§ 11.12 a.m.
§ THE MINISTER OF STATE, DEPARTMENT OF HEALTH AND SOCIAL SECURITY (LORD ABERDARE)
My Lords, this Bill is designed first to put an end to practices which in the Government's view are not consistent with the basic purposes of the supplementary benefit scheme; and, secondly, to bring the social security system more closely into line with modern conditions.
First, I shall deal with supplementary benefit for strikers. The legislation of all Governments since the war has been based on the principle that a striker should get nothing from the State for himself, but only for his dependants. The Labour Government reaffirmed this principle in Section 10 of the Ministry of Social Security Act 1966, but it is violated by present practice, under which, in assessing the amount of supplementary benefit for a striker's family, any income personal to the striker—mainly tax refunds and strike pay—is disregarded, up to the limit of the man's own requirements, currently £4.35. Incidentally. I use the word"striker"somewhat 629 loosely: strictly, I should say"men out of work due to a trade dispute and disqualified from receiving supplementary benefit for themselves ". The effect of this is that a married striker's income is often brought up to the full amount which he would receive if he were an ordinarily unemployed man.
This practice has grown up by historical accident. All that the Government are doing in this part of the Bill is to see that the principle accepted by all their predecessors is carried into effect. The Bill proposes accordingly, in Clause 1(4), that strike pay and tax refunds shall be disregarded, in assessing supplementary benefit for his dependants, only up to the limit of £1 which applies, under the 1966 Act, to other types of miscellaneous income.
Clause 2 is aimed at what I think it is fair to say is the deliberate exploitation of a weakness in current legislation. There is a statutory ban on the payment of supplementary benefit to men in remunerative full-time work. This ban is postponed for a fortnight by regulation, in the case of"persons becoming engaged…in such work ". The regulations are primarily designed to meet the needs of people resuming work after unemployment or starting their first job, who will have no wages for a week or a fortnight and to whom, as new and usually unknown workers, employers could hardly be expected to make advances on wages. They also apply to strikers when they return to work; although, in such cases, as the men are known to the employer and are presumably intending to carry on in the same employment for some time, it is perfectly reasonable that the employer should pay advances sufficient to keep them going until the first pay day. Until a few years ago, employers very frequently agreed to make such advances when men went back to work after a strike.
There was a disturbing development in 1969 when, after a major strike, the employers withdrew their agreement to give advances at all their different plants, under pressure from the workers at one plant. The precedent was very soon followed in other strikes; and it is now generally realised that it is very much to the striker's advantage to refuse an advance from his employer and to draw 630 supplementary benefit instead—since an advance has to be repaid, and is part of taxable income, while supplementary benefit is not repayable and does not count towards tax. The figures speak for themselves. In 1968, about £334,000 was paid out in supplementary benefit during strikes, but little more than £80,000 in the period after strike. In 1969, when the first signs of exploitation appeared, the comparable figures were: £747,000 paid out during strikes, and almost as much—£668,000—after the men had gone back to work. In 1970, £1,445,000 was paid during strikes; £888,000 after. In the first four months of this year, the amount paid out after strikes had already reached nearly £500,000. All the post-strike figures relate only to large strikes of which separate figures are kept.
The previous Government were aware of this problem and took power in their National Superannuation and Social Insurance Bill to reduce this expenditure; their plan was to make supplementary benefit payable after a strike only for a striker's dependants and not for the man himself. But this was no more than a palliative: those who received supplementary benefit for their families would have remained in very much the same position as they are now. That is, by refusing an advance of wages, they could get supplementary benefit (though not at the full rate as they do now) for a period for which wages would be paid within a week or two. We can see no justice or sense in a system which requires the taxpayer to subsidise a man who has returned to work from a strike simply because he prefers not to take an advance of wages from his employers. Clause 2 therefore provides that any supplementary benefit paid after the end of a strike shall be repayable, through the employer. An important part of the clause, read with Schedule 1, is the proviso that supplementary benefit will not have to be repaid too quickly: if a person's income in any week would fall below a figure equivalent to £3 above the supplementary benefit level, repayment would be deferred.
The National Insurance Act 1965 provides that a man who is dismissed for industrial misconduct, leaves his job voluntarily, or refuses to take suitable work without good cause, may be disqualified for unemployment benefit for 631 up to six weeks. The decision on whether or not to disqualify is made by the independent statutory authority appointed under the National Insurance legislation. It would make nonsense of these provisions if the disqualified man could immediately draw full supplementary benefit.
