§ 2.55 p.m.
§ Baroness Jeger rose to call attention to the Government's social security review (Cmnd. 9517–20); and to move for Papers.
§ The noble Baroness said: My Lords, I beg to call attention to the Government's social security review and to move for papers. Your Lordships will be relieved to know that I do not actually mean to press for Papers because if I did we should have to commission several wheelbarrows to transport the documents, and their cost works out at over £26 a head for noble Lords or anyone who wants to read them.
§ Many noble Lords wish to take part in this important debate, and many have a highly specialised experience and knowledge of various aspects of the Green Paper. We are looking forward with great interest to several maiden speeches. However, noble Lords will no doubt be relieved to hear that I do not intend to examine every detail of the Green Paper documents but rather to look at some of the underlying principles in the context of the Government's general economic and social policies.
§ First, I want to ask about the status of these documents. I understand that essentially a Green Paper is a discussion document, and indeed the Government invite discussion. But, my Lords, for what purpose? We find that fundamental decisions have already been taken, such as the abolition of the state earnings-related pension scheme, the death grant, the maternity grant and many others.
§ The introduction to the Green Paper says that the Government will welcome views on the proposals and will consider them carefully. But I have to ask the noble Baroness the Minister whether this applies to the abolition of SERPS (as we have to call it), the death grant, maternity and heating allowances, and the reduction in housing benefits. Are these just discussion points or are they definite decisions by the Government?
I found myself wondering about the origin of this phrase "a Green Paper". Many noble Lords who have been members of another place, as I have, may recall that, although it was not actually called a Green Paper at the time, the beginning of this exercise was a memorandum on the development areas published in 1967 when my noble friend, now Lord Stewart of Fulham, was then Secretary of State for Economic Affairs. In relation to a debate in the other place on the development areas, he said:
The view is frequently expressed by the Confederation of British Industry, the T.U.C. and other bodies that the opinion of informed and interested parties should be sought and publicly discussed while policy is still in a formative stage. The Government have much sympathy with this view, and it is in this spirit that they put forward this proposal for full consultation and public discussion. Following this consultation and discussion, the Government will decide whether or not to submit a proposal for legislation to Parliament." —[Official Report, Commons, 5/4/67; col 245.]
Therefore, I want to ask the noble Baroness the Minister whether we can consider this Green Paper in the light of those words:
whether or not to submit a proposal for legislation to Parliament."?
To which of the present proposals do those words
apply? It would seem from the press and from statements that have been made in this and other places that there are definite decisions in this Green Paper and not merely subjects for discussion. Judging from the reception which these documents have received, not least from those organisations most concerned at the sharp end, many people will be hoping that, in the light of public discussion, the Government will decide not to legislate on all the proposals. I want to make it clear that the Labour Party is a party of social change. We believe in social change. That is the reason for our existence, and of course we want to see changes.
§ Although this report has often been referred to as an updating of Beveridge, in fact there have been many changes since 1942, such as, for instance, the bringing in of the earnings-related pensions scheme. But the most important difference in the country's circumstances between now and then is that the original proposals were made in the light of full employment. Beveridge regarded unemployment as the worst form of waste, and how right he was.
I have been reading the first debate in the House of Commons on the Beveridge Report. I was interested to read that the late Sir John Anderson, who was then Lord President of the Council, said on 16th February 1943, at col. 1659 of the Official Report:
I have been told that 500,000 off the unemployment figure means, on a reasonable calculation, no less than £200 million added to the national income".
If we were to update those figures, many of us would realise how our spending on social security is in effect diminished by the increasing rate of unemployment, and that full employment must be the bedrock of any sensible social security scheme.
In fact, the Green Paper—I must let noble Lords know that I have read it—at paragraph 4.8 says:
unemployment has now displaced old age as the main reason for low income".
Sixty-two per cent. of the unemployed—many of them long-term unemployed—depend on supplementary benefit. This is estimated, according to the Government's own figures, to cost £40 million in 1985–86. This is a measure not of deliberate self-impoverishment by the British people, but of the failure of the Government's economic policies.
Of course we have to revise the Beveridge Report and bring it up to date, but I must remind your Lordships that there are some fundamental principles in that report. For instance, Beveridge said:
The aim of the plan for social security is to abolish want by ensuring that every citizen willing to serve according to his powers has at all times an income sufficient to meet his responsibilities".
That is a part of the Beveridge Report which does not need changing.
§ Now we have Government complaints about the rising cost of the welfare state. Their policies force an increasing number of people into a state of need, and then the Government proceed to attack the poor instead of attacking poverty itself. Yesterday's Statement is another example of the Government's philosophy that welfare consists of a redistribution not of wealth but of poverty, taking from the poor to help the poorer, while the rich go unscathed. I would remind your Lordships that there has already been a 267 serious loss of income because of the abolition of the earnings-related supplement to sickness and uneployment benefits.
§ The difference between us—and it is fundamental—is that we believe that a fair and adequate welfare state is not a burden on a productive economy, but is an essential political basis for sound economic policies. But that would require bringing together taxation and social security.
§ I know that there is soon to be a document on personal taxation, but it should have been issued now, because we cannot make sense of these Green Papers—if there is any sense to be made of them at all—without knowing the social purposes of the Treasury's fiscal policies. At present about half of the social security budget is met from general taxation; so why are the Government so hesitant about bringing these things together in the same context?
§ We have to come, regrettably, to figures, or rather to the absence of figures, but they sit, like Banquo's ghost, at the table. The Secretary of State in another place has told us that they are not relevant at the present time, and that this Green Paper is concerned only with structure. Some of us would think it is more concerned with destruction.
§ This is like an architect presenting a client with a structure plan without any costings. Why are the Government delaying the figures, as we have been told, until later this year? Are the Government nervous of the public's reaction to what will probably show that many of our citizens will end up in greater poverty because of this report, if it is implemented?
§ I submit that the Government must have figures. What else was the Cabinet arguing about through all those months of leaking gestation? Are the figures being delayed because the Government are setting the minimum standard too low and they want people to get used to the idea that poverty will be on the increase? In one area we have figures, apart from the figures of the cost of these enormously expensive documents which no one who is most affected will be able to afford to buy.
§ We have figures in relation to housing benefit. We are told that it is to be cut by £500 million, and that this may affect about 7 million people, many of them pensioners. Are the Government saying to the country that these people, who have been receiving housing benefit under the Government's own scheme, do not need it? Why did the Government construct this scheme? This benefit is often needed because the Government have no coherent housing finance policy. I understand that about 4 million pensioners will be affected, many of them because they have modest occupational private pensions—which another part of the Green Paper tells them they ought to have in the future, and that that is the way forward and the way out of poverty.
§ There is another figure which the Government have given us. Applicants for rate rebate are to pay at least 20 per cent. of their rate bill no matter how poor they are or how high their rate bill. I know that there has been a big increase in applications for rate rebates, but that is another result of the Government's policy. It is due largely to unemployment and to cuts in the 268 general subsidies to councils for building and social services. I must ask the Minister whether this 20 per cent. is a figure for discussion?
§ No elector can assess the effect of the proposals on his own affairs. The Conservatives have promised to reduce taxation, but what if they reduce taxation and national insurance contributions go up, and rates go up because of cuts in Government contributions? Prescription charges have gone up from 20p to £2. Under this Green Paper there are to be no free school meals, no welfare milk, and no vitamins for pregnant and nursing mothers. We have to put all these things together if we are to make any sense of the Government's actuarial exercises, and I find it difficult to do that.
§ I must spend a moment on the most arguable suggestion, and that is for the abolition of the state earnings-related pension. It is political nonsense to abolish this. After having pensions in and out of political rows and argument at last we got a consensus, and I appreciate the work which noble Lords who do not always agree with me, including the noble Lord, Lord Boyd-Carpenter, did in this regard. But now we are putting pensions back into the arena of party politics. If anybody thinks that this party, when it returns very soon to Government, will support this suggestion, they had better think again. It creates uncertainty, which is a cruelty for old people. It is impossible to ask people who are thinking about retirement to accept the suggestion that what they have looked forward to will not happen.
§ I do not know why the Government seem to be so keen on frightening young people about the increasing numbers of the elderly. This was not the view of the Government's own Social Security Advisory Committee. These threats seem to suggest that even this Government are afraid to look forward to any increase in the country's wealth. What a scenario for a brave future for our young people—that this country will get poorer and poorer and that it will not be able to look after its elderly. I am sure your Lordships appreciate that many countries less advantaged than our own take on the elderly as a social and personal responsibility.
The Government Actuary's Report, Cmnd. 5928, says that,
hope was based on the assumption that the rate of unemployment would be two-and-a-half per cent. and growth in real earnings three per cent.".
I challenge the Minister to come to this House and say that the Government have abandoned those hopes, that unemployment will go higher than 2½ per cent. and that the growth in real earnings will not reach 3 per cent. I suggest that this whole subject of pensions has been considered in a way that is too actuarial. In my view pensions, whether public or private, are a call on the resources of the whole nation. There is nothing in the Green Paper to explain how the total economy of the next century will be able to support a more numerous idle population. They will be idle either because of arbitrary retirement ages, which we should be considering again, or because of increasing unemployment. These are questions which we should be thinking about rather than just producing these pessimistic figures of demographic forecasting.
§ The main result that I have been able to find about these changes is that there has been a jump in the share values of life assurance companies. Many of them have suggested that the high administrative costs of dealing with small earnings will be rather a nuisance. There will surely be problems for casual or seasonal workers and agricultural workers, and for small building firms who take on labourers for short periods. At present we have 11 million people who are in occupational pension schemes and 11 million who are not. I hope the Minister will tell us what effect there will be on the incomes and prospects of those 11 million who are not in occupational pension schemes and who are depending on the consensus of the SERPS arrangements.
§ Some clever gentlemen were on this committee. One of them described the scheme as ingenious and another said it was very elegant. Those descriptions relate more properly to a courtesan than to a serious consideration of poverty in old age. But most worrying are the missing figures. Paragraph 9.8 explains the setting up of the social fund to be administered by the DHSS local offices on a discretionary basis. The fund will have an annual budget, but it is not clear whether that budget will be local or national. Thirty specific benefits given under the statutory regulations will be replaced by discretionary awards, often loans, repayment of which would be deducted from benefits which people receive only if they are on a level of poverty which needs support. This idea can only make the poor poorer. The latest figure I have of single payments which would come under this heading is £170 million. I want to ask the Minister whether it is proposed that the social fund will receive £170 million, or more or less. We really are back to the board of guardians.
§ I remind your Lordships that in previous times single payment grants were discretionary, but in 1980 the Conservative Government—and for once, I think, quite rightly and properly—introduced regulations to replace the discretionary system with a clear legal structure in which there would be objectively established legal rights in published regulations with a right of appeal to independent appeal tribunals: first, to the social security appeal tribunal, then to the social security commissioners and finally to the Court of Appeal. But now there are to be cash limits and no independent right of appeal except, as I understand it, perhaps to the High Court. How will people who are refused know whether they are refused because their local manager has run out of money, because he does not like the cut of their jib or because there is a genuine case for refusal? Many might fail just on wrong presentation.
§ I have been on social security appeal tribunals and I know how often we have found in favour of the claimant, because with careful questioning and conversation one finds he has been refused because he had not made his own case very well. In some instances the department won. In other cases we were able to reach compromises and to talk about them. People felt that there was some fairness and some understanding. Will the Minister confirm that only independent appeals can now go to the High Court? How is the claimant to prepare his case?
§ I do not worry very often about European 270 organisations, but I am worried because I understand that the European Court has said that all administrative and statutory rules should be, to quote one of these awful European words, "justiciable". I am told that means that every rule should contain within it a right of appeal. I want to know what the Minister will make of that.
§ The family credit scheme to replace income supplement is also open to debate. Family income supplement, because it is means-tested, is taken up by only half the families the Government think are eligible. I think this figure is likely to fall because under the new scheme workers will have to involve their employers in their personal circumstances. This is not always acceptable to workers. We shall see a lower take-up under the new scheme because in most cases the payment will go to the father or husband in his wage packet. At the same time we cannot be sure that while this is linked to the abolition of school meals and welfare foods the father's extra money will be spent on those desirable purposes. That is the strength of child benefit—that it goes to the mother and is more likely to be used for the children.
§ I have another figure to put forward; and I apologise to the noble Baroness. I hope that I am not giving her too much work. I know that she and I would rather have been at another place today—and I do not mean that "other place". According to the Sunday Times of 9th, June the Government have already put a figure of £750 million on savings from this review. Is that the correct figure? Were these Green Papers worked out on the basis of a nil-cost directive? If the figure that the Sunday Times used is wrong, will the Minister give us the correct figure? What has been the result of this fundamental, splendid, radical, review of the social services? It has been to cause anxiety to many people in great need. It has left the country with no costings and no understanding of the connection between future taxation and future social security benefits. It has left the country with no assurance of the reality of discussion and, above all, with no sense of national unity in which a rich country tries to deal with a poverty situation which is a disgrace in the 20th century.
I pause for a moment before quoting the following;
Freedom from want cannot be forced on a democracy or given to a democracy. It must be won by them. Winning it needs courage and faith and a sense of national unity: courage to face facts and difficulties and overcome them; faith in our future and in the ideals of fair-play and freedom … a sense of national unity overriding the interests of any class or section … (Signed) W. H. Beveridge, 20th November 1942".
§ My Lords, I beg to move for Papers.
§ 3.22 p.m.
§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington)
My Lords, this debate provides an opportunity for us both to discuss and explain the Government's proposals for reforming social security and to welcome four distinguished maiden speakers. It is now rather over two weeks since we published our Green Paper, and many of your Lordships will have had an opportunity to study our proposals for change. I therefore intend so far as possible to avoid repeating what I said on 3rd June.
271 I was disappointed that the noble Baroness, Lady Jeger, was not more informed in her remarks today than when she had to respond more or less instantly on publication day to the Statement that my right honourable friend made in another place. There has been general agreement on the need to review social security. In doing so, the Government have had the vision and courage to look not only at the immediate future, but also into the next century. I regret that the speech of the noble Baroness contained no hint of this.
Consider if you will, my Lords, the scale of social security operations. Spending on social security accounts for some 30 per cent. of all public spending—about £40 billion a year. About 120,000 civil servants and local authority staff are needed to run the system. Forty-thousand of them are concerned with supplementary benefit alone. That is hardly surprising when you consider that the supplementary benefit system is so complex that the instructions for staff dealing with it occupy 16,000 paragraphs in two volumes. And supplementary benefit is only one of some 30 different benefits and allowances, most of them with their own rules and all of them with complex provisions about which benefit can or cannot be claimed alongside which other benefit. It is no exaggeration to describe the social security system that we have today as a labryinth. It is not only true that, as the first sentence of the Green Paper says, the system has lost its way, but also that many claimants are themselves lost in its complexities.
The proposals for change which we have put forward in the Green Paper are radical and structural ones. They are aimed at meeting real need, simplifying the system and putting it onto a proper basis for the future. And let me at the outset remind your Lordships of our undertaking to illustrate the effects of those changes when we publish firm proposals for the new structure in the White Paper this autumn. It is nonsense to suggest that we are concealing detailed figures about the new benefit system. Precise figures have not been settled; indeed, they cannot be settled until later. At that stage we will of course evaluate fully the new structure to ensure that it provides a fair result for individuals and an economical result for the taxpayer. Until then the debate should be about the important structural reforms proposed in the Green Paper. Here I must pause to reply to the noble Baroness, Lady Jeger, and tell her that we shall, of course, welcome representations about the proposals. The Green Paper proposals are the fruits of a long and thorough examination during which there was widespread consultation and public debate. We do not contemplate any major departure from the broad structure of social security as set out in the Green Paper, but of course there is still a lot of scope for debate about details. This is precisely why we did not include illustrative rates and figures at this stage. There are areas where we have specifically asked for comments, such as the idea of having a decade for retirement and suggestions on how best to encourage the spread of industry-wide occupational pension schemes.
I know that the Opposition do not want to discuss the structure of social security. They merely want to play at doubting Thomases. The smokescreen that 272 they are putting about on the need for detailed figures is being raised because they know that this is the first time that any Government have put forward proposals for a fair and comprehensive system for all income-related benefits together. They have no policy of their own, and they are not prepared to discuss the principles on which the system should be based.
I now come to the major proposals in the Green Paper. I shall start with pensions. One of the reasons for my right honourable friend setting up his pensions inquiry was a growing concern about future pension costs. It is, I think, worth dwelling on these briefly, if only because some of the argument since the Green Paper has been channelled into the rather narrow question of, can we afford the state earnings-related pensions scheme? Certainly the sums involved are awesome. If SERPS were allowed to continue unabated, its cost alone would rise to £23 billion a year by 2033. That, is about half as much again as we spend in total on pensions at the moment. And it would push total pension spending up to between three and over four times its present level—between £45 billion and £67 billion a year. As the Green Paper says, costs on that scale must give anyone pause for thought.
The question of whether we can afford SERPS is an important one, but by no means the only one. I would suggest to your Lordships that we should also be asking ourselves whether it is right to earmark so far in advance such a huge slice of public spending. Will the money be well spent then? I cannot believe that your Lordships will think so. I have said that a major aim in the social security review has been to direct resources where they are most needed. Of that £23 billion in the year 2033, half would go to topping up good occupational pensions. We can be pretty sure that there will be many whose needs will be greater than those of the occupational pensioners whom SERPS is set to benefit indiscriminately.
There may not be complete agreement among your Lordships on whether or not the state should be in the business of providing additional pensions. But the Government are convinced that it should not. We believe that the time has come to put an end to the two nations of people with and without occupational pensions by seeing that everybody gets a pension with his job. There can be no doubt that people actually want this. The Gallup survey carried out for the pensions inquiry showed conclusively that people with occupational pensions were glad to have them and that those without would like them. We see the future shape of pensions as a new partnership between the state and occupational and personal pensions. This is not to deny the invaluable job that many employers have done over the years in providing their employees with good pensions. Certainly that is a partnership; but so long as half the workforce remains uncovered, it can be at best a limited partnership. And the level of occupational provision has remained almost at a standstill for two decades.
Our proposals will put matters to rights. They will place the responsibility for pensions on the twin pillars where they rightly belong. The basic pension will remain at the heart of state universal provision. We are pledged to protect its value in real terms, and we have more than honoured this pledge since coming to power in 1979. Only yesterday my right honourable friend 273 announced that the basic pension for a single person will be raised from November by £2.50 a week, and that for a married couple by £4 a week. That is generous but not extravagant. I make the distinction because your Lordships will have seen the proposals put forward to my right honourable friend's inquiry by the Liberal Party. Their suggestion of a vastly inflated basic pension would raise pension costs immediately by £10 billion a year. Even what they describe as a modest first step would add at least £5 billion to the bill. Your Lordships will not be slow to see what that would mean in terms of overall social security spending and national insurance contribution rates. The Government believe that it is better to target help where it is needed, not scatter vast increases in benefit prodigally and indiscriminately.
We propose to phase out SERPS over three years for all but people within 15 years of retirement. At the same time we intend to phase in a minimum pension requirement. This will mean ensuring that employees, except for those in the age group still covered by SERPS, 16- to 18-year-olds and very low earners, have an occupational or private pension of their own from their jobs. They and their employers would have to contribute at least 4 per cent. of their earnings to the pension, once the scheme is fully in place, with the employer meeting at least half of this.
This arrangement will ensure the near-universal spread of occupational and personal provision in the most sensible way. Because the contribution is expressed in terms of a minimum, it gives both employers and employees the flexiblity to decide how much they want to put aside towards pensions. But the very existence of a minimum, although pitched at a level to keep right down any extra burdens on employers and employees, will ensure that everybody will save for a pension and should have enough in retirement to keep him from having to fall back on income-related benefits.
The new framework will be flexible. Defined benefit schemes will be able to count as complying with its requirements, and those which are contracted out now will do so automatically. And personal pensions will have a vital part to play. Once SERPS is phased out and additional pensions rest where they belong, on the second pillar, personal pensions will become attractive to many people and their employers.
We do not think that employers should be able to make membership of their own pension scheme compulsory. Any employee should have the right to opt for a personal pension instead of joining or remaining in an employer's scheme; and if he does so, he should be able to expect at least the same minimum contribution from his employer. We believe that by framing the minimum contribution requirement in the same way for personal and occupational pensions, we shall achieve the important objective of avoiding any threat to the finances of existing schemes.
Personal pensions will also provide small employers who want to avoid having to set up their own scheme, and who are not covered by one of the industry-wide schemes that we hope to encourage, with an alternative way of meeting the requirements of the new pension framework.
We are proposing a very positive step towards more equal treatment for men and women in occupational 274 pension schemes. The Green Paper suggests that, apart from cover for surviving spouses of either sex being required, equal amounts of savings should at equal ages buy equal amounts of annuity for men and women. That of course applies to the proceeds of the minimum contribution. The Government believe that the provision of so-called unisex annuity tables for this purpose will be well within the insurance companies' capacities, when taken with the equality of survivors' provision that I have mentioned. So long as we have unequal treatment of men and women within a system that turns on a statutory requirement, we cannot claim to be making more than token gestures in the direction of true equal treatment in social security.
Our proposals for pensions build upon the steps which this Government have already taken in the Social Security Bill currently before your Lordships' House to achieve improvements in occupational pension provision. At the same time they will release resources into the next century for direction where they are most needed. I think that when the noble Baroness, Lady Jeger, reflects on that and on the scale of cost that would otherwise arise she may rather regret her remarks in response to the Statement on 3rd June, when she said that it was impossible to say that pensions cost the state money.
I will now turn, if I may, to our proposals on income-related benefits. The present system is frankly a mess. We have different ways of assessing income for different benefits. We have a maze not only of benefits but of bits that are added to benefits. We have the absurd situation where people can be better off out of work than in work, and the equally absurd situation where, for somebody in work, a pay rise can mean the extra he takes home is less than the amount that he has lost in terms of benefit and tax and contribution payments.
The Government's proposals will tackle those absurdities. Most fundamentally, perhaps, we are intending to have a single basis of assessment for income-related benefits. And that basis of assessment will be net income. This will create the structure of a new and much more coherent system than the present one.
