§ 4.36 p.m.
§ LORD BOWLES
My Lords, this is the first Bill for 11 years to increase family allowances, and it gives me particular pleasure to be introducing it to your Lordship's House to-day. I think the proper place to start, by way of introduction to the Bill, is to remind your Lordships of all that the Government have achieved in three years of office to help the less well off sections of society. First, so far as the problem is one of low earnings, the Government's incomes policy has always recognised the need to improve the standard of living of the worst-off members of the community. One of the current criteria for pay increases is, to quote the White Paper on Prices and Incomes Policy after 30th June, 1967 (Command 3235):Where there is general recognition that existing wage and salary levels are too low to maintain a reasonable standard of living.Since the beginning of the year there have been substantial increases in wage rates for lower-paid workers—for example, workers in the agricultural industry and in the distributive trades. These will have been of particular importance in improving the circumstances of those covered. Since I made these notes I have made further inquiries, and I should like to draw attention to the figures published in the November Ministry of Labour Gazette, which show that between January and October this year increases in weekly wage rates amounting to nearly £1 million net a week have been awarded to workers in agriculture and the distributive trades. I stress the word "net", since this is not 809 the figure of earnings but simply the increase in the basic full-time weekly wage rates. The majority of these increases were accepted under the lowest-paid-workers criterion.
Secondly, there are various measures taken to protect people against the effects of unemployment or sickness. National insurance benefits have been increased twice since the Government came into power, the last increase being at the end of October, with the result that they are now one-third higher than in October, 1964. A married couple with two children now get £9 8s. 0d. in benefit as against £7 1s. 0d. in October, 1964, which is a rise of £2 7s. 0d. In addition, the Government have introduced a scheme of earnings-related supplements to unemployment and sickness benefit, providing a supplement of up to £7, depending on his previous earnings, on top of his basic benefit, to prevent a drastic drop in income if a man becomes unemployed or sick. Further, we have remodelled the old national assistance scheme in the new supplementary benefits scheme. This scheme, with improved rates of benefit and easier qualifying conditions, was introduced in November last year, and the rates were increased again in October of this year. Then there is the redundancy payments scheme. This scheme provides a tax-free payment, dependent on age and length of service, to an employee if he loses his job. During the year ending last September payments were made to no fewer than 230,000 redundant workers, who received an average payment of £200 each—a total expenditure for that year of £46 million.
My Lords, these are the special measures which the Government have taken for those who are not in work. For those who are in work, there are other measures. First, there is the rates rebate scheme, which will have benefited many low income families. Over 1 million householders are now enjoying rebates amounting on average to about £15 a year. Despite massive publicity we are not sure that all who qualify for a rate rebate are in fact applying for one, and this is a problem we are studying. "Take-up", if I may use the word, is uneven as between one area and another; and there is some evidence that tenants who pay no rates as such but simply have rates included in their rent are slower to come forward for a 810 rebate than owner-occupiers. As I say, this is something the Government are looking at. As a personal view, however, I think I may say that, no matter how many leaflets or advertisements are put out, there are many families who are impervious to official print of any kind and will not respond to it. Possibly personal contact by, for example, rent collectors and social workers should be the main means of persuading these families to apply.
Next, there are rent rebate schemes run by some local authorities for their poorer tenants. Such schemes have the Governments firm backing, and I am glad to say that 650 local authorities in Great Britain are now operating such schemes. In addition, we have substantially increased the housing subsidies paid to local authorities. Then, for owner-occupiers in the lower income groups there is the Government's new option mortgage scheme. This comes into operation next April and gives help, by way of a preferential rate of interest—I think 2 per cent. lower than it otherwise would be—to those borrowers who cannot derive much benefit from the tax relief at present given on the interest part of mortgage repayments.
Finally, my Lords, I come to the measures relating to school meals and welfare milk which were announced last July. In April we propose to improve cur provision for the larger families by extending the right to free school meals automatically to all fourth and subsequent children in a family; and to free welfare milk to all third and subsequent children under five, including a pregnant mother with two or more children under five. Apart from this, the scales for exemption from charges for school meals have just been raised in line with the recent increases in the rates of supplementary benefit. We wish to see many more families take up their rights to free school meals and welfare milk, and we have in hand the preparation of publicity campaigns for this purpose. The arrangements for claiming are also being reviewed so as to make it easy for families to exercise their rights without embarrassment. The changes and improvements introduced by this Labour Government in social security since it came into office costs over £520 million a year. Next year it will cost £820 million, and I hope 811 the public begins to know what we are doing for the worse-off people in our community.
My Lords, now I come to the Bill itself. Family allowances were, of course, one of three main assumptions on which Beveridge based his plan for social security in 1942. It was, he argued absurd to make satisfactory provision for the abolition of want when a man became unemployed or sick, if want persisted when a man was in work. The wages structure took—and still takes—no account of family commitments. Family allowances are the logical solution to this problem and the arguments which Beveridge adduced are as valid and as conclusive to-day as they were in 1942.
The immediate background to this Bill is the Report of the Ministry of Social Security's inquiry entitled Circumstances of Families, which was published last July. The key figure in that Report was the estimate that in the summer of 1966 there were about 500,000 children in about 160,000 families whose incomes were below the supplementary benefit level introduced in November, 1966. They could not be brought up to that level, either because the father was in full-time work (and hence not eligible to receive national assistance, as it was called in those days) or because he was already receiving assistance but his normal earnings were not such that the gap between his resources and his requirements could be fully closed. In a sense this figure of 160,000 families was a measure of the extent to which the earnings of the lower paid had lagged behind the improvement in the benefits provided for those unable to work or to find work. It was clear that, of the existing social services, the family allowance scheme represented the only way of improving the financial position of these families. Consequently, the series of proposals announced by the then Minister Without Portfolio in another place and by my noble friend Lord Shepherd to your Lordships' House on July 24 included as their central element a substantial all-round increase in family allowances to take place next April. Provision for this increase is the main purpose of the Bill.
There are two other principal provisions in the Bill. The first concerns the 812 rates of national insurance dependency benefits for children which are related to the level of family allowances, and thus it is in effect consequential on the family allowance increase. The second, which is quite unrelated to the increase, gives the Minister of Social Security power to deal with a problem of family allowance administration which may arise at some time in the future in the event of a general trend towards the staggering of school holidays.
