a week. The DHSS tax benefit models suggest that, in April 1985, typical rent and rates for a married couple with two children were £16.55 a week rent and £8.65 a week rates. That means that the youngster is being asked to contribute almost half of a typical family's housing costs. How can the Minister argue that that is not excessive or unreasonable?
That is not just my view. It is also the view of the Social Security Advisory Committee, which is a quarry of anti-Government material. I hope that that will not give the Minister grounds for abolishing it, because it is an extremely important voice in the wilderness. For the moment, it is a voice coming out of prison, because we are allowed to see its reports. On the increasing of the deduction to £8.20, the SSAC said this:We are concerned, however, that these increases have gone beyond what is fair and realistic, and that there will be circumstances in which it is not reasonable to expect the non-dependant to pay a contribution of as much as £8.20. In these conditions the householder either has to bear the increased deduction himself, as a real cut in his own income, or force the non-dependant to leave. Neither may be a realistic option in the actual circumstances of the family, and may indeed work against other aims of social policy, such as the cohesion of the family unit and the better exercise of control by parents over young people. Many representations to us pointed out that if the non-dependant were encouraged to leave home as a result of these changes, the social security costs could well be higher in the long run. It is not possible to quantify this suggested consequence of the proposed changes, but those concerned with dealing with homeless young people report to us that quarrels over finance are a significant cause of young people leaving the parental home.That is a comprehensive indictment of the Government's policy of rapidly increasing the non-dependant deduction. The rise for 18 to 20-year-olds from the pre-April 1983 period, when it was £3.15 a week, to the time of today's order is no less than 230 per cent., while in the same period inflation was of the order of 10 per cent. As the Social Security Advisory Committee, the Government's own advisory committee, concluded,this increase in two years bears no relatiion either to inflation, to increases in earnings or to increases in housing costs.In my view, it is simply a way of hammering young people, which seems to be quite an obsession of the Government in many of their policies.
There seems to be a inconsistency, to put it mildly, in the Government's approach to young people. On the one hand, they encourage them to live at home with their parents, for example, by imposing the two, four and eight-week rule on the under-26-year-olds in board and lodging, by proposing a lower rate of income support for the under-25-year-olds in the Green Paper. On the other hand, by 1364 imposing very high levels of non-dependant deductions, they make it increasingly difficult for them to do so if their parents are on a low income. Either way, I believe that the deductions bear harshly on young people.
On the main Social Security Benefits Up-rating Order 1985, I wish to make one major point. It is an extremely important one, I think, which has so far been missed. The two-stage change in the future uprating time scale, to which the Minister referred, from an annual cycle based on November to July 1986 and then to April 1987, has so far been seen, at least by Opposition Members, as a device paving the way for a handout of goodies in the electoral run-up period, as we imagine, in the middle of 1987.
There is another perhaps much more serious issue which I think has not been noted. Under the guise of what is purely an administrative procedure, the Government will cut benefit of nearly 7.5 million single pensioners and nearly 2 million pensioner couples by about £25 million a week. By bringing forward the date on which pensioners get their yearly rise from November 1986 to July 1986, the Government almost certainly will be giving them less, not more. This is because the retail price index has already risen by 4.5 per cent. between January and May 1985. There is nothing unusual about that—it is the normal seasonal sharp rise in prices at the start of the year. If the annual rise in the retail price index turns out to be 4.5 per cent. or thereabouts for the period January 1985 to January 1986—that is certainly the Government's intention and the Chancellor's repeated forecast—it means that pensioners will get nothing, or nearly nothing, because the retail price index will show a nil increase over the period May 1985 to January 1986. That is the period on which the next uprating will be based. I imagine that the Government have noticed that point. I do not think that anyone else has, and in my view it is an important point.
If, on the other hand, the Government left things alone and uprated pensioners' benefits in November 1986, as has been done on a bi-partisan basis over the past 11 years, pensioners might expect to get an increase of around £1.75 a week if they are single and £2.75 a week for a couple. That is the extent to which I believe pensioners will lose by this apparently innocuous bringing forward of the uprating period from November to July.
§ Mr. Newton
I am interested in the point which the hon. Gentleman makes. It is obvious that any uprating mechanism, over whatever periods are used, related to the rate of inflation will mean that the uprating figures will be affected by changes in the rate of inflation.
Has the hon. Gentleman considered the point that, had we used the Labour Government's uprating formula of operating on forecasts rather than historic figures, it is likely that the uprating in pensioners for which the orders provide in November would be significantly lower than on his analysis? He is really saying no more than that he thinks that the rate of inflation will drop, a comment for which I am grateful in a wider context. If that is the case, the old forecasting method which the Labour Government applied would have produced much lower increases in pensions this November than those contained in the uprating order.
§ Mr. Meacher
The Minister, perhaps not surprisingly, evades entirely the point that I am making. If I may answer his specific point, it matters not whether one uses the forecasting method or the past record method as long as 1365 one is consistent in keeping it year by year, because there are swings and roundabouts. Given that there is an under-expectation of inflation, losses are made up next time around so long as one maintains the 12-month periods. What we are discussing for the first time is the reduction of a 12-month assessment period for the uprating to an eight-month period. That will have significant effects on the next uprating. There will be a once-and-for-all signifaicant loss by pensioners. The Government had better take that point on board, and consider whether they still wish to go ahead with an uprating period which is likely to give pensioners zilch next time.
§ Mr. Newton
It would obviously be wrong—indeed, I am sure that the hon. Gentleman would not wish—to raise unnecessary and misleading fears. The Government have made it clear that the upratings, at whatever time they are carried out—the one we are carrying out with these orders for next November, the one which we propose for July 1986 and the one which we propose for April 1987, and thereafter annually in April—will continue to be based on the historic measurement of the rise in prices. There can be no question but that pensioners will be protected against any rise in prices which takes place. The point at issue is to what extent that rise in prices has occurred in, and is therefore taken into account for, any particular uprating.
§ Mr. Meacher
The Minister is not answering my point. If there were a 12-month period, what he says would be absolutely correct and, if only the Government would continue to do that, there would be no issue. My point is that the switch from a 12-month to an eight-month period can produce very different results. I am not commenting on whether this is a deliberate device to cheat pensioners of the uprating which they might otherwise get if one kept to the 12-month period. I am saying that it looks as though that will be the result. We all have to take a view on why that is being done. I am not trying to raise fears but, if I am correct that most of the inflation is bunched at the beginning of the year, and one takes the period thereafter as the basis for the assessment period, what I said seems to follow. That will be a substantial disadvantage to 10 million pensioners. The matter should be reconsidered carefully.
Our main contention on this mass of orders is that, behind the genial facade of the uprating, there lurks a series of pitfalls. Wherever the Government are not bound hand and foot by statutory requirement, it seems to some of us that no end of ingenuity has gone into ways of introducing fresh cuts. To give one example, the Minister said that the Government are putting in £26 million. If the Minister refers to Hansard of 15 July this year at columns 63 and 64, he will see that the figure is £23 million, but we will not quarrel about £3 million. If he is putting that amount into improving family income supplement and increasing the housing benefit and child needs allowance, that is fine, but it is dwarfed by the £175 million cut in child benefit. As I said, about 13 per cent. of that cut is being used to assist families in greatest need.
To give another example, the Government are spending an extra £1 million a year, as the Minister mentioned, in extending the lower rate heating addition into sick or disabled person's supplementary benefit. At the same time, they are ending the central heating addition for new claimants which, according to the Government's figures, 1366 given on 2 July, will save £55 million by 1988. The word "save", as always, is a euphemism. We are talking about cutting benefits to claimants.
Thirdly, the Government have presented the change in the earnings rule for the wives of invalidity and retirement pensioners as an equal treatment measure between men and women—and indeed it is, to a certain extent. But as in the case of the changes in the immigration rules. it is a levelling down between the sexes rather than a levelling up. It involves cuts in benefit which, according to the Government's figures, will amount to £20 million in 1987–88.