The new family credit is an imaginative and positive step towards meeting the needs of low-income families. It will represent a real improvement over present arrangements for working families with low incomes. Family income supplement is not the most satisfactory of benefits. Because it is based on gross earnings, it can create a poverty trap effect. Because family credit is based on net income (and is taken into account for housing benefit), it will be virtually impossible for families to face marginal tax rates in excess of 100 per cent. They should be sure of getting an increase in total family income as their earnings rise.
Secondly, family income supplement is based on a one-child family. There are small additional increases for further children, but this takes no account of the children's ages. This is a point on which differences between family income supplement and supplementary benefit are again relevant. Because help is not provided in a way which mirrors supplementary benefit rates, some families—mostly those with older children—can find themselves no 275 better off, or even worse off, when they are working full time than when they are out of work. This is the so-called unemployment trap.
The new family credit will overcome this problem by using the same basic structure as the income support scheme that is to replace supplementary benefit. At the lowest income levels there will be a substantial premium paid to all families, augmented by allowances for each child. When taken with child benefit, the level of benefit should ensure that a family with children will not be worse off in work.
Choice flexibility and the personal responsibility that goes with exercising them are important features of the review proposals as a whole. We are intending to extend to working families with children, by replacing free school meals and welfare foods with an extra cash element in the family credit. The overall aim of family credit will be to make sure that people actually get enough in their pay packet to help meet the everyday costs of living. For that reason, it is clearly better to give them benefits in cash rather than in kind. But families on family credit will continue to be exempt from National Health Service charges.
The very language of supplementary benefit is a jungle. With scale rates, available scale margins, normal requirements, additional requirements, housing requirements and single payments for starters, it is hardly surprising that few claimants can find their way through the jungle or have any clear idea of how their weekly benefit payments are worked—probably the exception is the noble Lord, Lord Banks. And each one of those phrases from the list of jargon that I ran off a moment ago can conceal a multitude of complexities. Take single payments, if your Lordships will. These are one-off payments for items such as necessary furniture or household equipment or for special expenses. But the level of detail to which the administration of these payments can descend is quite horrific. It is, I assure your Lordships, perfectly possible to have a prolonged argument—which may even go to appeal—about whether or not a particular claimant should be given a payment towards a hot water bottle!
Even with this supposed fine-tuning the supplementary benefit system can still fail to meet people's real needs. In seeking to cut through the complexities and to direct resources where they are most needed, we must first ask ourselves whether in fact the supplementary benefit system is right to try to meet small individual needs, or whether it would be preferable to have a broader approach for regular weekly support, with separate arrangements for really special needs and emergencies. We have concluded that this is the better way.
That is why our proposed new structure of income support, with the social fund providing for those special needs that I have just mentioned, is the right one. In essence, income support will provide a flat weekly rate of benefit, with different rates for people over and under 25. But that flat rate will be supplemented by premium rates. So all pensioners will get a premium, with older pensioners—those aged 80 and over—getting a higher one. People with a continuing disability or sickness will also get a premium, as will lone parents. In addition, all families with children will receive a premium.
276 Our income support proposals will provide a much simpler system and will reduce the number of personal questions asked before benefit is assessed. They will direct resources where they are most needed, fitting in both in aims and in administration with the other important income-related benefits of family credit and housing benefit.
We do not want to inhibit thrift. That is why we are proposing to retain the total disregard of the first £3,000 of capital assets, but also to allow people to have up to £6,000 before becoming ineligible for income support. This will provide a proper protection for people who have built up modest savings over the years and, we believe, strike the right balance between incentives to save and the need to ensure that income-related help is not directed at those who have enough to live on without it. A similar concern lies behind our proposals to change the earnings disregards.
If we are to be compassionate, we must recognise that there will be some really special needs which income support cannot of itself meet. I am thinking of the unforeseen expenses imposed by an emergency and of directing particular help at claimants who have real difficulties in managing on their normal incomes. That is why we are proposing to set up a social fund, run separately from income support and on a discretionary basis, to provide help of precisely this kind. I can assure the noble Baroness, Lady Jeger, that it will be run by staff of my department's local offices who will be specially trained to assess situations and give sympathetic and quick help where needed. Let me say at once that we are confident that the fund will work in such a way that help will be at hand wherever it is genuinely needed, no matter when that need arises. In this, the running and financing of the social fund will be no different from that of many—indeed, most—of the statutory bodies and agencies providing what one might in the broad sense call welfare services.
The social fund will also provide realistic help with maternity and funeral expenses for people on low incomes. And I must make it absolutely clear that the tax-free £1,000 lump sum which we are proposing to give widows instead of the widow's allowance will be completely disregarded in deciding whether or not somebody can get help with funeral expenses from the social fund.
Much of what I have said will apply also to housing benefit. Many of your Lordships will have been struck, as I was, by the elaborate diagram in Volume 2 of the Green Paper showing how housing benefit works now. With its intricate network of tapers—the way in which benefit is withdrawn as incomes rise—it was reminiscent of nothing so much as a chart showing the rowing results at one of the older universities. That is why, in a measure which of itself will make a major contribution to simplification, we are proposing a single taper for housing benefit in place of the six that exist now.
Until now the housing benefit scheme has been only slightly less difficult to grasp than supplementary benefit. This was a point which the housing benefit review team, whose report we have published separately, were swift to grasp. They also pointed out that people in similar circumstances can get significantly different treatment, which can lead to people in work getting less than people out of work 277 with similar incomes. By basing housing benefit on the same test as income support and family credit, we shall remove that danger and ensure that people in work get the same treatment as those out of work with similar needs. So far—
§ Lord Ennals
My Lords, I am most grateful to the noble Baroness for giving way. Before she leaves the subject of housing benefit, does she accept that the proposal for the simplification of supplementary benefit and housing benefit are to put straight or to make clear legislation that was introduced by the present Conservative Government within the last four years?
§ Baroness Trumpington
My Lords, I think that the noble Lord, Lord Ennals, could have made that point in his speech.
So far I have spoken about people with equal and undoubted needs. But, my Lords, we are not satisfied that the present housing benefit arrangements, taken as a whole, are concentrated on real need. The way in which both spending and the scope of housing benefit have grown suggests this. We are talking about over £4 billion going on housing benefit in the last year and about 7½ million households benefiting from it. That is over one in three households—a significantly higher proportion than in other countries in a similar position to ours. This means that nearly two households pay for the benefit of one. The review provided us with both the opportunity and the means to direct housing benefit where at is most needed. We have grasped that opportunity, by accepting that households on income support should automatically be eligible for the maximum level of housing benefit. And it follows from what I have said about the unemployment trap that people with the same net incomes as those on income support will similarly qualify for maximum help.
That maximum help will include 100 per cent. rent refunds. We agree with the housing benefit review team that the existing framework of powers will for the most part provide sufficient safeguards to prevent tenants and landlords taking advantage of this, and that the need to provide full help with rents outweighs this danger. There are already powers to restrict benefit in cases where rents seem excessive or where accommodation is bigger than the claimant's circumstances seem to warrant. And, of course, local authorities can themselves refer suspected cases of abuse to the rent officer, who will set a proper rent.
But we believe that local authorities should have a greater incentive to control costs. The price of a simpler system must not be unrestrained growth in rents, at the expense of the taxpayer and the ratepayer. The powers that we are proposing in the Green Paper to vary the amount of direct subsidy to local authorities for benefit expenditure, and the reserve power to set limits to the level of rent eligible for housing benefit, will provide the necessary additional protection.
The question of our proposals for help with rates depends to a degree on what emerges from the review of local government finance. If domestic rates continue to be an important part of local authority revenue, people should have a more direct perception 278 of them and of what is involved than they are likely to do if they can simply expect blanket and total reimbursement of their rates. We believe that it is an important part of local government accountability that everyone should have to pay at least some of their rates; no one should be totally cushioned from the effects of local authorities' policy decisions in this field. That is why we are proposing that the maximum level of housing benefit should fall short of 100 per cent. help with rates. Again, this is the hallmark of a responsible Government, determined to ensure similar responsibility at local levels.
With regard to our proposals on widows' and maternity benefits, we believe that a tax-free lump sum for all widows is a more realistic way of helping them to cope with the immediate expenses of bereavement, and that building on this help, by giving older widows and those with dependant children widows' pension and widowed mother's allowance respectively, on top of the lump sum from the moment of bereavement, is yet again the right way of meeting true needs. So far as maternity benefits are concerned, it is surely right to direct maternity allowance at women who have given up work to have their babies, and to give them more choice about when to give up and when to return to work than they have now, without losing any allowance as a result.
Your Lordships will have noticed that I have spoken at length. I have done so because the Green Paper embodies, by any standards, a gigantic and radical re-examination of a vast structure that affects us all. Reactions to the Green Paper have inevitably varied, though I think that I may say our proposals have been generally welcomed—and rightly so—by those without a particular axe to grind. But on one thing those with axes and those without are agreed—there was a need for a look in depth at social security and for improvement.
Our proposals add up to a system that is modern, effective and compassionate. They take account of changing needs and the responsibility of Government to claimants and to those paying tax and contributions, both now and far into the future. They will make a determined onslaught on the poverty and unemployment traps. At the beginning of my speech I set out the Government's objectives. Those are objectives to which we remain firmly committed. The proposals that I have outlined will meet them in full.
§ 3.54 p.m.
§ Lord Banks
My Lords, the House will be grateful to the noble Baroness, Lady Jeger, for raising this important subject this afternoon. It has provided us with the opportunity at an early date to discuss the Government's proposals. The noble Baroness, Lady Trumpington, has given us a fairly comprehensive resumé of those proposals. I think the Government are to be commended for undertaking the reviews; but it seems to me that they have left a pretty short period of time for consultation to take place. Three-and-a-half months, covering the holiday period, does not really seem long enough. There are in the proposals some measures which we would support and many about which we will want to be strongly critical.
I should like to begin with a regret, and follow with a complaint and two questions. The regret is that the 279 review, lengthy though it is, as we realised this afternoon, is not fully comprehensive in that it does not really take into account the operation of national insurance and that some national insurance benefits are not examined at all. The working of national insurance is generally outside the scope of the review. The tax and social security systems will be better aligned as a result of the proposals which the Government are now putting forward, but they remain separate. They are not integrated. The integration of tax and social security will undoubtedly come about before too long, and when it does I fear that it will mean another upheaval of the kind that the Government are now contemplating.
In that context, I think it is important to bear in mind that two of the Government's schemes, which they have been persuading this House were excellent and which were introduced during their current term of office, are strongly criticised in the Government's reviews; namely, the new supplementary benefit regime, and housing benefit. I think that is the point that the noble Lord, Lord Ennals, was making. One of those is to be replaced and the other is to be considerably modified. I think we have to be very careful to avoid a period of continuous upheaval in the social security field.
My complaint is the universal one that there are no figures. I can understand the Government's desire to have the structure carefully considered; but we cannot pass final judgment on the structure without the figures. We need to know how that structure will operate within the resources that the Government are prepared to make available. We need to know who are the gainers and who the losers. We need to know how much the gains and losses entail.
My first question is this: is it correct that the Government are hoping to save £1,000 million as a result of these activities? We on these Benches, the parties of the Alliance, are against cutting resources for social security. We believe that if any genuine and justified savings can be made, they should be re-allocated to improve benefits which are acknowledged to be inadequate, such as the retirement pension; or, for example, the earnings rule could be abolished or a proper disability income introduced—two things to which, as I understand it, the present Government are committed.
The second question is about the review teams. I wonder whether the noble Baroness can say if it is correct that members of the review teams are not in any way committed to the proposals in the Green Paper? Certainly the public comments of the advisers in the pensions field seem to suggest that this is the case. If I may, I should like to make a brief comment on the different elements within the Green Paper. First, there is income support, which is replacing supplementary benefit. Undoubtedly the Government's proposals would lead to some simplification of the present supplementary benefit arrangements. There is, on the one hand, to be a separation of the benefits into income support, and on the other, the social fund, which will deal with single payments and emergencies. We have worries about both of these. For example, premiums are to be paid in addition to the scale rates for certain categories of 280 claimant, and these will replace the additional allowances which people receive at present to meet certain specific needs. What we do not know at the moment is whether these premiums will in fact fully replace what people are now receiving by way of special allowances. Some disabled claimants rely for as much as 30 per cent. of their weekly benefit on extra allowances. Will the premium for the disabled adequately replace that? Much the same is true of pensioners. Again, it is a question of needing the figures.
Then, the social fund is to be cash limited. As I understand it, this means that offices throughout the country will have an allocation from the limited fund. But what happens if an emergency arises after the funds have run out? Can the noble Baroness say what percentage or what proportion of the disbursements under the social fund it is anticipated will be by way of loan? It would seem very unfortunate indeed to increase indebtedness among the poorest people of the country.
Then there will be no appeal. I understand the Government's desire to simplify things; but is it right that the answer that the claimant gets is final and that there is no appeal at all against the decision? One of the most unsatisfactory features of our social security system in recent years has been the fact that so many people have come to rely on supplementary benefit. There is a great increase in the numbers. It would seem that the Government envisage that continuing. There is no attempt, as I understand it, to take people off means-tested benefits, which would of course be one of the objects of a tax credit system.
Turning to housing benefit, we welcome the fact that the rules of the new income support scheme will be used to assess entitlement to housing benefit. We welcome the fact, too, that net income will be used as a basis for the scheme. But we cannot support the proposition that all should make a contribution of 20 per cent. to the rates. Will this not mean a cut in housing benefit for everyone, including the poorest? Pensioners account for over one-half of all householders who are helped by housing benefit. Would it be right to impose an additional burden on pensioners, particularly when it is generally recognised that the basic retirement pension is inadequate? Again, we need the figures here to see precisely what will be the effect of what is proposed.
I now come to family support. We are glad to know that child benefit is to remain. We were worried, because it appeared that it might not be index-linked in the future, and yesterday our fears were justified when we learned that it is not to be index-linked this year. What I want to ask the noble Baroness is this. Is child benefit to go down the same road as the death grant and the maternity grant? Is it to be allowed to decline in value every year, until the Government say that it is now so small it is not worth keeping and that it costs too much to maintain it?
We have to bear in mind that child benefit was introduced to replace family allowances, but also to replace income tax allowances. It is a means of a general readjustment between those with children and those without children—a point that was made clear in Sir John Walley's letter in The Times yesterday. Again, family credit, which replaces family income 281 supplement, is to be based on net income rather than on gross income and that is a move in the right direction. We would support the Government's intention to make sure that people are not better off out of work than in it. It seems that family credit would help mitigate to some extent, but perhaps not by very much, the poverty and employment traps. However, we cannot welcome the fact that family credit paid through the employer will go to the husband in most cases and lead to a transfer from mothers, who get the money at the moment, to fathers. We think that is a retrograde step.
So far as the death grant is concerned, there is to be benefit paid from the fund to those who are unable to meet funeral costs. How will that be assessed? I notice that if benefit is paid out from the estate it is ultimately to be recovered if the estate is above a certain size. Would it not be more sensible to allow everyone to claim and to recover it through this method that is to be used in any case for those who are granted benefit after means testing? That would avoid means testing at the time of bereavement. I cannot really believe that it would be more administratively expensive, because it would eliminate a means test, and we all know that the means testing of benefits makes them expensive to administer.
I should like to say a word about pensions, and here I should again declare an interest again since I am an insurance broker specialising in pensions and life assurance. The Liberal Party has consistently argued for a larger basic pension rather than an earnings-related pension. We have argued, in addition, that there should be a special provision for those not covered by an occupational scheme, in that they should be allowed to invest in a personal pension plan up to 3 per cent. of their income and receive a matching contribution from a central account administered by the Government, but paid for by a levy on all employers without a pension scheme.
I first put that forward in an article in the News Chronicle in 1958 and it became Liberal Party policy in 1960. In 1975, in the Second Reading debate in this House on the introduction of the scheme now in operation for pensions, I made the point about a larger basic pension rather than an earnings-related one and put forward this scheme for special provision. Since then we have been worried about two problems, the first of which is the problem of cost, to which reference is made. Perhaps I may be permitted to say that in that 1975 debate I said that we were committing future generations to pay more than we were prepared to pay for our own pensions today.
The second problem that we have been worried about is the fact that under existing arrangements the oldest would remain the poorest, so far as the state scheme is concerned, until about the third decade of the next century. And of course the earnings-related pension gives more to the better off and does not help those who are already retired to any great extent—most of them not at all and others to a very small extent.
So I put forward a plan to meet those two problems, which secured the support of a series of joint meetings of the taxation and social security committees of the Social Democrat and Liberal parties. The essential feature of it has recently been advocated in another 282 place by both Mr. David Steel and Dr. David Owen. The basic feature of that plan was that the earnings-related pension should be abolished, guaranteeing accrued rights, and that contracting out should be ended. Those are the first two points of it, and the Government are to do those things for men below age 50 and women below age 45.
It then said that everyone should pay contracted-in contributions and that the extra money raised in that way would pay for a 25 per cent. increase in basic pension. This the Government are not doing, except that those formerly contracted out will pay some additional contribution, but there is no increase in the basic and that we very much regret.
Then we advocated the plan, which I mentioned just now, for 3 per cent./3 per cent. into a personal pension for people not covered by an occupational pension scheme. The Government are proposing to make it 2 per cent./2 per cent. and to introduce something very similar, except that we said it was a right that people should have and that they should be free to decide whether to take it up. I notice that Peter Kellner in the New Statesman said that there is a strong libertarian argument in favour of that. However, the Government propose to make that compulsory.
Then we said that people in an occupational scheme should have an option, when they were newly entering the occupational scheme, to go in for the personal pension arrangement instead, on a 3 per cent./3 per cent. basis. The Government are saying that this can be done at any time. We did not go as far as that, because we felt that it would be destabilising for pension schemes. I shall be interested to hear what the noble Baroness thinks about that.
So the Government have followed some of our suggestions, and obviously I welcome that. But the absence of a substantial increase in the basic, which apparently was advocated in the review team by Professor Alan Peacock, is a major obstacle to our supporting the Government's pension package as it now is.
I agree with two sentences in the evidence which Age Concern presented to the review, when it said:We advocated an earnings-related contribution but not a pension related to earnings, since we found it impossible to justify the notion of a differential income in retirement supported by the state".However, it went on:Age Concern does not want to see any Government abolish the earnings-related pension only to do little or nothing to raise the basic pension".That would be my position exactly.
To sum up the Green Paper as a whole, one of the arguments against our present system of social security is its complexities, as the noble Baroness, Lady Trumpington, has reminded us this afternoon. Some of the proposals in this Green Paper should help to reduce that. But another argument has been the confusing variety of separate sources of benefit—national insurance, supplementary benefit, family income supplement, housing benefit, statutory sick pay and child benefit. Under their new names, and amended in the way proposed, they would still continue separately. They would be better aligned and better co-ordinated, but they would still be separate. In addition, of course, the income tax system would still 283 be separate. Its impact on social security would be modified, but it would still be operating separately. Our eventual aim must be to bring them all together in one single system, and any steps we take in the meantime must be such as will not frustrate that aim.
§ 4.10 p.m.
§ Lord Silkin of Dulwich
My Lord, may I begin by thanking the noble Baroness, Lady Trumpington, for her general welcome to maiden speakers, and, if I am allowed to do so, at the same time express my gratitude to individual Members from all parts of your Lordships' House for their very generous welcome to this particular rather elderly maiden? I do so with the thought in mind that there is of course a tradition of generosity from your Lordships to fellow Members of the House—I hope not to take too great an advantage of that, and certainly not today—and because I believe that that welcome owes something, at least, to the respect which Members of this House felt for my father, who in the last two decades of his life devoted his time to this House, for which he developed a very great affection.
I mention him more particularly because it seems to me that while we can debate this subject perfectly properly in isolation, it forms part of something very much larger in which he played a major role in the years immedately following the war. I refer to the development just before the war and just after the war of a system of community provision, whether it be Butler in education, Bevan in health or Beveridge in the subject we are discussing today, which certainly at one time became the envy of the world: a system which provided or sought to provide, in general with very great success, that the extremes of poverty were mitigated and that the worst features of life, the accidents of life, were guarded against irrespective of the origins or means of the citizen concerned.
As time has gone on that system has been modified, and from time to time it has been improved. It has perhaps worn somewhat thin in places. I believe that we have to look at the Green Paper against the background of how that system stands today. It is certainly very thin indeed in a number of places. What is important is that when we come to look at the basis of the Green Paper and ask ourselves what it seeks to do, we have certainly to accept that after 40 years of a system in which, as it were, a suit of clothes has become worn and we have become used to it—it has been patched up here and there—it is necessary to examine it to see whether something better and something new is required. That is how the Government suggest they are looking at it.
I am certainly not going to cast any aspersions on their approach, though I am bound to look at what they have done in the context of what is happening in the rest of the social welfare system. Therefore, it is perfectly reasonable that there should be the bringing before Parliament of this new suit. What is perhaps a little surprising is that, contrary to the traditional position, what we seem to have here is the new suit visible but no sign of the emperor. The emperor is, after all, the flesh and bones by which one can test the measure of the new suit itself. Without that, it is difficult to know where it pinches, where it is too tight, 284 where it is too loose, where it is too short and where it is too long. It is unfortunate, whatever the reason may be, that in debating the subject we do not have that benefit, particularly, and perhaps surprisingly so, because it is not as though the Green Paper provides us with no figures at all. On the contrary, there is the £1,000 benefit for widows, to which reference has been made. But why we could not be provided with all the figures is something one should like to understand.
I want to deal as quickly as I can with two specific matters in relation to the Green Paper. The first relates to income-related benefits, referred to by the noble Lord, Lord Banks. I certainly welcome the provision which is to be made, apparently, that the basis for computing those benefits should be net income rather than gross income. Having said that, it leads me, as I believe it led the noble Lord, Lord Banks, to ask why we cannot have a system in which you receive your benefits and, having received them, you are then taxed upon the gross income which you have received after any necessary disregard has been made. The Green Paper does not go into argument on that; it refers to the difficulties of what is apparently called "churning". I do not know, but in my experience as good things have come out of churns as have gone into them, and I for one should like to know why it is that that solution has been rejected in favour of the one in the Green Paper.
