§ Mr. Speaker
We now move to the important Opposition debate on child benefit. I must tell the House that I have selected the amendment in the name of the Prime Minister.
§ Mr. Michael Meacher (Oldham, West)
I beg to move,That this House strongly condemns the Government's breach of their own repeated promises to increase Child Benefit in line with inflation which will result in mothers and children being deprived of £175 million in the current year as the first of the Green Paper cuts; notes that Child Benefit is uniquely effective in countering family poverty, reducing the poverty trap and ensuring that mothers are the recipients of monies needed for child care; and therefore calls upon the Government to restore the real value of Child Benefit both now and for the future.Our case in this debate is very simple and very clear. It is that child benefit is uniquely effective in countering family poverty, in reducing the poverty trap and in ensuring that the person who receives the money necessary for caring for the children is the mother. It was a Labour Government who brought in child benefit and, for the reasons that I have just given, we believe strongly that it is a key benefit, central to our social security system, which should be built up and not cut back. It is a benefit which has attracted widespread endorsement.
I offer at the outset one or two quotations. My first is this:We would all, I suspect, like to see an increase in child benefit; I think that it is one of the most effective ways in which you can deal with the problem of poverty and the problem of bringing help to children.I am sure that we would all say "Heat, hear" to that. Those were the words not of a Labour Minister, but of the present Secretary of State for Social Services when speaking to the Treasury and Civil Service Sub-Committee on 28 July 1982. That was when he still believed in child benefit, just as, when he set up the pensions inquiry, he.still believed in the state earnings-related pension scheme.
If child benefit was, in the Secretary of State's own words,one of the most effective waysof dealing with the problem of poverty, does the downgrading now of child benefit mean that the Government are repudiating that objective? The Secretary of State does not appear to want to reply now. No doubt he will do so later.
On 28 June 1983 the Prime Minister said that the Government's real increase in child benefit then wasevidence of our commitment to the family."—[Official Report, 28 June 1983; Vol. 44, c. 49.]Quite so, but does this latest princely increase of 15p—which is less than one third of the rate of inflation—now indicate that the Government's commitment to the family is somewhat wilting? That is another question to which we would like an answer today.
I offer a third quotation:It plays a major part in easing the unemployment trap, and so in our strategy of improving incentives for everyone. It is important for families, and particularly for the low paid. Indeed, 1099 it is the benefit which provides the greatest help to many of the poorest families in the country. I refer, of course, to child benefit."—[Official Report, 15 March 1983; Vol. 39, c. 143.]Again that is not some Child Poverty Action Group enthusiast, as one might think, but the right hon. and learned Member for Surrey, East (Sir G. Howe), the then Chancellor of the Exchequer, in 1983.
If child benefit is so effective in all these roles, according to Ministers, why is it being sidelined now? If all those unsolicited panegyrics applied in 1982 and 1983, why do they not apply now?
The Secretary of State's justification for his backtracking on child benefit was stated by him in his answer to me a week ago, when he said:The first priority must be to give help to families in greatest need."—[Official Report, 18 June 1985; Vol. 81, c. 177.]It would indeed be a seductive argument if it were true, but it is not. It simply does not reflect what the Secretary of State has done, for three good reasons.
First, only a fraction—about 16 per cent.—of the £175 million saved from the child benefit cut is being used to improve benefits for low-income families. The improvement in family income supplement will cost just £17 million, and the housing benefit child's needs allowance £12 million — which had in any case originally been promised for April this year. So the Government are not transferring resources at all; they are cutting benefit to mothers by £150 million.
Secondly, cutting child benefit and spending more on FIS, which is the Government's strategy, does not concentrate resources on the poorest families. It has the opposite effect. It cannot be stated too often that take-up of child benefit is virtually 100 per cent., while FIS, because it is means-tested, reaches only about half of all the low-paid families which are eligible. Housing benefit is little better—the take-up there is about two thirds. So the losers from the right hon. Gentleman's package are clear. They are those entitled to FIS but not claiming it, and that is about 200,000 of the poorest families, those with incomes just above the FIS eligibility levels, and mothers and children in families with reasonable incomes, but where the income is not shared fairly. Far from being helped by what the Government have done, those families will be the hardest hit.
There is a third important reason, if one follows through the logic of the right hon. Gentleman's package, why the outcome contradicts his own claims. It is that even those families which get the family income supplement will find that the so-called extra help that the Government are providing by increasing the FIS prescribed amount by more than 7 per cent. will be swallowed up by the loss of child benefit and the consequential changes in housing benefit.