My Lords, Clause 1(1) of the Bill, increases family allowances by 7s. a week per child as foreshadowed in my noble friend's statement of July 24. The new rates will be 15s. a week for the second child in the family and 17s. a week for the third and each subsequent child. Family allowances started in 1946 at a rate of 5s. a week. They were increased to 8s. in 1952 and, for third and subsequent children only, to 10s. in 1956. As I have said in my opening remarks, for the past 11 years they have remained unchanged. The new rates will also give the allowances a higher real value than ever before. They come into operation on April 9 next. Larger families, I would remind your Lordships, have already had an advance instalment of this 7s. increase. Under temporary powers conferred on the Minister of Social Security by the National Insurance Act 1967, a 5s. increase has been paid for the fourth and each subsequent child in a family from the end of October. The Government thought it only right that the larger family should be given some help before the winter. This 5s. temporary increase terminates on April 8, immediately prior to the coming into force of the new rates under the Bill.
Subsections (2) and (3) of Clause 1 deal with the adjustments of national insurance and industrial injuries dependency benefits for children by reference to the new levels of family allowances. The revised rates are set out in Schedules 1 and 2. To put the matter briefly, they represent an increase of 3s. for the first child, who does not qualify for family allowances, a reduction of 4s. for the second child, as against a family allowance increase of 7s., and a reduction of either 4s. or 6s. for third and subsequent children, again as against a family allowance increase of 7s. Taking these alterations together, the result is to increase the total 813 amount payable for a child by 3s. a week, with the exception of third and subsequent children, who already get in total 2s. more than do first or second children. In these cases the increase will be 1s. The effect will be that the total amount of insurance dependency benefit together with family allowance, where payable, will be the same whatever the place of the child in the family. The new rates, taking account of family allowance where payable, will be 45s. 6d. for guardian's allowance, child's special allowance and the children of widows, instead of 42s. 6d. as at present; and 28s. for the children of other beneficiaries, instead of 25s. or 27s.
Your Lordships may question why there should be this increase in the provision for the children of insurance beneficiaries. This is a natural query. Benefits for children have, after all, been raised substantially over recent years, and your Lordships will recall that the latest increase came into effect as recently as this October. Your Lordships may also point out that the object of a family allowance increase is to help people who cannot be helped through the national insurance and supplementary benefit schemes. There is also the point that the balance between family allowances and benefits under those schemes has been upset during the long period that family allowances have been untouched, and that this Bill presents the opportunity of restoring that balance to some extent.
There are, however, two reasons why the Government have thought it right that the family allowance increase should not be offset to the full extent against the insurance dependency benefits. First, the charge for school meals is to be increased by 6d. from next April, and this may affect recipients of benefit if they have any income in addition to their basic national insurance benefit—for example, the earnings-related supplement to sickness and unemployment benefit and to widow's allowance, or benefit under a private sick-pay scheme. Secondly, there is a tax point. Family allowances are taxable: sickness and unemployment benefit are not. To exchange one for the other could have the result that a beneficiary with enough other income to bring him into the tax field would be worse off. These two factors, in the Government's view, justify the increase in the total payment which we are proposing.
814 A word about costs. The gross cost of the family allowance increase is estimated to be about £124 million in the first full year. This figure will increase in later years with the increase in the number of children who qualify. The fact that it is stated in the newspapers to-day that the birthrate seems to be rising too slowly, does not mean that this statement about an increase in later years is wrong, as the noble Lord, Lord Drumalbyn, of all people, will certainly know. Children are staying at school longer, and therefore more qualify for family allowance. The offsetting reductions in dependency benefits will produce a saving of nearly £3 million to the National Insurance and Industrial Injuries Funds, and there will also be a saving of £5 million on supplementary benefit. The total expenditure on family allowances next year is estimated to be £281 million. These figures are not by any means negligible.
Clause 2 is extraneous to the main purpose of the Bill. It gives the Minister of Social Security power to prescribe notional school-leaving dates for family allowance purposes. Title to family allowances in general ends when a child reaches the upper limit of compulsory school age or, if he continues in full-time education beyond that age, the date when e leaves school or college, or reaches age 19, whichever is the earlier. For administrative reasons it is necessary to predict with some accuracy the date of school-leaving, and this is required over a year in advance, so that the issue of an allowance order book can be arranged to take account of the fact that a child will be dropping out of the family as defined for family allowance purposes. The fact that the Ministry requires over a year to deal with an alteration of this kind gives some idea of the extent of the administrative work the Ministry do.
At present, matters work satisfactorily, because the great majority of schools in England and Wales, on the one hand, and Scotland, on the other, break up at or about the same time. Serious practical difficulties will, however, develop if school-leaving dates become staggered. Clause 2 therefore, as I say, makes it possible, if the need arises, for the Minister to prescribe school-leaving dates for family allowance purposes. I must stress that the power is purely precautionary, 815 and it is not thought that its use will be required in the very near future. It simply seemed prudent to take the opportunity of the Bill to have the power in reserve.
The remaining provisions of the Bill are subsidiary. Clause 3 deals with finance. Clause 4 is formal. Schedule 3 deals with commencement and transitional provisions.
Some of your Lordships may criticise the Bill as being insufficiently "selective", the fashionable adjective nowadays for "means test". If they consider that family allowances should be subjected to a direct means test, no doubt they will take this opportunity of making their position completely clear. So far as the Government are concerned, as has been made clear on a number of occasions, a direct means test in this sphere of social security would be totally unacceptable. There are many reasons why, but perhaps the three most important are these. First, a means test would be an obvious and powerful disincentive to work and effort because any increase in earnings would merely result in a corresponding reduction in the allowances payable. Secondly, it would require an immense administrative apparatus. And, thirdly, it would not in any case be a complete solution to the problem of family poverty. All our experience suggests that many people eligible for means-tested benefits cannot, for a variety of reasons, be persuaded to claim them. Moreover, we would certainly not agree that the families living below supplementary benefit level are the only ones in need of help. An even greater number of families are living not very far above that level and they can by no means be described as living in affluence. They have suffered over the years from the steady erosion in the real value of family allowances.