The second and final matter with which I want to deal specifically is the question of the earnings-related pension. The Green Paper justifies what is proposed on the basis that, because of demographic changes which will be likely heavily to increase the proportion of non-earners, particularly pensioners, to those who provide the resources of the community, we cannot afford to pay them what would result from the present scheme. It is said that we cannot afford to compel the workers in 20 years', 30 years', or however many years' time it may be, to provide for those who have done their work for the community. The first point I find difficult about that argument, in relation to what is proposed, is that it is hard to follow what difference is made, so far as the Government's proposals are concerned, by such an approach.
What is provided for the pensioner or the non-worker at any one time is a part of the resources of the community which are being earned at that time. Nothing else can be used for that purpose. How will the problem be helped by pushing that particular duty off the backs of the taxpayer and the working population and onto private insurance schemes which will have to make use of precisely the same resources, though no doubt achieved in a slightly different way? Perhaps it will not be all that different, if one has regard to the kind of investments which have to be made, whatever the source may be.
Secondly, and perhaps even more importantly, when we say that the working population cannot afford to give such benefits to those who retire, are we really accepting that because of changes in the balance between the workers and those who have done their duty to society a lesser standard of living should therefore be provided for those who have done their duty? Are we saying that in that sense we cannot afford to make the correct provisions? In fact, one can afford what one wants to afford. If we want to afford a decent 285 standard of living for those who have retired, we will do so. I do not understand how it can be used as a justification for this change—that we cannot afford it.
I have already outstayed my leave by a minute or two. I have done my best to be non-controversial, while asking the odd question or two. I have always regarded myself as a singularly non-controversial person, until one day I woke up to find myself described as "the controversial Attorney-General". I promise your Lordships that in future I shall be less controversial.
§ 4.23 p.m.
§ Baroness Lane-Fox
My Lords, it is my pleasure that it falls to me to congratulate most warmly the noble and learned Lord, Lord Silkin of Dulwich, on his maiden speech. Being aware of his distinguished career in another place, we can hardly say that we were surprised by his excellent speech this afternoon. It is however heartening when still further funds of knowledge arrive in your Lordships' House, such as that which has been so ably exhibited by the noble Lord.
Some of us who have grown up with the social security system have a great deal for which to be thankful. Perhaps most of all it has helped to bridge the gap when inflation and the high cost of living so escalated the cost of simply existing that outside help became vital. Indeed, so conscious are some of the system's beneficiaries of the value of its assistance—means-tested or otherwise—that it is not the normal course to complain and try to pull the system to pieces. Nevertheless, anyone who has watched and lived with the passing scene over the past 40 years must be aware that this whole area has grown to skyscraper proportions, not always following a logical design.
Who could have visualised, when the social security system began, that it would eventually be costing £40 billion a year? I believe that even the noble Baroness, Lady Jeger, if she were here, would agree that this is the first real full review of social security since Churchill's wartime coalition commissioned a review from Lord Beveridge. So it would be mad to suggest that a review is not due; in fact, one is overdue. The Government deserve to be warmly commended for facing up to that fact and for not burking the issue. It is to be hoped that the Government get the credit they deserve.
An important factor is the change in public expectations. It is hardly surprising that post-war generations are more sophisticated in their demands for provision. This influence has helped the system to grow so piecemeal that it is often difficult to understand, as we have heard, and complex to administer. It has been like a conveyor belt, with more and more items piled on as it keeps moving. This review marks a profound, constructive and courageous step to see where the loan requires to be rearranged to suit the need.
For reasons best known to those who say or write it, I have heard it suggested that the intention is to dismantle the welfare state. I consider that to be a mischievous, alarmist suggestion. It is a suggestion which, if there were any truth in it—and I know that there is not—I could never support. Those of us who 286 are privileged to work closely with the more unfortunate members of the public always are privileged to have their needs in mind. There is no doubt that a better-targeted system is the only way to ensure that the long sought-for maxim of the most help for the most in need can come true. Even so, thinking recipients have been worrying about where the money is coming from to finance the continuing pension commitment. Those who have got down to making a few calculations realise that to have allowed the conveyor belt to run on would be to have dug a pit for the endeavours of younger generations in the new century that is so fast approaching us.
Enough is enough, and of course it is right to plan a coherent, merciful and workable scheme that will retrieve those worst hit by life and better match the lifestyle of the rest. I realise that on such a delicate matter it is hard for some sections of the Opposition to resist suggesting that there are evil ulterior motives. But noble Lords opposite would, I believe, truthfully accept that it is owed to everyone to get best possible value for the money spent, since that money comes from the public themselves. I am sure that we in this House all recognise that it is far too easy to make mind blowing provisions and that in order to be conscientiously constructive it is necessary to be cost-conscious and realistic.
That is the answer I gave to one of the many people from whom I receive letters. This particular lady had written to say that she understood that the Labour Party planned to continue to pay invalidity pension on top of retirement pension. I am not suggesting that any noble Lord ever suggested that to her, but that is what she wrote. This lady thought that it was just to be a lovely handout from a private fund of the Labour Party. She was obviously quite wrong.
§ Baroness Lane-Fox
The difficulty she faces, my Lords, of rising expense is a very genuine difficulty encountered by ageing disabled people, as we all know. The sad fact is that successive Governments have punished this group through the mobility allowance. It is extraordinary that new claimants are ineligible after the age of 65 and the allowance is cut off, immediately, for recipients at the age of 75. That is pretty draconian treatment and my hope is that my noble friend the Minister will recognise this as an area of need that calls for attention.
Once it is made clear that there is no special magic reservoir of money people will depend entirely on careful management of their affairs. Nobody could say that it is good management to leave a financial scheme unreviewed for more than 40 years. Obviously, those among whom I work are cheered to see that a new incomes support scheme will give them a guaranteed weekly income, although apprehension is felt that there is need for careful explanation, which I trust will be provided to all disablement groups. What is more, some of us believe that the major national survey at present in hand will, for the very first time, reveal the numbers, the circumstances and needs of disabled people. These revelations may well prove to be inconvenient. The fact that, despite this, the Government are pressing on regardless in search of the truth in this area shows the wisdom and compassion of 287 the Secretary of State and the Prime Minister. This is not the work of any cynical Government wishing only to find cosmetic answers. This survey is a caring survey, geared to find the true situations in which people find themselves, however sad those may be.
As your Lordships know, when your difficulties are pretty unbearable it is salubrious and heartening to make them known, and the results of the survey will be of great importance to individuals as well as to the Government. Certainly the advance in medical science has allowed many more elderly and disabled people to survive and over the past six years £1 billion more has been paid out to the extra numbers claiming long-term sickness and disability allowance alone. These numbers cry out for the current survey, all the more so since the Government are committed to working towards a more coherent system of cash benefits for disabled people.
This is, of course, just one facet of the comprehensive social security review, and I realise that. My noble friend the Minister has assured us that the way is still open for influence and suggestion in this area. It is my hope and belief that the outcome will improve the lot of those we long to help.
§ 4.33 p.m.
§ Baroness Warnock
My Lords, perhaps I may first join with the noble and learned Lord, Lord Silkin, in expressing my gratitude to the House for its generosity and its welcome and then go on to crave still further indulgence if I make a few maiden observations on the Green Papers under discussion.
I think it would be difficult to disagree with the avowed purpose of the Green Papers, which is to provide social security primarily and mainly for those who most rely on it and then to simplify the means of access to this security. The extent to which these two admirable aims can be connected with saving any money is, I think, a matter that is far more dubious; but I do not want to say anything, even speculatively, about the finances involved. However, there are three general points I should like to raise.
The first concerns supplementary benefit and the abolition of this in favour of the new system. Supplementary benefit is at present paid to all those whose resources fall below an agreed level, and a level which can be readily ascertained by anyone. It is to be replaced by a system of payments for specific needs. I am bound to say that I share the doubts of the noble Baroness, Lady Jeger, on this particular issue. These payments are to be made at the discretion of the department from the new social fund. The point of this change is to direct help exactly to where it is most needed and that, of course, is a very good aim. However, I am anxious about the consequences if payments are to be made by the local DHSS office according to its assessment of the claimant's need, and, of course, depending on how much money there might be left in the fund, either nationally or locally, when the claim is made. I am very much afraid that the claimant may not fully understand why the claim is either turned down or, indeed, allowed. Yet if there is openness, which I strongly believe there should be, this may result in what will, in effect, become a strict 288 set of criteria according to which a claim can be made and the flexibility of the system, which is supposed to be its merit, will, of course, then be lost.
I am not in the very least bit comforted by the assurance that the funds will be distributed by experts who will counsel the claimants. I have fairly recently come across a doctor of medicine who assured me that he, personally, always counselled his patients when they came seeking treatment for their infertility. I asked him whether or not the counselling proved useful. He replied that it did, that it was extremely useful, and he generally managed to counsel his patients until they went away. I fear that the counselling of claimants for discretionary grants might come to have the same sort of success and I fear, too, that the most helpless and the most bewildered claimants will be the first to succumb to this kind of counselling.
My second point is rather different. Throughout the Green Papers there is visibly the intention that the provision of pensions and grants for certain contingencies, such as funerals, should be to an increasing extent partly the responsibility of the beneficiaries. They say that people ought to begin forthwith to save for a rainy day—the day their spouse dies or the day they die themselves. That is to say, we should insure against old age and death. The picture of the thrifty household with its modest savings in a stocking or put away in a crock is doubtless attractive, and I am certainly not suggesting that people should not save. I believe, too, that once upon a time people saved rather more than they do now. The fact is that most people have completely got out of the way of saving, and in order to induce people to save for the future they must feel a certain level of security in the present.
It is very difficult to look to the future unless you are confident that the present can look after itself. Those who are interested in, for example, preventative medicine complain of difficulty in making people believe in their own future; but I have heard it said that the future is a middle-class concept. That is doubtless somewhat exaggerated, but I think it is true that we cannot, overnight, turn non-savers into savers. We must recognise that there is an enormous educational task to be performed first. Those most in need of provision, whether for their own widowhood or for their own funeral, are, as a matter of fact, the least likely to be ready to contribute, to understand the need for contributing, unless they can come to think differently about their own future.
My final point will be very briefly made. Though it is true that in specific ways the Green Papers progress beyond Beveridge, in some respects these papers may almost have been written in the 1950s. The assumption throughout the papers is that the typical family is one where the husband has been working for the same employer virtually all of his working life, where the mother does not work but is at home with the children, and thus it makes sense to describe a family support payment which is to be made to the father through his weekly pay packet.
Despite some modest concessions to the unemployed in the papers, throughout I think there is hardly any recognition that the pattern of people's lives may in the future be totally different. Long-term 289 unemployment is just one of the matters which may make people's lives different. Besides long-term unemployment, I believe we have to consider part-time employment, sporadic employment, shared jobs, and attempts at self-employment which may sometimes come to fruition and flourish but quite often may quite suddenly collapse. All these are phenomena of which I think we shall see a very great deal more and which among both men and women may in future be taken as normal.
I hope that in future discussion of the Green Papers, which I sincerely hope there will be, a bold and imaginative way can be devised for matching social security and pensions to these new and various needs. This is the direction in which I believe we should be progressing.
§ 4.42 p.m.
§ Lord Grimond
My Lords, it is an honour to be called upon to congratulate, on your Lordships' behalf and on my own, the noble Baroness upon her notable maiden speech. High things were expected of her. She comes to us with a long history of achievement in different fields. I am sure your Lordships will agree that we have not been disappointed. Of course, she has at least two great advantages in dealing with this subject. First of all, I understand she has mastered existentialism, which is the only subject of equal complication to the welfare services. Secondly, she has an elegance of expression which conceals any possible scintilla of controversy which might enter into her speech; I am not suggesting that it did: but the great art of being controversial is to appear not to be controversial. I know we look forward with great expectations to many further speeches from the noble Baroness.
Perhaps I may say two things which are not perhaps strictly relevant. One is that I and the noble Lord, Lord Blake, once commissioned and published a book by the noble Baroness called Education: a Way Forward. I recommend it to all your Lordships and take this advantage to give it a plug. The other point which perhaps I may mention is that I was for many years a friend of her brother Duncan, whose death we all much regret.
May I also congratulate the noble and learned Lord, Lord Silkin, from these Benches? He is an old friend, not only from the Commons but, indeed, from before the Commons—from the apple trees of Normandy! I enjoyed his speech very much, again with its great care to avoid any touch of controversy.
I agree with those noble Lords who have pointed out that the present system of welfare is complicated and expensive to administer, and has lost sight of its main aim. I think it is worth restating what is its main aim, which to my mind is very simple. The aim is that no-one in this country should be forced to live below a certain level through poverty. That may seem very obvious, but in point of fact it has somehow been lost sight of in the development of the general system of welfare. The main aim is to help the poor. In some ways, it is the rich who have gained.
Here I follow the noble Baroness who has just addressed us. It seems to me that one cannot separate the welfare services from the general state of the 290 country and its industrial organisation. As she pointed out, unemployment and other changes certainly affect these services. Nor can the welfare services be separated from other transfer payments which are not usually regarded as part of the social services.
Therefore, I would suggest that when the Government are engaged in discussing the matters raised in the Green Papers they should also look at the general running of the economy. They may consider how far the spread of ownership and how far, for instance, Mr. Weitzman's book The Share Economy are relevant to this question. I believe, as I hope the Government do, that as this country grows richer the need for social services should decrease. The need for medical services may well increase because we have learned to keep people alive longer and learned to deal with new diseases. However, as we grow richer the number of people who are in or near poverty should surely decrease because they should be given a share in the general prosperity of the country.
It seems to me that what is very relevant to the future of these services is how we shall divide out the profit, so to speak, from the new technologies. At the moment it appears to me that capital is reigning very much at the expense of labour, and that we are in danger of becoming a country in which the comparatively few people who own or who are engaged in the new technology become immensely rich, while the great run of the population benefits from it hardly at all. I think that will have very serious effects upon the welfare services, will be very undesirable and can only be obviated by looking again at ownership and the spread of wealth.
Further, it is clear that some of the subsidies which have been paid benefit principally the comparatively well-to-do middle classes. This is true, on the whole, of the housing subsidies, with advantages to the mortgage holder. It is true of further education. It is true, to a great extent, of passenger services on the railways. Anyone who doubts this should read A Strategy for Equality by Mr. Le Grand, which points out very clearly how it is the middle classes who have gained from these transfer payments. I should also recommend the reading of Change by Mr. Arthur Seldon, which points to the same phenomenon and also to the phenomenon which I understand from reading the Green Paper is called "churning"—a new phrase to me but not, I gather, to the noble and learned Lord, Lord Silkin.
To my mind, there is no doubt that the social services have taken a wrong turning and that we are now wasting an immense amount of money in, on the one hand, taxing people and, on the other, repaying them in subsidies of one form or another. We are also subsidising people who do not need it at all.
That brings me to my main theme, which has already been mentioned by my noble friend Lord Banks. Have the Government abandoned altogether the tax-related approach to the social services? Personally, I believe that what this country needs is a minimum income, payable to everybody. I do not think that we can now say to people that if they become poverty-stricken or disabled through one cause they will get more or less than they will if it is through another cause. I believe that we should aim 291 for a minimum income. As a step towards this, I think we should advance on a tax-credit system or reverse income tax. I should very much like to know whether the Government have virtually abandoned this approach. It may be said that it is casually mentioned on page 19 and in connection with the family credit scheme. However, on the whole they seem to have been moving away from this. Not only was it put forward many years ago by a notable Liberal, Lady Rhys-Williams, but it has in the ranks of the Conservative Party that great ornament Sir Brandon Rhys-Williams. Has he been abandoned by his party, too?—because, personally, I think this is the way forward. It is very noticeable that under the present system the most appalling anomalies take place. It was pointed out in another place only yesterday by Dr. Owen that in certain circumstances a family earning £26,000 a year pay a lower proportion in tax and contributions than a family earning £8,000 a year. This is really intolerable. It could be overcome by moving in the direction of a national minimum income through the tax credit system.
I am afraid that, much as I respect the Government for their apparent desire to look at the fundamental needs of social welfare, they have not done so. Once again, their words do not seem to be carried through in their actions. I do not believe that this Paper is revolutionary. I do not believe that it will make much difference to the complications of the social services. For instance, the social fund will be immensely complicated. It has already been criticised by several speakers. The idea that local officials can deal with special cases without setting up a great feeling of injustice and also fresh demands for newer systems seems unrealistic. The present scheme has endless complications, largely through taking note of exceptional circumstances and trying to deal with them in ad hoc ways. That will happen again.
Like previous speakers, I wish to know about the limit of the fund. Is it to be limited for a certain period? If so, will those who first come to the fund be better off than those who come later? If the fund is exhausted presumably those people who come at the end of the period will get nothing at all. This is not the way to make social welfare services either simpler or more acceptable. I also have doubts (although, here, I fear that I may not carry my noble friend Lord Banks with me) about the funding of pensions, particularly in the public sector. It seems to me, as already mentioned, that pensions are paid for out of current production, whether you like it or not. The resources come out of current production.
For many years I served upon the House of Commons pension fund. We paid a great deal of money to eminent stockbrokers and the public trustee. One day they came along and said, "I think you ought to know that we have lost half your fund. The stock exchange has fallen and it is worth exactly half what it was". I thought that this would be distressing to my fellow trustees. I expect that the noble Lord, Lord Barnett, will know about this. But not at all! If the fund falls, the Treasury pays. It makes not the slightest difference to House of Commons pensions whether the fund is a success or a total failure. I wonder how many more funds are in that position. We should face up to 292 the fact that pensions are a charge upon current production. They have to be paid out of current production, however it is done—whether through Government, through private firms or in any other way. Society has to face up to the fact that it has to look after its old folk, of whom, I may say, I am one. I am afraid, therefore, that I do not regard this as a revolutionary or wholly satisfactory start to a controversy or discussion. I hope, however, that discussion will take place.
I should like to conclude by recommending two old saws to the Government. The first is that they should have the courage of their convictions, which they have been losing to a great extent lately. Secondly, as they are going to be hanged anyway—you cannot deal with the welfare services without stirring up a hornets' nest—they may just as well be hanged for a sheep as a lamb. I therefore recommend them to go a great deal further in the directions that I have indicated, and not to stop at what I regard as a rather muddled point in their discussions.
§ 4.54 p.m.
§ Lord Williams of Elvel
My Lords, it gives me great pleasure to associate myself with my noble and learned friend Lord Silkin of Dulwich and the noble Baroness, Lady Warnock, in thanking your Lordships for the courtesy that you have extended to me and my fellow maidens—if I may use that expression—today and indeed on our arrival in your House. Many noble Lords have been kind enough to tell us about what we should be doing and should not be doing. I retain with special affection the advice of a noble Lord who told me that it would take me at least five years to find my way around this House. In the context of today's debate where a number of noble Lords have complained about the absence of figures, I regard the presence of this particular figure as being of fundamental importance. However, it seems to me at the present stage to be a serious under-estimate of the time it will take me to get established here.
With your Lordships' leave, I should like to make some observations on the proposals put forward by the Government to modify the state earnings-related pension scheme. I shall try as far as possible to avoid the rather distasteful acronym of SERPS, but I fear that I may be obliged to use it. I hope very much that your Lordships will agree, whatever the views of individual Lords about the substance of such proposals, that it is of great importance that these matters be fully understood by informed public opinion. If they are not, there will at best be only partial acceptance. And if there is only partial acceptance, there will inevitably be renewed controversy. There may well be controversy in any event, but I should like to leave that aside for today, and offer, in a constructive spirit, some comments on four points relating to the proposals which I believe the Government will wish to look at carefully when they come to present their White Paper in the autumn.
The comments that I offer in this spirit I make because I believe that we are dealing with a proposal, or a series of proposals, of very great social importance. It is in the tradition of your Lordships' House, I understand, to attempt to maintain, even across party boundaries, the principle of national 293 cohesion. We should make no mistake about it. National cohesion is here at stake as a central part of the fabric of the social security system is modified. My first point concerns the question of funded pension schemes as opposed to unfunded pension schemes. As I understand it, the Government, in their proposals, intend to change from a wholly unfunded scheme to a partially funded scheme. The basic pension will continue to be provided on an unfunded basis through the national insurance system, but the top-up will be provided on a funded basis.
Funded schemes are of course common in the United Kingdom, in North America, Canada and elsewhere where trust law prevails. Unfunded schemes are common where Roman law prevails. Indeed, if your Lordships look at companies in France, the Federal Republic of Germany, Italy or Spain, you will find their schemes are entirely unfunded. There appears to be no intrinsic moral virtue in a funded scheme as opposed to an unfunded scheme. I think all of us would welcome an explanation from the Government, when the White Paper comes forward, on the merits that they see in changing from one particular method to another particular method of providing for pensions.
The second point is that the Government propose not only to fund partially the pension scheme but to fund it through the private sector rather than the public sector. The estimates of the total annual contributions for the 10 million or so people who are at present covered by the state earnings-related pension scheme—the estimates of the contributions required to maintain the top-up—are of the order of £4 billion a year to provide benefits broadly equivalent to the benefits provided by occupational schemes existing in the private sector. There seems, again, no clear expression in the Green Paper of why this £4 billion should be directed towards the private sector rather than the public sector. For instance, in Sweden, there is a funded pension plan which is run by the public sector rather than the private sector. I understand that the Green Paper talks about partnership. I would welcome some further extention of these explanations when the Government come to publish their White Paper.
Thirdly—and I mean no disrespect to the noble Lord. Lord Banks—I wonder whether the private sector will be able to cope with the new influx of customers who will come to the privately-funded part of the pension scheme. Generally, to date, those who belong to pension schemes do so in the context of their employment. They are part of a company scheme or of a local authority scheme. It seems to me that what is proposed (and I hope that I do not misunderstand the provisions of the Green Paper) is that individuals should be taking out their own pension schemes for the top-up rather than be part of a general scheme administered centrally or by a competent body.