I shall give an example which effectively demolishes the Government's case. In March of this year the average FIS payment for a two-child family was £12, which implied an average wage of around £76 a week. Assuming that their earnings increase in line with inflation, this family's FIS award will increase by £1 in real terms as a result of the higher FIS levels announced by the Government a week ago. However, at the same time, no less than 70p of this £1 increase will be snatched back by the cut in child benefit.
Indeed, the result will be even worse because of the infernal logic of the interconnection between means tested benefits. Because increases in FIS are taken into account 1100 for calculating housing benefit, many parents will find that the gain in housing benefit due to the increased child's needs allowance will be outweighed by the downward adjustment to housing benefit resulting from the higher FIS levels. The Secretary of State looks puzzled, but I hope he realises the logic of his own proposals. That is exactly what will happen even to those who get the fullest benefit of his increases.
The result of all that was the boast by the Secretary of State a week ago:The first aim is to direct help to the poorest … That is precisely what we are doing".—[Official Report, 18 June 1985; Vol. 81, c. 177.]That is not borne out by the facts. Indeed, the truth is the reverse. Downgrading child benefit and upgrading the odds and ends of means tested benefits at the margin does not bring the greatest help to the poorest families, but traps them even more deeply in their own poverty.
We know the Government's real motive behind this child benefit cut. It has next to nothing to do with targeting the needy, which is Fowlerspeak for more meanstesting. It has everything to do with cutting expenditure on benefits to safeguard future tax cuts, which, as usual, will go mainly to the better off and the rich.
§ Mr. Meacher
If the hon. Gentleman was in his place at the start and heard my argument, he knows how compelling it is. If it has a fault, I should like to know what it is. It contains the compelling fact that even those who will benefit most by the increase in FIS levels will probably lose in net terms, leaving aside those who, because they do not claim FIS, do not get the benefit.
Far from concentrating resources on poorer families, which will not happen as a result of this package the proposal paves the way for concentrating resources on the richer sections of society — a redistribution which has become the characteristic hallmark of Thatcherite Toryism. That connection was made absolutely explicit yesterday by the Chancellor of the Exchequer when he made a ringing call to bankers and business men at the Carlton Club in favour of further tax cuts at the expense of further public expenditure cuts, and child benefit is the first victim of that renewed Treasury drive.
§ Mr. Hayes
How can the hon. Gentleman say, hand on heart, looking at the figures, that the Government's proposals are not designed to help families most in need, when he has not mentioned that one-parent benefit has increased by 7 per cent., that the child's needs allowance has gone up to £15.40 a week, and that there is a new higher prescribed amount for families with older children?
§ Mr. Meacher
I am not surprised that the hon. Gentleman ran away after a single day when he was setting up a new organisation in the Tory party, if those were the sorts of arguments that he had in mind. He obviously has not listened to my remarks. I mentioned the increases in housing benefit, in the child's needs allowance and in the FIS prescribed amounts. I agree that for one-parent families the FIS increase is an improvement, but would the hon. Gentleman care to give the details of the increases and the number of families who will receive them? They are minuscule compared with the 12 million children who are losing 35p every week this year as a result of the cut in child benefit.
1101 This switch from public expenditure to taxation cuts has precious little justification. The Financial Times—scarcely a Left-wing publication—commented on 20 June, just after the Secretary of State announced his package:By looking for economies in the benefits but not in the tax allowances which form part of the welfare system, the Government is open to the charge of unfairness. The real value of child benefit, in reality a substitute for child tax allowances, is to be cut by nearly 5 per cent., yet the Chancellor recently raised the married man's tax allowance, enjoyed by couples without children, by twice the rate of inflation.In truth, the married man's tax allowance has been increased by about 17 per cent. — that is, if it was increased by the statutory price-linked formula which the Government use—whereas child benefit is 3 per cent. lower in real terms — that is, if it was pitched in accordance with that formula. That demonstrates how, long-term, the fiscal trend under Tory policies has worked against families.
§ Mr. John Butterfill (Bournemouth, West)
When does the hon. Gentleman intend to depart from the brief prepared by the Child Poverty Action Group? Is he aware that most of us have read it?
§ Mr. Meacher
I am pleased to hear that. I hope that many Conservative Members, including the Secretary of State, will read it, because it represents a devastating indictment of the Government's social policies. If the Secretary of State read more documents such as that at bedtime, rather than the briefs from his Department, we might get better policies from him.