On the other hand, some of your Lordships will no doubt regret that the increase in family allowances is not greater. But in this, as in every other sphere of public expenditure, we must recognise that, however desirable the objective, the speed of our advance must necessarily be limited by the resources for the time being available. As I have said, the cost of the Bill as it stands will be a very substantial one—£124 million in the first 816 full year. Some people, including the Trades Union Congress, have argued that the cost could be substantially offset, and the benefit of the increases effectively concentrated on the lower-paid, by reducing income tax allowances for children. The T.U.C.s proposal is to add another 10s. a week to the 7s. increase proposed in this Bill. The gross cost of this would be £177 million in a full year, which of course would be in addition to the £124 million which is the gross cost of this Bill. On their question of tax alteration it would be presumptuous of me to say anything at this moment. Any question of this kind must, of course, be left to the Chancellor of the Exchequer to consider in the context of his Budget.
My Lords, this is a short Bill, but I should not like your Lordships to think it an insignificant one or to underestimate the benefit which it will bring to families with children. To restore family allowances to their original real value we should have to raise them to 10s. 8d. per child. To raise them to their real value at the time of the last general increase in September, 1952, would require a rate of 12s. 8d. So that in setting rates of 15s. and 17s. we are going well beyond what is necessary to give family allowances the highest purchasing power they have ever had. I beg to move that the Bill be now read a Second time.
§ Moved, That the Bill be now read 2a.—(Lord Bowles.)
§ 5.0 p.m.
§ LORD DRUMALBYN
My Lords, we are grateful to the noble Lord, Lord Bowles, for his careful exposition of this Bill. From his start I felt that his long catalogue of the additional benefits that have been given could only be interpreted as an apology for this Bill. This is a Bill about poverty. Family allowances are really a device to reduce the effects of poverty due to large families. It originated in France; and it is interesting to note that it did not originate through the State but by employers during the First World War. Indeed, in France it continues to be paid by employers. This would perhaps have been an opportunity to adapt ourselves to the Common Market system. It is worth noting that our own family allowances are considerably lower than those paid in the majority of European countries, and certainly in the Common Market countries. How could this have 817 been done? When the selective employment tax was brought in I wondered whether it was being introduced in order to condition employers to pay rather more in the way of contributions in respect of each employee. The Green Paper has come along and seems to have disposed of that idea. But the fact is that on the Continent employers do have to pay rather more than we do in this country.
As the noble Lord said, the arrangements that are contained in this Bill were announced last July. Since that time devaluation has come along. There is a sense in which devaluation presents an opportunity. It is then possible to increase social security benefits—family allowances and the like. I would recall to the House that this is precisely what France did at the time of her last devaluation. In a sense, we are doing it now. But the difference is that France planned the conjuncture, whereas we have had it forced upon us.
Another disadvantage of the present way of dealing with these matters was pointed out in an interesting couple of articles in The Times on Thursday and Friday, April 6 and 7. It was pointed out then that one of the great disadvantages under which family allowances have suffered is that they were introduced during the war—or, rather, they were planned during the war: they were agreed upon in 1942, the Bill was passed in 1945 under the National Government, the Caretaker Government, and they came into operation in 1946. But they were passed at a time when there was no opportunity for public discussion of family allowances, and that is possibly why there is not the overwhelming support for family allowances in this country that is enjoyed by National Insurance. Sir John Walley said in his article:The British system relies heavily for the popular understanding of new measures on the discussion and controversy which in peace-time precedes and accompanies legislation.Well, this announcement was made last July. It was a firm announcement. It has had remarkably little public discussion since, and we are not going to have a great deal to-day.
In this country we have national insurance to provide a basic income for the old, the sick and the unemployed. From 818 the start, it was recognised that some people would not qualify for national insurance and that some of them would have young families. First, national assistance scales, and now supplementary benefit scales, lay down the minimum income, apart from rent, which Parliament has thought it right for all to receive.
Assuming a weekly addition of £3 for rent and rates, the present minimum income for a married man and his wife, if they have three children between five and eleven, I calculate to be £14 11s. 0d. That is what a married man with a wife and three children, paying £3 a week rent and rates, will get in the way of supplementary benefit if he is not working. If he has six children up to 16 years old he will get £16 5s. 0d. This compares with £12 13s. 4d. which is the National Joint Council rate for local authority manual labourers. So if he is working, and he earns less than that sum, neither national insurance benefit nor supplementary benefit are available to him. Not only does he fall below the minimum income approved by Parliament for those who are old, sick or unemployed, but if he falls sick or loses his job he will not get more than the net amount he is now earning. It is bad enough if he has nobody but himself to provide for. If he is married and has no children, his wife can also work. But it cannot be disputed at the more children he has the worse off his family will be.
It was, I suppose, to find out the extent of the problem that the inquiry into the circumstances of families, to which the noble Lord referred, was carried out in the summer of 1966. The Report was published last June. The inquiry was based on a sample of some 2,400 families, who were interviewed by officers of the Ministry of Social Security in their spare time. I think that one should pay due respect to them for this, and convey our thanks. Colloquially, I suppose it could be said that the purpose of the inquiry was to find out how many families, with how many children in them, fell below the poverty line, and how far they fell below it. In truth, however, the concept of a poverty line is pretty arbitrary. It is not a subsistence level; nor is it based on any scientific method of ascertaining what resources are needed in different parts of the country. It is 819 rather a reflection of the social conscience of the community—what resources can be regarded as providing a tolerable minimum level in a comparatively affluent society. Thus, in the last dozen years there has been a rise in that level—of real spending power—of well over 50 per cent.
The Government have stated their intention of ensuring that the most needy shall not suffer as a result of devaluation. I hope that they will be able to fulfil this intention. But it cannot be assumed that they will. If the kind of situation to which the Chairman of the Prices and Incomes Board referred yesterday arose—and in all our hearts we know that it could arise—it would not be possible for anyone in the country to maintain their standard of living. What the Report did was to calculate from the sample estimates the number of families which fell below the level of national assistance scales as they were in 1965 and 1966, until the new supplementary benefit scales were introduced at the end of November, 1966. Since then, however, there have been further changes in the supplementary benefit scales, the last coming into operation on October 30.
Each time the poverty level is raised by increasing supplementary benefit scales by more than the rise in the cost of living since the last increase, the number of families falling below the poverty level is automatically increased. For instance, the number of families of two or more children whose resources, apart from supplementary benefit, fall below the requirements as measured by supplementary benefit scales automatically rose, according to the inquiry, from 280,000 to 345,000 when the November, 1966, increase was made; and the increase last month must have increased it still further.