Generally speaking, private pension plans as opposed to occupational schemes provided by companies are for higher income earners, and those who will come onto this particular market as a result of the changes proposed by the Government in the Green Paper will have earnings of approximately £80, £90 and £100 a week. As I see it, it will be extremely difficult in administrative terms—although again I ask 294 for clarification—for the industry to absorb this influx into this relatively limited market at present. I hope that your Lordships will agree that nothing could be worse than a failure in administration of a new scheme when it is put into practice. Before we can be completely persuaded, I should very much like to see some more reassuring noises coming from the industry itself, indicating that it is properly geared to accept this new influx of clients.
Finally, there is stress in the Green Paper on partnership between the public and the private sectors. The Green Paper says that,employees will be required to contribute to an occupational or personal pension".I imagine—and again I look for clarification—that this requirement will be in the form of some statutory obligation.
Quite apart from the libertarian points, which I do not want to raise, I believe that your Lordships would welcome some view from the Government, when they come forward with their White Paper, on exactly how all this will operate and, if there is to be a statutory obligation, how this will be policed, what will be the sanctions, and who will knock on whose door and say, "You have not paid for your pension plan".
I should like to conclude where I started. In order to ensure a proper level of public acceptance of proposals of such importance, a full understanding of what is intended is necessary. I am sure that this will come with the White Paper and with the explanations that will accompany it.
I hope that I have not abused the courtesy that your Lordships have extended to me as a maiden speaker by exciting controversy. My purpose has been to help in this process of understanding and I feel sure that the Government will be thinking carefully—indeed, have been thinking carefully—about the matters that I have raised. I hope that your Lordships will excuse me if I say, finally, that I may well adopt a firmer position on certain matters in future debates.
§ 5.4 p.m.
§ Lord Swann
My Lords, in the light of his distinguished career in finance and industry I am sure that it comes as no surprise to any of us that the noble Lord, Lord Williams should have given us a maiden speech of such exemplary clarity and wisdom. I am sure that I speak for all of us when I say that we hope to hear him many times in the future. May I also echo the words of former speakers about our two other maiden speakers, the noble and learned Lord, Lord Silkin, and in particular an erstwhile fellow academic and old friend of mine, the noble Baroness, Lady Warnock.
The Green Paper ranges far and wide over a very large number of issues and I want to concentrate on just one of them—namely, the implications of the proposal in the Green Paper that, above a certain quite low income level, an employer shall provide either a company pension or contribute to the employee's personal pension. Moreover, the employee in a firm which provides company pensions shall be free to decide which sort of pension he wants.
I want to concentrate on this aspect of the Green Paper for a reason that I ought to declare. I have 295 recently taken on a position which was filled with much distinction by a former Member of this House—namely, the late Lord Byers, who for many years, until he died, was the chairman of the Company Pensions Information Centre. As some of your Lordships will know, this is a small organisation, supported by a number of leading life insurance companies, whose function is to run courses and provide information for employers, trade unions—increasingly for trade unions—and others involved in the complexities of company pensions. Some of your Lordships will be familiar with the excellent range of explanatory booklets which are published by the centre. It is clear to us that, if and when the proposals of the Green Paper become law, the centre will certainly have to work overtime.
The present proposal was foreshadowed in the Secretary of State's consultative document published last year, which was much concerned with what is known as the early leaver problem—namely, the fact that someone who changes jobs, by choice or otherwise, while in an occupational pension scheme based on final salary finds that his pension at the end of the day is less, and sometimes decidedly less, than the pension of a man on the same final salary who has stayed with one employer all his working life.
I should explain that this is not due to malice on the part of the company or the pension managers in question; it is an inherent result of the structure of the final salary schemes. As your Lordships will know, these schemes are now standard in the public sector and widespread in the private sector, where in most cases they provide X/60ths—X being the number of years that the man has worked with one firm—of a man's final salary in any given firm. Without going into detail, it will be apparent that, say, 20/60ths, a third, earned early in a career, when his salary on leaving a firm will be relatively low, and a further 20/60ths earned later in a man's career when his final salary in another firm is considerably higher, will not add up to as much as the 40/60ths of an identical final salary received by a man who has spent all his time in the same firm.
The consultative document saw this as inequitable as well as being a disincentive to job mobility. Hence the proposal in the Green Paper that any employee should be free to opt out of such final salary schemes, being obliged instead to contribute, along with the employer, to what is variously called a money purchase scheme, a personal pension or a portable pension. Such schemes involve in general a steady rate of funding to build up a pot of gold belonging not to the company but to the individual, with which, when he retires, he buys an annuity as his pension. There is, in consequence, no penalty involved in changing jobs. Moreover, as the Green Paper points out, it has the merit of giving the individual ownership of and control over his own money, much like the owner-occupier of a house. For these reasons I welcome, as does the centre, this widening of possible choice. Is this then the perfect solution?
Alas, personal pensions also have their snags, and quite serious ones. They too can, and often do, give rise to inequities. Someone who started on a low salary, but slowly worked up to a high final salary, is 296 likely to find himself with a poorer pension than someone who started at a reasonably good salary as a young man but only progressed slowly to a distinctly moderate final salary. It was indeed this very factor that started the shift away from such pension arrangements and towards final salary schemes some 30 or more years ago.
There are other snags. With a portable pension there can be no certainty as to how one's ultimate pension will compare with one's final salary. Most serious of all, those people whose policies fall in at a time of high inflation, when the underlying investments have not yet caught up, can be much disadvantaged. It was in fact precisely this which led to the universities pension scheme—as I know all too well to my own cost—the FSSU, a type of portable pension, being abandoned a few years ago in favour of a final salary scheme, the USS. The arrival of index-linked gilts may go some way to overcoming this snag, but only if—and it is a big if, and subject inevitably to much future political uncertainty—index-linked gilts continue to be issued and in sufficient quantity.
Final salary schemes do not share these uncertainties but they have suffered, as I have mentioned already and as is well known, from the snag of disadvantaging, in varying degrees, those who change jobs, especially in mid-career, unless they are lucky enough to be in a position where they can negotiate, demand, or command distinctly higher salaries in the job they move to. Whether final salary schemes are as much of a disincentive to job mobility as is often supposed is harder to tell. They are probably not a disincentive early in a career, which is in fact when most people change jobs, and when in any event job changing does not make much difference to one's ultimate pension. On the other hand, in mid-career it may well be different.
There are a number of other points that need to be made. In the first place although those who stay for 40 years with one employer get a two thirds of final salary pension, is this actually the right criterion or yardstick of the adequacy or success of a pension? It is not generally realised, for instance, that a married man on average earnings will, counting his basic state pension, be actually slightly better off in net terms when he retires even though he only has a half final salary pension. A married man with two thirds of a final salary pension—that is the maximum—will be better off, and in some cases much better off, again in net terms, when he is retired unless his final salary is more than £15,500 a year.
It should also be said that important steps were taken in the 1975 Act, and are proposed in the present Social Security Bill, to overcome the job changing problem: namely, the revaluing of what are called preserved pensions when a person moves jobs. They are welcome steps and will gradually mitigate the problem. Now, my Lords, which type of pension is best? The truth must be that there is no simple and straightforward answer. To assume, as the Green Paper seems to do, that portable pensions are much to be preferred is simply not true. It has to be said that there is a considerable element of chance. Either type of pension can end up giving the best answer, depending especially on an individual's pattern of job 297 changing, but also the incidence of inflation and much else as well.
Perhaps the only useful advice one can give to those people who, if and when the Green Paper's proposals become law, will have to decide whether to go for a final salary scheme or a portable pension, is for them to try to weigh up whether or not they are likely to move around, voluntarily or otherwise, either because that is the type of person they are or because that is the nature of their chosen walk of life. Journalists, for instance, are given to changing jobs with great frequency—which may have something to do with the bad press that final salary schemes have been having of late. They would be well advised certainly to consider portable pensions at any rate when they are young, although possibly final salary schemes as they get older. Employees in many walks of life, by contrast, move around much less. They would very probably be better in a final salary scheme.
In short, a lot of people are likely before long to be faced with a difficult decision, and for some of them there can be no certain, right answer. Dare I say that it will be interesting—revealing, perhaps—to see how our colleagues in another place react in due course. Some of them must foresee a safe future in one job until retirement; others, depending on where they are, may face repeated job changes. Not all the decisions in the other place, or in the wider world, will prove to be right, and inequitable results will turn up in the future just as they do now. There is—alas!—no certainty in this world.
To sum up, I believe that the Government are right to open up the possibility of portable pensions to anyone presently with a final salary scheme. And given, rightly or wrongly, that they wish to abolish the state earnings-related pension—and we have heard much on both sides of that argument this afternoon—I believe they are right to require that everyone above a rather low income level must be in one or other type of scheme. I think also that the Government have made valuable progress in ironing out some of the difficulties and inequities. But some of the details are horrendously complicated, and many people, employers and employees alike, are going to find it very hard indeed to understand everything, and even more difficult to know what to do for the best.
I foresee that the Company Pensions Information Centre, and a lot of advisers and consultants, are going to have a formidable job on their hands explaining the ins and outs. I can only hope that the relevant Government pronouncements and literature will, for once, be written in clear and cystalline prose. Let me in conclusion give an example why. A lot of important topics in the Green Paper are going to require clarification during the consultation period. I know that the pensions world finds the Green Paper unclear on one small but important point, and no doubt many others as well. At the moment the national insurance contribution rebate in respect of those who are contracted out is a total of 6.25 per cent. for employee and employer combined, a figure which is generally agreed to be fair. For people who remain in the state earnings-related pension scheme the Green Paper envisages that the new national insurance contribution rate will be a combined figure of 20.45 per cent.
298 However, what will be the combined national insurance rate in respect of those men over 50 and women over 45 who continue to be contracted out of SERPS? There seem to be three possibilities. The first is the new contracted-in figure of 20.45 per cent. less the existing rebate of 6.25 per cent. A second possibility is the new contracted-in rate of 20.45 per cent. less a rebate larger than 6.25 per cent. A larger rebate would be justified since only the oldest age groups will continue to be contracted out. At those ages pension provision is particularly expensive and the existing rebate of 6.25 per cent. would he too small. A third possibility is the new combined contribution rate, which will apply to those too young to remain in SERPS, of 16.5 per cent., though I do not see how that could be justified. Your Lordships will see why I plead for an answer of crystalline clarity.
§ 5.19 p.m.
§ Baroness Turner of Camden
My Lords, I, too, should like to express appreciation of the opportunity to say a few maiden words on this important topic. In the trade union movement—and I speak as one who has spent the best part of a working life as a trade union official—social security has always been one of our most basic concerns. Removal of deprivation, degradation, and the misery which were the lot of many working people decades ago has historically been a prime motivation for us. In their place we wanted to put dignity and self respect, decent living standards, security against everyday risks such as ill health and unemployment, and proper provision for mothers, families and pensioners.
The system of social security we have today has been achieved only after many years of long and hard efforts by Governments and other organisations. The welfare state is a noble part of the heritage of the United Kingdom. There is no doubt that raw poverty, of the kind that existed before the coming of the welfare state, has largely been eradicated. Some gaps remain; for example, among the down-and-outs who can be found in the stations and subways of our cities, and recent measures on board and lodging allowances may, unfortunately, create a much larger problem in this area. But achieving the end of absolute deprivation is not enough. Like all civilised societies, we need a social security system which seeks to maintain and improve standards more generally and to provide a safety net.
The review Green Paper is much obsessed with fears about the future, but we need to have a historical perspective. Factors which cause despair and degradation are still with us. Ill health is still very much with us, as are crippling disease and accidents, poverty in old age, and low wages, especially among women and ethnic minority groups; and unemployment is with us still on a horrendous scale. Ideally we all want to eradicate unemployment, have less illness, fewer accidents and less low pay. Many of the circumstances that threaten people's wellbeing are becoming more prevalent. We have more people over retirement age and a growing number of one-parent families. The problems are not new, but the more difficult the times, the greater is the need to protect people against risk. The fundamental merit of our 299 system is its universality; the fact that it affords protection to everyone.
Of course, the capacity to pay benefits rests ultimately on the health of the economy. I believe that there is no substantial evidence that social security payments impede economic growth. Many other developed countries have made more economic progress than we have and they are paying better benefits and directing more of their resources to social security. Indeed, there are very well-respected economic arguments that benefits help the economy in times of recession by maintaining spending power and demand.
There are those, including academics perhaps more experienced in theory than in real life, who say that times have changed. Yes, people must be protected, but the state need no longer take responsibility for that. Today, they say, private arrangements can be made. It is true that in certain sectors of social provision fruitful co-operation can and has taken place between the public and the private sectors. One such sector is pensions. In the mid-1970s all parties agreed on the introduction of pensions legislation which it was felt could finally produce a solution to pensions problems. It was the second or third attempt by Governments to introduce new pensions legislation, and this time everyone was in agreement. Hence we had the establishment of SERPS, the state earnings-related pension scheme, and the opportunity for better private schemes to contract out—a genuine and I believe fruitful partnership between the public and private provision.
Trade unions were often criticised in the late 1960s for not being interested in pension provision. We were told that all we were thinking about was the next wage round. It is true that in those days it was difficult to persuade the younger members to take any care regarding their future and to concern themselves with retirement benefits that they would not be enjoying until perhaps 20 or 30 years hence. However, we conducted a campaign among our members. We raised the level of understanding, and the result of all that is that 11½ million people are now in occupational pension schemes, many of them contracted out of the state scheme. We ran courses to tell our members about pensions and many of our leading members became trustees of main pension schemes. Of course, nobody is claiming, and nobody has claimed in the debate, that the pensions legislation introduced in the mid-1970s was perfect. We have the problem of the early leaver and discrimination against women, because although the legislation guaranteed equal access, it did not guarantee equal benefits. I was glad to hear from the noble Baroness this afternoon that it is intended to do something about discrimination against women and that we have already had some legislation to benefit early leavers.
But the cornerstone of these occupational schemes which are contracted out is SERPS. If the SERPS scheme goes, with it goes a whole system of earnings-related private schemes, because they will be undermined if SERPS is no longer in existence. Nor is it possible to maintain that the provision of personal private pensions will cope with the need that will remain. In fact, I argue that to emphasise private 300 pension provision can be done only by people who have no conception of what it is really like to be poorly paid. By that I do not mean destitute; I refer to the mass of our people who live on tight budgets, who live not from day to day, but certainly from week to week or from month to month, and are not in a position to think about retirement provision in 20 or 30 years' time. They are concerned with day-to-day existence. This is true of many women, particularly the growing number of those who head single-parent families. They stand to lose by the abolition of SERPS.
Moreover, they are the very people who are likely to be easy prey for unscrupulous speculators who will begin to sell private pensions. Even the Government's blue paper on private personal pension provision acknowledges that there will need to be a strengthening of consumer protection in this area if people are to be protected against speculation. Frankly, it will be difficult to do that.
It is an illusion in my view—and certain other speakers this afternoon have said a similar thing—to pretend that the issue of extra demands on resources can be avoided by talking about private as opposed to public provision. The essential issue cannot be avoided—that to meet our social objectives of preventing poverty and protecting living standards and helping families we have to allocate resources for these purposes. We have to find the money from the income of the nation. The alternative is that we have to abandon these objectives. I do not think that is anybody's desire and I do not believe it is the desire of the Government, because everybody is committed —this has been said from both sides of the House—to a system that does not lead to degradation and poverty.
As noble Lords have said, no one believes that the present system is perfect. It has grown up in a piecemeal fashion in response to needs as they have been perceived. It is extremely complicated; so complicated that many people do not claim benefits to which they are entitled, and there are overlapping benefits. But a review should not herald the beginnings of a departure from the concept of a universal safety net for our people. The threat to decent pensions for all should be removed. Child benefit, one of the least complicated benefits, should be preserved and its value should be preserved. We should seek to maintain the broad agreement we have in this area which is of the utmost importance and we should not let ideology overrule common sense.
§ 5.28 p.m.
§ Lord Beaumont of Whitley
My Lords, it is my very pleasant duty to congratulate the noble Baroness, Lady Turner of Camden, on her maiden speech, and, indeed, I can do so with great sincerity, because we have heard a speech of extreme competence in the field and extreme compassion. Those two things are very much respected and welcomed by your Lordships' House. We hope that she will make many more speeches in this House in the years to come.
We have seen a multiplicity of "maidens" today and we can merely hope that they will not be daunted by some of the things that they have seen and heard. Anyone might be baffled by this Green Paper; anyone 301 might be slightly worried about the traditions of your Lordships' House. We have seen the noble Lord, Lord Sandford, taking over the whole of the Bishops' Bench, and we have seen the noble Baroness, Lady David, taking over the Conservative Front Bench at one moment. It has certainly been an unsettling occasion.
I put down my name to speak on this occasion not because I think that I have any special expertise of my own to offer on this subject, but because I wish to place on record the serious concern on this subject felt by Church Action on Poverty, of the executive of which, as some of your Lordships know, I am a member.
It is an ecumenical body founded by a number of Christians, mainly Anglicans at the beginning, later working with boards of social responsibility and similar organisations in other Churches. It is concerned with what it regards as the sheer weight of misery found in many parts of this country. It regards its task, first of all, as to speak to the Church about the existence of that misery—because, as the right reverend Prelate the Bishop of Liverpool has reminded us in the past, comfortable England does not always understand what is going on in deprived England—and to urge the Church to exercise the influence which it undoubtedly has, through your Lordships' House, among other instruments of Government, to see that changes are made.
It is often said that the Church has the right to speak out on matters of principle but no particular authority to prescribe remedies. It is, I think, clear that here there is a general principle involved in the matters we are discussing today. Although Church Action on Poverty has a considerable expertise in the details of poverty and what should be done, particularly since one of the advantages it has is that more and more these days it is only the clergy who live among the really poor. There are plenty of other people from the middle classes who have done so, too, but if you take any given profession or any given walk of life then, on the whole, the doctors, the social workers and the policemen live outside such situations and go in for their daily work. It is the clergy, undoubtedly rather more comfortable than a number of their parishioners, who are still living alongside them, in some of the real slums and in some of the real areas of poverty that we have.
The theological basis of Church Action on Poverty is, I think, secure. The bishops have obviously considered that the Green Paper is not only unspeakable, but even past praying for; but no doubt the noble Lord, Lord Sandford, has done his best on their behalf. The Christian religion abhors the presence of riches in the midst of poverty. That, I think, is one statement which is incontrovertible. It is what the parable of Dives and Lazarus is about.
We in Britain today see a growing under-class of the population, certainly over 10 per cent., and some would put it much higher, who are excluded from the society in which the other 80 per cent. to 90 per cent. live, excluded from the society which they see every evening on their television sets—because they have television sets. They are people who have to choose from time to time whether to clothe their children properly and smartly and on a par with the other children in the school or whether to feed them 302 properly; and old people who have to choose between food and warmth from time to time.
Many people in this country, I think, doubt that this happens. The people on whose behalf I am speaking, the clergy of the poor areas of this country from all Churches, know that it is so. If any of your Lordships doubt what I am saying, I can find many of them who would be—I will not say delighted—already to take your Lordships and show you that what I am saying is, unfortunately, so. The degree of distress that I am talking about of course if not foreseen and of course is not intended. In almost every case, a middle class, well educated person with proper training could get by without much hardship on what the state provides until problems strike. Other people, less well trained and educated—and that is our fault, my Lords, and not theirs—cannot cope at all. And even those who can cope run into trouble when the least little thing goes wrong because there are no reserves of any kind and once things go wrong, they continue to go wrong. The money for a wreath, for a funeral of a loved relative has to be borrowed and somehow the debt gets deeper and deeper and the problems pile up.
The social fund which the Green Paper suggests is an interesting proposal and it is undoubted, I think, that we need something along those lines. But it is equally quite clear from the criticisms that have been voiced in all parts of your Lordships' House today that that is not by any means a completely well thought out or satisfactory answer.
What is most worrying, I think, about the whole Green Paper is an implication that poverty is not to be relieved, that the poverty line is not to be raised up and, indeed, that it may even sink. That poverty is not to be relieved is obvious from the fact that this is a nil-cost review of an already inadequate system, and the appalling result is an overall net cut in social security expenditure. If we cannot move the poverty line up—and if we tax the hidden welfare state of the rich, then, of course, we can, but there is no sign of that whatsoever—we must not let it move down. If we lived in the kind of society where there was a danger that there was not enough to eat for everybody such a moveable poverty line would be unavoidable. On a desert island when the food runs out everybody sinks below the poverty line. That is not the position we are in today.
We live in a country which, comparatively speaking, is getting poorer, but actual riches are still here. Sections of British society are swimming in it. The Government keep on telling us that the national income is going up every year. If that is so, why are the poor not getting less poor?—because, whatever the figures say, they certainly are not. You may go to Liverpool, or Newcastle or Tower Hamlets and ask them if they are getting richer year by year. They are not; because what gains there are nationally—and I am a little sceptical about gains at all these days, if properly accounted—are certainly not shared out. Instead, we are like the figures in the old cartoon climbing the ladder out of the swamp. When hard times come the top man says, "We must all take a step down," and the man on the lowest rung disappears below the surface. But in fact it is even worse than that. The man on the top rung passes the word down for 303 everybody to step down and he himself, steps smartly up. The rich are getting richer all the time.
As we see it, the attitudes behind this Green Paper are based on myth—the myth that if the poor receive fewer benefits, they will work harder, the myth that there are plenty of jobs if only employers could pay little enough. There is no real recognition that there really are no jobs for 4 million people and that there will not be any without a reappraisal not only of the economic policy which has led us into this particular state at this particular time but of the whole perspective in which we view modern economics.
No one, wherever they live in this country, can doubt that there are thousands of jobs which need doing. One has only to move half a mile outside one's house, wherever one lives, to see that. These are all real jobs in the sense that they would raise the wealth of the community. The average repairs, for instance, which need to be done to houses in this country are £4,000-worth per house. That is a measure of the decay in our housing stock which can be halted. What we do not yet have is the economic system to cope with this kind of situation.