I do not think your Lordships will disagree with me that the present 75p reduction is derisory; and indeed the previous Government in their National Superannuation and Social Insurance Bill proposed to raise it substantially. This Bill goes a little further than they did; we retain their principle that the reduction should be limited to a proportion of the single householder rate, and differ only on what that proportion should be. Clause 1(2) provides for a reduction of 40 per cent.; if the previous Government's Bill had become law, the reduction would have been 35 per cent. The Supplementary Benefits Commission will have no power to remit or alter the amount of the reduction; their discretionary power to"add back"something in exceptional circumstances where otherwise undue hardship would be caused will remain unchanged. And an assurance has been given that the Commission will be invited to review their rules for dealing with such cases of special hardship when the Bill becomes law.
Clause 7 of the Bill abolishes entitlement in any circumstances to flat-rate unemployment benefit and sickness benefit under the National Insurance Act and to injury benefit under the Industrial Injuries Act for the first three days of a period of interruption of employment. Subsection (1) does so for unemployment and sickness benefit; and subsection (2) for injury benefit. The retrospective payment of these benefits for the three waiting days was introduced into the National Insurance scheme at its start in 1948. It was no doubt justified by the circumstances of those days, but in the twenty-three years which have since elapsed the situation has been transformed. Personal disposable income, for example, has quadrupled in the period 1946 to 1971; and in the same period the annual total of personal savings has increased eight-fold. National Insurance benefits have increased very substantially in real terms and will be increased again when the new rates of benefit provided by 632 the National Insurance Act 1971 come into operation in September. Earnings-related supplement to sickness and unemployment benefits, which comes into payment with effect from the third week of incapacity or unemployment, was introduced in 1966. In 1949, 28 per cent. of married women were either in employment or self-employed, and the average earnings for women, both married and single, were £3.94 a week; in 1969, no less than 46 per cent. of married women worked, and the average earnings for women, both married and single, had risen to £12.11—with that figure having gone up still further to £13.99 in 1970; and while the Government well recognise that there is not a working wife in every family, changes of this order of magniture are bound to have a substantial effect.
Another important development has been that the provision of employers' sick pay schemes has grown very substantially. The figure of coverage was only about 56.5 per cent. as late as 1961–62, but in April, 1970, employers' sick pay schemes covered over 72 per cent. of all male employees. For manual workers, the corresponding figure, while lower, was still nearly 65 per cent. of all full-time male employees aged 21 and over. And even given that many employers' sick pay schemes may have waiting days for which no payment is made, the introduction and development of these schemes makes a great improvement for workers over their situation in 1948, when many of them had no sick pay scheme at all. In these new circumstances we believe that the substantial savings of a net £19 million per year are better used to help those in greater need; for example, the chronic sick, for whom we have made extra provision amounting to £24 million per year in the recent National Insurance Act.
I need not trouble your Lordships with a long account of the remaining clauses of the Bill. They are designed mainly to remove some minor anomalies which have crept in with the passage of time. Clause 3 improves arrangements for the prevention of duplicate social security payments; Clause 4 removes a defect in the control of fraud by extending the functions and powers of inspectors; Clause 5 provides that arrangements can be made 633 with Northern Ireland for a unified social security system; Clause 6 extends existing powers to make reciprocal arrangements with other countries; and Clause 8 increases the fine for failure to pay National Insurance contributions from £10—at which it stood in 1911—to £50. I should explain in a little more detail why it has been decided to abolish in Clause 9 the local advisory committee. The local advisory committees which were set up in 1948—and which were succeeded in 1967 by the present bodies served a most useful purpose in the early years of the post-war schemes. As more experience was gained of the operation of the schemes, and with the development of more sources of advice both to the Departments and to the general population, the need for formal machinery of this kind has diminished. In many cases it has been increasingly difficult to find sufficient work to justify calling them together except at long intervals. I am sure your Lordships would wish me to repeat on your behalf the thanks which have been expressed to the chairmen and members of these advisory committees for their past services.
This Bill is the stable companion of the National Insurance Act which recently passed through this House. That Act made many and significant improvements in social security benefits; it also made considerable increases in contributions. It surely behoves us at the same time to examine the whole system with a view to eliminating abuses and rearranging priorities. That is what this Bill seeks to do. It will make an important saving of £21 million a year by recognising that in the course of time some parts of our provision have been misused and other parts are no longer necessary. It seeks to bring our social security legislation up-to-date and eliminate waste. It must be looked at in conjunction with the social security system as a whole, and I am confident that I can ask your Lordships to give it a Second Reading.