I quote again from the document, this time from the Conservative Women's National Committee, the publications of which I do not normally read. In a passionate plea on behalf of child benefit, that organisation said:We recommend that as economic circumstances permit, child benefit is increased in line with increases in tax allowances, or at least protected against rising prices.Poor old Emma Nicholson. She really did her best among the upper echelons of Conservative women. Just her luck that the present Government are led by a women who happens to be more like a man. [HON. MEMBERS: "Sexist."] I am sure that the Prime Minister will be delighted by that reaction from the Government Benches.
There is a further important reason why this attack on child benefit cannot be justified on the grounds of public expenditure costs, which is what I suspect the argument is really all about. Even if child benefit had been indexed fully in line with inflation—as we believe it should have been—expenditure on it would still be falling in real terms. That is because the number of children qualifying for it has been, and still is, falling. It fell by 1 million in the six years up to 1984, and that reduction saved about £300 million at present benefit rates. Moreover, the number will continue to decline in the immediate future because of the relatively low birth rates of the late 1960s.
All of that is in addition to the fact that the Conservatives have cut spending on child support since 1979 by allowing child benefit to fall below its 1979 level during the period up to the November 1983 uprating, and by the steady and continuing reduction in the real value of child support for national insurance beneficiaries. For those reasons, there is absolutely no excuse today, in expenditure terms, for chopping back child benefit even further.
§ Mrs. Edwina Currie (Derbyshire, South)
The hon. Gentleman referred to the position in 1979 and then carefully spoke of the November 1983 uprating. Is he aware that in that uprating, and in the November 1984 uprating, the resulting real value of child benefit was higher than in any year under any Labour Government back to 1951?
§ Mr. Meacher
Quite, and we are approaching November 1985. It is true that at November 1984 prices the value of child benefit rose to £6.85, the level from which it is now being increased. That is marginally, by 15p, above the level in April 1979. However, at November 1984 prices, in the same real terms, it is now to be lowered to £6.57. That is precisely our objection. Child benefit is not being increased steadily in line with rising prosperity and increasing growth, as we are always being told, but is being lowered.
There is even less excuse for any cut in child benefit. The Government are mortgaged to the hilt in terms of promises about child benefit. The previous Secretary of State for Social Services, the right hon, Member for Wanstead and Woodford (Mr. Jenkin) said in 1980:We are committed to the child benefit system and it is our intention, subject to economic and other circumstances, to uprate child benefit each year to maintain its value." — [Official Report, 28 July 1980. Vol. 989, c. 1063.]Perhaps we should now ask: are the Government saying that the economy is in a worse shape than in 1980, so that the promise of the then Secretary of State no longer holds good? Otherwise, we should like to know how their actions are justified.
Equally important, I quote from the letter from the 38 organisations, including the National Federation of Women of Great Britain, to the Prime Minister in March this year. The letter reminded the Prime Minister of her pre-election assurance:there are no plans to make any changes to the basis on which child benefit is paid or calculated.Nothing could be more unequivocal than that. Moreover, the letter went on to say:In our view, the retention of child benefit, paid at a reduced level in real terms, alongside a restructured system of meanstested child support would mean a 'change in the basis of that benefit'. The Government would be seen, we believe, to be paying lipservice only to the principle of a benefit for all children, and would be widely suspected of intending to allow the reduced universal benefit to decline in value until it withered away and was replaced entirely by meanstested provision.In a nutshell, that is exactly what is happening, despite all the Government's solemn pledges which are churned out like confetti before an election and then disappear like snowflakes on a boiler after it.
What is most worrying is that this attack on child benefit is not a "blip"—to use a word which I believe is beloved of the Chancellor of the Exchequer—but part of a calculated long-term strategy on the part of the Government to run down child benefit. I quote from paragraph 4.49 of the Green Paper, which is a very important statement by the Government: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. We will therefore have regard to the need to concentrate resources in this area … in determining the overall level of child benefit.That says it all. Today we are debating the beginning of the end of child benefit. All that I would add is that to embark on this strategy—
§ The Secretary of State for Social Services (Mr. Norman Fowler)
As the hon. Gentleman is about to conclude, are we to understand that we shall have this debate without him informing us of his own policy in this area? Does the hon. Gentleman still stand by the pledge that he made only two months ago to abolish the married man's tax allowance?
§ Mr. Meacher
I shall certainly outline not only our future policies but what we have done in the past. In April 1974 the Labour Government inherited child benefit at £5.14, at November 1984 prices. We increased that to £6.70. We shall not cut child benefit. We shall seek to increase it, not in line with prices as we did previously, but to do better than that. We stand on our record. If only the right hon. Gentleman could do the same. He inherited the level of £6.70, and it will fall this November to about £6.57.