§ LORD BOWLES
Perhaps I could interrupt the noble Lord. Surely he is not suggesting that when we increase a benefit more people are really poorer.
§ LORD BOWLES
A position could be reached where I could raise the standard of life of people in this country when the noble Lord might be on the poverty level.
§ LORD DRUMALBYN
I agree with that. This is something the noble Lord said when he quoted what Lord Beveridge said. I also equipped myself with that quotation. But the fact is that this gap between the supplementary benefit scales and the lowest levels of income becomes more difficult to fill as the supplementary benefit scales are increased.
The other point the noble Lord mentioned was that there are many people whose incomes exceed the supplementary benefit scales but who are badly off, often because they have to pay more than they can afford for rent. Even professional people with large families can be really hard pressed, especially if they have a position in which they are expected to fulfil heavy social obligations but with no opportunity of recovering expenses. To some extent the embarrassment of such people can be relieved by family allowances; but these allowances have never enjoyed the overwhelming support of the nation, and it may have been a mistake to pay them weekly. If such allowances had been paid monthly, those who received them might have been less apt to waste them. I am not implying that everybody wastes them, but there is some waste of them, and I do not think any of the Common Market countries pay social benefits weekly. In some of them, of course, family allowances have by law to be paid with the weekly pay packet by the employer. Incidentally, this is why it is so much easier for countries like France to practise the principle of equal pay as between the sexes. I believe that this would not be readily acceptable without a good deal of public discussion in this country, where we believe in "the rate for the job", irrespective of family commitments. Incidentally, I know of no country in which family allowances are subject to a means test, although I understand that in Germany there is a rather high income limit.
Given our present system, every time family allowances have been under review the main questions have been, first; what general level of increase is needed to restore their value and make them more effective? Secondly, should increases, or the same increases, be paid in the case of each eligible child, or should more be paid for the fourth child than for the third child, and so on? Thirdly, should 821 there be a limit above which they are not paid at all, as in West Germany? And, fourthly, how should whatever increases are made be paid for?
Taking the last question first there is, of course, a great deal to be said for transferring the entire burden to what on the Continent are called equalisation funds. In some countries these are run by public corporations, in others by occupational groups, always under State supervision. The general principle is that people should draw out of the funds while they have families and that all who are not bringing up families should help those who are. The effect is that of a consumption tax—the allowances raise the cost of goods and services to those who buy them. I believe this to be a good principle. What I think would be thoroughly bad (the noble Lord said it would be presumptuous of him to refer to taxation, but it is not so presumptuous of me) would be any suggestion that the net increases in family allowances should be paid for solely by reductions in child tax allowances. The real value of child tax allowances has declined by 40 per cent. since before the war and is now 10 per cent. less than it was a dozen years ago. The cost of family allowances should be met by taxpayers as a whole and not merely by taxpayers with children to bring up. I should have thought this was very clear.
Any form of help to families is, of course, redistributive. In this country family allowances form part of taxable income and are treated as earned income, and are a charge on the Exchequer. Child tax allowances are also redistributive, in that they allow families to keep more of what they earn at the expense of taxpayers in general. But there is a fundamental difference between family allowances, which are a handout by the State, and allowing people to keep more of their own money to discharge their family responsibilities; and I hope that this fundamental principle will be maintained.
On what principle should Exchequer help to families be based? I suggest that it should be on compassion and on national policy—compassion for the most needy, and particularly for children, who should all be given a fair start in life. Then there is the national policy, the aim of which should be, first, assisting the wage and salary earners who could 822 not bring up their families, to use a Burnsian expression, "in decency and order" without help; and, secondly, ensuring that young married people, and particularly those who have the ability to contribute most to the national wealth, are not discouraged by excessive taxation from having children. I think it is a pity to overlook this essential point.
In principle, therefore, we ought not to be considering what increases should be made in family allowances without considering how and by whom they are to be paid for, as we do in the case of national insurance benefits; and, secondly, how they are to dovetail with other forms of help to families. What consideration is being given to what is called negative or reverse income tax? One such proposal was developed by Professor Dennis Lees in the October issue of Lloyds Bank Quarterly, on the basis of a payment of 50 per cent. of the difference between income and the supplementary benefits scale, where income falls below it. I quite agree that the same objection which applies to the means test applies also to this payment of 50 per cent. Nevertheless, it mitigates the gap which will still remain after family allowances have been made available.
Turning to the first question, I understood the noble Lord to say that the figure would be some 2s. 8d. per week. I should have put it rather higher, at some 4s., but presumably the difference between that and 7s. was added either to pay for the 6d. extra cost of school meals per day or to cover the prospective rise in prices following the period of severe restraint. On that basis, only the first child's school meal will cost the parents more.
I come to the question of which children should get increases in family allowances and whether we should continue to have them straight across the board. Chapter II of the Ministry of Social Security Annual Report shows that at the end of 1965 approximately 65 per cent. of the 4 million or so families receiving family allowances contained two children, 25 per cent. contained three children, and 9½ per cent. contained four. The total number of children in these families was estimated at nearly 10½ million, excluding those over the age limits, and the total number of children for whom family allowances were paid 823 was 6½ million. The noble Lord says that the total cost now will be £281 million.
§ LORD DRUMALBYN
I am sorry to trouble your Lordships with some figures, but I am afraid that I cannot make my argument without mentioning them. The inquiry showed that on the basis of the supplementary benefit scales applying from November, 1966, there were 345,000 families—that is one in twelve—whose resources were less than requirements, excluding any supplementary benefits. Of these, rather more than 120,000 who were not working had their resources made up to supplementary benefit levels; 20,000 more received some supplementary benefit but, because of the wage stop, could not be made up to the full supplementary benefit scales. The Report for 1966 says:The amounts by which such allowances were restricted ranged from a few shillings to several pounds.Indeed the Supplementary Benefit Commission's report on the administration of the wage stop, which has just been presented to the House, referred to two cases where the wage stop deduction was over £6. This was the highest level of the cases, although in the majority of cases it was less than 50s. In addition, there were something like 75,000 families who were thought to be eligible for supplementary benefits but were not receiving them. Many of these would be only temporarily in need, through sickness or unemployment, but the biggest group of families were those not eligible for supplementary benefits because the father was in whole-time work. These amounted to 125,000. The Report "tentatively estimates" that the number of families with only one child where initial resources fell short of supplementary benefit scales was a further 25,000. I think it is a good thing to get these figures on the Record.