§ Moved, That the Bill be now read 2a.—(Lord A berdare.)
§ 11.28 a.m.
§ BARONESS PHILLIPS
My Lords, I should like to thank the Minister for explaining the various clauses of the Bill. This is part of the implementation 634 of New Policies for Public Spending, and it has to be looked at against the other measures that are being introduced to save money: the school meals price increase, the withdrawal of the free milk to the children and the cost-related prescription charges—I could go on. It also must be looked at against the backcloth of substantial unemployment figures. I am very fond of the Minister who introduced this measure and I do not like to have to tell him that I do not like his Bill. I find it a peculiarly mean Bill, and I think it is difficult to justify it except as a measure for saving money.
The Minister has very carefully described it as a tidying-up process, but basically this is a measure to save money. In New Policies for Public Spending there is a direct reference to the fact that there will be a saving of £20 million a year by changing the unemployment, sickness and injury benefit payments as the Minister has described so that they will not now be payable on the first day, but there will be three days of absence from work. Most Bills are mixed bags. One generally finds some clauses which make life a little better for people, even if some other clauses make life a little difficult. But, except for the clauses on the reciprocal agreements, this Bill does not appear to me to make life better for anyone.
I turn to Clause 7, relating to the payment of unemployment benefit. The National Insurance Act 1966 set out the conditions of payment of benefit and said that a day of interruption of employment means a day of unemployment or incapacity for work. This matter concerns particularly those industries where people are often put off, or where they have to seek other employment at very short notice. They are the low-paid workers, the people in the industries which depend on the short-term worker. The original Beveridge Report, which I have just reread to refresh my mind, emphasised that if a man could not work by reason of sickness, unemployment or any other incapacity, he should be in receipt of some money to help him over the period. This is a basic part of our scheme of National Insurance and Social Security. I am sure that there are excellent reasons for introducing this change, but we must recognise that we are changing what has been a basic principle.
635 Let us have another look at the question of the abolition of the local advisory committees. Again, in the Act of 1966 we get some idea of the kind of people who make up these committees:The persons from among whom members of such committees are selected shall include persons representing employers, persons representing employees and persons having local knowledge and experience in matters affecting the function of the Commission.I know such a person: she is a neighbour of mine, a retired executive worker, who sits on one of these committees, unpaid, at some inconvenience to herself as she has to travel. She is most conscientious and anxious to help all the cases that come before her, and she is knowledgeable because she has been a worker herself.
I notice that the Minister in another place, in justifying the abolition of these committees, said that there were other ways in which voluntary workers could use their talents. He referred to the fact that we could now have more professional advice. Surely, my Lords, this misses the whole point of the committees. They are showing the public that there is an independent link between the statutory administrators and those who are on the receiving end. Again, a very important feature in British life is that people must know that they can always appeal to have their cases looked at by their peers. I wonder whether these committees have been given opportunities to operate as widely as they might have been, or whether they have been encouraged enough. I will return to this point during the next stage of the Bill, because it is one about which I am not at all happy. I believe that to save the small sum concerned was the major point of the exercise, rather than the suggestion that the need for them had disappeared.
If we look at some of the other points of the Bill, we see that a lot of work will be thrown on to employers. Part I of Schedule 1, which refers to the way in which the deduction notices on the recovery of the money have to be made out, says in paragraph 2(2):Every deduction notice shall contain the following particulars, namely—Surely, employers already have to do quite enough work. The P.A.Y.E. system throws on the average employer quite an amount of extra work for which he takes time and employs people specially. This is yet another instance of the extra work involved.
- (a) particulars enabling the employer to identify the claimant;
- (b) the amount by reference to which deductions are to be made by the employer
636 from the claimant's earnings by virtue of the notice;
- (c) the claimant's protected earnings; and
- (d) such other particulars as may be prescribed."
Let us look at another clause in the Bill. The point I refer to recurs several times, and I shall ask the Minister to explain—not necessarily now, but during the passage of the Bill—why we find these words. I am bound to tell him that I have found them in the other Acts as well, so that he can say, with every justification, that the previous Administration used them. But I think he will know by now that I do not consider that a good enough reason for anything being included for the whole of time. In Clause 3, we see the words:…at the discretion of the authority administering it…I am not quite clear what this means. If there is only one authority administering these matters, it would be more specific and much safer to say just that.
My Lords, I will not labour any further points now. I cannot go through the usual convention of wishing this Bill a fair passage. I do not like it. I feel that it is an erosion of some of the basic principles of social security, and that, apparently, it is merely a way of taking from one group in order to give to others.