§ Mr. Fowler
The hon. Gentleman said in a statement only two months ago that he would double child benefit and abolish the married man's tax allowance. Are we to understand from what he has just said that that part of his policy has been abandoned?
§ Mr. Meacher
I think that the right hon. Gentleman is used to the terminology of Green Papers. I hope he believes that Green Papers are the subject of consultation. I made it clear that the document I released was not party policy, but a consultative paper. There should be serious consultation about whether we spend £4.5 billion on the married man's tax allowance, which is in no way concentrated on those who need the money, instead of increasing child benefit, which is far and away the most cost-effective and direct way of assisting those in need. That is a serious question, and if the right hon. Gentleman seeks to make a mockery of it I think that his view will be taken into account by the people of this country.
It is a travesty of consultation that the Secretary of State, having issued a Green Paper, which we presume is for consultation, embarks on carrying out the policy with his first statement no less than two weeks after he issued the Green Paper. Is that his idea of a Green Paper and consultation? That is also a pointer to the shape of things to come from the Green Paper. So far we have been given no figures from the right hon. Gentleman's policy document, after the most important review of the welfare state for 40 years, except for two. One is a £500 million cut in housing benefit, and now we have a £175 million cut in child benefit. It does not exactly fill us with a great deal of confidence as we await the rest.
It is our contention in this debate that the Government's family policy—if I can dignify it with that title£is fundamentally flawed and misconceived. In seeking to justify the cut, the Prime Minister argued on 20 June that the alternative to raising tax thresholds isof particular benefit to families".£[Official Report, 20 June 1985; Vol. 81, c. 433.]It cannot be said too often and too strongly that that is absolutely wrong. An increase in tax thresholds gives most money to the highest paid and least to the low-paid lifted out of tax, while the half a million working families with children below the tax threshold gain absolutely nothing. An increase in child benefit, on the other hand, is pound for pound a far more discriminating way of assisting families and concentrating help on low-paid families in need.
1104 Even the Government's Green Paper accepts, at paragraph 4.44, thatChild benefit is simple, well understood and popular.Yet, perversely, the Government now want to give higher priority to family income supplement, which is complicated, poorly understood and unpopular, and moreover, worsens the poverty trap. Not only that, but the problems associated with FIS will be compounded by the shift to the proposed family credit scheme. In particular, not only will payment through the pay packet be used. I suspect, to subsidise low-pay employers, but the benefit is less likely to be spent on the children, and the take-up could be reduced still further.
Last November the Government clawed back £1 a week from pensioners on supplementary benefit who were getting heating allowances. This June they are clawing back £1 a week from families with three children. That cut further threatens the diet and health of children, especially since the Government have already withdrawn school milk and run down school meals, when one third of all children in our society are in families living either at or only just above the Government's own poverty line. It is not a policy for families; it is a policy for cutbacks at the expense of families. Because 7 million mothers and 12 million children will lose, I earnestly and unhesitatingly request every Member of the House who cares about families to vote for our motion.
§ The Secretary of State for Social Services (Mr. Norman Fowler)
I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:endorses the Government's commitment to maintain Child Benefit as a universal benefit paid to all mothers as a contribution to the cost of bringing up children; notes that an additional £2 billion will be spent on benefits as a result of the uprating in November; welcomes the additional help that will be provided for low income families with children and welcomes the proposals for a simpler and more effective benefit structure which will result from the Government's recent review.I am considerably underwhelmed by the speech of the hon. Member for Oldham, West (Mr. Meacher). When he started, three Labour Members were present on the Back Benches. The numbers have increased a little, but even now are not into double figures—Ascot has ended and Wimbledon has begun.
Everyone knows that the hon. Gentleman's attack is a sham. The trouble with him is that he now speaks in such perpetual hyperbole that he is losing all contact with the real world. He complains of the uprating statement last week as being another attack on the welfare state. But what did the statement say?
The statement set out an increase in spending of over £2 billion a year, taking total social security spending to over £42 billion a year — one third of all public spending. That is a real increase in spending of over 30 per cent. since 1979. The statement set out an increase of £4 a week in the pension for a married couple and £2.50 for the single pensioner—increases which benefit over 9 million pensioners. The statement set out a 7 per cent. increase in unemployment benefit and a 12 per cent. increase for those on invalidity pension.