There is to be a change in the housing benefit rates taper which will lead to cuts for more than 2 million households, including 500,000 who will lose entitlement to rate rebates altogether. For that and the big increase in the nondependent deductions, there is not even any compensating improvement in benefit for the most needy.
While we welcome those parts of the package that will restore protection against inflation, the package is pitted with hidden cuts. I have mentioned only a few tonight. If it is a preview, as I believe it is, of the Green Paper scenario, all that I can promise the Government is that they are in for a long, hot autumn.
§ Sir Brandon Rhys Williams (Kensington)
I do not want to speak at great length, although the House is not too full, and one might be excused for taking the opportunity to dilate on some of the very important things that underline the decisions contained in these regulations.
I would like, first, to congratulate my right hon. Friend the Secretary of State on something of the greatest importance—the renewing of the Conservative party's commitment to child benefit as the keystone of the family support system.
§ Sir Brandon Rhys Williams
The hon. Gentleman may be surprised by what I have said, but he must be as aware as I am that there is a body of people inside and outside the House who need to be reminded again of the strength of the arguments in favour of child benefit being paid as a universal benefit, rasher than targeting assistance to people who might appear to be in the greatest need.
For the most part, the people who have not given the subject of the redistribution of income a great deal of attention feel that child benefit paid universally is somehow wasteful and that it would be better for the money paid to be concentrated on those who come forward through case work and can establish that they have a great immediate need.
However that may be, I should like to congratulate my right hon. Friend on the resolute way in which he has presented the case and won the argument in favour of the continuation of universal child benefit. It is a very important matter and an absolutely right decision. He should be congratulated especially by me, because I have taken an active interest in this subject for a very long time. I am delighted with the way in which he has taken up the cause and convinced the party.
I should like, however, somewhat sadly, to comment on the failure to uprate child benefit this year in line with the movement of the economy. Seeing the hon. Member for Birkenhead (Mr. Field) in his place reminds me that 1367 on 23 April 1980 he and another hon. Member, who unfortunately is not here tonight, were kind enough to support me when I sought the leave of the House to introduce a 10 minute Bill called the Child Benefit Uprating Bill. The House did not seek to divide and I was given leave to introduce my Bill.
I do not wish to detain the House too long, but the matter is so apposite to what we are discussing now that I would like to read out the brief explanatory memorandum. It states:Child benefit was introduced in 1977 to amalgamate in a single payment the family allowance, which was paid from 1946 to 1977, and the child tax allowance, which was introduced in 1799 by William Pitt and was finally phased out for almost all children resident in Britain in 1979.The objects of the Bill are to raise the amount of child benefit to a figure at which its purchasing power will be broadly equivalent for standard rate taxpayers to the combined value of the two earlier forms of provision for children at the time when the family allowance was first introduced in 1946; and to ensure that its purchasing power does not again fall more than 5 per cent. below that value.The Bill accordingly stipulates that the rate to be paid shall be raised from November 1980 to not less than £5 per week and that adjustments shall subsequently be made not less than once a year to keep the purchasing power of the benefit in line with retail prices.In proposing the necessary adjustments to the rate of benefit to be paid from time to time the Secretary of State is required to take account of factors in the composition of the Retail Prices Index which affect its relevance to the particular needs of children.I do not think that it was a bad Bill. I have not sought to calculate what the figure of £5 in November 1980 would need to be today, but I am sure that it would be more than the uprating to £7 which the House is now considering. If I introduced such a Bill again, I do not think that I would rely for the uprating on the retail prices index. The right index should be the yield of personal taxation, because that is the direct way of assessing the movement of the economy and what the economy is able to bear in the redistribution of income.
I want to make one elementary point. Child benefit is not part of Government expenditure. The Government do not spend the money—it is spent by the parents, usually the mother, of the child. The Government act as agent in the redistribution of income. They take money from people through tax and hand it back through benefits. That is the Government's special function as originally envisaged in the national insurance scheme, which was outside the Treasury in its early days. I am sure that the Treasury did not like that, and it has now more or less absorbed it completely into the Budget. However, the original concept of national insurance was that money was paid in by people at the times when they were able to contribute and drawn out by the same people at the times when they needed it—for example, in the form of pensions, unemployment relief and sickness benefit.
During the life cycle of a citizen, there are times when he puts money into the system and other times when he draws it out. We all welcome the fact that pensioners are entitled to draw money out. However, there is a strange reticence about children drawing out money. Yet they are also citizens and during their life cycle we hope that they will make a valuable contribution to the economy. At times they will be putting much more in than they are 1368 taking out. Surely during the life of a child we are considering the time when society should ensure that the child has enough income so that it is properly brought up.
The precise amount of contribution at any one time in the life cycle of a citizen, and the precise amount of benefit that a citizen can take out, are choices for the Government of the day. There is no absolutely right level of benefit or absolutely right level of contribution that one could look at like tablets of stone from Sinai. The Government must make the choice, and they are doing so now.
The right course is to interpret the popular will. What do people want to contribute to national insurance or income tax? what do they think should go back to different categories such as children and pensioners? What should the upratings be so that the Government keep in line with popular feeling while at the same time making the necessary adjustments to adapt to the movement of the economy?
The Government must interpret the popular will, and it is my humble submission that on this occasion my right hon. Friends have it wrong. The public would have preferred child benefit to be increased fully in line with the movement of the economy rather than by the smaller amount to the round figure chosen by my right hon. and hon. Friends. It is a matter on which it is not possible for anyone to pontificate, but I feel that a mistake has been made. I hope that that will be rectified in future years.
Of course, other aspects of the Department's budget must be considered. Within the whole of the outgoings of the Department, a great number of choices must be made, and I know how painful they are for my right hon. and hon. Friends. The House appreciates the attention that Ministers give to getting these matters as right as they can with the resources they have.
Should they have done more this year about raising the selective benefits, which are a sort of emergency service outside the conventional pattern of the redistribution of income, or would it have been better to target their money to the universal benefits? They have chosen the selective benefits and, no doubt, that money will be well spent and competently administered within the limits of the system's capacity to cope with the problems that we have.
However, the selective benefits are not being increased in real terms by the full amount of the cut in child benefit. Thus, the decision to concentrate on the selective benefits does not absorb the full amount of the money that will not be put out in the form of child benefit. We are changing the life-cycle pattern of the average citizen.
What will be the real effect of this decision? It represents a shift from families to childless people in terms of their spending power. Is that a social objective of the Government? I believe that it is not, but that it is an incidental effect that has not been thought through. Although it was not desired initially, it is, nevertheless, a real effect.
When childless people complain that they do not see why they should be made to contribute to other people who choose to have families and bring up children—who say that it is a matter for them if they want to have children—they are neglecting the fact that somebody brought them up when they themselves were children: somebody made a contribution to their upbringing.
When childless people complain that they are asked to pay, by means of tax or national insurance contributions, for the families of other citizens, I feel disposed to ask them, "Who are you bringing up in compensation for the 1369 fact that you, in your turn, were brought up by somebody else?" Each generation takes something from the previous one and passes it on to the next, and we all make the contributions that we can or that we feel able to give. I am not sure that I would have chosen childless people as those who should be beneficiaries of the change in Government policy on the redistribution of income.
We also see here a shift from women to men. We recall the debates that we had about abolishing the child tax allowances and amalgamating them with the old family allowance. Family allowances were conventionally drawn by the mother and the child tax allowance was an aspect of the make-up of the pay packet of the man. We had debates, some of them not entirely creditable, in which some Members argued that the wallet was more important than the handbag. The decision was taken; but now the Government are, to some extent, reversing it. I do not regard that as being in accordance with the spirit of the times and I hope that further thought will be given to that aspect of the matter.
From the administrative point of view, we are seeing more emphasis on individual casework and less reliance on automatic computer credits. The child benefit is an automatic credit. It is a benefit which enjoys an extremely high rate of take-up. There is no humiliation to people in drawing the universal child benefit; but there is inevitably a degree of reluctance on the part of citizens—an element of humiliation and elements of distaste—in drawing a benefit which relies on proof of need through casework.
