§ 5.5 p.m.
§ Lord CULLEN of ASHBOURNE rose to move, That the draft order laid before the House on 4th July, be approved. The noble Lord said: My Lords, it may be for the convenience of the House if we discuss two other Instruments at the same time—namely, the draft Supplementary Benefits (Determination of Requirements) Regulations 1979 and the draft Family Income Supplements (Computation) Regulations 1979, which were laid with the order and will be debated in another place on Wednesday 25th July.
§ The purpose of all three Instruments is to implement, in the week commencing on 12th November, the majority of the increases in social security benefits announced by my right honourable friend the Secretary of State for Social Services in his Statement in another place on 13th June. I think it will be helpful to your Lordships if I take the up-rating order first and then deal with the regulations. The order provides for increases in national insurance and industrial injuries benefits. The principal benefit rates are listed in Appendix I to the Government Actuary's Report on the up-rating order, but it may be helpful if I refer to some of the main items.1673
§ The most significant item, both socially and financially, is the standard rate of retirement pension. The order increases this from £19.50 to £23.30 for a single pensioner and from £31.20 to £37.30 for a married couple. This is an increase of 19½per cent., and it takes account of the expected 17½ per cent. movement in prices between November 1978 and November 1979 and of the shortfall in last year's up-rating. It is proposed that other long-term benefits be increased on a corresponding basis. Since 1977, the level of operation of the earnings rule for retirement pensioners has been linked with the general level of earnings. The amount a person can earn before his pension is affected will accordingly rise in November from £45 to £52.
§ As to the earnings rule for the dependent wives of certain pensioners, your Lordships may recall that the Pensioners' Payments and Social Security Bill, which has passed through both Houses and is awaiting the Royal Assent, removes the requirement to increase the earnings limit for those wives and we propose to maintain the limit at its present level of £45. This is the matter to which the Joint Committee on Statutory Instruments has specially drawn attention. The Joint Committee has pointed out in its report that the Pensioners' Payments and Social Security Bill has not yet received the Royal Assent and, to that extent, the draft order anticipates the enactment of the Bill. That is so, but the order is not intended to come into force until 12th November, and I understand that the Bill will receive Royal Assent on Friday of this week, 27th July.
§ Turning now to short-term benefits, the standard rate of sickness and unemployment benefit will rise from £15.75 to £18.50 for a single person, and from £25.50 to £29.95 for a married couple. These higher rates represent increases of 17½ per cent. Other short-term benefits will rise by corresponding amounts. For the first time, the up-rating order contains a provision relating to the earnings-related additional pensions payable under the new pensions scheme. These additional pensions began to be paid from April 1979 and it is proposed to increase them by 17½ per cent. from November.
§ I know that many of your Lordships are especially concerned with the welfare 1674 of the disabled and will be pleased to know that there will be increases in attendance allowance, which will rise from £15.60 a week to £18.60 at the higher rate and for people entitled to the lower rate of allowance, from £10.40 to £12.40. Noncontributory invalidity pension and invalid care allowance will both go up from £11.70 to £14.00. Mobility allowance will rise from £10 to £12 a week.
At this point, I should apologise for the fact that the printed copies of the order which were laid before your Lordships on 4th July contain two small errors. On page 1, in footnote (c), line 3, " 1975 " should read " 1978 ". On page 3, in footnote (b), line 3, the words after " regulations " should read
as amended by regulation 8 of S.I. 1978/1123".
These errors will be corrected in the final version of the order. The order fulfils my right honourable friend the Secretary of State's statutory duty under Sections 125 and 126A of the Social Security Act 1975. It also fully discharges the Government's undertaking to honour the increases in retirement pensions which were promised before the election by the previous Administration.