That is the real context of this debate — and the debate that is to follow on housing benefit. The uprating represents not a cut in spending on social security but the payment of over £500 million more than was originally 1105 planned for social security spending. Those resources have been directed at some of the families most in need. That is right, and I make no apology for our priority.
There is one fundamental point to make, which I sought to raise with the hon. Gentleman towards the end of his speech. We are now past the stage when the Opposition can get by simply by letting loose the hon. Member for Oldham, West to set out a shopping list of aspirations—and then repudiate those of his policies that lack instant consumer appeal. We are now at the stage where serious debate has to be joined about our objectives in social security policy and about the best methods to achieve them. For the Opposition, that means moving from generalised aims to particular policies. The trouble is, to judge from the hon. Gentleman's speech, all that that means is a move from the incoherent to the incredible.
Over the past few weeks, we have heard one call after another for more spending. According to the hon. Gentleman, virtually every part of the social security budget will be increased by billions of pounds. On child benefit alone, two months ago the hon. Gentleman proposed to spend an extra £4.5 billion a year and to pay for that simply by abolishing the married man's tax allowance. We should be clear what the effect of this would be. For 10 million couples, it would mean an increase of about £7 a week in their tax bill. For the 5 million without children it would mean a £7 a week cut in their income.
What I find even more than usually extraordinary about the hon. Gentleman's speech is that he utters vague generalisations about tax and social security but has not bothered to put any of his comments on the Government's record into that context. In particular, he has not looked at the effect of total policies in the lower income sector which is, of course, crucial in the whole rationale of child benefit. In other words, one cannot look at child benefit in isolation. One also needs to take into account what else has happened in terms of the tax system. Several things have happened. Tax thresholds are now 20 per cent. higher in real terms than they were in 1978–79. In other words, married taxpayers paying at the standard rate are £3.30 a week better off because of what we have achieved in raising the real level of thresholds. Those with working wives are £5.40 a week better off. In the context of this debate, it is right to point to that achievement.
§ Mr. Robert Hughes (Aberdeen, North)
I accept that one should look at matters in the round. Therefore, will the right hon. Gentleman look at the position of taxpayers to see how much indirect taxation they have to pay as a result of switches of Government policy from direct to indirect taxation? Will he look at the increase in rents that the Government have forced upon people and take into account the increasing rate burden imposed by the Government, and then tell us whether people are individually better off or worse off in their net tax burden since the Tories came into office?
§ Mr. Fowler
I would gladly do all those things, but it is sensible, when talking about child benefit in particular — we all remember the history and rationale of child benefit, which was to bring help particularly to those in the low income sector—to look at the tax position as well. At the same time we should examine the national insurance position.
1106 The changes in the structure of national insurance contributions announced in the last Budget will also give extra help to those on low incomes. For the lowest paid, they almost halve national insurance rates, and for people earning under £90 a week they will mean increases in net income ranging from £1.10 to £2.18 a week. That is effective and immediate help directed at those on low incomes.
Therefore, the context of this debate is a £2 billion uprating of social security, a raising of tax thresholds with the effect that 1.25 million people have been taken out of tax altogether and a reduction in national insurance in this year's Budget of 3.5 million low wage earners.
§ Mr. Tony Marlow (Northampton, North)
I am sorry to interrupt my right hon. Friend so early, and I am grateful to him for giving way. Before he altogether leaves the married man's tax allowance, can he answer this point? In today's society, is it really sensible if, when two individuals, both working, get married, they have an increase in their tax allowance? As Secretary of State for Social Services, would not my right hon. Friend rather that the money that is lost in that tax allowance could be spent somehow on families?
§ Mr. Marlow
Would it not be a good idea if we moved it more towards a child tax allowance, as we have in the past?
§ Mr. Fowler
I see that the hon. Member for Oldham, West now wants child tax allowances to be considered as well. There appears to be no end to his flexibility on what his policy will be. I accept that there are issues that have to be examined; that is why the Green Paper on personal taxation that my right hon. Friend the Chancellor of the Exchequer is bringing forward later this year will look at this sector. That is the right context.
§ Mr. Frank Field (Birkenhead)
The right hon. Gentleman has just made two very important points, one about raising the tax threshold and one about changes in national insurance contributions, and those changes need to be recognised. Will he take the argument a stage further and admit that neither the raising of the threshold nor the national insurance changes distinguish whether the taxpayers have children and that, over the past 30 years, we have shifted the burden of taxation onto those with children? Before the last election and up until recently, both sides thought that the only way to shift the burden back was to raise child benefit in line with tax thresholds. Is not that an important point, and is not the failure to raise child benefit in line with thresholds a defeat for the Government's policy, which they say is about protecting the family?