Leaving out of account the estimated 75,000 eligible for supplementary benefit but not receiving it, there were something like 160,000 to 170,000 families, containing some half a million children, below the so-called "poverty line". How far below the poverty line were they? About three out of five had a deficit of 824 less than £1, and of the remainder two out of five had a deficit between £1 and £2, and three out of five had a deficit of over £2. Less than one in four had net incomes of over £15 a week, and more than half had net incomes of under £12 10s. This Bill is going to add 7s. to the net income of families with two children and 35s. to the net income of families with six. It is estimated that there are about 455,000 children in families of six children and over. While three out of five of all families receiving family allowances comprised only two children, only about one in seven of children in families with resources less than supplementary benefit scales and not receiving supplementary benefit were in families of only two children, while nearly one in four was in families of three, and the remaining three-fifths of children were in families of four or more.
Given these figures, my Lords, there is surely a strong case for limiting the increase to the third and subsequent children. It is not unreasonable to consider a family of two as normal and therefore not in need of an increase in allowances. If the increase were given only to families with three or more children, I calculate that the saving would be at least £40 million to set against the extra gross cost of £124 million. Part of this could be used to increase the amount of the allowance for the fourth and subsequent children. There is, of course, the complication of the increase in the cost of school meals and welfare milk. But if it were desired to cover these increases for those not entitled to free meals—and every child of families receiving supplementary benefit or with incomes below supplementary benefit scales is entitled to free meals—an increase of 3s. for the second child could be made, the same increase as is made for the first child in national insurance benefits. I estimate the cost at £18 million, leaving £22 million for increasing allowances for large families, which would be quite worth while.
I recognise, of course, that devaluation is going to add to the cost of feeding and clothing children. But the figure of 7s. was decided on last July, at a time when the Government were still proclaiming their intention never to devalue. But devaluation is going to hit the largest families most heavily. Surely it 825 is in the largest families that the biggest shortfall of incomes below supplementary benefits scales mainly occurs. In that case should not the saving on the second child be used to increase the family allowances for the fourth and subsequent children? Clearly the Government must have considered this. The Leader of the House in another place said this on November 16:I gather that my right honourable friend has some late Amendments and that it would be for the convenience of the House to see them in due time to debate them."—[OFFICIAL REPORT, Commons, col. 638.]For that reason the Committee stage in another place was put off. These Amendments, however, never came forward. Of course, the Amendments might have been of quite a different character.
Many people have thought it odd that, in order to help some 240,000 families, increases in family allowances are to be given to some 3¾ million families. They also think it odd that those on supplementary benefit scales will receive no increase whatsoever. It is hardly an answer to say, as the noble Lord did, that they have just had an increase last month, because that had nothing to do with devaluation. Are we about to have another Order laid before Parliament to increase supplementary benefits, and in particular the children's allowances under them?
In fact, of course, the Government can truly say that they have not given a flat increase of 7s. for all eligible children. But the exceptions they have selected are curious. There are the families receiving supplementary benefit I have just mentioned. But there are also families receiving national insurance benefit. They will receive 3s. more national insurance benefit for the first child—presumably to compensate for the increased cost of school meals—but 4s. less national insurance benefit for the second child, and 6s. less for each additional child. So that while they will get their 7s. family allowance, the total they receive, taking family allowances and national insurance together, will be 3s. more for the second child and 1s. for each additional child. I doubt whether these families will take very kindly to having the increases in national insurance benefit they received only last month reduced. Nor will the civil servants, I suggest, enjoy having to recalculate the benefits before next April 826 for all who remain sick or unemployed throughout the period.
I recognise that from next April the fourth and subsequent children are to be entitled to free school meals without regard to their parents' income, and that the cash value of these will be 7s. 6d. a week, at least in term time. But the Inquiry into Family Circumstances showed that although all children of parents who are receiving supplementary benefit or whose incomes fall below supplementary benefit scales are entitled to free meals, only about half the children entitled to them actually take them. I have not given notice of this question to the noble Lord, but perhaps he may be able to tell me the answer. Can he say whether the Working Party which was looking into the working of the school meals service has yet reported, and what it proposes to encourage the other half of the children to take them, top? Has he considered issuing parents of children entitled to free meals with vouchers which they could cash at the Post Office, so as to provide the cash with which the children could pay for the meals and so avoid this odious distinction between those who pay and those who do not?
Perhaps the main difficulty of low income families where the father is in full-time work in comparison with families receiving supplementary benefit is that the former cannot get any help from the Supplementary Benefit Commission towards their rents. Could not something be done about this, even as an interim measure? It is absurd for the Government to try to ban rent increases altogether in order to help 250,000 people. Surely, the way to help them is by a proper system of rent rebates from local authorities for which the Supplementary Benefits Commission should reimburse the local authorities. If this needed a change in the law, surely that change should have been in this Bill. Of course, I recognise that this would still leave private rents out, and you would probably have to deal with them direct through the Suppementary Benefits Commission. I recognise the difficulties of getting people entitled to benefits to apply for them; or, alternatively, getting the Supplementary Benefits Commission to seek them out as they did in the case of the old and retired.
827 To sum up, this Bill will do some good but at a cost out of all proportion to the good that it does. We have very little confidence in the Government's judgment in this. No convincing argument has been put up for the original decision to give a flat increase of 7s. for all children after the first. The Government themselves recognised that it was the largest families who were the most needy when they raised the allowance by 5s. for the fourth and subsequent children from the end of October. My guess is that the intention was to raise the amount for the fourth and subsequent children by 5s. in October and then to have a flat increase all round. My guess is that that is probably why the Minister resigned—because we did not get that increase. Perhaps the noble Lord will tell us, because the Minister has never done so. We all realise, of course, that the resources of families which fall below the so-called poverty level cannot be raised only by increasing family allowances. There are a host of other factors—rent and rate rebates, allowances for non-industrial disabilities among them. But we shall need a lot of convincing that it was right to make a flat increase right across the board, including the second child.