From answers to parliamentary questions I elicited the fact not long ago that, in the administration of national insurance and supplementary benefit, the Department is required to make more than 90 million manual entries every week. That is the administrative burden that is now carried by the loyal and wonderfully reliable and long-suffering staff of the Department of Health and Social Security. In that the Government are relying increasingly on casework and less on the use of computer and automatic benefits, they are adding to the millions of entries that must be made, and that is a mistake.
We have many times debated the whole subject of selective and universal benefits. One must remember, because the logic of the argument leaves one with no choice, that if the Government rely on universal benefits, they unite the nation and eliminate administrative work. But if they rely on means-tested benefits, they introduce into the redistribution of income two highly undesirable elements.
A large number of people learn the hard way that there is no purpose in thrift because they must run their savings down—I appreciate that there is an allowance, that it is not ungenerous and that it is being increased—before being eligible for benefit. If they save a large sum of money, they rule themselves out of benefit. That must for many people be an argument against thrift.
More than 8 million people in Britain today are dependent on supplementary benefit. That means that 8 million people are learning the hard way that an aspect which is central to the tenets of the policy of the present Government—which is widely supported and which is part of the British tradition of common sense, namely, the importance of self-reliance and thrift—does not apply to them.
Further, they are not always the same 8 million people whom we carry with us as second-rate citizens. People go 1370 in and out of reliance on supplementary benefit from time to time, so that between one election and another the number of people who have learnt that what the Government say about the importance of thrift does not apply to them may be as many as 10 million, or even more.
There is also the problem of the disincentive to work, which the Government are seeking to diminish by their brilliant suggestions for the reform of the redistribution of income. However, when all is said and done, if we rely on giving benefit only to those on very low incomes and withdraw their capacity to draw benefit as they increase their incomes, we undermine their incentive to work. We can dress that up in different ways and try various methods to encourage them to work, notwithstanding the logic of that underlying fact. Nevertheless, selective benefits undermine the will to work, and that is a fundamental argument against them.
In spite of what I have said, I congratulate the Government on their decision that universal child benefit shall remain the keystone of our family support. Christian democrats in all parts of the House can rejoice in that.
I have one suggestion, which I hope the Minister will consider to be constructive. Because a number of people feel that it is wrong for them to draw child benefit because they do not strictly need it, the Government may consider the possibility—I have mentioned it in the House before—that such people could be allowed to renounce the child benefit and let it remain the child's money. It could accumulate in a special account, such as a national savings account, and be indexed to cater for changes in the value of money. After reaching a particular age—say 18—the child would be entitled to a lump sum which would be the rolled-up full amount, with compound interest, of the child benefit to which that child was entitled from the start.
Many parents might think that an endowment of, say, £10,000 which had been saved for the child by that means, would be an attractive family credit. Instead of drawing the money each week, when they feel that they do not strictly need it, they could sign a form of renunciation which would allow that money to accumulate on the child's behalf until, say, the age of 18, being a form of child endownment giving a capital sum instead of a weekly allowance.
I hope that the Minister will consider that possibility. It would meet the case of people who feel a certain distaste, perhaps an unnatural shame, about drawing their child's benefit. It would give them another option.
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
I am always pleased to be able to take up the remarks of the hon. Member for Kensington (Sir B. Rhys Williams). I feel that I am better informed for listening to his speeches. Of course, I do not always agree with what he has to say, but I appreciate his experience and assiduous work on these matters. I am pleased to say that I agreed with many of his comments, especially those directed to child benefit. Perhaps his effusive congratulations to the Government on the way in which they have maintained child benefit as the keystone of their policy when they have failed to increase the benefit sufficiently to keep it in line with inflation could be described as incongruous, but I agreed with the majority of his speech and he advanced his case extremely well.
1371 Last weekend I canvassed the views of the man in the street, as it were, in my constituency. I included especially the elderly. I sought my constituents' views on the upratings that we are now discussing.
§ Mr. Kirkwood
I stand corrected. I carried out my canvass in what might be described as small Scottish rural towns and I accept that it might not have produced an average and typical sample. However, it appears that there is a wide gulf between their perception of the opportunities and standard of living that are available to them and that of the Government. I deployed to the best of my ability the case that the Government are presenting, which it is possible to do statistically. The reaction of those to whom I spoke was to ask, "What about the top salary pay review and the awards? It is all very well to say that £2,000 million has been spent on the uprating but what about the Secretary to the Cabinet, whose salary is to be increased from £50,000 to £75,000 per annum?"
Retired people, especially those on small occupational pensions, complained bitterly that their pension income is taxed. They stressed that they have been waiting for a long time for the Government to change the earnings rule. The Government have promised that they will do so as soon as they feel that they can afford to change the rule but they have been promising change for a long time. Other complaints were directed to dental charges, the service provided by opticians and the limited list of drugs available to doctors for prescriptions, although some of the complaints about the list have been met. However, there remains a great deal of heartache, confusion and concern in the high street of Hawick and other places in my constituency.
One can say until one is blue in the face that the uprating reflects the movement of the retail price index but the response of the average person is to argue that a 1 per cent. increase in the RPI is not reflected exactly in price increases in the shops and that a tin of corned beef which costs 65p moves up to 75p in the space of a week although the RPI has reflected only a 1 per cent. movement. One lady told me that she had calculated that her shopping costs over the past two years had escalated by 33.3 per cent.
Many of my constituents cannot understand why they are faced with standing charges for their gas, electricity and telephones. They read in their newspapers that the fuel industries are, by and large, making huge profits in terms of money, which they understand, yet sometimes standing charges amount to as much as the units that they have consumed. The Government are doing nothing to reduce standing charges and in some instances are imposing levies on the fuel industries which bear adversely on some of the poorest in our society. The argument applies to television licences, but to a lesser extent. There is concern also about the death grant, and the Government's proposals would serve only to make the position worse. I received complaints also about the Government's failure to increase the Christmas bonus to a proper level in line with inflation.
It seems that there is a wide gulf of misunderstanding. If the Government have a better case to put to the public, I suggest strongly that they get out into the highways and byways and present it to the people. They should make a better job of their PR if they think that they can do so.
1372 There is a gap between those receiving benefits and pensions, which are based on the retail price index, and increases in average earnings, which are based on another scale. How is the discrepancy to be approached in future? Do the Government recognise the justice or the merit in increasing benefits and pensions in excess of what is statutorily required to try to redress the balance? If they say that they are not prepared to accept that recommendation of the Social Security Advisory Committee, it is inevitable that pensioners and those in receipt of benefits will fall further and further behind wage earners.
I agree with the hon. Member for Kensington that there is a shift in Government policy in favour of childless couples. If that is the fact, it should be stated explicitly and debated. Like the hon. Gentleman, I feel that it is the wrong way in which to move. The move to diminish the importance of child benefit to the extent of £175 million discriminates actively and positively against women, which is deeply to be regretted. Some of the pressure groups feel that the process of consultation that the Green Paper is supposed to stimulate is being stymied and fudged by some of the changes that the Government propose or which have been made, especially in relation to child benefit.
The Government might have been able to persuade me that the cut in child benefit was defensible if they were able to be more convincing in the provision that they have made for other benefits, especially family income supplement. I might have been persuaded by the Government's case if the cut in child benefit of £175 million had been diverted to the family income supplement mechanism, or to a far larger extent. The Minister has said that £26 million has been ploughed back into FIS as opposed to the £175 million that has been removed from child benefit. Unfortunately, the proposals for FIS do not go anything like far enough to enable me to support the cut in child benefit. The Child Poverty Action Group suggests that if the Government are determined to proceed with the £175 million cut, they should consider introducing a child benefit premium for low income families. That suggestion should certainly be considered during the consultation period.
The CPAG has argued—it has persuaded me—that the FIS system reaches only a small minority of low income working households with children. Its briefing paper states:The analysis of low incomes in Vol. 3 of the Green Paper shows that about 700,000 families with children headed by a wage-earner were in the bottom fifth of incomes (the definition of low income used) in 1982. The number is likely to be even higher today. FIS is currently received by only about 200,000 families (and was received by only 158,000 in 1982). Similarly, DHSS figures show that, in 1981, over one-and-three-quarter million children were being raised in working families living in poverty or on its margins (up to 40 per cent. above SB level). FIS is currently received on behalf of only 417,000 children.There is evidence that FIS does not go far enough, and the Government have missed an opportunity to extend that cover.