§ Mr. Fowler
It is not remotely a defeat, but I agree with what the hon. Gentleman has said, in a typically sensible intervention. I do not wish the hon. Gentleman any permanent harm by that comment. Clearly, what he says is entirely right. The tax system, and only the tax system, can direct help at low-income families without distinguishing between low-income families with children and those without. The same is true for national insurance. The context of this debate, unlike the picture painted by the hon. Member for Oldham, West is the £2 billion uprating announced last week, and the fact that we have raised the tax threshold and reduced national insurance.
1107 It is against that background that the Government had to decide their priorities on child benefit. We have already made it clear that child benefit should continue as a benefit payable to all families irrespective of their incomes. The greatest priority must be the support of families on low incomes, not the general level of support. It is here that we find some of the most difficult problems—as the review of social security showed—and it is right that this should be our first priority.
That is why we decided to take other measures to get extra help to low-income families. The result is that we have made two important changes to the family income supplement scheme. Two hundred thousand families stand to gain from these changes—those with older children will gain most. We have increased the allowances in the scheme by at least £1 more than the 7 per cent. increase in prices would have justified. That will mean that the benefit payable at a given level of income could be £3.75 per week higher for a one-child family and £4.50 per week higher for a two-child family.
Wherever we divide on this, I think that the hon. Member for Oldham, West will agree at least with this step—that we have, for the first time, introduced some age relation into the family income supplement system. At present, the allowances for children are the same whatever the age of the child. That is in marked contrast to the supplementary benefit rates, which rightly give more help to those with older children. This gives rise to some of the more extreme effects of the unemployment trap—the help available for a child through family income supplement is well below the help provided for a teenage child through supplementary benefit. By increasing the prescribed amounts for a child aged 11 to 15 by £1 per week, and for a child aged 16 or over by £2 a week, we will be taking the first step to reducing that problem. It is of course a first step to reduce a problem which many people previously recognised.
I also announced last week a further real increase in the child need allowance in housing benefit. That is the amount of extra income which is assumed to be needed for each child in assessing entitlement to benefit. At its new level of £14.50 — a £1 a week real increase — the allowance, although not age-related, will be much closer to the scale rate for older children in supplementary benefit. The change will also benefit more than 500,000 families with children in receipt of standard housing benefit and increase entitlement by up to 40p per child per week.
The hon. Member for Oldham, West failed to mention the increase of one-parent benefit from £4.25 per week to £4.55, the fully uprated child scale rates in supplementary benefit and the child dependency additions payable with national insurance benefits.
§ Mr. Meacher
Will the Secretary of State nevertheless confirm that the point I was making — that those 200,000 families who do not receive family income supplement will not get any of those extra benefits? Secondly, even if they are getting family income supplement, the fact that there is a connection between housing benefit and family income supplement, and that family income is taken into account in assessing for housing benefits, means that the increase in the housing benefit child need allowance will be outweighed by the downgrading of housing benefit because of the 1108 relationship with housing benefit. The net result will not be a gain, even for those very few families who are most favoured by the right hon. Gentleman's changes.
§ Mr. Fowler
The hon. Member has not got it quite right. With regard to housing benefit, children on supplementary benefit will not lose at all. As for the housing benefit rates taper and the changes to which the hon. Gentleman referred, those below the needs allowance will not lose either.
Perhaps I might give the hon. Gentleman an example of what will happen. A family earning £80 a week and with two teenage children gets £10 of benefit a week. Under the new system that I am introducing as a result of the uprating, the benefit for that family will increase to £15.50. I accept that family income supplement is not conceivably an end to the matter — we should not be making our family credit proposals in the Green Paper if it were. We have already said that we intend to do more to improve the circumstances of low-income working families with children.
§ Mr. Fowler
I shall not give way again as I should like to get on. The new family credit scheme would aim to eliminate families with children finding themselves worse off in work than on supplementary benefit, to prevent any family facing a marginal tax rate of more than 100 per cent. — which completely undermines incentives for people in lower-paid jobs — and to give extra help through the pay packet so that people in lower-paid jobs have their tax and national insurance liability effectively reduced or eliminated.
Those are important social objectives and real improvements in how our social security system works. The Government have made it clear that we regard a universal child benefit as important.
§ Mr. Fowler
It is the only recognition in our tax or benefit system of the extra responsibilities borne by all of those who are bringing up children. They are recognised in almost all western European countries that I have visited and whose social security systems I have seen. We must keep that general support in proportion, however. I see no reason why we should provide help to all families with children at the level appropriate to those families most in need of help. The Government are proposing a general level of help and additional help for families most in need.