The questions I have been putting to the Government are these: First, has the Working Party on School Meals yet reported? Secondly, why did the Government choose 7s. as the appropriate increase in family allowances last July? Thirdly, why, having chosen it, and having declared their intention that the lowest paid shall not suffer, have they decided to stick to it in spite of devaluation? Fourthly, are the Government intending to increase supplementary benefit scales in the near future? And, fifthly, why, in view of the Inquiry into Family Circumstances, was it decided to give the same increase in family allowances for the second child as for subsequent children? Ought not the fourth and subsequent children to have received a higher allowance? I hope the noble Lord will be able to answer these questions.
§ 5.30 p.m.
§ LORD ILFORD
My Lords, my noble friend has recalled something of the early history of family allowances. Many of your Lordships will recollect, as I do, 828 the persistence and determination of Dame Eleanor Rathbone in another place. She was the real author of and prime mover in the movement to obtain family allowances.
There is nothing novel or startling in this Bill. It aims at no more than increasing the scales of family allowances to make up their loss of value due to progressive inflation. I make no complaint of that, but I recall that when a Conservative Government were in office they were frequently taken to task upon the ground that they introduced periodical Bills for improving scales and never did anything else. This Bill is for precisely the same purpose as the Bills which have been introduced periodically for the purpose of improving the scale of rates of national insurance and of supplementary benefits. This Bill really goes no further than that.
The Bill aims at relieving what is called child poverty, or family poverty; and in so far as it does so, we should all welcome it. But when we examine the things which this Bill does and some of the things it leaves undone, we are bound to ask ourselves whether the Government have chosen the right instrument for dealing with this problem of child poverty. Indeed, the Government themselves appeared at one stage to have been in some doubt as to whether family allowances were the best instrument for that purpose.
When a debate took place in another place in April of last year the then Minister of Social Security, discussing this question of family allowances, said:Another method of helping is by a general increase in family allowances, but would this be the way of using scarce resources when so much needs to be done over the whole field of social services, not only cash payments, as the honourable Lady has said, but in health, in housing and in education? We all know that much needs to be done here, and we as a Government have decided that this method"—which is the use of family allowances—would not be the best way of helping."—[OFFICIAL REPORT, Commons, 20/4/67, col. 849.]She then gives reasons for that. We do not know what made the Government change their mind between April and November, but undoubtedly they must have considered various means of relieving the poverty which this Bill seeks to relieve.
829 I have been trying to ascertain how many families would benefit by the proposals in the Bill and in how many families one might expect to find child poverty will be relieved. It is not easy to get this information from the published statistics. I have done my best with the statistics published by the Ministry of Social Security, but I am not convinced that I have been able to get at the truth; and I hope that if I go wrong the Minister will be able to put me right.
It is, I think, clear that nearly 4 million families will in fact benefit by improved payments. The figure is actually 3,900,000, but 4 million is good enough. Of this 4 million, 280,000 families had resources which were less than was required to meet their needs by the supplementary benefits standard. There were 135,000 families out of the 280,000 who were receiving national assistance. Those families will not benefit by this Bill because what they receive in additional family allowances they will lose in a reduced supplementary benefit.
I suspect that arising out of this proposal the Minister will have a large number of disagreeable letters from those who have been disappointed, having read in the papers that they are going to get a 7s. increase and then they find that they do not get anything because it has been taken off national assistance. Of course, those families are maintained at the standard at which further assistance is considered unnecessary; but they do not look at it like that. They look at it in a human way and say, "I saw in the paper that I was going to get 7s. and I have not got it."
The 135,000 families who are receiving assistance must be deducted from the 280,000 whose resources are below the supplementary benefits standard. That leaves 145,500 families whose resources are below the supplementary benefit standard but who, for one reason or another, are not receiving supplementary benefit. Some of them are families where the father is in full-time work. In some cases the allowance has been reduced by the operation of the wage stop. That brings the total number down to about 145,000, and I take that as the number of families where child poverty may be expected to exist. In order to relieve the need of those 145,000 families we have to pay in 830 creased benefits to nearly 4 million other families. It is rather shattering that in order to improve the conditions of 145,000 families, we have to pay increased allowances to nearly 4 million persons.
§ LORD BOWLES
My Lords, may I just ask the noble Lord one question? I think I am right in saying that we are not paying these family allowances to just the number of families that the noble Lord has mentioned purely and simply to raise the standard of living of the 120,000 families or whatever number he mentioned. We want them all to have an increase—all the families.
§ LORD ILFORD
If that is the purpose, I can understand it; but there must be a large number of those 4 million families whose income is well above the supplementary benefit standard and who are not in need at all.
I turn for a moment to another aspect of this rather difficult question. I read with great interest the Ministry of Social Security's latest publication which deals with the operation of the wage stop. Of course, a wage stop is repugnant to anybody. I found it very repugnant when I first found on the National Assistance Board that I had to offer a man an allowance which was less than he was entitled to by my own calculation. The difficulty is that there is no escape from doing it, and that is what the Government have found. There are strong feelings about the wage stop and there always has been. I used to receive a considerable correspondence on the subject of the wage stop, but I think I was always able to satisfy my critics because, when one comes to look at the circumstances in which the wage stop is applied, there is no alternative but to restrict the payment made to an applicant in this way.
It is not right that a man should receive more money when he is not working than he is able to earn when he is working. The public recognise that, and certainly the newspapers recognise this fact and are very ready to bring to the attention of the public cases where this sort of thing is alleged to take place. In many of the cases one reads in the newspapers the real facts are not fully stated. A man is prosecuted at a magistrates' court and, with his having been leading a life of crime, the police naturally inquire what he has been doing 831 and how he has been living. He frequently says, "Oh, I get national assistance". When one looks into the circumstances of the case one often finds that he does not receive national assistance. Frequently he has not only himself but his wife and a family of young children dependent on the allowance. The allowance paid to him by the Board is the appropriate scale allowance for two adults and perhaps two or three small children. I think that to some extent we can disregard the criticisms which appear in the newspapers, but the fact remains that the public very much resent a man's being paid more money when he is idle than when he is able to work. The argument which appears to convince the Minister is the one based on the man who is still fully in employment. It is not right that a man who is at work should be earning less money than he would receive if he became unemployed and was totally idle. The wage stop, however repugnant it may be, is something to which we have no alternative. I am glad to see that the Government have come to the same conclusion, as indeed I thought that they would when they became responsible.