Child benefit is an important part of the budget of the low paid. Again, the CPAG reported the analysis of the social policy research unit at York university, and concluded:child benefit clearly plays an important role … Low income families not in receipt of supplementary benefit received about a fifth of their net disposable incomes from child benefit, rising to about a quarter for lone parent families if one-parent benefits 1373 is also included … These results suggest low income families would lose a substantial proportion of their income if their entitlement to child benefit was in any way reduced.That is true. The case has been incontrovertibly made. The Government have made a mistake, and the hon. Member for Kensington was right in saying that the popular will was contrary to the Government's will. The man in the street was surprised to find the extent of the Government's proposed cut. Given the Green Paper reviews and the ongoing consultation process, the future does not augur particularly well for low-income families. The work done by the Institute for Fiscal Studies is evidence of that. It studied the impact of some of the proposals on one-parent families, and one-earner couples with a variety of family complexions, and concluded that low earners, low income families and single parent families would bear the brunt.
I am worried about the central heating addition changes. Their introduction cannot be justified. The £1 million extension to the disabled and the sick is obviously a welcome development, as all sides of the House will recognise. However, the complexity of the system that remains will cause tremendous confusion. The present dual test identifies those who are sick and disabled and who live in difficult-to-heat accommodation. Whereas previously people in that category could double up those two conditions and receive a higher rate of benefit, the proposal will remove that possibility. The Government should consider restoring the possibility of receiving the higher level of benefit, if the difficult-to-heat accommodation test is also met.
There has been considerable trouble in my constituency with the difficult-to-heat estate rates. The Government should reconsider that, and introduce proposals to allow people to apply for and claim that rate of benefit, if the central heating equipment was installed after the estate was built. I have personal experience of the tremendous difficulties that that causes.
I cannot understand why the Government have chosen 5 August to introduce the change in the central heating additions. It may be a deeply significant date. It would have been much more sensible to use the November uprating date so that we had more time to publicise the cut. As the hon. Member for Birkenhead (Mr. Field) rightly pointed out, people who do not apply between now and August will forgo the benefit, and that is unfair.
If the Government are acting in good faith on the central heating addition, during the consultation period they should spend money on a widespread campaign for take-up of benefit so that we have a true measure of the cost of benefit. It could be easily done by giving local offices the power and resources to campaign in the local press, and on local radio and television stations. That would satisfy me to a greater extent that the Government were approaching the review in a more open-minded and fair-handed way.
The staff resources of the Department must be stretched to the limit by the proposals for next year. The concertinaed process of the upratings, on top of the development work on some of the changes, especially in housing benefit, will put an intolerable pressure on some of the front line staff. I do not mean the mandarins in Whitehall but people such as those in my local integrated office. By and large they do a good job in impossible circumstances. I hope that the Government are considering them, as well as policy points and other problems.
1374 It would be churlish not to recognise that the Minister's announcement on board and lodgings allowances for residential increases in nursing homes must be warmly welcomed. The Minister responded quickly, and I certainly did not expect the announcement so soon. It shows that he has been paying attention to what has been going on. The increases will be warmly welcomed, and that is a good point on which to end.
§ Mr. Frank Field (Birkenhead)
I was intrigued to hear that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) spent last weekend meandering through his constituency, and setting on unsuspecting constituents to ask their views. He shows a political talent which most of us lack. Perhaps he was more aware than the Government Whips of how close Wednesday's vote would be and how near the possibility of a general election we were. His local paper will undoubtedly pick up his diligence in gaining constituents' views.
I was also interested to learn that the hon. Gentleman discovered his constituents' concern about the Top Salaries Review Body award. It is interesting that in the early hours of Wednesday morning, when we discussed top people's pay, the Chamber was so crowded that hon. Members were almost swinging from the balconies, and that today, when we discuss bottom people's pay, far fewer hon. Members are present in the Chamber. I cannot quite understand why.
I am sorry that the hon. Member for Kensington (Sir 13. Rhys Williams) has left the Chamber, because I wish to comment on some of his remarks. He has obviously taken comments on the need to consult constituents to heart. At this moment he is probably tearing back to Kensington to hear his constituents' views. He skilfully plunged the stiletto knife into the Government by gently congratulating them on their child benefit decisions. He was really saying—if he were not such a gentleman he would have put it in my terms—that if we did not have a Government whose protection of the family was so awful, we would be debating, not cuts in child benefit but increases, and we congratulate the Government only on the new status quo that they are creating because the position could have been much worse. Child benefit could have been means-tested. The Government could have paid attention to their supporters and abolished it completely. It is appropriate that the hon. Member for Kensington should comment on child benefit, because for a long time he was the lone voice trying to educate the House and the country about its importance.
The change of view on child benefit and family support owes a great deal to the work of the hon. Member for Kensington. Back Benchers can be influential if they stick through thick and thin to a few topics. I welcome the hon. Gentleman back to the Chamber. It is appropriate that I said the nice things about him while he was out of the Chamber. I can now refer to some points of disagreement.
I hope that the hon. Gentleman, who is the main champion of child benefit in this House, will not again end his speech in the way that he did this evening, by saying that some parents feel a certain amount of guilt about drawing child benefit. If guilt exists, it has to be challenged, because it is a benefit that goes to all families as of right. I hope that we would not limit any reform to those parents who at any time feel that they are so hell off that they do not need to claim child benefit.
1375 I hope that the next Labour Government—we all live in hope—will be far more radical and follow the path of the New Zealand Government, and not only in regard to the abolition of tax benefits. For a considerable time the New Zealand Government have allowed mothers to choose whether they wish to capitalise part of their child benefit payments. If we are serious about extending home ownership and the ownership of capital goods in the community, this House and the electorate should think seriously about giving people the chance to have a capital sum in lieu of child benefit payments, rather than adopting the much more modest proposal made by the hon. Gentleman. He seemed to suggest that some people feel some guilt about claiming child benefit and that they should be allowed to build up a capital sum for their children. I should much prefer that capitalisation to occur for the family now, rather than that children of well-to-do families should pick up the value of child benefit at 18, or whatever age was chosen.
I should like now to refer to the comments of the Minister for Social Security in his opening speech. Opposition Members were trying to establish that there has been a major change in attitude towards child benefit on the part of the Government, whereas the Minister was claiming that nothing of the kind had occurred. He was saying that at each review the Government have to make a judgment about whether to increase child benefit. That is a major change from the position that was outlined before the uprating statement.
I need to take the House back to the time of the last Labour Government. They were wrongly maligned on many issues but rightly on their initial attitude to child benefit. The House will remember that the Labour party gave an election pledge to introduce child benefit by merging the family allowance system and child tax allowances. Then some northern Members talked over the weekend to their constituents—I warn the hon. Member for Roxburgh and Berwickshire that it is dangerous to talk too much to one's constituents—who were horrified to find that the Government were proposing a reform which would transfer income from men to women. The Government panicked. Initially they said that the scheme would not be introduced but, as a result of the leaking of Cabinet papers, they were forced to introduce the scheme.
The then official Opposition rightly exploited the embarrassment of the then Labour Government. One of the means of exploiting that embarrassment was the tabling of early-day motions. Early-day motion 420 was tabled on 12 July 1977. One of the signatories to an amendment to that motion was the present Minister for Social Security. It called on Her Majesty's Governmentto ensure that increases in child benefit are treated in the same way as tax cuts, so that … there can be an improvement in the real value of child benefit as part of an overall reduction in the burden of direct taxation and a shift to indirect taxation".I emphasise that the operative words talked aboutan improvement in the real value of child benefitand not the cut with which we are faced today. The signatories also wished to seea shift in indirect taxation".My hon. Friend the Member for Pontypridd (Mr. John) received a letter from the Prime Minister during the general election campaign of 1983, and her reference in 1376 that letter to child benefit came in two parts. They are important and relevant to our debate. First, the Prime Minister said:Child support has also been fully protected under the Conservative Government; allowing for the new rate announced at the time of the Budget, which came into payment this November, there has been an increase since April 1979 of over 62 per cent. in the level of child benefit. This would put Child Benefit at its highest ever real value.It was absolutely correct and right for the Government to make that claim. If tonight's orders are passed, the Prime Minister will not be able to make that case to any hon. Member or to any constituent, because we are now talking about cuts in child benefit.