It is true that no one has yet come up with the answers. We do not yet have our new Keynes, but many people are trying to find it and a few of them are edging towards solutions. A number of them are in the party opposite as well as in the parties on this side of the House. But very few of them appear to be represented in the Government. This Green Paper shows no signs at all of grasping the problem, let alone of suggesting any answers. Nor does it betray any of the moral outrage that one would hope for from those who have the dreadful responsibility of dealing with the situation which daily gets worse.
§ Lord Sandford
My Lords, perhaps the noble Lord, Lord Wallace, would excuse me if I were to intervene for a moment, as I was mentioned twice by the noble Lord, Lord Beaumont; and so were the Bishops. There are a number of explanations as to why they are not here. One is that they are in conference in Manchester, as it were, rewriting the Creed; or, if the House would prefer to believe it, some of them may be at Ascot. But in any case I shall take it on my own shoulders to make sure that they read carefully what your Lordships have been saying in this debate.
§ Lord Beaumont of Whitley
My Lords, I was casting no aspersions on the Bishops themselves. I know how very seriously they take this problem; and indeed a number of them are fully associated with the body on whose behalf I was trying to speak.
§ 5.43 p.m.
Lord Wallace of Coslany
My Lords, I am very relieved that this ecclesiastical exchange has finished. It rather added to the strain of my speech.
One of the main reasons for my taking part in this debate is that I am one of the few left who took part in the Second Reading debate on the National Insurance Bill in another place in February 1946. That debate was the start of the implementation in great proportion of the Beveridge Report and certainly marked the founding of the welfare state, a welfare 304 state founded, as Prime Minister Attlee said, on faith in the British people and—do not forget this, my Lords—founded after a long and devastating war from which we came successfully to peace. That was an act of faith. I hope that that act of faith will continue.
In my maiden speech on 7th February 1946 I concluded with these words, as reported at col. 1959 of the Official Report:This scheme, above all other schemes, will strike deep to the heart of humanity in every home in this country. I make a plea for the humane administration of the scheme. I ask the Minister to reduce the number of forms, and to make the necessary forms as simple as possible … We must aim at reducing, and not adding to, anxiety".I repeat, we must aim at reducing, not adding to, anxiety. With the greatest of respect, I would humbly submit that that is the very theme of this debate.
A fleeting glance at the Green Paper gives the impression that what I said in 1946 is the objective of the Government: simplification, easing of anxiety, helping and persuading people to make their own provision for the future. This is but a thin veneer over proposals aimed at reducing expenditure at the expense of worse-off members of society and the reduction of taxation benefiting the better-off sections of the community. Even with the remarkable absence of detailed costing in the Green Paper, that is the impression that is bound to arise in the minds of the majority of people in this country.
As a former spokesman on the Opposition Benches, together with my noble friend Lord Wells-Pestell—we all regret the reasons for his absence and wish him well—I can say that we were faced, since the present Government came into power, with a record number of social security Bills, the majority of which were economy measures—concealed cuts, if you like—and littered with orders to be submitted to Parliament by the Minister—orders which this House can discuss but not amend or reject. In such orders people's rights were, and still are, obscured in a mass of legal gobbledegook. Any noble Lord who has served on the Statutory Instruments Joint Committee will know what I mean. Every weekend by post, and upon arrival at this House on Tuesdays, one receives masses of such documents couched in incomprehensible terms. These frequently had to be translated for us by expert officials.
Too much of this sort of thing is going on these days. Organisations such as Citizens' Advice Bureaux and others helping people to obtain their rights, particularly under social security and health legislation, are hard pressed to keep abreast of and to clarify the orders that keep flooding out from Government departments. My fear is that when—I nearly said, hopefully, "if"—legislation is introduced to implement the Green Paper proposals the situation will not improve but get worse. We have to ease off this growing tendency to operate legislation by statutory instrument.
Financial security in old age has always been a key factor in social security legislation. Pensioners are to be among the losers as a result of this review. Some are fortunate to receive an occupational pension as well as the state pension, such as former MPs who receive such pensions geared to the cost of living index. I plead a personal interest there. However, about 5.9 million 305 have incomes within 40 per cent. of supplementary benefit level and have to rely on a group of meanstested benefits to survive. If such weekly additions are to be replaced by proposed income support premiums many elderly people will lose out on income.
The proposed abolition of the state earnings-related pension scheme will hit 11 million people. What I cannot understand is the Government's proposal to abandon the scheme altogether. I cannot understand their approach to the problem. I should like to ask the noble Baroness this question: is the statement by Mr. Stewart Lyon, past president of the Institute of Actuaries, correct—that phasing out of the scheme had never been discussed or even recommended by members of the inquiry?
Private insurance for adequate pension cover, as we know, is not easy to secure and is expensive. Occupational pension schemes in the private sphere vary in type and payment of pension. Small firms do not and cannot run them. What happens when a firm goes "bust"? The more privatisation we have the more likelihood there is of bankruptcy in the private sector. It is not unusual these days: there are more bankruptcies today than we have had for many years. The transfer of pension rights from job to job is a good, sound principle. What will happen in the case of redundancy or unemployment—will they be covered? These questions are not fully answered. The state earnings-related pension scheme was established by all-party agreement. Modification may or may not be necessary, but would submit that it is better to keep the scheme and to negotiate changes on the basis of all-party agreement rather than scrap it, as the Government propose to do.
Of course, the problem that we face in this debate is failure on the part of the Government to give detailed figures of gains or losses, or indeed figures of the amount of public expenditure which is involved. The Government must have these figures in their possession: otherwise, they have been talking in airy-fairy terms on suppositions without any basis. It seems that the Prime Minister, who has been pressed by the Leader of the Opposition, has now given way and said that the figures will be produced in the autumn after the Brecon and Radnor by-election.
Some estimates of losses produce by outside experts are alarming. According to one expert, the changes for widows would mean a loss for some of £17,000 in benefit; but the DHSS will save £112 million by 1997. The £17,000 loss of benefits refers to widows aged 44 with grown-up children, or those who are childless, before reaching retirement age.
The death grant has always been a problem. With funeral costs averaging between £300 and £400, the grant of course is almost negligible; but some people are very thankful even to receive that. To replace the present grant of £30 by a discretionary grant subject to a means test is a retrograde step. I was a Member of Parliament for a number of years and frequently had a hard job to convince elderly people that supplementary benefit was a right to be applied for. Frequently I have rung up social security offices, in Norwich in particular, and said to the head: "Get one of your charming ladies to go along and have a cup of tea with old Mrs. So-and-So and chat with her and 306 persuade her to apply for a benefit: she is too proud at the moment to apply." Elderly people are sensitive and fiercely independent so far as means tests are concerned. Today, several thousands of people are too proud to apply for supplementary benefit; and it is certain that the same position will apply in connection with help with funeral costs.
In conclusion, I should like to say that reading this Green Paper gives me the feeling that there is a touch of arsenic and old lace about it—a smell of Victorian values, about which we have heard a lot lately from a certain lady in another place. We have heard a lot lately about the need to return to Victorian values. Self-help is stressed frequently in the Green Paper. I am the first to admit that today in Britain we could do with more of the Victorian values in so far as family life and respect for marriage are concerned. But with a return to Victorian values we also have the poor law and the threat of the workhouse, with the separation of husband and wife. I am old enough to remember that. These things happen.
That was the fear of old age—that you would be reduced to the workhouse, the biggest social indignity that mankind could suffer. We replaced it with the welfare state, which has been maligned by the press, by Conservative Members in another place and in the country. There have been sneers about free weeks for foreigners, and so on—I have the press cuttings at home. I think that the Members on these Benches have known about this and about how, under the veneer of support for the welfare state, there is opposition to it. There is the belief that people should help themselves and that God helps those who help themselves. But we have to remember that today we live in a different world. Above all, we have to remember that it is our responsibility and our duty not to add to anxiety but to reduce it.
§ 5.56 p.m.
§ Lord Houghton of Sowerby
My Lords, I should like to add my words of appreciation and congratulation to our four maiden speakers this afternoon. In the week before Wimbledon, one might describe this afternoon as a unique and absorbing display of mixed doubles. I am not sure whose side they were all on; but the noble Baroness, Lady Warnock, had limited political choice of a partner although she would have been able to choose between a lawyer and a banker. However, we have heard four new voices in your Lordships' House. We hope to hear all of them again, well informed and experienced as they are.
I am not able to go as far back in my Parliamentary work on social security as my noble friend Lord Wallace. When he was speaking on that Second Reading, I was broadcasting on it. Out of 300 broadcasts I did on one radio programme, one-third concerned social security. That was right from the publication of the Beveridge Report to the completion of the five-pronged social security scheme of 1948. Then I went into the House of Commons to see what was to be done about it there.
I think this review is timely, and in all honesty I believe that we ought to congratulate the Government on the production of such comprehensive and informative documentation in the time that has been 307 available to do it. We have rarely had anything so comprehensive and complete to enable us to study the future of our social security arrangements. The present scheme which we are discussing in its fundamentals today was accepted in 1975 as being generally agreeable. That was 10 years ago and I think we ought to observe that the last decade has been the most stable of the past 30 years as regards social security. I sincerely hope that the Government will not repeat the futilities and frustrations that were suffered in the early years of the formulation of social security policy, which led to 10 years of stagnation and 14 years in which to accomplish an agreed scheme in 1975.
I believe that the lesson which the Government must keep in mind is that any government must find the consensus to carry through any major reforms which will survive a change of government because experience shows that, whatever is done, if it is not generally acceptable it will not last. We have already had two notable examples of that.
I did the first two years of work on the scheme which, in its general structure and principles, eventually became the scheme of today, but it never reached the statute book in the period of the Labour Government. Crossman came to grief with the general election of 1970. Sir Keith Joseph, who succeeded him, produced an entirely new and different scheme and placed it on the statute book with an operative date, but that came to grief with the general election in 1974. The four years between 1974 and 1978 were taken up with the adoption of the scheme that we have today and its administrative preparation. There is surely a lesson to be learnt from that in political terms about the wisdom of trying to find a consensus.
In Barbara Castle's day, when she was busy trying to find the consensus, she had a very able Minister of State, the late Brian O'Malley, and there is a recent letter to The Times, dated 4th June, from the former leader of the CBI team negotiating with the Government at the time, who writes:The late Brian O'Malley said that he would go on negotiating and making concessions until he found a formula that we would all accept and undertake to stay with.That was his accomplishment and that is his memorial. It seems to me that it is something which the Government must emulate in the review that they are now undertaking. It is better for a pension policy to be enduring rather than to be absolutely fair. I think we have to see what we can agree on, if we are to have firm foundations for the future for at least the main structure of our pensions scheme.
I am sure we can agree on one thing, and that is that the present arrangements regarding the flat-rate pension are fundamental to the Beveridge Plan and are not to be questioned as part of our future scheme. For most pensioners today, and for those who will retire during the next 10 years, the flat-rate pension will continue to be of most importance, and the first aim and condition of any review must be to maintain the real value of the flat-rate pension and improve upon it if we possibly can.
When we look at the earnings-related addition to the flat-rate pension, we are at the centre of whatever controversy there may now be on pensions policy. 308 This has been the trouble for the last 25 years: what shall it be and how shall it be paid for? So here we are again. Let me say at once that I do not regard this part of the present scheme as being fundamental to social provision. I never have. When I was working on this scheme, we were seeking a superstructure to the flat-rate benefit which would give the bulk of the working population the sort of pensions which were enjoyed by white-collar and supervisory staffs, in the public sector and elsewhere, who had long been in occupational schemes.
Beveridge thought that it should all be undertaken by voluntary action, but we thought—and I still think for all sorts of reasons that I need not dwell upon—that it cannot be left to voluntary action. Probably we should not have begun our consideration of the earnings-related pension scheme but for the breakthrough of the flat-rate contribution principle made in 1961 by the noble Lord, Lord Boyd-Carpenter. He broke down the barrier erected so firmly in the Beveridge scheme: flat-rate pensions for flat-rate contributions, and there began a modest form of graduated pension and graduated contributions.
I am sorry that the noble Lord is not present, but I may say that that was not pensions policy but financial policy. The graduated contributions were intended to be used to support the uprating of the flat-rate scheme. As I said at the time, it was hardly the best insurance practice to take current premiums to finance current claims and set aside the contingent liabilities of the increased pension eventually to be paid. But the Labour Party at that time had published a book called New Frontiers of Social Security. Our sights were set very high then. Our emotions in the 1950s were not perhaps quite as strong as those of my noble friend Lord Wallace in 1946. We were beginning to gain experience. In 1966 the principle of earnings-related benefits was extended to sickness and unemployment, so we were really on the path of graduation and earnings-related contributions.
What is in question is whether we can fairly or properly stick to the existing method of financing future pensions. Can we go on demanding that the emerging generation of young people shall pick up the bill? That is what it amounts to. The future generation, as part of the so-called "generation contract", will have to foot the bill for all the stored-up pensions that the present generation of active workers are accumulating. I think that, so far as the flat-rate pension is concerned, we can firmly and fairly place the future responsibility for financing it, whatever its level, on the future generation, because we are now financing it ourselves. We finance our flat-rate scheme in return for the next generation supporting the scheme from which we shall draw benefit.
As regards social security, I think each generation should take its responsibilities, but for the extra part—the top-up, as my noble friend Lord Williams said—of the scheme, which is really national superannuation and for which there is already extensive occupational provision alongside the national scheme, I believe that the Government are right in thinking that we should take a very close look at the implications of the principle, its practicality and prospects for the future. If there is any reasonable doubt, I think it has to be looked at with considerable 309 caution. The noble Lord, Lord Grimond, said that all pensions are paid out of current production; but not all pensions need be paid out of current production, at least not in this country.
There is scope in superannuation investment for investment overseas. The world is getting smaller. Investment is spreading more widely and investment from this country in other countries is being reciprocated here by investments from elsewhere. But I do not think it is for the Government alone to have a view on the question of whether we should depart from the pay-as-you-go system; that is, the unfunded pension scheme.
This is where the consensus of 1975 should be replaced by another one and there should be full consultation with all concerned in deciding whether to make the change which is forecast in the Government's discussion paper. We are entitled to have a separate and authoritative examination of the situation, apart from the Government but based on all the information the Government have and other information which may be required. This is an investigation that could be undertaken in time to reach conclusions on the future. I see nothing wrong in reviewing the prospects of the scheme for the future. All enormous schemes of this kind require periodical stocktaking.
I am not put off in my approach to this by the fact that the Government's thinking goes along similar lines. I am merely saying that this is one of the options, and the option which the Government themselves seem to prefer, and it is worthy of very close and unbiased examination. But I differ from the way in which the Government propose to do it. I am not in favour of privatising the graduated scheme—and this was referred to by my noble friend Lord Williams. The state scheme already lives side by side with the occupational schemes. What we need now, if we agree, is a different way of financing the state scheme in that range of superannuation provision; and we have to look at the two together.
It might be prudent, in any case, to begin partial funding of the scheme—and my noble friend Lord Williams referred to this. That alone would be a very big and complicated exercise. But it seems to me that the advantage of funding is that the existing generation of contributors set aside from their disposable incomes money which can be used for investment in future prosperity and enlargement of the economy, so laying firmer foundations for the ability to pay the pensions in due course. That seems to me to be a perfectly sound economic and political proposition.
Moreover, many people like contributing for themselves, for something that they recognise as belonging to them, rather more than paying money into a fund with which they appear to have no identity. As far as possible, if anything in this direction is to be done it should be accompanied by some identifiable stake in the superannuation side of the scheme for individual contributors.
But there is one snag that has to be overcome. It seems to me that with such a conversion of the state superannuation element into some kind of institutional form, whether in the private sector or by the creation of a state-owned corporation, the tax position 310 of pension funds generally would have to be changed. The present tax concessions to occupational schemes and funds have created a tax haven without parallel in our savings economy. It is quite unjustified. The Chancellor is reported to have fought and lost on stopping some of the huge loss of £3½ billion net of tax revenue, with £2¼ billion of that in tax relief on pension funds' investment income. The sum of £650 million a year of tax revenue is lost by paying lump sums tax-free out of tax-free contributions out of tax-free investment income. You cannot be more tax-free than that. From a fiscal point of view, there is no argument in support of it. If it is anything at all, it is social policy and political policy, but it is not fiscal policy. So if we are to have a premium-based funded state scheme, the tax position of pension funds will need to be tidied up.
While I am at it, I am going to throw another brick into the debate. Why has tax relief on mortgage interest been exluded from the review of housing benefits? They are two sides of the same coin. Here is another slice of social housing-cum-political policy embedded in our tax system, with another £3¼ billion of tax revenue handed out to our property-owning democracy. There are 1¼ million mortgagees who have loans averaging between £15,000 and £30,000, and they get between £10 and £20 a week housing benefit from the taxman, yet we are now going to chip away at housing benefits lest some people in need get too much.
The difference between those who get housing benefit and those who get tax relief is the difference between those in need and those who have the means to qualify, and the total cost to the Exchequer of each of these two groups if not very far apart. If we are looking for a legitimate source of additional finance for any section of the social security scheme today, let the Chancellor loose on this. But, of course, I know that the official spokesmen of the two principal parties will rise and say, "Mortgage interest tax relief is safe with us "When I raised this matter in a recent building society debate, my noble friend Lord Stoddart could not refrain from reaffirming the commitment of the Labour Party to maintaining mortgage interest tax relief.
This, again, has no fiscal relationship to the assumed ability to pay. It has no relationship to the value of or income deriving from, the property upon which the mortgage itself is charged. It is part of the history of taxation that assessments on the notional value of the occupation of property included mortgage interest, land tax, ground rent and other burdens on the property. But when Schedule A tax was abolished on owner-occupation by the then Chancellor, Mr. Selwyn Lloyd, the last vestiges of justification for allowing tax relief on mortgages, against property income which had been removed from taxation, disappeared. But there it is.
All right; I shall not attempt to remove it in your Lordships' House, because the Parliament Act 1911 stops us. But I shall say that, while economies are being sought in social security expenditure and while people are feeling, as they will feel, that their needs are being depreciated and written down, let us bear in mind, if we do nothing else, where the Chancellor could get the money from people who have no real justification for the concessions that are given to them.
311 I finish by saying that I have heard some rather snide remarks about Britain being an entitlement state. So far as the taxation side is concerned, it is becoming a concessionary state as well.
§ 6.19 p.m.
§ Lord Stallard
My Lords, it is always extremely difficult to follow my noble friend Lord Houghton of Sowerby, whose expertise is renowned. His knowledge of pensions, and of occupational pensions in particular, is something that I have admired over a long period of years. I am glad that none of his bricks was aimed at me, but I am certain that some of them have found their target.
The Secretary of State heralded his review of social security benefits as the most substantial review of the social security system since Beveridge. The resulting Green Paper has been roundly criticised by many of the voluntary organisations concerned, and by local authorities and their associations, which are alarmed at the implications for housing and administrative finance. I was amazed to hear that the noble Baroness, Lady Trumpington, was almost unaware that there was any criticism of the Green Paper. She seemed to infer that it had been met with applause all round. I can assure her that that is not the case in the quarters I frequent.
No one denies the need for reform. This was something else the noble Baroness seemed to misunderstand in regard to our side. We are not denying that there is need for reform. I certainly never have denied that. There is certainly a need, and there is also a great deal of dissatisfaction with the present state of affairs. That is not denied either. Indeed, most of us gave a guarded welcome to the announcement of the reviews, although we were concerned mainly about the Treasury input or lack of it, and we still are.
Some commentators have seen the reviews as a piecemeal approach. I do not; I tend to share the views expressed in a major report in the Sunday Times on 8th April 1984 by two reporters, Michael Jones and Martin Kettle, that the reviews were designed to look piecemeal. That is nearer the truth. They were really a continuation of the Think Tank's report that had been leaked to the Economist in September 1982. The report was aimed at achieving cuts in public expenditure by,dismantling huge chunks of the welfare state".Noble Lords will realise that that leak occurred only one month before the Conservative Party conference which was to celebrate the outcome of the war in the Falklands Islands. It was obvious to any commentator at the time, it was obvious to everyone, that this leaked report from the Think Tank had to be shelved immediately, and pushed to one side, if possible, and a new approach adopted at a more convenient time. That was the tenor of many statements and reports at that time. While I give the Secretary of State full marks for his ingenuity and for his presentation of the present Green Papers, I never had any doubts that the proposals contained in the Think Tank's report would reappear and that any suggestions or proposals would be on the same nil-cost basis that has been the hallmark and the declared policy of Conservative Administrations since 1979.
312 If I had time, I should like to have listed the 20 or so major changes since 1979 which have resulted in savings for the Government of many hundreds of millions of pounds at the expense of pensioners, the unemployed and other beneficiaries. The Prime Minister, herself, in an interview with the New York Times in January 1984 said that,Britain was sitting on a social security time bomb",with,the prospect that, towards the end of the century, a large lump of new pension payments will come due. Employer contributions towards pensions have thus far been used to meet general governmental expenses … and unless some changes are made … there will not be enough money to foot the bill".That is the thinking and the philosophy behind the Government's approach.
The Minister of Social Security in February of the same year said in reply to a number of queries in another place:However, some changes have got to be made in order to contain the rising cost of social security within overall public expenditure targets. The Government believe that the housing benefit scheme is the fairest place to make them".He said that the fairest place to make those cuts was in the housing benefit scheme. I could use numerous quotes to illustrate the Government's approach to the solutions, as they see them, to deprivation and poverty, and their long standing and consistent determination to cut back social security expenditure. I believe that the present dissatisfaction with the various complex schemes, in particular the housing benefit scheme, is being used as a screen behind which to impose further cuts, as leaked in that Think Tank report nearly three years ago.
Other noble Lords have mentioned various aspects of the Green Paper. I want to deal with some of the implications for the housing benefit scheme. This is one area of the Green Paper's suggestions for reform where, from our own knowledge and from accurate estimates, it is possible to work out some of the effects on claimants. The Green Paper endorses the objectives set out by the independent review team which saw the need for a fundamental reform, and in doing so therefore it tacitly accepts the failure of the 1982-83 scheme—something I have said on a number of occasions in this House and elsewhere. Most of the problems inherent in that previous attempt to "simplify" housing assistance can be traced back to the "no extra cost" constraint. With the DHSS now again talking of "simplifying" the scheme but also seeking to make savings estimated at about £750 million out of housing benefits alone, the parallels with the 1982-83 experience are only too depressingly clear.