§ Let me turn now to the Supplementary Benefits (Determination of Requirements) Regulations, which provide for increases in the supplementary benefit scale rates laid down in Schedule 1 to the Supplementary Benefits Act 1976. The increases proposed are the same as those in the related national insurance benefits and will also come into effect in the week commencing 12th November. We propose that the long-term scale rates, which apply to supplementary pensioners and to people, other than the unemployed, who have received supplementary allowance continuously for two years, should be increased from £19.90 to £23.70 for the single householder, and from £31.55 to £37.65 for a married couple. The ordinary scale rates, which apply to the unemployed and to other people who have received a supplementary allowance for less than two years, will be increased to £18.30 for a single householder and to £29.70 for a married couple. We also propose to increase the scale rates for other adults and for children. The special preference for the blind will continue at the same amount. Regulation 2 also ensures that the increases in attendance allowance 1675 are passed on to supplementary beneficiaries in need of attendance.
§ Your Lordships may also like to be made aware of other changes affecting supplementary beneficiaries which, though not provided for by the regulations, will form an important part of the up-rating. The Supplementary Benefits Commission has decided to increase the discretionary additions for extra heating and the standard additions for special diets. These changes will come into force at the same time as the increases in the scale rates.
§ I now turn to the Family Income Supplements (Computation) Regulations 1979, which provide for the prescribed amounts below which Family Income Supplement is payable and the maximum amounts of Family Income Supplement is payable. The prescribed amounts will be increased from £46 to £54 for a family with one child, and a further £4.50 will be added for each additional child. We propose to raise the maximum weekly rate of Family Income Supplement from £10.50 to £12.50 for a family with one child, with an extra £1 payable for each additional child. These amounts apply both to one parent families and to two parent families. Taken in conjunction with the Chancellor's Budget decisions on income tax, these Family Income Supplement proposals demonstrate our commitment to maintain and improve incentives for poor families living on social security to return to work.
§ My Lords, I should like to finish by giving the cost of these increases and explaining how they will be paid for. As my right honourable friend indicated in another place when he announced the Government's proposals on 13th June, the up-ratings, taken together with the Christmas bonus, will increase the annual expenditure of social security benefits by about £2,700 million a year. The present national insurance contribution will be broadly sufficient to meet the additional expenditure falling to be paid from the National Insurance Fund in 1979–80. We will consider later this year what changes to the rates of contributions and earnings limits will be required for 1980–81. I trust that your Lordships will accept the three Instruments now before you and I beg to move.1676
§ Moved, That the draft Social Security Benefits Up-Rating Order, laid before the House on 4th July, be approved.—(Lord Cullen of Ashbourne.)
§ 5.15 p.m.
§ Lord WELLS-PESTELL
My Lords, we are grateful to the Minister for his statement relating to the three orders now before your Lordships' House. I am not unmindful of the fact that this House has several more hours' work before it, nor do I forget that I have already made two comments about these very matters on previous occasions since the coming into office of the new Government, and so I do not propose to go over that ground today, nor to ask the Minister any questions. However, I am sure that he would be the first to recognise that I, too, would wish to take the opportunity to register our concern at certain features of the matters that he has mentioned. Obviously we welcome the up-rating, but, as I have said previously, we are very disturbed that these and future increases are to be tied to prices, not wages. I know the Government's arguments on these matters, but I have in mind the effect of rising prices and the serious increase in inflation which many of us believe will take effect as soon as November of this year—let alone in the succeeding 12 months. The noble Lord mentioned an increase of inflation to 17½, per cent. by November 1980. I hope that it is no more than that, but we are fearful that it may well be, and we feel that the Government ought to have been a little more mindful than they seem to have been of that eventuality.
We are concerned with the widening, as we see it, of the gap between the short and the long term benefits which we feel will be aggravated by what I do not think it would be unfair to describe as possible widespread unemployment following on the Government's economic policies; in fact, I think they have been honest enough to say so. Furthermore, we find it rather difficult to understand the Government's failure to increase child benefit by 50p a week, as we ourselves promised we would do. We regard this as being of supreme importance to the ordinary family. I know that it is being done for the one-parent family, but I think that it is much more important, or just as important, for the ordinary family, bearing in mind the severe effect that the increase in VAT will have on children's 1677 clothing. This will be a very serious problem affecting the majority of school children, and we are rather surprised that the Government did not see their way clear to increase the benefit in the way we promised. We are not unmindful of the fact that such a proposal would cost upwards of £200 million, but these matters are important to the family. I do not wish to say anything more, other than to repeat my welcome for the up-rating, and to express the hope that the Government's view that inflation will not go beyond 17½ per cent. by November 1980 will prove correct.