In her letter, the Prime Minister rightly went on to refer to the achievements of her Government when she said:The importance the Government attaches to Child Benefits was made clear by the Chancellor of the Exchequer in his Budget speech in March this year, when he said: 'It is important for families and particularly for the low paid. Indeed it is the benefit which provides the greatest help for many of the poorest families in the country'''.I emphasise the crucial importance of the statement about the importance of child benefit for families and for the low paid, and that it is of the greatest help to many of the poorest families in the country. Her letter illustrates the significance of the change that we are debating tonight.
Until the introduction of the order, the Government could claim that the Conservative party was the party of the family. The Government will not be able to make that claim in the next general election because tonight, for the first time under this Government, we are seeing a reversal of the policy of clear commitment to view increases in child benefit in the same way as reductions in taxation. Before the order, there was no talk of increasing FIS or of introducing a new social credit. The Government maintained that the benefit was crucial to all families and to all women, and of particular importance to the low paid.
I should like now to refer to the points made by the hon. Members for Roxburgh and Berwickshire and for Kensington. We know that the Government will save£175 million from the cut in child benefit. We were fobbed off by the Minister for Social Security when we intervened in his speech. We have a right to ask him whether the Government will give us an assurance that the whole £175 million will go into the new social credit. The Government cannot claim that the cut is being made as a means of targeting help on the poorest families unless that assurance is forthcoming. The hon. Member for Kensington said—he has a delicate way of putting a stiletto into the Government's side—that if we do not get that commitment, the Government will be using much, if not most, of the saving not to help poor families but to help finance tax cuts for all taxpayers, the majority of taxpayers being those without children. Therefore, we shall be seeing a redistribution from families to single people.
I end, as the hon. Member for Kensington ended, by reminding the Government—because I am less gentle than the hon. Gentleman in thinking that the Government do not need to be re-educated about the importance of child benefit—that it is not only a way of maintaining tax equity between people with children and those without children. We must all reiterate the new argument advanced by the hon. Member for Kensington that it also ensures that thrift is not penalised because there is nothing in the rules of paying child benefit which will penalise those who save and those who have capital. It also concentrates help on the very poorest people in the sense that child benefit 1377 is a larger part of their incomes than it is of the incomes of other families. It is the best way of tackling the incentive to work problem and, as both the hon. Member for Kensington and the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) reminded the House, it is the most effective way of transferring resources to women.
I hope that the Under-Secretary will be more forthcoming about this issue than the Minister has been. The Opposition are putting forward the view that there has been a fundamental shift in Government policy from a commitment without qualification to child benefit to a limited commitment to it. That has profound repercussions, in the way that other hon. Members have described.
I want also to comment on two other issues raised in the orders. The first relates to central heating additions and the second to the changes in housing benefit.
The Government must be given credit. They are highly skilled in presenting these changes. If private industry paid attention to our debates, it would set head hunters to work to discover who it was in the DHSS who had this extraordinary skill of presenting quite significant cuts as a way of providing extra help for the poorest of our fellow citizens.
We see it in the heating additions. The Government say that they are making an automatic benefit for the sick, the disabled and the blind who are on the long-term rate of supplementary benefit and do not have to register for work. The Government say that they will get the benefit automatically. At the same time, after 5 August, the Government are to abolish the heating addition for central heating.
It is a clever move. From the answers to parliamentary questions by the Under-Secretary, we discover that the automatic benefits will cost £1 million in a full year but that the cuts in central heating additions will total £55 million. The message goes out to our constituents that, on average, 510 of them will lose this benefit unless they claim before 5 August. We have 10 days in which to tell large numbers of people who currently are eligible for central heating additions that they should claim.
I tremble for the future of our social security system when I consider the reason that the Government put forward for the cuts. It is that they are alarmed at the numbers of people claiming. It has been a success. The Government have targeted help to it. Our constituents have claimed. Then the Government say that so many people are claiming it that it had better be withdrawn quickly. It means that we are caught in the Government's own benefit trap.
Benefits are secure under this Government only if large numbers of our constituents do not claim them. Once they start to claim, the chances are that the Government will suggest that the expenditure is getting out of control and that cuts must be made.
I congratulate the Government on the cleverness of that DHSS official who has managed to present yet another important cut as an increase in benefit rights for some of our poorest constituents.
As for the changes in housing benefits, even the cleverness of that official in the DHSS has not been able to disguise the extent of the cuts both in the rates taper and, as my hon. Friend the Member for Oldham, West (Mr. Meacher) said, in the changes in the non-dependant deductions.
1378 Under these changes, overall about 2 million claimants will lose some benefit, 460,000 will lose all help with their rates and an additional 340,000 will lose all housing benefit. It means that about 800 of the constituents of each hon. Member will lose all help with their rate payments, about 550 will lose all help with housing benefit and, in total, between 3,500 and 3,600 of our constituents will suffer cuts in their living standards as a result of this move to change the rates taper. If that is not enough, we see further cuts in these very important changes in the non-dependant deductions that many poorer households will face.
The Government make these proposals without any real understanding of the tension caused in low-income families. Many mothers know what a strain it is to bring up children in a poor household. There is a sense of continual failure that they have never managed to give their children what other children have. They are anxious that when their children cease schooling and, if they are lucky enough, find jobs or draw benefit, they have money in their own right with which to buy clothes, just as their peers at school or at work have always had. For the Government to say that, at the point where there is extra income coming into a household, for the first time they will claw it back shows a real lack of imagination. If it is not a lack of imagination, it demonstrates a degree of cruelty which even this Government have not shown until now.
There is much in the orders that the Opposition welcome. There are the changes for disabled people which all hon. Members will welcome. There are the changes for our very sick constituents in nursing homes. That is especially welcome and it is a very generous move on the part of the Government. However, necessarily I have concentrated on the cuts in the heating additions and above all in child benefit. There has been a sea change. Until this order, the Government could claim that they had a good record in being the party of the family. They made much of that. In 1979, the Government claimed to be that party. In 1983, they rightly claimed that their record justified that assertion. They will not be able to go into the next general election with that claim intact.
§ 8.8 pm
§ Mrs. Margaret Beckett (Derby, South)
We have had an interesting and wide-ranging debate. I shall endeavour not to cover the same ground so ably covered already by those hon. Members who have contributed.
I begin where my hon. Friend the Member for Oldham, West (Mr. Meacher) left off. We were talking about the change in the uprating date, and my hon. Friend said that this might have unfortunate implications, for example, for pensioners, and he wondered whether this was a way for the Government to save money or just what their intention was.
I have a nastier mind than my hon. Friend the Member for Oldham, West. I wonder whether the Government have in mind that, because the inflation figures will be rather lower than normal when these changes are being considered, they will be able to tell pensioners that they are not entitled to anything because inflation has been kept low and there is little need to give them very much. However, they will add that, out of the generosity of their heart, they intend to put in an extra 1 or 2 per cent. over and above the rate of inflation. That is much more in line not only with what my hon. Friend the Member for 1379 Birkenhead (Mr. Field), with his customary charity described as skill but with the boldness, if not the barefaced cheek, that the Government usually show in advocating their policies. It would also be much more in line with the Government giving pensioners an increase similar to that which they would normally receive at the date of the usual uprating and claiming credit for it being over and above the rate of inflation, and with the election-winning strategy that the Government are attempting to pursue.