One of the key problems with the current housing benefit scheme was the failure to unify the two separate benefit systems—the supplementary benefit scheme and the rent rebate, rent allowance and rate rebate schemes. To overcome this it is proposed that there should be a single income assessment test in future. This is fine in principle—I can agree with that in principle; it was the objective to unify the schemes entirely, and the principle is good—but previous studies have shown that it is not possible to implement equality of treatment equitably without spending more overall. That is an accepted fact among all 313 researchers. Bringing the two schemes together as proposed will just mean that lots of people will lose benefits.
The independent review team recommended unequivocally the 100 per cent. help with housing costs for those on lowest incomes as the only fair way of meeting the needs within the present vagaries of the housing market. However, the Government have accepted the argument for rent but they have not accepted if for rates. The noble Baroness mentioned quite proudly the acceptance on the question of rents but she very conveniently forgot to mention the position on rates, which is different. Claimants should meet, according to Government, 20 per cent. of their rates. I have had discussions with SHAG and other involved organisations, including local authority representatives, and I have established that the consequences for claimants on income support who are having to meet 20 per cent. of their rates could be considerable, to say the least. Perhaps I may ask the Minister this question. Would that be compensated for by an equivalent increase in income support schemes? The 2.5 million claimants who are now getting rate rebates will have to resume rate payments. The obvious result of this proposal must be an increase in rate arrears, with all the attendant problems with which we are all only too familiar, and a colossal rates and rents collection task for local authorities.
Whereas the Green Paper does not give any figures of the amount of saving which would be made if the 20 per cent. was not compensated for, SHAG and others have estimated that savings in that field alone would likely be of the order of £250 million. It is worth noting here that one of the key arguments used by the DHSS to persuade local authorities to agree to the introduction of the housing benefit scheme in 1982–83 was that, by rebating claimants' rent and rates at source, local authorities would greatly reduce their rates and rent collection tasks and also their arrears problems. That was the carrot held out to local authorities on the introduction of the original scheme. But the administrative costs of the new proposals with the new changes will be quite staggering for local authorities.
Both the independent review team and the Green Paper accept the logic of a single taper scheme, which, again, was put forward mainly by SHAC during the pre-consultative process, in order to allow the simplification of the taper system, which was also mentioned by the noble Baroness as probably being one of the most complicated parts of the social security system as it presently exists. I do not think that I have the time to explain to the noble Baroness or to anybody else the existing taper system, even if I understood it. I can, however, comment on the changes. The proposals will involve several changes. Everyone will have the same tapers. But at the moment pensioners, for instance, have more generous tapers applied to their eligible income than do non-pensioners. I ask the noble Baroness this question: will that treatment continue?
Secondly, the same taper will apply to rent and rates. At the moment, existing tapers mean that claimants lose 29 pence in every £1 on rent and 9 pence in every £1 in rates as income rises. The proposed new combined taper, on the basis of the 314 model 70 per cent. of net income, will mean a rate of withdrawal of 42.7 pence in every £1.
In practice, the new taper will mean that anyone with income above supplementary level will probably lose some housing benefit because of the effect of the new sharper tapers. This will particularly affect occupational pensioners, families with average earnings, and owner-occupiers—all of whom may lose housing benefit altogether. A number of examples could be given. SHAG estimates that there will be 2.2 million home owners, 4 million pensioners and 1.5 million people on low income who will lose benefit. I should have thought that two single tapers—one for rates and one for rent—would be a fairer proposition and should still be considered.
I conclude with a few words about the implications of the proposed scheme for local authorities, as this aspect must be foremost in the minds of many of us at this moment. One of the reasons for the total chaos surrounding the implementation of the 1983 housing benefit scheme was that local authorities did not have enough time to get their administration sorted out before they had to try to work the scheme. It was quite impossible for them. Here we are, two-and-a-half years later, proposing fundamental changes which will need new computer programs and new staff training if the scheme is to be implemented in time.
On the last occasion, local authorities had 25 months in which to make their arrangements, and they could not do so. We have discussed this point in previous debates. There are now only 21 months to April 1987 and we do not know yet what the new scheme will look like. I forecast that local authorities will again be in difficulties and that some of them just will not be able to cope.
I asked my local authority for a view on the administrative problems that might accrue if the new scheme is implemented. That part of its reply states:When the present Housing Benefit system was introduced local authorities were charged with the administration of the system. The task was imposed upon them, it was not sought. One of the principles agreed at the time was that any additional administrative costs incurred by local authorities, net of any savings generated by the system, would be reimbursed in full. The level of direct exchequer subsidy on total administration costs was fixed at 60 per cent. to reflect this principle.The Green Paper proposes dispensing with this directly attributable subsidy on administration, and incorporating the administration costs into the Rate Support Grant like most other local authority administrative spending".For local authorities such as Camden and other inner city authorities which receive no block grant, this would be nearly a joke if it were not so tragic. Camden receives no block grant at all. The new scheme will mean a new loss of subsidy of £1.3 million and no possible gain via the block grant. That is a tremendous problem in the present circumstances.
My own local authority's response continues:Even for those authorities in receipt of grant many would still suffer serious financial loss because of the iniquitous system of targets and penalties used in the grant system",which we have discussed when debating local authority Bills and rates Bills in this House The response concludes:Therefore the principle that local authorities would not incur additional costs in administering a Housng Benefit system imposed upon them by Central Government has been scrapped".315 So another promise has gone.
I predict that unless some of the constructive criticisms levelled by SHAC, Age Concern, Citizens' Advice Bureaux, local authorities and others directly involved are acted upon before the final scheme emerges, then the result could be almost as chaotic as that which accompanied the previous scheme. I hope that the Government are listening.
§ 6.34 p.m.
§ Lord Hunt of Tanworth
My Lords, I want to speak about that section of the Green Paper which concerns provision for retirement. I must begin by declaring an interest, in that I have recently become the chairman of the Prudential Corporation, which is one of the bodies that could expect to benefit from a policy of greater reliance on the private sector for pension provision. However, I can give only a qualified welcome to the Green Paper, and I shall explain why in a moment.
Like other noble Lords, I should like to begin by welcoming the fact that a review of the way that we provide for retirement has taken place. It is a complicated subject, as is apparent from this debate, and it is one where we ought not to rush into conclusions without very careful reflection and consideration of the Government's proposals.
It seems to me that three things are self-evident. First, it would be unthinkable to abandon SERPS and to return to the pre-SERPS position whereby vast numbers of people depended on supplementary means-tested benefits to supplement their basic retirement pension. Secondly, things have however changed since SERPS came into force, and not all those changes could have been foreseen at the time. There may be arguments about precisely what those changes are, what was foreseen at the time, and what assumptions were made at the time. But the prospective number of people in work in the future that is now foreseen as a proportion of the population raises serious questions about a pay-as-you-go scheme, if calls on future contributors and future taxpayers are to be kept within reasonable bounds.
Thirdly—and I hope that this point is also self-evident—the worst course of all would be to do nothing until the situation gets out of hand or leads to a trail of broken promises. So whatever view your Lordships may take of the Government's proposals, I believe that the Government were right to consider corrective action now. To those who say that the Government are playing politics, I would say only that if I wanted to play politics, I would not pick up this particular subject—particularly since there is no saving to the Government on retirement outlay in the short term. Even if politics are not being played, there are political choices. One of the problems is that the Government are to some extent in a box, because no modification of the present scheme can achieve savings without reducing benefits.
The Government's solution to this conundrum has, on the face of it, apparent attractions. First, it keeps the state's costs in check. And behind all this—as behind every decision taken by this Government and previous governments—lies the whole problem of 316 public expenditure borrowing limits. Secondly, by funding through the private sector, one should produce additions to savings which at least partly add to capital formation and therefore higher production. Thirdly, it is consistent with facilitating job mobility through portable pensions.
I have, however, three reservations. The first is the reservation which most people have, which concerns the absence of illustrative figures. I can see the Government's difficulty over the timing of this Green Paper in relation to the public expenditure review and the autumn upratings. But figures are needed if people are to be convinced of both the viability and the fairness of the proposals.
Secondly, I echo very much what has been said about the need to avoid pensions once again becoming a political football. When I say that, I am not arguing for what might be called consensus politics in the middle-of-the-road or the Butskill sense.
There are, however, certain things which ought to survive a change of government if possible, and pensions is one of them. This is not just because it is a long-term planning process into which much effort and money would have to be invested in devising, marketing and administering the new schemes which might then have to be unscrambled, but also in terms of confusion and inconvenience to individual employers, particularly small employers, and above all to individual contributors. Pensions concern their future at a time when they are no longer able to provide for themselves and need to know where they stand.
My third reservation applies to the apparent complexity of the situation with which we would be left if the Green Paper proposals are adopted unchanged. By definition most of those affected by the proposals are those who are now in SERPS, or would be in SERPS and without an occupational scheme. Therefore, they are likely to be in small groups, with many earning below the national average. Many noble Lords have referred to the complexity of the problem, but I should like to illustrate this by giving some remarkable figures which can be found in the sixth survey of occupational pensions by the Government actuary. In 1979 there were 1,260 employers each employing over 1,000 people and no fewer than 1,250 of them had an occupational pension scheme; in other words, well up at around 90 per cent. However, if you go to the opposite extreme and look at the number of firms employing fewer than 10 people, there were no fewer than 430,000 firms and of those only 30,000 had a pension scheme; 400,000 did not. Therefore, one has to look at a situation where perhaps about 400,000 very small employers are introducing the new scheme. The responsibility for deductions would rest with the employer but each employee in a firm of perhaps eight, nine or ten people would be able to choose his own fund. There would be small and variable deductions, some weekly and some monthly. At the same time, the private sector would also have to cope with the review and likely modification of many—probably all—existing occupational schemes as SERPS is phased out. It would also be necessary, as some noble Lords have pointed out, to have effective monitoring of what went on, some sanctions and some assurance of consumer protection.
317 Having expanded on the difficulties I do not want to say that it is impossible, but it would be a very strange paradox if the intention to give more personal freedom of choice in fact led to greater complexity and a higher cost structure. Therefore, there is a case for simplifying the Government's proposals. There are a number of ways in which this could be done. To give just one example, it would be possible to give employers, at any rate initially, the ability to meet the net requirements through a group scheme without necessarily providing all individuals in small firms with a facility to direct their contributions to a variety of institutional funds.
I have touched on only some aspects of the problem and my comments are not intended to be destructive because I think there is much to commend in the objective of that part of the Green Paper which deals with pensions. The noble Lord, Lord Williams, in his excellent maiden speech—and we have been very fortunate today in hearing four excellent maiden speeches—raised the question of whether the private sector could cope. I suspect that if you ask different people concerned with pensions in the private sector you would get different answers. I believe that if Parliament were to approve proposals on these lines the private sector could cope, provided there is some simplification; but I believe that some simplification is necessary. However, whether or not the private sector can cope, I think that the proposal is so significant that before embarking on it we should all be able to see clearly, first, that the proposals are workable for those who will have to implement them (particularly small employers) and, secondly, that the proposals will command continuing broad political support, even if not enthusiasm. This means that the Government will have to persuade people, not only in the Division Lobbies but more generally.
I repeat that I welcome the review because I believe that some change in SERPS is inevitable. I remain to be convinced that this particular solution is right. Therefore, I am glad that the Government's proposals take the form of a consultative document. I hope that that consultation will be genuine and that the Government will listen to the views put to them. I also hope—and I understand the Government's problems over the timetable—that rather more time for consultation will be allowed than seems to be suggested because some people are going to suspend judgment until they see the illustrative figures and until they understand rather more clearly what is involved in these very far-reaching proposals.
§ 6.46 p.m.
§ Lord Molloy
My Lords, I too congratulate the four maiden speakers on the speeches that we have listened to this afternoon and I congratulate them particularly on the high standard which has been set. I also thank the noble Lord, Lord Hunt of Tanworth, for his most interesting speech. I was totally staggered that he found there was not much to blame this Government for, and also at his amazing knowledge. Therefore, I give him one or two points on which he might like to concentrate.
In 1979 the level of unemployment in Great Britain was going down; bankruptcies were going down; and suicides in small businesses were going down. Within a year of the present Administration taking over they 318 started to rise, rise and rise. I have listened for four years to the Benches opposite telling us that in a few weeks' time there will be an onslaught on unemployment—which is at the level of about 4 million—that there will be an increase in productivity and that small businesses will at last get on their feet. Having listened to that, month in and month out, year in and year out, I am bound to say that I would be deeply suspicious of the ability of any businessman in the private enterprise sector who thought that the record of this Government was anything to be applauded in any way because—and this is the whole point of my submission—the reason we have these interesting 13 chapters on the reform of social security is the result of a big row between the Chancellor and the Secretary of State, to which I shall refer later. The real reason for the argument and discussion is this: "How much can we destroy our social security; how much of the welfare state, without causing us too much harm electorally, can we really eradicate?" That is the reason we have this Green Paper. It is the total inability of a businessman's Government to run our nation anything like their predecessors did between 1974 and 1979.
We then had the winter of discontent; and I admit it and the trouble that it caused. Ever since then, under the Tories, we have had winters of discontent, autumns of discontent, springs of discontent, and summers of discontent, year in and year out. It is about time that big businessmen, and small businessmen, acknowledged that because I am sure that the 4 million-odd on the dole are people they should like to employ.
Therefore I also think it necessary that we should look at our own progress, not only of yesterday but also in terms of the question of why welfare was created. One realises that the first old-age pension was known to some people, who are still alive today, as "the Lloyd George". What a row that caused when it was introduced! However, Lloyd George succeeded. It was because of the fact that our history in the first industrial revolution was absolutely appalling but at the same time brilliant, with the wonderful inventions, the complete disregard for human suffering, in those "dark satanic mills", as the hymn says. They did exist, you know; they really were dark and they really were satanic.
After that came the wars, when many more paid the full penalty; and mostly—overwhelmingly—those who died were of the working-class stock; there is no argument whatsoever about that. Then there were those, who were in work in those early days, who literally went from bed to work. Cheap labour and appalling conditions at work and at home were natural. When the aged were worn out, they had one place to go: to rot in the workhouses.
We have managed to change some of that, but we had to fight against the viciousness and avarice of employers with their starvation wages. There was a little easing of the burden, the cruelties of the '20s and '30s. The hunger, the homelessness, the humiliation was then attacked by Beveridge, just as it followed on from the commencement of what Lloyd George had tried to do. One realises that when Beveridge, with whom really we are concerned tonight, was drafting these proposals the Secretary of State was not even 319 born. Some of us were wondering what kind of land we were going to return to and whether we were going to be double-crossed, as we were last time, about a land fit for heroes to live in. The kind of land that we wanted was then created by that brilliant Administration from 1945 to 1951. With it, we saw the birth of what is I think the wonderful welfare state.
However, now, as then, we have also to understand what was the purpose of the welfare state and why the money was given, as it is being given to people on the dole today. For what reason was social security given to people? Was it given to them to buy shares somewhere, or to invest in some big organisation? It was to buy food from the grocer, to pay the rent and to pay the rates. In short, people simply collected the money to give away to the landlord, the grocer, the baker, the candlestick-maker and so on. That is what has to be appreciated.
I will tell your Lordships this. Modern youth appreciates this argument very much indeed, even if they have not yet quite grasped it in the upper hierarchies of the City of London. We are now back to that awful situation of the '20s and '30s, which is to see millions on the dole and the disgrace of our jobless teenagers. Just listen to this. In the north of England, unemployment is above its highest point in the late '20s and '30s. One of the reasons for this is that money has to be saved; something has to be done. Therefore we have a situation of seeing, to our credit, that the viciousness that existed in the '30s is now being eased tremendously by the welfare state, particularly in social services, housing development and the great National Health Service. It is all allied to this argument in this Green Paper. If we do not see that full picture, we will quite naturally be myopic. It is very necessary that we do.
I understand there have been arguments going on within the Cabinet, where they have been trying to formulate a financial policy. All that has happened with all the financial policies over the last five years has been the creation of unemployment. No one can argue against that. I would be willing to sit down immediately if anyone could tell me that unemployment has decreased. It has not, and it will become worse.
We have the Chancellor of the Exchequer complaining of a system which encourages idleness and irresponsibility and discourages initiative and enterprise. His party has created more unemployment than there has been in the last 10 to 30 years. The idleness of our youth is a disgrace and the initiative of entrepreneurs has been blunted by the particular policies of this Administration.
In 1982 the Government "Think Tank", which was the Central Policy Review Staff, called for drastic changes in the welfare state. I am sure they all went to work on their bikes; I am quite sure of that. I am also very sure that they were not very well heeled and that they were quite prepared to take it on the chin themselves while they were dishing out cuts for everyone else—the old, the aged, the pensioners and the unemployed. They wanted to end the link between inflation and social security benefits. I find this appalling in this day and age. However, to her everlasing credit our Prime Minister later described it 320 as politically inept. But worse was to come. That was the Green Paper which we have been reading over the last few days. The phasing out of SERPS is probably also an appalling disgrace.
From time to time people outside this House say, "Why can't you all get together? Why can't all the parties, all the MPs, all the Members of the House of Lords (it doesn't matter what party they belong to) get together on one issue at least: the social security of the individuals who comprise this nation?" Well, they did it, and the result was SERPS. Indeed among the signatories in full support of that was none other than Mr. Fowler himself. Thus one can see what a load of rubbish we are discussing. It does not matter what intellectual interpretations are being given to it: it has to be understood and is being understood by the ordinary man in the street.
The other argument submitted recently, which I have heard before and which I also find appalling, is that the poor are having too many children. It was a good job that the poor of the early '20s had their children because they were the people who frustrated the Fascists in 1940, right through to 1944. We have sometimes to appreciate that, because they do. Then there has been the argument that child benefit is threatened. Here again I want to pay full credit to the ladies of the Conservative Party and their national advisory committee, because they went to see the Prime Minister and persuaded the Iron Lady to change her mind. I think that must be acknowledged.
Then there comes the row between the Chancellor and the Secretary of State over too much tax relief if SERPS was replaced by private pensions. That was the argument. I am sure the noble Lord, Lord Hunt, knows that if you leave this to private enterprise, there will be so much tax relief on people's pensions that it will cause a headache for the Chancellor. Thus, what was decided was that abolition would give way to the term that we now all recognise as "phasing out".
The proposals involve official prying into individual circumstances. Just listen to what I have to say, my Lords. Officials will be allowed to pry into private circumstances and there will be no appeal against their decisions. In what kind of society are we going to move which seems to think that the overwhelming mass of the British people are cheats, liars and crooks? It must stop. What I feel is disgraceful is that the mandarins of the social security service will be served by their prying, petty commissars—and in this Great Britain of ours! These are some of the matters that need to be looked at very closely.
Beveridge declared war on want, disease, squalor, ignorance and unemployment. With it, he gave birth to the welfare state. I do not understand why big businessmen, people in the City, as well as the trades union leaders do not understand why this was done—unless it is a more terrible thing to have five years of a Tory Government than have five years of war. When Europe was in ruins, after the greatest war in the history of mankind, when almost everything was destitute, this nation picked up not only itself but other nations as well. Its very example was an example to all mankind.
Then, out of this, within a year or two after that appalling war, Aneurin Bevan had created the 321 National Health Service and James Griffiths the social security scheme. We want to be proud of these matters, not try to dismantle them now that we have a bit of panic on.
Let us acknowledge that the benevolence of the welfare state not only reduces poverty but could actually strengthen the market economy. There are many people in some parts of the north of England, in Liverpool and in South Wales—butchers, bakers, shoemakers, those running the small draper's shop on the corner—who say, "Thank God for social security, or we would be out of business". It is not money that they keep for themselves. It is to pay the rent and rates, to pay for clothes and to buy food. That is what we have to understand. It is hardly mentioned in any of the 13 chapters of this highly intellectual document which I suppose has been drawn up by people who do not know the real meaning of being on the dole or going hungry. We have provided a civilised alternative, with the welfare state, to the whips of starvation and destitution. All parties in the past 30 years have endeavoured to replace contempt for the poor with compassion and understanding.
We should appreciate the finer aspects of philosophy in life. It is not all economics. It is not all privatisation and nationalisation. We have to have a feeling within us. I thought that SERPS was a wonderful example of Parliament at its best when it designed to abolish poverty almost totally by the year 2033. That has gone, or at least is under threat of being abandoned and destroyed. That in my judgment is a criminal act. It runs contrary to a philosophy that all of us can share irrespective of our politics in this country. The capacity for emotional concern of individual life, unmarred by removable or preventable worry, poverty or ill health, is the most significant quality of a civilised human being. I believe that those qualities are available in all parties represented in this Chamber and in the other place. They are the qualities that we need to garner together, to build our nation so that once again we, in these islands, can pick ourselves up and in so doing prove an inspiration and give an example to others in similar difficult cirumstances.
§ 7.2 p.m.
§ Baroness Ewart-Biggs
My Lords, to be a mere run-of-the-mill speaker today among such an eminent group of maidens is a great honour. Although the term "galaxy of talent" is rather over-used, it is nevertheless a relevant term to describe the maiden speakers we have heard today.
In my view, the importance of this debate must rest upon the fact that it is mainly concerned with those who, at the present time, are in the greatest need. That this is a fast-growing group is borne out by the fact that in the last decade, with 2.7 million fewer jobs in manufacturing industry, the proportion of people with incomes in the bottom 20 per cent. bracket of working age has grown from 65.1 per cent. to 80.8 per cent—a rise of over 15 per cent., which is, indeed, a staggering change. So one purpose of this Green Paper is largely a response to the ever-growing cost of keeping an increasing number of people on the poverty line.
I have only a few comments to make and a few questions to put to the Minister. First, may I say one 322 word about how I interpret the philosophy that has motivated the Government in proposing these changes. It seems to me that this Green Paper is, indeed, a further confirmation of the Government's overall strategy to create a dual society in Britain. One aim would appear to be to divide off the sector that depends on state support from that which does not, and to apply two entirely different standards to the two sectors. For the state sector, it will develop public assistance schemes that minimise cost. For the market sector, it will encourage new initiatives in the private and occupational spheres. As a result, two entirely different social structures will develop.