§ LORD FRASER OF LONSDALE
My Lords, when I heard the noble Lord introducing the Bill a point occurred to me, and perhaps the Government or any lawyer can help me on this. It was stated that a person in full employment is not entitled to draw supplementary benefit. Surely, when one returns from striking one is in full employment, and it is quite immaterial whether there is some private arrangement, however helpful, with one's employer to advance money. That has nothing to do with the law—whether it is common law or Statute law I do not know but one is in full employment from the moment one returns. Why, then, is any special new legislation required?
§ 11.37 a.m.
§ LORD ABERDARE
My Lords, I am most grateful to those noble Lords who have spoken on this Bill. I will first deal with the point just made by the noble Lord, Lord Fraser of Lonsdale, since it is a specific one. He was quite right when he said that supplementary benefit is not normally paid to a person in work; but there is the one exception which I mentioned in my speech, which is made under regulations, that it can be paid for the first two weeks of a person's taking up work. The exception is there in order that somebody who is working for an employer for the first time, or who has returned after a period of unemployment, shall be helped through those first two weeks when the employer may not be willing to make an advance of wages to him. What has gone wrong is that this has also been applied to persons returning after a strike, when we think it is perfectly reasonable to expect the employer to make an advance to the man. After all, he knows the man, since he was employed by him previously, and presumably he will then continue to be employed by him. That is why the anomaly has crept in, and we are trying to put it right under the Bill. I hope that that explanation will satisfy my noble friend.
§ LORD FRASER OF LONSDALE
My Lords, may I have the leave of the House to ask a further question, for elucidation? I quite understood what the noble Lord has just said, because he said it in his opening speech. But whether it involves a strike or a man first going into employment does not seem to me to matter very much, unless the regulation to which he has now referred has statutory backing. Has it such backing?
§ LORD FRASER OF LONSDALE
My Lords, if it has, that answers my question. Then when we did it last time we made an ass of the law or somebody did.
§ LORD ABERDARE
My Lords, my noble friend is trying to be a little more harsh than we are. We still think it is 638 right that a man who is taking up employment for the first time and who may not have any funds at his disposal should be able to apply for supplementary benefit.
I did not expect the noble Baroness, Lady Phillips, to welcome the Bill. It was no surprise that she did not, although she disagreed in a very charming way. May I briefly take up one or two of the points that she made? She emphasised her point that we are doing this entirely to save money. I hope that is not the impression that the House gained from my speech. This Bill is to put right various anomalies, and most of its provisions were proposed, although perhaps not enacted, by the last Government. Of course, we have different approaches in certain regards and we put forward different proposals, but I think I am right in saying that nearly all these provisions were proposed at some time by the last Government We are also trying to adjust priorities within the field of social security. We are indeed making savings in certain directions where we think they do not cause hardship, and we are applying those savings within the national insurance field to other benefits where we think they are more urgently required. This is particularly true of the saving which the noble Baroness mentioned in regard to the payment for the three waiting days.
I should like to make just one point to the noble Baroness. She said that the low-paid worker would suffer because he would not get anything for the first day or two of his unemployment. That is not so. He never received this payment within the first three days. He always had to wait for two weeks before any payment was made. He received it after two weeks. I tried to explain that conditions are different now. Many employers have sick pay schemes, and the benefits themselves are so much improved that this is no longer an urgent priority. There are other more important priorities. The remarks on local advisory committees are noted. They do not have sufficient important work to do, but I respect the opinion of the noble Baroness, and I shall return to it at the next stage.
The burden on the employer of complying with Schedule 1 on the recovery of supplementary benefit paid was mentioned. The employer can avoid the 639 necessity for doing that by making an advance of wages. This we would prefer. The employee need not then claim supplementary benefit, and the employer will not have to get it back. That is the way out for the employer who feels this process to be too complicated. I am most grateful to the noble Baroness and my noble friend.
§ BARONESS GAITSKELL
My Lords, I do not wish to intervene at any length, because I have not done my homework; but the Minister could clear up one difficulty. I can understand the Government wanting to do something about the three days of unemployment, because that is part of their philosophy. But what about the question of injury? Is it the fact that a man who has sustained an injury does not receive the first three days' money? I do not understand why that should be so.
§ LORD ABERDARE
My Lords, it has been the case that the first three days, the three waiting days, were not paid within the three days because of administrative difficulty. Hitherto, after two weeks—twelve days—retrospectively the three waiting days have been paid. The Bill abolishes this procedure.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.