Hon. Members have spoken about the Government's change of policy towards child benefit and family income supplement and the way that that represents a shift away from assistance for families. I listened, as always, with interest and admiration to the remarks of the hon. Member for Kensington (Sir B. Rhys Williams). I do not always have the same degree of admiration when I listen to those who say how hard it is for them to bring themselves to claim child benefit, especially, as is sometimes the case in the House, when those same people use the fact that they hate claiming child benefit as a justification for its ceasing to be a universal benefit. The result would be that hon. Members and a whole range of other people who are not so well paid would lose the advantage of child benefit.
The hon. Gentleman said that there might be some way in which people could change the use of child benefit. My hon. Friend the Member for Birkenhead made some suggestions. I have never understood why those people who so dislike child benefit do not make a convenant and transfer the money to a charity or a group of poor people about whom they are worried. I trust that the next time a change in the universal nature of child benefit is advocated those people who say that they should not be drawing it will have seen that it has gone to those in greater need.
§ Sir Brandon Rhys Williams
I should not like to say that I disagree with the hon. Lady's attitude, because I believe that there is a good deal of humbug amongst those people who are well off enough to raise a child without this form of tax cut. Child benefit is a tax cut. A benefit and a tax cut are the same. In suggesting that a way should be found to turn the benefit into capital for the child, I am seeking also to emphasise that the money is the child's and not that of the parents. The parents should not think that they are drawing it for themselves. They draw it because they have a responsibility for the child, and they should spend it on the child. In those cases—not many—where mothers are blamed for not spending it on the child, it should be drawn to their notice that that is the purpose of child benefit.
§ Mrs. Beckett
I take the hon. Gentleman's point. I do not altogether disagree with him. In a sense, we accept that child benefit is a benefit for the child. The fact that those who draw it have no need of it is often used as an argument for child benefit not to be universal. I have never understood why such people do not take steps to give it to those for whom they usually express anxiety instead of seeking to reduce the scope of the benefit for those who may need it more.
Although families may benefit from the increase in family income supplement, they are liable to lose through some of the changes in child benefit and housing benefit. That means that they are not being treated as generously as the Government sometimes claim.
1380 We wholeheartedly welcome the change being made in line with the pledge given by the Minister of State about the payment of funeral costs for people engaged in disputes, and the changes and the substantial increase in payments to those who have suffered vaccine damage.
We were sorry the other day to hear the Minister say that that change does not necessarily mean that there will be an increase each year in line with inflation, but we hope now that the Government have taken powers to make that increase that it will not be seven years before the next increase—even if it is not every year. I know that the Minister said that the changes did not preclude the introduction of a more wide-ranging scheme for those who have suffered vaccine damage and others, but we hope that that is not a sign that the Government have no plans to introduce better schemes.
The Government should draw to the attention of those who might be able to claim the central heating addition the fact that they are liable to lose it. The Government should seek out those who have wrongly suffered a voluntary unemployment deduction. The Minister will be aware that his Department has recently been absolved from the duty to make the payment to those people, but we hope, nevertheless, that the Department will consider undertaking a further campaign to draw that loss to their attention. I hope that he will give an undertaking that in the meantime the Department will not destroy the files so that there is no record of those who may be able to claim such deductions were they aware of the extent to which they have been deprived.
The Minister mentioned the regulations which we have become accustomed to call the board and lodging regulations. We welcome the improvement that the Minister has announced. It is fair to say that the Government were warned consistently, when they introduced the temporary regulations and when they introduced the present regulations, that the limits set were inadequate. We are glad that they have decided to make an increase from November and to make the limits available to those in nursing homes. It was extraordinary that people in such homes were entitled only to claim something like the attendance allowance above the limits available for residential care homes.
Although we welcome what the Minister said about residential care homes and nursing homes, there is one aspect of what he said which caused me anxiety. I hope that when the Under-Secretary replies he will answer my questions. The Minister for Social Security said that he felt that the change in the date of uprating from now until July 1986 meant too long a wait for an alteration of that magnitude which would therefore be made in November. He did not, however, announce any increase in the limit for the under-26-year-olds who are also affected by the regulations. I wonder whether the implication of what the Minister said is that we shall have to wait until July 1986 for an increase in those limits. That would be a serious matter.
We are at the beginning of the period when people in major cities, especially London, will be affected by the limits and the other changes in the board and lodging regulations. There will be increasing protest about the inadequacy of those limits, for example, in London. If we are not to see any change in those limits for a year—as may be inferred from the Minister's statement—the Government are in danger of making an already bad position a great deal worse. I shall say no more about the 1381 structure of those regulations, on which we have strong views, because I am sure that we shall return to the subject. I am anxious to have an answer from the Minister on that point.
I welcomed what the Minister for Social Security said about the increases in other allowances, although I wondered—I shall not press the Under-Secretary on this point—whether he was implying that the meals allowance might be reviewed down. I hope that I was mistaken in drawing that inference, but we shall watch that point carefully. If that were to be the case, it would add insult to injury and greatly exacerbate what is already a difficult and, for many youngsters, a disastrous position.
I intend to deal with housing benefit and central heating additions together. My hon. Friend the Member for Birkenhead, with his usual skill, drew the Government's attention to the fact that they are acting strangely if one accepts their description of the course on which they claim to be embarked.
In terms of the entire housing benefits scheme, we have seen how the Government first substantially cut the money available for general housing subsidies by £1,300 million since 1979. They then actively encouraged increases in rents that were bound to follow by cutting such a fantastically large sum from the general housing subsidy. When those rents increases meant that many more individuals were eligible for housing benefit, the Government said that too many people were claiming it, and, having targeted spending in the first place, they used that targeting as an excuse for later cuts. We strongly suspect that we shall be seeing that on a much greater scale later.
As my hon. Friend the Member for Birkenhead pointed out, the only reasons so far advanced by the Government for making the change in central heating additions—unless the Minister comes forward with a fresh reason tonight—is precisely that too many people are claiming them. That was also the reason for the Government's proposals on board and lodging regulations. It is all very well to have such regulations, but the problem seems to arise when people are so inconsiderate as to wish to draw these benefits.
The Government have deliberately imposed extra taxes on fuel and have deliberately raised fuel costs. It is therefore extraordinary that they should be cutting heating additions. I understand that many people, particularly those who draw the higher rate additions, are unemployed. It is particularly unfortunate that, in line with the Government's general attitude to the unemployed—and their proposal that such people be on the lowest rate of income support in the scheme that will be put to us in the next parliamentary Session — they are again cutting central heating additions to the unemployed.
The Minister of State said that central heating additions used to be higher because the costs of central heating were considered to be above the costs of heating in general. It was pointed out by my right hon. Friend the Member for Glasgow, Govan (Mr. Milian) that that could well be because at this time of year many people did not have their central heating switched on. My constituency case work convinces me that my right hon. Friend is quite correct.
But let us set aside the reality of how people live and accept the Government's argument. The Minister appears to be saying that it was fine to have a central heating addition when costs were above general costs, but now that they are not so far above, or perhaps even below, general 1382 heating costs, the money is taken away altogether instead of being switched to improve general heating additions. That is a strange argument, and it is perhaps another example of the ingenuity to which my hon. Friend the Member for Birkenhead referred when he spoke of the Government justifying the various cuts and changes that they have made.
§ Mr. Newton
I hope that the hon. Lady recognises that, leaving aside heating additions, the supplementary benefit rates include a basic element for heating costs. The justification for the existence of the heating addition is that the types of property involved carry with them heating costs over and above the norm. That seems to destroy the hon. Lady's argument.
§ Mrs. Beckett
I understand the Minister's second point, but, as I have already said, the Government's own actions have substantially raised the cost of fuel.
The Minister is always telling us that this Government feel that they have a much better record than previous Governments. If he feels that the notional element in supplementary benefit rates far heating costs is sufficient, we would be more than happy if he gave an order of magnitude as to what exactly that element is. We would then be able to judge how near that comes to meeting the fuel costs of claimants.
We should like to hear that the Government intend to keep the higher rate of addition for those who will still qualify. I understand that at present only about 4 per cent. of claimants would qualify. But those who are fortunate enough to qualify under the Government's new scheme should at least get the higher rate of addition, particularly as they could lose out if in the past they were entitled to two additions but did not claim the one that is being preserved.