§ 5.19 p.m.
§ Lord BANKS
My Lords, I wish to join in thanking the noble Lord, Lord Cullen of Ashbourne, for his very clear explanation of the purpose of the orders. As he explained, they are the usual annual up-rating orders covering national insurance, supplementary benefit, and family income supplement. They have been described elsewhere as the biggest cash increases ever. But I think one can say without any hostility that that is no particular credit to the Government, because the Government are merely performing their statutory duty to increase the long-term benefits in line with increases in prices or earnings, whichever are the higher, and the short-term benefits in line with increases in prices. The size of the increases is really a measure of inflation and of the failure of successive Governments to control it.
As has been pointed out, the long-term benefits go up by 19.5 per cent., and that takes account of the shortfall last year. The fact that there was a shortfall last year demonstrates once again the undesirability of having a reference period which is half in the past and half in the future. The 17½ per cent. estimate of inflation between last November and next November is, of course, a worrying figure. The long-term benefits this year have been increased in accordance with increases in prices, since increases in prices were the higher, but the noble Lord, Lord Wells-Pestell, has drawn attention to the fact that there will be a change in the future, in that these benefits are to be related to prices only.
The Government argue that to have the double-barrelled arrangement, where it is 1678 either prices or earnings, is no longer sustainable. They speak about the ratchet effect, and the fact that when earnings are higher then the relation of benefits to earnings is maintained, and when prices are higher the relation to earnings is improved, so that gradually you have an increasing share of the national wealth, a higher proportion of the earnings, going on pensions. The Government say that this is not sustainable as something which is open-ended and will not come to an end. On the other hand, I think we would all agree that the relationship between pensions and other long-term benefits and earnings is not yet at a satisfactory level, where we really need to worry about that, and I would have much preferred to see them wait until the relationship was more satisfactory before they considered too seriously the possibility of difficulties a good distance into the future.
The Secretary of State in another place, when he was first announcing these increases, said that it was the Government's firm intention that pensioners and other beneficiaries could confidently look forward to sharing in increased standards of living. If there is an increase in the standard of living—and that may not look very hopeful just at the moment—then earnings must have exceeded prices for that to come about; but the Government no longer intend that benefits should increase as fast as earnings, so that, in a period of increased standard of living, while the pensioners and others may share in it they will not share in it to the full, and will fall relatively behind earnings. I think all that will have to be very carefully considered when the legislation to make the change comes before the House. Moving from that, I should like to welcome what the noble Lord, Lord Cullen of Ashbourne, said about the discretionary payments for extra heating in supplementary benefit, and I also welcome the increase in the mobility allowance.
Finally, turning to the cost of the increases, earnings-related contributions should of course meet the cost of earnings-related benefits, but when prices are ahead of earnings then earnings-related contributions may not meet the cost of prices-related benefits. However, as the noble Lord pointed out, for 1979–80 the Government Actuary anticipates a surplus in the 1679 National Insurance Fund of £35 million. But the first full year is 1980–81 and, as the noble Lord hinted, it looks as though income will be insufficient in that year, and we must therefore be prepared for increases in limits or in percentage rates, or both, later in the year, presumably to take effect next April. But that will be an additional part of the cost of prices running ahead of earnings, which in any event must reduce real income. With these few comments, my Lords, I support the passage of these orders through the House.
§ Baroness HORNSBY-SMITH
My Lords, I wish to intervene for only one minute, but the noble Lord, Lord Wells-Pestell, made a statement which I believe is quite inaccurate. Surely there has never been any VAT on children's clothing. Am I not right?
§ On Question, Motion agreed to.