I find no great attraction in the option, which the hon. Member for Oldham, West trailed, of increasing child benefit in order to tax it, as the hon. Gentleman appeared to suggest on the BBC "Newsnight" programme last week. Doubling and then taxing child benefit would increase public expenditure by about £4.5 billion. Even allowing for the extra tax revenue, the cost would rise by £1.5 billion to about £6 billion a year. The result would be a savage cut in effective tax thresholds—for all families with children, the point at which earnings would be subject to tax would be reduced by about £725 per child. That would mean an increase in tax, at standard rate, of almost £220 a year.
§ Mr. Meacher
The right hon. Gentleman totally misunderstands what I said. I did not say that child benefit would be increased and taxed with the current income tax 1109 structure. As the Minister of State, who was present, ought to know, I argued that it could seriously and valuably be done only in the context of a different type of income tax structure.
§ Mr. Fowler
If the hon. Gentleman does not mind my saying so, the House is in some difficulty about what he means, because he keeps changing his story. [Interruption.] The hon. Member for Holborn and St. Pancras (Mr. Dobson) doubtless wants to give the hon. Gentleman his support, but I am sure that the hon. Gentleman can look after himself. Two months ago the hon. Gentleman set out in a Green Paper, which he described as a document which would pre-empt the Government's proposals—
§ Mr. Fowler
That is probably right, and as I understand it, that sentiment is shared by the whole shadow Cabinet.
The fact is that on "Newsnight" the hon. Gentleman said that we can pay universal benefit such as child benefit to everyone and then concentrate it on those in the greatest need without a means test by taxing the benefit.
§ Mr. Fowler
I hear what the hon. Gentleman said, but that is not in the quotation. I am delighted to know that he has ambitions to change not only the social security system, but the tax system. He now wishes to change the structure of income tax. Has the hon. Gentleman got those proposals past the Shadow Cabinet yet? Would he like to intervene and tell me what those proposals are for the change of the income tax structure? His silence speaks volumes.
The Government want to see child benefit at a reasonable level, payable to all families irrespective of means.
§ Mr. Fowler
I shall not give way.
The Government want to see full provision for those with children on supplementary benefit, a more effective system for working families with lower incomes to help with the greater pressures they face, and a continuing reduction in the burden of tax on the lower paid. Our policies and plans are clear, both in the short term and in the proposals that we have put forward for the long term. Our policies are based on a clear view of priorities—in particular, our aim to direct more help towards low-income working families. Our policies also recognise the need to find a balance between benefit levels capable of meeting those objectives and what the taxpayer can afford.
In contrast, we have the approach of the hon. Member for Oldham, West. I do not see what the point is of his coming to the Dispatch Box time after time with promises of spending increases, if he can never provide an adequate answer about how the money will be raised. I do not see the point of his promising money for benefits, if the consequence is to bring down tax thresholds, to drag more people into tax, and to take the benefit money away in higher taxation.
As a result of the uprating system, the Government will spend more than £42 billion a year on the social security 1110 budget. Even by the hon. Gentleman's definition, that is not a cut in social security. It is an increase in spending of more than £2 billion a year.
§ Mr. Fowler
The hon. Gentleman is wholly wrong. It shows his complete ignorance of social security, which goes hand in hand with his complete ignorance of health policy. Our policies represent the Government's practical commitment to help people, such as the retired, the unemployed—
§ Mr. Dobson
Will the right hon. Gentleman tell the House what the figures would be if unemployment had remained at the level it was when the Tory Government took power in 1979?
§ Mr. Fowler
The 30 per cent. real increase in spending from 1979 to today has partly been because of the increase in unemployment, but also because of a real increase in benefits and because there are more beneficiaries, such as the 850,000 extra pensioners.
§ Mr. Fowler
The hon. Gentleman does not understand what I am saying, which is that the Government certainly face their commitments and fulfil them.
We have retained child benefit as a universal benefit paid to the mother, but in addition, the Government are tackling the real problem of bringing extra help to low-income families with children. In the uprating, we are achieving that notably with the help of the family income supplement system. In future, thanks to the review of social security, we shall be able to use the new family credit scheme.
The Government's record is one of giving help and support to families with children, both through the benefit and the tax systems. It is a record that we shall maintain in the future.