We have been told the cost of these proposals, but we have not been told very much about the sources from which the cost is to be met. It has been freely suggested in the newspapers and elsewhere that the cost of this increased family allowance ought to be met by withdrawing the child allowance in income tax relief enjoyed by parents. The Minister was asked about this in the debate on the Bill in another place, and she replied that that would be a matter for the Chancellor of the Exchequer in his Budget in the spring. That may be so, but I think that we ought to be told a little more now about what is proposed.
If it is proposed to withdraw tax allowances in respect of children, I hope the proposal will be dropped. In my view it would be grossly unfair to make one section of the population pay for a social benefit received by another section. If social benefits are to be paid for out of public funds, all those who contribute to public funds ought to contribute to them and not simply a selected group. That proposal would hit just the type of young 832 man whom one wants to encourage to-day, the young professional or business man getting on in his profession or business and not finding things very easy financially. It is no good wailing about the brain-drain if one is going in for taxation of that sort. It will inevitably produce dissatisfaction, discontent and resentment among precisely that section of the population upon whom we are largely dependent for the success of our industry and our national life.
In conclusion, I will say a word about the national minimum wage. It is often held out, usually by the Party opposite, that some day we shall establish a national minimum wage which will make all these devices like the wage stop and everything else unnecessary. I believe that a national minimum wage is a totally impracticable proposition. I think anyone who has had experience of assessing allowances to poor people very soon finds out that what one wants is not a fixed scale but a flexible scale, so that in one case you can pay a little more and in another case it may not be necessary to pay so much.
§ LORD ROWLEY
My Lords, may I ask the noble Lord, in view of his statement that a minimum wage is totally impracticable, whether he is aware that in the United States there is an hourly minimum wage operating throughout the whole of the nation applying to anybody who obtains a contract of employment?
§ LORD ILFORD
But does it relieve poverty? The factors which make up an applicant's requirements are so varied. Take, as an example, his rent. The levels of rent in the North of England are very different from those in the South. The national minimum wage would have to take account of that and of any special requirements due, perhaps, to ill health or to some other factor on the part of a particular individual. To my mind, the great merit of the supplementary benefit system, as we now call it, or the national assistance scheme as I once knew it, is that the allowance which is paid is so completely flexible. The officer can work it up for a high rent, lower it for a low rent, take into account a diet involving more expensive food, which a man may have been ordered, circumstances which impose excessive wear on his clothing and details of that sort. The allowance can be adjusted to the requirements of 833 the individual. No system of payments will ever relieve poverty completely if it operates on a fixed scale or is not capable of being adjusted to meet those various factors which I have suggested. I think we should all welcome the Bill, but whether it is really the right instrument for the purpose for which it is intended is more doubtful.
§ 5.51 p.m.
My Lords, I have always supported family allowances ever since I read of the Rowntree survey at York and, I hope, not merely because I have always drawn them—though I do not declare an interest in this. But I would point out that they are taxable, and to that extent they are selective. The noble Lord, Lord Bowles, at the Dispatch Box, played the old, old political game of defying the Opposition to make some announcement which, if they had done so, would have been a vote loser. My noble friend Lord Drumalbyn was not born yesterday, and needless to say, he made no such pronouncement.
I think any sensible person would like to find some method of directing the money chiefly to those who really need it more than others, and I must say that I cannot think of a way. Administratively, it seems almost impossible, having regard to the fact that the family allowance is paid to the wife and not to the husband. The only method which I can suggest is the idea put forward from time to time, I believe by the Liberal Party, of what you might call positive and negative taxation, whereby the people below a certain level receive taxation and those above pay. Perhaps we shall come down to that one day. If the Government wanted to make the payment more selective, it would of course always be possible to treat it as unearned rather than earned income. Such a move would make no difference at all to the people at the bottom, and would make a few shillings a week difference to people such as myself at the top.
This particular increase has come at a fortunate moment from the point of view of devaluation, because on a £14 wage 7s. a week will be 2½ per cent., and 14s.—that is, for two children—will be 5 per cent. The rise in prices will probably be about 10 per cent., so anybody with four children will expect to have been taken out of the devaluation hazard by 834 a benevolent Government. But I hope that, when the inevitable wage and salary demands are made—and it is almost imperative in the national interest that they should be strongly resisted, unless they are accompanied by increased productivity arrangements—that point will be put forward; that those who have the families, and therefore have the largest expenditure, are to some degree catered for by this increase in the Bill.
I want to ask the noble Lord only one question. He said that staggering of school holidays was in contemplation, but not in the near future. I wonder whether he could enlarge slightly on that point, so as to give the unfortunate parents some inkling of what is to happen.
§ 5.55 p.m.
§ LORD BOWLES
My Lords, we have had a most interesting debate and I am only too sorry that the noble Lord, Lord Amulree, could not speak. He came to see me before the debate started and said that he had to leave at half-past five, and therefore we have missed the benefit of his contribution. I told him that nobody would mind if he went immediately after speaking, but he was unable to wait any longer.
The noble Lord, Lord Drumalbyn, gave us an interesting lecture about what is going on on the Continent, and particularly in reference to those countries in the Common Market. But we think it is unfair to make a direct comparison between our family allowances and those of the Common Market. One should take account of all the social, health and welfare services. Also, in some Common Market countries the scheme is contributory and confined to employees; that is to say, the self-employed are omitted. It is noteworthy, too, that Germany, whose scheme was originally employer-financed, recently went over to being State-financed.
Then the noble Lord referred to the question of negative income tax, and wondered whether the Government had given that any consideration. I have made inquiries and I find that it is not a new idea but has been receiving increased attention recently. It is something the Government have been looking at, but I should be deluding the House if I did not stress the difficulties involved. It is idle to present it as a solution to our social security problems. For example, not everyone is inside the Pay-as-you-earn 835 system—for example, the self-employed, and those earning below 5 guineas a week—and last year's income tax return is by no means always a very useful guide to this year's needs. Professor Lees, while concluding that the system he described was fiscally feasible, said that whether it would have the effect intended and be administratively feasible was quite another matter. Professor Titmuss, in his recent New Statesman article, took a much more pessimistic note.
The noble Lord, Lord Drumalbyn, talked about the 7s. He said that it was decided before devaluation, and asked why we still stuck to it. The answer is that it is the most the Government can afford at this particular juncture, commensurate with our economic situation. Then he made a rather interesting point about dropping the family allowance for the second child, as well as not giving an allowance to the first.