The Government ought to consider extending the estate rate addition to estates in which central heating systems were installed after the estate was built rather than at the same time. That is an unquestioned loophole in the regulations, and, having made fairly substantial savings elsewhere, the Government should well be able to afford such an extension.
Over the last few years there have been substantial cuts in housing benefit—far above what could possibly be justified. In 1983, 400,000 people lost entitlement altogether, and 1.75 million lost some benefit in order to provide a cut of about £50 million. In 1984, when there was a cut of £215 million, 500,000 people lost entitlement altogether, and about 1.75 million lost at least some housing benefit entitlement. The Government are now embarking on another round of cuts of about £500 million. We can therefore expect substantial additional numbers of people to lose out.
Apart from the general cuts in the housing benefits scheme, there are specific proposals that come within the ambit of the changes that we are now discussing. Has the Minister been able to discover or invent any justification for the cut in subsidy, to local authorities to 80 per cent.? In the past, the subsidy that was received was generally of about 100 per cent. When we last discussed housing benefit, this appeared to be a wholly arbitrary figure. There seemed to be no particular reason why the rate should have been set at 80 per cent. There appeared to be no reason for saving that money. If the Government have now managed to come up with a reason, we would be interested to know of it.
1383 Has the Minister any better reason for taking away altogether the subsidy that local authorities are receiving for administration? At present it is about 60 per cent. of costs. We were told that it would provide a greater incentive to contain costs and improve efficiency, but this is at a time when the Government intend substantially to increase the costs and difficulties faced by local authorities, as well as the number of defaults they are likely to face, by the proposal under which everyone will have to pay 20 per cent. of the rates.
We are also discussing the increases in tapers that the Government will be putting forward. I understand that over the past two years the Government have effectively doubled the rate taper. There are now to be further substantial changes. Not only will that affect hundreds of thousands, if not millions, of people, but it will save the Government substantial sums. I sometimes wonder whether the Government appreciate the effect of this on the incomes of those from whom they keep making what they regard as comparatively minor savings.
There has recently been evidence from the Low Pay Unit about the amount of household income left for those with incomes at the highest levels at which housing benefit is still paid. We understand that the Government are seeking to reduce those levels, and the Government constantly complain that housing benefit is paid too far up the income scale. But, as we constantly remind them, it is not paid to anyone who is even near average earnings unless that person's rent is above average.
Using the data from the family expenditure survey, in evidence to the Government's housing benefit review the unit pointed out that, after expenditure on essentials, such as food, fuel, clothing and housing, the kind of households that are able to draw housing benefit are left with about £2.50 to £3.50 a day. It also drew attention to the items that those sums of money have to cover: laundry, shoe repairs, transport other than to work, toilet requisites, the prescription charges that the Government have substantially increased and such minor costs as children's pocket money and toys. Nevertheless, these are very important items of expenditure, particularly for poorer families. Therefore, it is unwise for the Government to continue cutting away at housing benefit, thinking only of the public expenditure consequences and not appreciating the effects that the cuts are having upon the standard of living of so many families.
This is applicable in particular to non-dependant deductions. My hon. Friends have made most of the points that I would otherwise have made, but I think that we ought also mildly to rebuke the Under-Secretary of State for his statement on 27 June that nobody on supplementary benefit would be affected by the Government's proposed changes to housing benefit. The Minister for Social Security said that it is unusual to announce the increases in non-dependant deductions with the upratings, so perhaps they had slipped the mind of the Under-Secretary of State. However, they certainly affect those on supplementary benefit and from that point of view alone ought perhaps to have been drawn to our attention.
The Minister for Social Security said that the index which has been consistently used for non-dependant deductions is 18 per cent. He implied that this increase has been used for many years. Will the Under-Secretary of State tell us whether the major increase in non-dependant 1384 deductions in April 1984 — an increase which was roundly condemned as wholly unreasonable by the Social Security Advisory Committee — was made purely because of the increase in the housing cost index? If so, it is surprising that the Government gave no reason for an increase which at the time was so widely and extensively condemned.
About 400,000 families will be affected by the Government's savings. I wonder whether they realise what the impact of these changes will be. My hon. Friend the Member for Birkenhead referred to the fact that a working teenager might have to pay almost half of the family's housing costs. This point was made by the Social Security Advisory Committee. It said that this was unreasonable. If such a household were fortunate enough to have two working teenagers, the consequent deduction of £20.40 from housing benefit would mean that parents who are living on supplementary benefit would receive absolutely no housing benefit if their rent and rate payments were average.
This is in sharp contrast to the attitude of the Government's housing benefit review group, which pointed out that the full housing costs, whether rent or rates, of those on supplementary benefit should be met. The increases in non-dependant deductions mean that the Government are putting more and more people further and further away from having their costs met. This may result in public expenditure savings, but it will result in a very substantial increase in family tension. My hon. Friend the Member for Oldham, West said that the Government will be making a saving of about £250 million by the introduction of these measures.
One of the documents to which reference has not been made is the report of the Government Actuary. Once again the Government are keeping the balance in the fund at 23 per cent. However, the Government Actuary, upon whose figures the Government are normally anxious to rely, says that a prudent Government need not set aside more than 16 per cent. of their income. The national insurance fund is a notional fund, but the Government appear to be raising substantially more income than they need. That means that it is not a notional sum. They must be raising about £1 billion more than they need to keep the national insurance fund in balance. They are also raising it in a most regressive way. It will be raised through national insurance contributions. The Government have made a number of changes, but they had not come into effect when these figures were drawn up. Not only are the Government raising substantially more money than they need; year by year they are also reducing the amount of money which is received in a more progressive way from the tax system through the Treasury supplement.
In effect, therefore, the Government, as in so many areas of our national life, are taking rather less from those who are more able to pay and rather more from those who are less able to pay. We have heard a great deal this week about why the Government believe it to be right to increase the salaries of the better-paid members of our community. It is in line with the Government's approach that the only figures in this package of measures which show an increase above the level of inflation are the non-dependants' housing benefit deductions. That is sadly characteristic of this Government's attitude. Although, therefore, we welcome some elements of the package, the Government do not deserve full credit for it.
§ The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney)
I am grateful to the hon. Member for Derby, South (Mrs. Beckett) for at least having the goodness to recognise, in contrast to her hon. Friend the Member for Oldham, West (Mr. Meacher), that a number of factors in the uprating package are to be welcomed. She mentioned the changes to the vaccine damage payments and the changes that will affect nursing homes and residential care homes. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) was also good enough to welcome those changes.
The uprating will add more than £2 billion to our massive social security programme. Even in the cut and thrust of parliamentary debate I had hoped that the charity induced at the end of the term would lead to a greater welcome by the Opposition of this package. Perhaps that was too much to ask of the hon. Member for Oldham, West.
Turning to pensions, we had the vignette of the hon. Member for Roxburgh and Berwickshire travelling around his constituency at the weekend trying to explain to his constituency pensioners the significance of the uprating of the basic rate of pension. I hope that he was good enough to explain the real increase since the Government came into office. If we achieve the projected rate of inflation, down from 7 per cent., there will be a 10 percentage point increase in the real value of the basic rate of pensions since 1979. I recognise the situation that he described, and that a number of people take a lot of convincing because they are constantly bombarded with a good deal of propaganda in the other direction.
Labour Members and members of the TUC have taken to misrepresenting our proposals on the state earnings-related pension scheme as a cut in the basic retirement pension. As we have constantly said and demonstrated, and are clearly demonstrating again tonight with these orders, our commitment to maintaining the value of the basic retirement pension is absolute and is fulfilled. The elements in the cost of living to which the hon. Member for Roxburgh and Berwickshire referred are taken into account in the RPI.
The hon. Member for Oldham, West saw some machiavellian plotting in the fact that to achieve many sensible advantages in introducing the uprating on an April to April basis, we were proceeding with two eight months uprating periods for pensions. He seemed to see some wickedness in that proposal. However, pensioners will have cause to recognise the benefit of that. It will more closely match the rate of inflation, although the hon. Gentleman seemed to have some worries that there would be a low or even no rate of inflation, which would cause problems for the pensioners.