So, although throughout the review lip service is paid to Beveridge, in fact the Government are clearly shifting in the opposite direction. For would it not be true to say that, properly understood, social security is not just about the relief of poverty; it is also about preventing poverty, both by the transfer of resources to those at the lean stages of the life cycle and by collective insurance against risk? One can only deduce that if the Government were really concerned about the equitable redistribution of public moneys then the review should have been concerned with the wider distribution of income and wealth, especially the hidden system of welfare to be found in tax reliefs, and not just about those sums already allocated to benefit.
Furthermore, the Green Paper would seem to border on the alarmist about the costs of our social security system. My noble friend Lady Turner has said this in a remarkable maiden speech. There has been stress on the burden that it has become to the taxpayer, on the need to bring it under control and on how it is constituting a threat to our economy. Yet OECD figures show that social security expenditure in Britain is well below the European average. One has only to look across the Channel to see an entirely different philosophy at work. On the Continent, there is an increasing recognition that new economic conditions could be turned to the advantage of all citizens by a new approach to income support. There, it is believed that a basic income scheme guaranteeing each person the unconditional right to an independent income sufficient to meet basic living costs would give true income security and incentives to work and save, even in a fragmented labour market. Clearly, this view implies a totally different conception of the state as a unifying force in society which aims to give all an equal basis for citizenship. As the Government here most certainly do not encompass this view, then any income support scheme that is conjured up is likely to be partial and divisive.
I should like to give briefly a few examples of how some of these changes, if carried out, will affect some of the least well off in the country—those who are always on benefit. The single parent—the lone parent—about whom I have often spoken before in the House, is certainly in that category. It must now be agreed that to some extent one-parent families are no longer a minority interest group. Although we should like to see their number diminish, I believe that the demographic signs are that marriage breakdown is likely to go on increasingly. Even were it to stay relatively stable, we are clearly aware that one-parent families pose major problems for social policy and that women alone with children will form a major factor in this country's poor.
323 The Government stress that the changes in welfare and social security are designed to help families with children. Yet these changes have raised many anxieties for single parents, who, after all, represent 48.5 per cent. of all the families with children on supplementary benefit. Again, it must be remembered that it is those who have to live on supplementary benefit for long periods who really suffer. Many of us might be able to jog along on a very low income for a short while. But it is when unexpected expenses arise—two children needing new shoes at the same time, or the cooker breaking down—that the crisis occurs. This makes it essential that the new basic income support level and the premiums are set high enough to cover the loss of single payments, additional requirements, water rates and the proposed percentage contribution to general rates.
For if the level is not set high enough, thus requiring lone parents to seek assistance from the proposed social fund, then their prospects do not look very good—for the following reasons. Decisions as to payments are at the discretion of each DHSS office, without any right of appeal. Each office will have a fixed annual budget. So what happens when that runs out just when a single mother needs some vital piece of equipment for her child? The repayment scheme will not help her, either, as it is evident that if an inadequacy of her income level makes her appeal to the fund in the first place, then the same inadequacy will prevent her from repaying the loan.
Therefore, although lone parents are among those who are meant to have been "targeted" as being among those most in need, there are many questions about how the new arrangements will in fact benefit them. Perhaps I may give one or two examples. Is it proposed to ignore child-care costs and other work expenses when calculating the earnings disregard for the means support for them? Secondly, will one-parent families receive the same rate of family credit as two-parent families, as they do under the FIS? While welcoming the proposed alignment of income support and housing benefit, can we be assured that lone parents will be treated as a couple for housing benefit purposes?
Lastly, while welcoming the proposals for improved treatment of widows—and I believe it is a very great improvement that widows should receive that help at the moment they are left alone and in the greatest need—would it not be logical that some additional measures be extended to lone parents, who after all have precisely the same problems in bringing up their children? These and many other questions will have to be thought of and answered before lone parents will feel anything but alarm about the proposed changes.
Before concluding, I want to mention just one useful activity which will be adversely affected by the abolition of single payments. This relates to an organisation called Neighbourhood Energy Action, with which I have recently become involved and which works in the field of fuel poverty. It operates a nationwide scheme to improve energy efficiency through home insulation projects. Its principal clients are the elderly and poor families with children who receive supplementary benefit. Indeed, around 80 per cent. of its draught-proofing work is funded by single 324 payments. Therefore, the abolition of these payments will put all this highly beneficial and practical work at risk. One can assume that very few of such households would be willing or able to pay for the draught-proofing material which at present is paid for out of the single payments. So not only would about 240,000 pensioners and many other low-income families be worse off, and probably accrue fuel debts, but also, from the employment point of view, all those young people taken from the MSC schemes to do the work will go back on the dole.
I cannot believe that the Government, which profess to encourage and approve such energy-saving and job-creative schemes, could have meant to bring on their demise. It is rather like throwing the baby out with the bath water, and perhaps the Minister can say a few words about whether this really will be affected by the abolition of single payments.
I should like to have commented on many other aspects of this Green Paper, but I am very far down on the list of speakers and I think that on the whole those many different aspects have already been mentioned. However, I find a cut in the value of child benefit a really extraordinary way of implementing the Government's claim that resources are being targeted to.those most in need. I am also anxious that mothers are to be deprived of the small independent income which they have hitherto received from the FIS and which I gather is to be channelled through the family credit scheme into the father's pay packet. Everyone who is interested in child welfare has been quite certain that the independent income which goes straight to the mother has most advantaged the child.
Therefore, I end where I began by repeating my belief that the net effect of these measures will be that the state sector—or the claiming class, for want of a better term—will be poorer and more restricted, that being the price to be paid for the greater freedom and incentives enjoyed by the rest. Without any disrespect to the noble Baroness, Lady Trumpington, I do not think that these proposals are exactly dripping with the compassion that she attributes to them.
§ 7.15 p.m.
§ Lord Rea
My Lords, at this stage in the debate I think that some of your Lordships might welcome a little light relief. With regard to social security, the Government remind me of the traveller on Bodmin Moor—or was it Dartmoor?—who lost his way. He asked a local farmer how he could get back on the road to Exeter. After a pause for thought the farmer said, "Well, first of all, sir, I would not start from here". I apologise to those who may already have heard the Irish version of this joke, but I think that Irish people should tell Irish jokes about themselves, and as an Englishman I shall talk about my own country. I believe that that tale sums up the Government's problem, faced as they are with a huge and embarrassing bill with which they would much rather not have to deal.
In a different sense the tale is apt in that I think the Green Paper does not look at the problem with a wide enough view. Surely the Government should have stood further back from the problem and asked how they can reduce the number of those who are dependent on social security. There is no hint in the 325 Green Paper about how to do this—no hopeful prospect for the future—which surprises me, as we have heard that it is a middle-class concept. Rather, there is a prospect of a continuous millstone around the neck of this country's economic future.
As many noble Lords have pointed out, the main reason for the recent rise in the social security bill is the need to keep 3 or 4 million unemployed people and their families going at such a level that they do not become destitute or start any ugly demonstrations or riots. Interestingly, it is often members of the party opposite who have persuaded the Government not to adopt policies which are too hard or regressive when seeking economies. I am not only talking about Back-Benchers and the lady members of the Conservative Party, but also about members of the Cabinet who have thought out the full implications of social security cuts.
Despite impressive rhetoric in the Green Paper—which I think scarcely deserves the name "Green Paper" because it seems to offer very little opportunity for discussion, and it offers only three-and-a-half holiday months in which to discuss the proposals anyhow—I do not think it will make any major impact on the situation. It is simply switching resources from one group of poor people to another. The problem of eliminating poverty is not even tackled.
I speak as a National Health Service general practitioner in a not particularly deprived area, who comes into daily contact with people who have real problems concerned with the lack of a job and poverty. These are people who are dependent on social security, whose lives are impoverished and who cannot develop in the way that one would hope they would in a country which is as prosperous as this one. I am often asked to provide medical reports giving evidence as regards claims for additional allowances for clothing, heating, special diets, etc. I dread to think how many more of these there will be and how much more desperate the cases will be when we have in operation the proposed social fund with its limited budget.
Other noble Lords have mentioned and discussed the difficulties that might well arise in that area. It is now not at all uncommon when their husbands are unemployed for wives to go out to work in order to make ends meet. Sometimes the husband does a good job as a house spouse, looking after the children; but sometimes that role is not accepted, and this is unhelpful for family life. I have seen, as have many other doctors throughout the country, an increasing number of people with alcohol and drug problems which are an indicator of the general despair and lack of hope which many people in this country feel at the moment.
Of course, life on the dole is not so bad now as it was in the 1930s, as the noble Baroness, Lady Turner, pointed out. But there is still plenty of evidence that poverty and ill health are linked. This was pointed out and clearly documented with many examples in the Black Report on Inequalities in Health, which I am afraid to say the Government have never yet addressed fully and given a serious and constructive reply to.
This country was among the world's leaders in health statistics—that is, expectation of life, infant and 326 perinatal mortality—in the 1950s and 1960s, but now we are well down the list, having been overtaken by many countries, and in particular by Japan which started to develop industrially only about a century ago. Japan is now the world leader in every kind of health statistic. I recently visited Japan which, though very overcrowded with rather smaller houses and more people per room than is usual in Europe, was full of healthy and contented looking people. Everywhere was neat and clean. There was a great air of prosperity. In fact, I was reminded of Switzerland.
However, recently I had some return visitors from Japan and I was ashamed of the evidence of poverty and poor maintenance in some London streets, and particularly in some of the National Health Service institutions that I showed them round, compared with Japan. In Japan they still have only 2 to 3 per cent. unemployment. They are worried about their rapidly increasing numbers of pensioners due to their good health, but their social security budget is a tiny proportion of ours.
That may be thought to be a totally different case not applicable to Britain but, as the noble Baroness and others pointed out, other countries in Europe have a higher proportion of their budgets devoted to social security. If you walk around Europe now, you do not see evidence of those pockets of poverty which you can see so easily in any British city.
The particular example I should like to point out is Sweden, which now, practically alone in Europe this side of the Iron Curtain countries—and that is a totally different picture—has only 2.9 per cent. unemployment, despite having to face the same world economic forces. I want to suggest one or two reasons why they have been successful. The main reason is that their Government are not afraid to step in with appropriate help to stimulate the economy, borrowing if necessary to do so in what must surely be the modern equivalent of Keynesian economics. He was not a Marxist; far from it. If anything, he probably saved capitalism from going under to either Marxism or Hitler in the 1930s and 1940s.
In the Green Paper there are plenty of references to Beveridge. He based his proposals, as other speakers have said, on an economy with near full employment. The supplementary benefit segment, or National Assistance Board segment, of the cake was never expected to be as large as it is today. I consider that no real progress can be made until the Government set us on the road to economic expansion and a reduction in unemployment. The social security bill will then decline in real terms while the income of the country increases.
There are many steps which can be taken to bring this about, but they will initially involve additional Government expenditure. The pump will have to be primed. This may initially involve some increase in the public sector borrowing requirement and perhaps for quite a few years, and this is anathema to the Government. Meanwhile our economy remains in the doldrums, the rich get richer, the poor get more numerous, and the social security bill climbs. No amount of tinkering about with it will help to solve the basic problem. There is an urgent need for much more investment in our manufacturing industry and in our infrastructure and, in particular, support for our most 327 unique asset, our scientific establishment. I submit that this is the way in which we can eliminate poverty and thus get the social security bill under control.
§ 7.26 p.m.
§ Lord Kilmarnock
My Lords, I regard this as a rather special occasion. We have been able in one afternoon to enjoy no less than four notable maiden speeches which have blown a real breath of fresh air into the usually hermetic atmosphere of the social security fraternity in your Lordships' House. It is rather strange that the Government Front Bench should not have more supporters behind it. You would have thought that they would have seen this as an important occasion.
There can be no doubt that the social security system was overripe for review and reform, if only because of its complexity and administrative cost. So the Government can claim some credit for having attempted to grasp the nettle. But with two or three exceptions, which I shall later acknowledge, their credit begins to run out rather fast. There was no consultation with other parties on the all-important question of pensions. There is no explicit commitment to the integration of tax and benefits systems which all informed commentators agree is the only way ahead. There is a dearth of figures, to which practically all noble Lords have referred, which makes the outcome in specific cases unpredictable and makes it difficult to conduct this debate. I find it frustrating to proceed from volume I to volume 2, which is simply a rather modest expansion of volume 1 with very little built in. I found that a rather frustrating exercise.
The Government have excused the lack of figures by emphasising their intention to concentrate on the structure of social security for the future. But what they have given us in fact is a series of minor structural reforms coupled with a cost-cutting exercise which is to be achieved in the short term through housing benefit reform and largely at the expense of the elderly. As my noble friend Lord Grimond said, there is no fundamental review here. There is nothing revolutionary.
The Government's aim to cut the total social security bill is justified by "shock horror" references to a 70 per cent. increase in social security expenditure over the past decade. But 35 per cent. of that increase is due to a rise in unemployment, 17 per cent. to the rise in the number of pensioners, and another 17 per cent. to child benefit, much of which is only a bookkeeping cost caused by the change of the old child tax allowances into a benefit. And though our social security bill accounts for one-third of Government expenditure and approximately one-seventh of the gross domestic product, it remains modest compared with that of some of our more successful European neighbours. This was a point made by the noble Baroness, Lady Turner, in her excellent maiden speech. If the Government want to make deep cuts in the social security bill, the quickest and best way would be by a substantial reduction in unemployment.
I said that there were one or two areas in which I thought that the Government have made a modest advance. One is family credit. This is to be based on the net earnings of low income families in work and is 328 therefore an improvement on family income supplement, which is based on the gross earnings and suffers from low take-up. It will be related to the age of children, like unemployment benefit, providing more resources for the older children. It bears a remarkable resemblance to the basic benefit proposed by the SDP, and we are delighted that the Government read our policy documents with such close attention.
As regards free school meals, we support in principle higher cash benefits for those on low incomes rather than a plethora of stigma-laden payments in kind. But the Government's abolition of free school meals is partial, as those on the new income support—that is to say, the successor to supplementary benefit—will continue to be eligible for them while those in work will get extra cash. We believe that this status distinction is wrong and that the same treatment should be accorded to all low income families, whether employed or unemployed. The Government are in no position to make moralistic distinctions between the deserving and undeserving poor at a time of historically high unemployment, to which their policies have contributed so much.
On the income support scheme, again in principle we prefer larger single cash benefits to a patchwork of separate benefits, so that people can choose how to meet their own needs. But many people rely on special additions for up to 30 per cent. of their income, which I believe my noble friend Lord Banks has said, and so we shall have to see how this works out in practice. Everything depends on the amount of money that the Government will devote to this, and that is still a secret.
On disregards we agree that a more generous savings disregard was necessary. It was disgraceful that people who had saved hard should have to run their savings down to £3,000 before qualifying for any assistance and it was a total denial of the principle of thrift to which the Government are wedded. The sliding scale from £3,000 to £6,000 is an improvement and perhaps it should be continued further up the scale.
The increase in the earnings disregard to £15 per week is another tiny step in the right direction but it is far too restrictive. It is to be confined to single parents, disabled people and couples unemployed for two years, who would be able to earn only £7.50 each if both worked. For couples unemployed for under two years, the single unemployed and the pensioners the disregard is £5 a week, which is almost meaningless, as work expenses can no longer be deducted. The SDP's basic benefit scheme is a much better way to help people combine income from work with income from benefits, with its single withdrawal rate of 45 per cent. which helps people to take up part-time work.
I am running out of remarks of approval or qualified approval. The good news was not very plentiful and here comes the bad news. There is quite a lot of it. The social fund involves wide discretion by officials, which was something we were moving away from and which caused the noble Baroness, Lady Warnock, such concern. As it will be cash limited, those who apply late in the financial year are likely to come away empty handed. There is to be no system of appeal and most of the payments will be loans, but loans for people with very low incomes are likely to leave them permanently in debt. This is a retrogressive step for a modern social security system.
329 The ending of payments by the DHSS of mortgage interest for the unemployed and those on state benefits is another retrograde step which comes very oddly from a Government dedicated to the concept of home ownership. It discriminates against those made redundant through no fault of their own and is shortsighted in that it could leave the Government footing an even higher bill for board and lodging and an even greater problem of homelessness in the end. Can the noble Baroness say in what way building societies might be encouraged to help people in this situation?
I now come to the sins of omission. A number of important opportunities have been missed. One of the greatest injustices of the current system is that people unemployed for over a year come off unemployment benefit and go on to the short-term supplementary benefit rate, and nothing is done for them. Between one and two years there is not even a higher disregard for earnings. This is a lamentable lacuna in the Government's proposals. Nothing is done for carers, mainly women, pinned down, caring for elderly relatives and keeping them out of expensive geriatric beds, often at the expense of being able to go out to work themselves. No relief is offered there.
But the treatment of death is particularly inept. The death grant was, of course, totally inadequate, frozen as it was at £30 over many years. But now anyone unable to meet funeral costs will have to apply to the social fund. When people die suddenly, unexpectedly, over a bank holiday, Easter or Christmas, as they frequently do, the relatives presumably have to wait for the next opening of the social fund office. They must then go cap in hand, wait in a queue and be subject to investigation, before they can agree any details with an undertaker for a funeral. This is disgraceful. The simple, equitable and dignified solution is the one that we have proposed on these Benches; namely, that the figure be raised to £250, recoverable from the estate of the deceased on the grant of probate or letters of administration. For God's sake, let us at least ensure that people can bury their dead with decency and dispatch.
On the vexed question of SERPS—I am sorry to use the acronym, but we all seem to have adopted it today—whichever solution one prefers, I think it can be unequivocally said that it is a profound mistake to reform pensions without all-party consultation, because any change imposed unilaterally will not have the effect of binding subsequent Governments. Indeed, the Labour Party have said this evening that if they form another Government, they will reverse the Government's proposals. The whole pensions field is simply opened up again to damaging uncertainty affecting many millions of people.
At one time I thought that the only solution to this heavy and growing commitment of a pay-as-you-go scheme lay in the extension of funded schemes to which the noble Lord, Lord Williams, referred. But even the Financial Times—I refer to an article on 18th May—did not see this proposition as self-evident. On 4th June it again pointed out that shifting the burden from the public to the private sector did not mean any less cost to society. It stated:If the Green Paper believes that the economy cannot afford open-ended pension liabilities through SERPS, it takes imagination to contend that even additional investment through the market will see the pension system over the demographic hump".330 I believe that point was made by the noble and learned Lord, Lord Silkin.
Furthermore, the administrative costs of SERPS are only 1½ per cent. of benefit costs, while those of occupational schemes are running at about 8 per cent. and those of some private schemes can be up to 18 per cent. of contribution income. Also SERPS has the great advantage of being fully portable; a valuable quality in an age of flux. Of course there are alarming actuarial forcasts which we cannot deny; so where do we go?
It was interesting to learn that even the Government's expert advisers did not agree. Professor Peacock wanted to abolish SERPS, but at the same time to raise the basic pension, as has long been advocated by my noble friend Lord Banks and the Liberal Party. Mr. Marshall Field thought that providing large numbers of small private pensions for highly mobile employees, such as those in the building trade as proposed by the Government, could be quite expensive. He said:It is the thing that the state scheme does rather better".Severe reservations have been expressed in this field extremely knowledgeably by the noble Lord. Lord Hunt of Tanworth, and by the noble Lord. Lord Williams.
Mr. Stewart Lyon favoured modification of SERPS, but not abolition. He said that SERPS,reaches those employees that the private sector cannot reach".Those are the employees that we want to reach as well. Incidentally, the current Social Security Bill includes a proposal for a register of occupational pension schemes. Can the noble Baroness tell us whether this will include the compulsory private pension schemes envisaged by the Government? Consumer protection, as the noble Baroness, Lady Turner, pointed out, will become of increasing importance.
When good men and true—the experts I have been quoting and some of your Lordships who have spoken this evening—and knowledgeable to boot disagree, it cannot be right to plunge ahead in the way the Government propose. Fools rush in where angels fear to tread.
The Government should consult genuinely between the Green Paper and White Paper stages and not just make token genuflections towards consultation that we have become so accustomed to from this Administration. They should do this with all the political parties on a matter that will span the lifetime of many Governments, no doubt of different complexions. Only all-party agreement can guarantee stability on pension provisions and structure into the next century at a price the country can afford, along with a fairer and more distributive system. To achieve this we shall all have to compromise on our most favoured solution. That was what my right honourable friend Dr. David Owen proposed in the other place yesterday, and I heartily endorse it. It was interesting that he was supported by some honourable Members on the Government Benches. The honourable Member for Brighton, Kemptown, said that if the Secretary of State wanted his scheme to remain in place for many years, he must look for broad, all-party support. If he did not get that, his scheme would be scrapped and replaced by another, and that would not 331 be in the best interests of future pensioners. Consensus may be a dirty word with the Government on many issues, but if they abandon it over pensions, they will do the country grave disservice.
§ 7.39 p.m.
§ Lord Ennals
My Lords, what a very fortunate man I am to be winding up for the Opposition on a day such as this when we have had not only four maiden speeches, but four remarkable maiden speeches from newcomers to your Lordships' House, all of whom have brought a tremendous variety of skill and experience. They have made their speeches with elegance, in a constructive way. I think that all of them will add to the debates when the proposals eventually become a Bill. I say to the Minister, who for the moment is looking a little lonely—
§ Lord Ennals
My Lords, I would suggest to the noble Baroness that if she merely turns round, she will see how lonely she is. It has been noticeable to all of us throughout the debate that only one Conservative Member, the noble Baroness, Lady Lane-Fox, has chosen to support the Minister.