§ LORD BOWLES
I beg the noble Lord's pardon. I misunderstood what he said. But poverty is not confined to the larger family. Over 40 per cent. of the families living below the supplementary benefit level, where the father was in full-time work, had only two children. It seemed quite wrong to the Government that those families should be given nothing.
Then the noble Lord suggested that it was in some way unfair that national insurance beneficiaries should get a general increase of only 3s. a child—1s. in some cases, as he rightly said—while a working person receives 7s. a child in family allowances for each child after the first. The answer is set out in a note which I have here, and perhaps I may read it. It is a little long but it may be useful to have it on the Record.
Family allowances and dependency benefits are, and always have been, part of the same total provision for the children of beneficiaries. In total—and it is the total figure which is important—beneficiaries will get more money for each child under the Bill than they do now. A widowed mother, as I said in my original speech, at present receives 42s. 6d. a week for each child in benefit and, 836 where appropriate, family allowances. Under the Bill she will get 45s. 6d. A sick or unemployed man at present receives 25s. or 27s. a week in total for each child. The Bill will give him 28s. There is more, but I do not think the noble Lord will want me to continue. I was asked: How many families will benefit? The answer is that nearly 4 million families will benefit.
The noble Lord also asked a question about the Working Party into the question of school meals and welfare milk which were not being taken up. The Working Party was set up by the Secretary of State for Education and Science to look into the question of why the school meals were not more adequately enjoyed and used. Their report has not yet come to hand. The problem of getting people to take up their rights is very much in the forefront of the Minister's mind, as it is, indeed, in that of the Supplementary Benefits Commission. I would refer the noble Lord to paragraph 41 of the Commission's recent Report on the administration of the wage-stop. For wage-stop beneficiaries the Commission have decided not only to make sure that each wage-stopped claimant understands what other State benefits are available to him but also to help claimants to obtain and, where necessary, complete application forms, and to follow up to see that the benefits are actually enjoyed.
§ LORD DRUMALBYN
My Lords, the noble Lord will, of course, appreciate that the wage-stopped families represent only one-sixth or less of the total families involved.
§ LORD BOWLES
Yes, my Lords. The number is about 26,000. I see now that it was the noble Lord, Lord Ilford, who asked the question as to the number of families who benefit under the Bill, and I did say that it was four million.
Lord Drumalbyn also raised the question of devaluation and asked whether the supplementary benefit rates would be increased to offset its effects. I can do no more than repeat the assurance given in another place, that the Government will watch price trends carefully and at the right time will take whatever action appears appropriate to protect the position of those who are most likely to be affected by price increases arising from devaluation. If the noble Lord will refer 837 to the Commons Hansard of November 29—he mentioned the fact that in another place the Committee stage of this Bill was postponed for about a fortnight—he will see that I think on a Motion to report progress the Minister made a statement. I have got a copy of that here, but I do not think I need refer to it.
On the question raised about the wage-stop and the Commission's decisions, which, as the noble Lord, Lord Ilford, knows, the Minister has said that she is accepting, I perhaps might read those decisions in a summarised way. Up to now, estimates of labourers' earnings have, where necessary, been based on local average earnings. In future the Commission will in these cases use the rates fixed by the National Joint Council for Local Authorities (Manual Workers). This will mean that in many areas there will be a higher rate than before. At present, earnings rates are reviewed twice a year. In future they will be kept under continuous review to make sure that improvements are fully reflected. In estimating earnings, the Commission at present deduct 7s. 6d. for what are known as "intangible expenses". I do not know whether the noble Lord knows what they are, but I do not, and I have never found anybody who does.
§ LORD ILFORD
My Lords, I recall the 7s. 6d. What the Board's officers do is to obtain, if they can, a realistic estimate of the man's earnings. If he has been in employment during the last six months, for example, they take what he earned during that period and do not use either the 7s. 6d. or any other measure. But if they are not able to get a realistic figure for his earnings before unemployment—if, for example, it is twelve months since he was employed, and perhaps he is no longer fit for the work he was previously doing—then they have to obtain some other standard. Now they are going to use the 7s. 6d.; and, indeed, they did in my time.
§ LORD BOWLES
My Lords, I am grateful to the noble Lord for that explanation. The noble Lord has also seen that the Minister is proposing that the 7s. 6d. should not be deducted in the future. The Commission will ensure that there is a full discussion with each claimant about the way in which his 838 benefit, if it is subject to the wage-stop, is calculated, and that he is notified of the details. At present, if the wife of a claimant with a wage-stopped benefit starts work, the full amount of her earnings is deducted. This practice will cease, and the family will benefit from the wife's employment.
Then the noble Lord, Lord Ilford, expressed regret that all families receiving supplementary benefit will not gain an advantage from the increase in family allowances. Of course, the Government's proposals, as I think the noble Lord appreciates, will help those families whose supplementary benefit is subject to the wage-stop. These are families who will not have benefited in full from the previous increases in supplementary benefit rates because their benefit had to be held at the wage-stop figure. Family allowances are payable whether or not the recipient is in work, and they are therefore payable in addition to supplementary benefit; so the family whose benefit is subject to the wage-stop will usually benefit in full from the family allowance increase. Other families receiving supplementary benefit will, under the Government's proposals, gain no advantage from the changes proposed by the Bill, but the children of those families have over the years been provided for by the increases in the supplementary benefit and national assistance rates. I do not think I need bother the House any more on this aspect. All these facts are probably known to the noble Lords who have come to listen and take part in this debate, so I will not keep the House very much longer.
As regards the staggering referred to by the noble Lord, Lord Hawke, I understand that he heard me say that it is not likely that this will take place in the very near future. This is purely a precautionary measure. We are taking advantage of this Bill to put it in so that the power is available to the Minister in case it is needed. But from my little knowledge of some parts of the country I think places like Coventry have already staggered industry and the school terms, because unless the schools and the factories stop at the same time the families cannot go away. I think I am right in remembering that four or five years ago, in Coventry at least, the factories and the schools stopped, I think, in the middle of 839 July; and that was a date that was perhaps agreed upon sufficiently in advance for the Ministry in those days to issue the necessary family allowance books. But I do not know that it is contemplated to be on anything like a large scale in the near future. I hope that, with those explanations and replies to a very interesting debate, your Lordships will now see fit to give this Bill a Second Reading.
§ On Question, Bill read 2a; and committed to a Committee of the Whole House.