As the hon. Gentleman knows, there has often been pressure for more frequent upratings than 12 months. I find it difficult to understand why he should be so concerned about uprating periods of eight months. The increase will reflect much more clearly the more immediate effect of the uprating from November 1985, and by July 1986 pensioners will have a much greater advantage. I hope that the hon. Gentleman will not seek to attribute the sort of tactics that might appeal to less charitable Governments to this one.
§ Mr. Meacher
Will the hon. Gentleman accept my proposition that it is likely that in July 1986, if the Government's inflation forecast is met, pensioners will get no increase?
§ Mr. Whitney
We shall have to wait to see what turns out. I cannot understand why the hon. Gentleman is so concerned that inflation should fall. I can understand that he might have some sensitivity about this, because he will remember, and he would like pensioners to forget, that the Government of which he was a member averaged an inflation rate of 16 per cent. in every year of office. Pensioners will never forget what that did to their savings. If the hon. Gentleman is upset that we are likely to have a low rate of inflation, I can assure him that pensioners will not be.
There was considerable discussion on child benefit, including the, as always, distinctive contribution from my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who appealed to all Christian democrats in the House to welcome the commitment that the Government have reinforced to the universal provision of child benefit. Child benefit is an extremely expensive social security provision. About 6.9 million families and 12.3 million children are involved. From listening to a number of Labour speeches one would have imagined that something desperate was being done, but about £75 million in a full year is being added to the £4.5 billion that we spend on that benefit.
The hon. Member for Birkenhead (Mr. Field) is clearly unable to be here now. However, in answer to his point, I can say that we are prepared to go into the next election reasserting our justified proposition that we are the party of the family, because provision at that scale, at a time of justified stringency in our national accounting, is something of which we are proud. As my hon. Friend the Minister for Social Security pointed out, in addition to the increase, which I recognise is not fully in line with inflation, we have directed some of that to the lower end of the income scale through FIS and the housing benefit children's needs allowance.
Account has to be taken of the fact that the rest of the community—those who are not at the lower levels with which we are mostly concerned here—will benefit from our achievements in the years since 1979 on wage increases and tax changes. Since we came into office, the real income of the overwhelming majority has increased, whereas it fell for most people during the period of the Labour Government. The real take-home pay of a person on average earnings has gone up by 13 per cent.
§ Mrs. Beckett
I noticed with interest that part of the hon. Gentleman's justification is that most people are better off, but I understand that if one takes into acount the whole package of tax changes made by the Government, only people with incomes of over £18,000 a year are better off. The Minister may move in such circles, but riot everybody else does.
§ Mr. Whitney
I refer the hon. Lady to the statistic that I quoted. When the Labour Government were in office, people were actually worse off, and that point must be taken into account. I particularly made the point that we are talking about people on average earnings. I recognise the unemployed, but that category is not at issue The 1387 increase under this Government has come about because with our child benefit we are targeting help more accurately where it is clearly needed.
The next source of concern for Labour Members was the non-dependant deductions. That seemed to take little account of the wages being discussed. It is important to remember that we are talking about, for the full non-dependant deduction of £10.40 a week, people between 18 and pension age. We are not talking about those on supplementary benefit, or the youth training scheme or pensioners, for whom the deduction will amount to only £3.90, but about those over 18 who would be expected, if they are in work, to face a deduction of £10.40.
The average gross weekly earnings of 18-year-olds last year were £83.60 for males and £73.90 for females. In relation to figures like that, it cannot be maintained that a deduction of £10.40 is in any way unacceptable. The hon. Lady referred to the last time there was a sharp increase. It was in 1982 rather than in 1984, when, on the same formula, housing costs for supplementary benefit cases were met under the supplementary benefits scheme and the non-dependant deductions increased by 21 per cent. In the following year there was no change in this item, despite increases in the main housing benefit and the supplementary benefit rate. Therefore, claimants have both gained and lost over the years by the application of that rule.
The cuts in relation to heating attracted a certain amount of attention and there were one or two areas of misunderstanding. The hon. Member for Roxburgh and Berwickshire referred to the estate rate heating addition. That has not been changed and his worries on that score are unjustified. Many of the cases he referred to would be eligible for the higher rate heating addition, and we are not putting an end to that. As my hon. Friend the Minister of State pointed out, nowadays the justification for the central heating addition is, to put it mildly, considerably less than it was, and it is scarcely to be maintained.
The hon. Member for Oldham, West (Mr. Meacher) seemed to be disturbed that some of the measures contained in our uprating proposals are in harmony with the proposals in our review. It would be rather strange if that were not the case. Having said that, I am not saying that the consultation process is anything but an extremely genuine and far-reaching one. It is, of course, the second stage of a lengthy and unique public operation.
For something like 18 months my hon. Friends the Secretary of State and the Minister of State had open hearings around the country and we received thousands of submissions. There were also many letters to the Department. After 18 months of careful study and review, all that resulted in the proposals. Then we had the period from June until mid-September for the second stage of the consultation process. I refer the House to another leaflet we shall be issuing today. It will give another fillip to this national process of consultation.
The House recognised the value of the increase in the limits on residential care and nursing homes and I welcome the support that those proposals received. When we introduced those measures, we said that we would continue to monitor their effects. The way in which we have done that has justified our promise. We recognise that the tightness of the nursing home provision and addition has caused difficulties, and I hope that the new 1388 figures we have announced, a £10 increase in the basic rate and the increase of the addition to £50, will improve the position.
The hon. Lady asked about the provisions relating to under-25s, known in our Department as the ordinary board and lodging. We shall maintain careful scrutiny and we have shown, as we promised, a good deal of flexibility on the time limits and the exemption categories. We have a proud record on that. Our initial indications do not at present suggest that there is the same sort of case for an overall increase in November in the ordinary board and lodging limits as for residential care and nursing homes which my hon. Friend has announced. That, too, is something which we shall keep under careful review, and we shall certainly monitor it very carefully.
§ Mrs. Beckett
I do not wish to press the Minister too much, but perhaps I could ask him to say a little more on this point. Will he give me an assurance that it is not the Government's intention to wait until July 1986 before announcing any increase in the limits? The Minister will know that the residential homes limits were considered to be inadequate. A couple of days ago the Leader of the House accused the Opposition of pandering to popular sentiment, and, although I do not accuse the Government of doing that, I suggest they are a little more worried about elderly people in residential homes than they are about the young, against whom they seem to have a particular dislike. I should like the Minister to assure us that it is not the Government's intention to wait for another full year.
§ Mr. Whitney
I should like to correct a misunderstanding which the hon. Lady has perpetrated more than once. She alleges some hostility on our part towards the young, but that is by no means the case. One of the reasons why we acted as we did was the great damage caused and the new unemployment trap. We shall continue to keep that under review as we kept under review, for example, the exemption categories. We showed our flexibility on that. We also kept under review the level of charges in residential care and nursing homes. By monitoring those, my right hon. Friend was able to announce charges. The evidence is lacking to suggest that there is a need, or may or may not be a need, for uprating.
We are considering an important range of additions to the social security programme. They include major increases in retirement benefit, unemployment benefit, and widow's pension and benefits. They are all of 7 per cent., which recognises that that was the increase in the RPI for May. If our hopes are fulfilled, it will mean a significant increase, by the time those proposals are implemented, above the cost of living at the end of November.
The upratings are another fulfilment of our pledges. We have increased invalidity pension by no less than 12 per cent. We have established our commitment to the Christmas bonus—understandably, that is a sore point with Opposition Members—we have doubled the vaccine damage payments, changed other benefits, and significantly increased residential care and nursing home allowances. The package will cost more than £2 billion. Since we came to office in 1979, we have increased our social security budget by more than 30 per cent. in real terms. Most of the increase is accounted for by higher real-terms increases in all the major benefits scales. We are also paying for about 800,000 more pensioners.
1389 The Government are proud of that record, and I commend the regulations to the House.
§ Question put and agreed to.
That the draft Social Security Benefits Up-rating Order 1985, which was laid before this House on 5th July, be approved.