§ Mr. Frank Field (Birkenhead)
The Secretary of State made much of the size of the increase in the social security budget, and he was undoubtedly wise to do so. However, he did not tell the House about the £2 billion increase in social security benefits most of which he had to bring about because of the social security laws. He did not mention that in areas where the Government have discretion, and where there is no legal commitment to keep benefits in line with rises in prices or tax thresholds, such as with child benefit, there have been cuts. Had past commitments to these benefits been fulfilled he would have announced not a £2 billion increase, but a £2.25 billion increase in social security payments. Yet again there has been a cut in the rate of increase in benefits.
§ Mr. Field
If the hon. Gentleman were as diligent in his attendance in the House at these debates as he is in the Select Committee, he would know that I have never claimed that there have been cuts, in the old-fashioned sense, but that we have been talking about cuts in the rate of increase in benefits.
Today we face a major change in the Government's stance. For the first time the Secretary of State has not 1111 made the Government's traditional defence on child benefit. Historically, both Front Benches have advanced powerful arguments why child benefit should be increased, not just in line with prices, which has not occurred this time, but, more important, in line with increases in tax thresholds. I thought that there had been agreement on that, but it appears from the debate that that agreement no longer exists.
During the past 30 years there has been a shift in the tax burden, and that has happened irrespective of which party make up the Government. While the tax burden has risen for all taxpayers, it has risen fastest for those with children. Until today's debate Ministers stood at the Dispatch Box and said that the only effective way of maintaining tax equity between those with responsibility for children and those without was to increase child benefit in line with tax thresholds. We have now reached an important divide, and the Government no longer believe that that is the most effective way. Yet they have not said what from now on their policy will be on redressing the tax burden, so that we reduce it faster for those with children than for those without.
§ Mr. Tony Favell (Stockport)
I have listened to the hon. Gentleman with interest. Does he accept that many better-off people with children—my family included—would willingly forgo a greater rate of increase in child benefit to help those who are less fortunate?
§ Mr. Field
I shall come to that point. The hon. Gentleman is not as well off as he would be if he did not have children. That is crucial and we must keep it in mind. Just as the hon. Member for Derbyshire, South (Mrs. Currie) was right to talk about the real increase and the real value of child benefit under the Government, we need to look at what that level would have been, had child benefit been increased in line with the rise in tax thresholds for single people and married couples.
The second argument that the Government have always used in these debates, although not today, is that child benefit is the most effective way of tackling family poverty. It is a major change that the Government will now rely on the family income supplement and on the new family credit scheme.
The Government were silent today on the third reason usually put forward by both sides of the House on the importance of child benefit—to maintain and increase incentives to work. There was no mention in the Secretary of State's speech that this is now an important objective of Government policy. He was wise not to say so, because he knows that the more the Government rely on means-tested benefits the more difficult it will be to maintain, let alone increase, the incentive to work. Yet this is a problem that many poor families face.
The fourth reason that binds or used to bind both sides of the House is that child benefit is one way to ensure that the money goes not to the man but to the woman.
The Opposition do not say that, since 1979, the Government have reduced child benefit below what it was under a previous Government. However, had the Government maintained their pledge to keep child benefit in line with rising tax thresholds—the threshold for a single person has risen by almost 90 per cent. —child benefit should have risen by an equal amount, but it has not. It has risen by only 75 per cent., which is a cut and a shift in the burden of taxation from those without children to those with children.
1112 Not only have the Government changed their argument about the defence of child benefit, but it is significant that when the Secretary of State announced the increase in child benefit, small though it was, there was no pro-child benefit lobby among Conservative Members. No Conservative Member criticised the Secretary of State for failing to increase child benefit in line with tax threshold increases. Far from it. The only Conservatives to speak were those asked the Secretary of State to rein back and cut child benefit still further. The organisations that are in business to protect and promote child benefit must now realise from recent debates that, for the first time in 15 or 20 years, there is no Conservative lobby in favour of the benefit. This damaging position must be quickly repaired.
From the uprating statement and from today's statement, we do not know whether the Government have made a once-for-all change in policy or whether the cuts in child benefit will recur in future years. The saving in child benefit is £175 million. My guess is that the Secretary of State has fought his corner in Cabinet to get those funds for his new family credit. We should like to know whether the Secretary of State envisages future cuts in child benefit to pay for even larger resources for the family credit scheme, or whether he was forced to agree to a cut just for this year in order to initiate the scheme. This is an important point, because the anger that we are expressing in this debate about the cut in child benefit mitigated if it is a once-for-all cut. But it is a different matter if the Secretary of State envisages further cuts in the future to finance the new scheme. I shall happily give way to the Minister to respond to this point.