I want warmly to welcome the speeches which were delivered by the maiden speakers. I think that my noble and learned friend Lord Silkin, a very worthy son of a noble father, he himself greatly distinguished as a former Attorney-General, brought much wisdom and cogency to the House. We also heard the noble Baroness, Lady Warnock, whose name has made its own contribution to many debates in your Lordships' House and who is a person of such piercing intellect. I hope that she is going to take her role here very seriously because she has an enormous contribution to make; not that we are not mostly, of course, highly intellectual, but there are moments when her presence will be needed. There was, too, the noble Lord, Lord Williams of Elvel, with his experience as chairman of the Price Commission. He made some very relevant comments and raised questions on SERPS, showing his clarity of mind on complicated issues. Finally, there was the noble Baroness, Lady Turner of Camden; and I shall have to watch what I say, for she is the general secretary of my trade union. She is a very distinguished trade unionist. She delivered today a very compassionate speech which made also good, sound, economic and social sense. I think that her role is going to be very important.
Since yesterday's Statement in another place was simply referred to and not discussed in this House, perhaps one should make two or three brief comments. I should like to say to the Government how much I welcomed the decision which was announced yesterday in relation to invalidity benefit and to congratulate them if I may—and I hope that the noble Baroness will repeat this to her noble friend the Leader of the House—on the decision to increase vaccine damage payments for which so many of us in your Lordships' House had so strongly pressed.
§ Lord Ennals
My Lords, the very fact that he took away the feeling of the House and took action is a tribute to him personally.
But the increase of 15 per cent. in child benefit is, I should have thought, derisory, to say the least. It does not even pay for a first-class postage stamp, and I am not even quite certain about a second-class postage stamp, particularly since the cost of postage stamps is to go up.
I want to turn to the main subject of the debate, what I call the "Fowler review". The years 1984 and 1985 have been dominated in this House and in another place by the Local Government Bill, which has been supported mainly by those with a sort of dog loyalty to the Government's unwise election manifesto commitment. I think that the nature of the White Paper which we are discussing here today, the Reform of Social Security, has ensured that it will dominate political life in this country for the next two years until the end of this Parliament. I must say to the noble Baroness and to her right honourable friend that to suggest that this is the greatest review of the social security divisions since Beveridge is sheer and utter nonsense.
I remember when the Beveridge Report was published in 1942, when my noble friend Lord Houghton of Sowerby was giving us wise advice on the radio and I was an education officer in my unit. I saw this as being what Hermione Parker said in The Times on 14th June. She said that it was strategic thinking on a grand scale. She said that there was a magic about it which captured the mood of the moment. Well, who can think of this White Paper as somehow or other strategic thinking on a grand scale capturing the mood of the moment? It is nothing like it at all. In fact, the Beveridge Report was so revolutionary that I can remember, when it was published as an ABCA pamphlet, that because it was so revolutionary it was actually withdrawn and I as education officer was unable to proceed with my lectures on the new society that was going to be created. There we were, soldiers, sailors and airmen, fighting against a monstrous, cruel and unprincipled enemy and, suddenly, we were all given a second chance, the opportunity of creating a fairer society in Britain. The post-war Labour Government's bold implementation of this created the welfare state which was, as my noble friend Lord Wallace has said, the envy of the world.
It did not meet the whole of society's needs. Successive Labour Governments added vital improvements to Beveridge's multi-faceted plan. I say "Labour Governments" because I cannot recall—although perhaps somebody else may be able to remind me—of steps forward taken by Conservative Governments. Child benefit replaced family allowance; supplementary benefit replaced national assistance; pensions were linked to rises in living standards, until the Government removed that right. We had new benefits for disabled people and we achieved a national consensus in 1975, as has been said from many sides of the House, with the new earnings-related pension scheme.
That was done after long years of argument. We can look back—and I certainly was involved in what we called then the Boyd-Carpenter scandal; and I am sorry that I used the term in his absence. We had the 333 Crosland national superannuation scheme and I was involved in taking that through the House of Commons. It was confusing, it was complicated and it was not a national consensus. We had Keith Joseph's earnings-related scheme, which never saw the light of day. And in 1975, due to the success of the late Brian O'Malley we tried to ensure that never again would this nation be divided about the nature of pensions for people 30 or 40 years from now. That was a tremendous achievement, and I must record the horror with which I see this Government coming forward, destroying this national consensus.
I am not disagreeing with the noble Lord who said, "All right. It is right that we should have a look at it". I shall say in a moment why I think it is right, but I am certainly not going to say that we should not look seriously at some modification and some suggestions that are made. But I believe that it was wicked to have put before us a proposal to phase out and therefore to throw the public back again into national confusion and to throw back the political parties into national antagonism. I say it constantly: it was a wicked thing to have done.
To hear Ministers speak, one might imagine that the provisions implemented in the 1940s have not changed to meet changing needs. They have changed; and we want perhaps to make further changes. In my view this is an ill-thought-out package which we have before us, apparently designed more to be a cost-cutting exercise than a new visionary set of proposals for the nation for the next generation and more. My noble friend Lady Jeger said (and others have repeated it) that we were not even given the figures. With the short time available how can one have effective consultation without knowing the figures? We know that the figures exist. The very fact that the Prime Minister said that they will be published in October or November in a White Paper means that the figures are known now. If they are known now why are they not made available in order that organisations can properly and effectively consult about what the Government believe to be an important set of proposals?
I entirely agree with the noble Baroness, Lady Lane-Fox, that this is not an attempt to dismantle the welfare state. That is an exaggeration which, I guess, will be repeated by some in the course of arguments. But it certainly is not something which is going to make us more proud of our welfare state, as I shall show in one or two of the things I want to say. We heard the noble Lord, Lord Stallard, and the noble Baroness, Lady Ewart-Biggs. They made it perfectly clear that the proposals do not match up to the social challenges of today. We do not know how many people will suffer; we do not know how many people might gain; we do not know how much will be saved, although we have now, as I say, been promised the arithmetic which already exists.
The Government say that the present system is too complicated as well as too costly. I am sorry to repeat myself, but I intervened earlier, in case there might be fewer Members of your Lordships' House present at the time I made my speech, with reference to the Government's proposals to reform and simplify the supplementary benefits scheme. That, after all, is a scheme they introduced themselves in legislation 334 which was hotly fought from the Opposition Benches in both Chambers and which they forced through Parliament four years ago following a review of supplementary benefits which had been carried out. Certainly they have used words that I can well understand: "confusion", "bureaucracy", and "large numbers of needy" being lost. I think it was the noble Baroness who referred in her opening speech to the language of supplementary benefits as being "a jungle".
Some years ago, when the new measures were introduced by Mr. Patrick Jenkin, he said thatthe present discretionary scheme has become unmanageable for claimants who do not understand it, for the staff of my department who cannot operate it, for the public who suspect it of abuseThey therefore introduced a scheme which is now being written off and criticised just as the previous one was. They made a "cock-up" of it. I do not want them to make a "cock-up" of the present Bill, which will be the eventual result of the Green Paper.
I shall use the description "SERFS": we cannot go on talking about "state earnings-related schemes", because we shall have long months and years of debating this issue. The present scheme was passed into legislation in 1975, not just with the wholehearted support of the political parties but with the support of the CBI, the TUC, the National Association of Pension Funds, the Life Offices' Association, the British Insurance Association, the actuaries and the Conservative Party. They all accepted that this was the best we could do in order to put an end to poverty in old age, and particularly for those who were coming to retirement at the turn of the century.
I was reading the debate in which a certain gentleman named Mr. Norman Fowler, and another named Mr. Kenneth Clarke, were speaking in 1975 on behalf of the Conservatives in opposition. They paid warm tribute to Brian O'Malley, and they congratulated the Labour Government on the way in which we had accepted so many of their proposals. We did so in order to achieve precisely the consensus which we achieved, and to see that the future of pensioners—an increasing number of people, as we knew—was not going to be used as a political football in the years that lay ahead. In trying to sustain that all-party approach, when the scheme was actually launched in 1978, when I was Secretary of State, I invited Mr. Patrick Jenkin (my "shadow") to speak at the launching. I did not include the Liberal Party because they had certain reservations about it, as has been pointed out by the noble Lord, Lord Banks, although I see that the Leader of the Liberal Party has now come round and it would appear that they thought that they supported the scheme, which actually they did not. But if they are eventually converted, then I am a happy man.
It was the Prime Minister, Mrs. Thatcher, who in the last election, when asked, said that there were no plans to change the earnings-related components of the state pension. That was in fact put on to the statute book with the full support of Conservative Members. I put this to the noble Baroness in an exchange that we had. The noble Baroness said that that was absolutely right, there were no actual plans. What does that mean? If, every time someone says, "We haven't any plans to do this," it means, "We have not worked out 335 the details of our plans but we are going to do it", then what is the value of words which are used on occasions like these?
Mr. Norman Fowler, as we know, when he announced the reviews, made it quite clear that the reviews were not going to deal with the state earnings-related pension scheme. To justify his change of heart he said on television a week or so ago that he had suddenly discovered an extra three million pensioners at the beginning of the next century. That is a load of "codswallop". Anyone could predict 10 years ago—and we did—what would be the level of pensioners, not only now but at the turn of the century, 10 years after the turn of the century, or 20 years after the turn of the century. There are no new facts, except that we now have a threefold increase in unemployment. That, of course, is the main new fact which has caused the Government to come forward with their proposals.
Secondly, there is such pessimism about the prospects of the economy as a result of Tory policy over these last six years that they no longer believe that they can guarantee a decent pension for pensioners 15 or 20 years from now. I believe that it is absolutely pathetic. They had confidence that they would be able to do it at the time when the Labour Government were in power. But now that they have their own Government they do not have the confidence that the economic situation will enable them to do this. There may be, as I said, some adjustments at which we can look. We are all reasonable people—some, if not most of us, are reasonable people. We shall look at serious proposals. But I must say that the noble Baroness will have a very difficult time unless the consultations—over very few months and with very few facts—lead to such proposals.
I shall not in fact go through many of the details, as I should like to have done and as some of my noble friends have done, about supplementary benefit and the effect that this will have on widows and the disabled. I think one of the most absurd things is the idea of cash-limiting a local office for people who need money for specific purposes. Let us suppose that nine months after the beginning of the year, because of special needs, the manager has simply run out of money. What does he say? Does he put a little advertisement in the local paper saying, "Anyone in desperate need, do not apply to us. Wait until 1st April next year"? To put forward a scheme like this is absolute nonsense. I think it is shameful that the Government should do so.
When the noble Baroness made her opening speech she seemed to imply that there had been a very warm welcome of the Government's proposals. One or two speakers today have said, "All right; we give the Government credit for having a look at something". But I have not heard much credit today for what they have come up with. And it is not just that they have had little credit here. What has been the response throughout the country? There has been a quotation from Mr. Stewart Lyon. I knew Mr. Stewart Lyon 20 years ago. We met in the course of negotiations. He is a wise fellow, a shrewd guy, who knows something of what he is talking about. He is the immediate past president of the Institute of Actuaries. He was a member of the inquiry team.
336 Mr. Stewart Lyon said that Government plans had never been discussed in the working party, let alone recommended by members of the inquiry. They had not been discussed in the working party because the working party knew that Norman Fowler had said that this was not one of the issues to be discussed. He went on to say:I have serious misgivings about dismantling the present structure. I myself argued, as I have consistently done over the past 20 years"—I can confirm that because I heard him doing so—that many of those without occupational pensions could not be properly pensioned through the private sector without excessive difficulty and expense, and that this was the real significance of the present partnership between the state scheme and private scheme.To anyone who argues that this is a new partnership, that these are great new pillars between the state and private system, I would say that that is what was established in 1975, and that is what is about to be undermined and destroyed now.
What of the attitude of other organisations? The TUC are totally opposed to it, as are the Child Poverty Action Group, and of course one would expect that to be the case. As the noble Lord, Lord Stallard, said, SHAC, the Housing Aid Centre, is totally opposed. The Disability Alliance have come forward with extremely critical comments as to the effect of this. I will read out one paragraph:The reform of supplementary benefit, the abolition of SERPS with its particular advantages for disabled people, and the cuts in housing benefit, will all hit disabled people dramatically, and the more severe your disability is, the more expenses your disability entails, the greater will be the loss of income. For disabled people the Green Paper represents virtually unmitigated bad news".What about some of the others? The Confederation of British Industry say that they are wary of the cost implications for employers. No wonder, my Lords. They say that they intend to make detailed calculations before giving a definite reaction. Mr. Henry James, director-general of the National Association of Pension Funds, feels that the occupational pension scheme movement has been damaged severely by the proposals and that God willing they will not be carried through; that is, by the proposals alone. He says that the task of the association is one of damage control to limit the effects. This is not a left-wing organisation. These are people who operate the pension funds.
I had a meeting yesterday with the Life Offices' Association and a most helpful brief from them today, although I will not go through that. I cannot pretend there is any enthusiasm at all for what is now being introduced. The Social Security Advisory Committee said that there should be,adequate time for further consultation and consideration of responses on any proposals for major reform".They referred to the prohibitive price of the Green Paper, which is £26.20 or nearly one week's supplementary benefit for a single adult. That really puts it out of reach of the people for whom presumably the review was carried out.
The Financial Times—and although it is pink it has never been considered a Labour paper—says:The welfare state is so important a subject for so many individuals and groups that the Government ought to allow at least six months, and preferably more like nine, for a full and informed public debate … It is one thing to ask for people's views before 337 Government plans are formulated and quite another to ask for considered reflections on actual policy proposals. The real debate about Britain's Welfare State cannot begin until the Government has made clear its own preferred approach to reform. The case for a lengthy period of genuine consultation is strengthened because the Government can claim no direct election mandate for these far-ranging changes".Nothing was said about this at the time of the general election except that it was not then an issue that was going to be faced by a new Government.
I have representations from the British Association of Social Workers and the Royal Association of Disability and Rehabilitation as to how these proposals will affect them. I could mention organisation after organisation which sees these proposals as presenting enormous social problems. I would say to the noble Baroness, not just to convey the small words but to convey the very genuine and deeply felt words of appreciation that I gave at the beginning, that I hope she will say to her noble friend Lord Whitelaw that in the debate in this House today there has been no one except herself who has stood up and bodly said, "This is the plan for the nation".
One could compare the response with that accorded to the Beveridge Report, or, for that matter, to the 1975 Act put forward by Labour, which was an example of effective consultation and eventual consensus. I will make a prophecy and then I will sit down. Whatever damage these proposals cause to millions of our fellow citizens if they survive the scrutiny of both Houses of Parliament, I can promise a line-by-line examination of the Bill when it reaches us next year. I believe these proposals will destroy this Government, and that is the best thing I can say for them.
§ 8.5 p.m.
§ Baroness Trumpington
My Lords, this has been a long—on occasions it has seemed very long—and interesting debate. The contributions of those whom perhaps I could name collectively as "a modesty of maidens" fulfilled all the traditions of this House. They displayed eloquence, brevity and charm. But did I detect the slightest evidence of iron hands in velvet gloves? I should like to join with those who have offered their congratulations and to say that perhaps if the gloves come off I would rather be in a neutral corner.
When your Lordships read Hansard you will see that some of your questions have already been covered in my original remarks this afternoon. I shall do my best to answer as many of the points that have been raised as I can., and I promise to write to those speakers who may feel they have been neglected by me.
I should like to deal with some of the points which were raised by the noble Baronesses, Lady Jeger and Lady Warnock, and the noble Lord, Lord Banks, who raised questions on the social fund. I should like to deal with two points which caused them concern: can the staff run it and how will the fixed budget operate? We do not pretend that the judgments which staff will need to make to reach decisions on applications for help will be straightforward. They entail the consideration of individual circumstances and then deciding on an appropriate response.
However, first I ought to make a number of points. 338 I do not think anyone would deny that the present regulated scheme already requires staff to reach difficult decisions in areas which have an important effect on large numbers of claimants. The difference will be that staff running the social fund will be concentrating on a limited number of cases, given the fund's specific remit. The problem at the moment is that there are so many areas of judgment in handling the potential entitlement of all claimants. I must say I suspect there are times when staff are deciding the precise amount and type of help in the light of the detailed rules of the present scheme when they must wish they could reach a more sensible decision with a greater amount of flexibility. We already have special case officers to handle cases of particular difficulty. Their role already includes giving advice on budgeting difficulties and serving as appointed liasion officers with social service and other welfare interests.
Clearly we shall have to consider how we develop the new arrangements. The staff running the social fund will have to be carefully selected and specially trained, for example, in counselling and interviewing skills and in the availability of help from other sources. However, they will have the existing arrangements to build on. I do not share the pessimistic judgment implicit in some of the comments that we do not have good staff able to perform this role with the necessary training and advice.
The noble Lords, Lord Banks and Lord Grimond, and the noble Baroness, Lady Jeger, raised points regarding the possibility of the social fund running out halfway through the year. I understand the reason for their concern in the sense that we do not now run this part of the social security system on such a basis. However, I have to point out that demand-led expenditure still has to be budgeted for in our public expenditure considerations, and paid for; but the reality is that most organisations, including those in hospitals and the social service fields, have to plan their spending on the basis of a budget. No one runs such a system on the stated assumption that they may have to shut up shop in the last month or so of the financial year. Obviously I recognise that, and that precisely because this is a new system careful consideration will have to be given to how we fix the budget and run the various mechanisms to support it.
The answer is to make as careful an assessment as we can of the numbers and the circumstances with which the fund will be dealing, and to introduce proper monitoring arrangements to ensure that payments in any period are consistent within the annual budget. That is something to which we shall be giving careful consideration as we work up this part of the scheme in the light of consultation.
The noble Lord, Lord Banks, also asked me whether decisions on payments from the social fund would be appealable. My answer to that is that they are not appealable in the way that adjudication decisions currently are, when appeals can be made to appeal tribunals and then to a social security commissioner. We believe that the remit of the social fund means that it will be better for decisions to be reviewable by management, who are well placed to judge whether the outcome is sensible and who can carry out the review quickly. Decisions on the social fund are essentially ones of judgment. The further away that reviews get 339 from the original decision, and in some senses the more formal they become, the more difficult it is to judge whether the initial decision was a reasonable one.
The noble Baroness, Lady Jeger, also criticised the more flexible decision-making process of the social fund. She praised the independent adjudicating process. I agree that adjudication is worthwhile with reference to weekly income, but it is slow, cumbersome and completely wrong for decisions relating to matters such as household needs. I referred earlier to a decision on a hot water bottle. This particular case went through three tiers of adjudication and the claimant still had not received a hot water bottle or a final refusal.
My noble friend Lady Lane-Fox, who is never wanting in courage, made an eloquent and sensible speech. She asked me a question about mobility allowance. I fear that I cannot encourage her to hope for more help at the present time. Removing or extending the upper age limits for mobility allowance would be very expensive. The latest estimate is that the total abolition of the limits would cost around £340 million a year. Resources on this scale are simply not available. Even to retain the age 65 limit for claiming, but then to pay the benefit for life, as opposed to the age 75 as at present, would cost some £120 million a year in the long term.
The noble Lord, Lord Ennals, and the noble Lord, Lord Banks, claimed that our proposals on income support and housing benefit complicated legislation introduced by a Conservative Government. The 1980 changes to the supplementary benefit scheme were the culmination of a review set up by the Government of which the noble Lord, Lord Ennals, was a member, and followed major changes under the 1966 Labour Government. The key point is that the changes made since 1980 largely carried forward the existing structure of supplementary benefit, and the same is true of the introduction of housing benefit. These structures existed while the noble Lord was Secretary of State. It is we who have had the good sense and courage to undertake a fundamental review. The noble Lord, Lord Stallard—
§ Baroness Trumpington
No, my Lords, I will not give way. Time is much too pressing. The noble Lord, Lord Stallard, raised a number of detailed points concerning housing benefit. He will forgive me if I write to him and do not go into them now. The noble Lord, Lord Hunt of Tanworth, was concerned that new pension arrangements will be too complex for small employers. The new norm for occupational schemes is much simpler than the present contracting-out arrangements. Making personal pensions easy to handle is a priority in our discussions with employers and the pension industry representatives.
The noble Lord, Lord Kilmarnock, spoke about the death grant. Any replacement scheme for the Government death grant will be paid from social security offices and no payment will be possible over public holidays, any more than single payments for funerals are now. The concern is surely over the 340 administration of the social fund. I have already explained how our staff were specially trained. I can assure your Lordships that when developing arrangements for the social fund we shall pay particular attention to the need for this aspect to be dealt with promptly and sensitively.
On pensions, several noble Lords, among them the noble and learned Lord, Lord Silkin, and the noble Lord, Lord Grimond, questioned whether there was any difference between affording SERPS and affording private pensions. The noble Lord, Lord Williams of Elvel, also touched on this when he asked why funded pension provision should be superior to unfunded provision. There is a difference. The national insurance fund from which the costs of SERPS are met is a fund in name only. In practice, it is no more than the contributions of the working population paid in, and then paid out at once to meet that year's pensions for the retired population. Our proposals will mean people building up their own pension funds with some say in how they are disposed. They will have more choice also about how much to save for their retirement and when. Contrary, perhaps, to what was implied by the noble Lord, Lord Swann, even with a money purchase scheme people can aim at a pension which represents a percentage of their earnings.
Of course there is not the same fixed sum as under a final salary scheme. It may be more, or it may be less, but it is precisely because final salary schemes represent an open-ended commitment that they are an unrealistic option for small employers. Our proposals will open the way to almost everyone in work having a personal or occupational pension. The noble Baroness, Lady Turner, spoke eloquently of SERPS, but she conveniently ignored the wishes of those people who are not now in schemes and for whom SERPS is the only option for having an occupational pension of their own.
Perhaps I may say a final word on the supposed pensions consensus. The noble Baroness, Lady Jeger, made some play with this. The Labour Party trumpet the virtues of national investment bank and pension fund direction; the Liberals want to replace SERPS with a grossly extravagant basic pension; and with reference to the remarks of the noble Lord, Lord Kilmarnock, the SDP, so far as one can judge, simply want to fiddle with SERPS, reducing benefits and putting nothing in its place. Some consensus, my Lords!
Noble Lords on the Benches opposite have been quick to carp but have been notably coy about what they want to see. That is not surprising. The Labour Party have a lot to be coy about. Do they rely on the far-fetched proposals of their social services spokesman in the other place, proposals that were ditched by their leader with the speed of light, or do they look for inspiration to that leader who yesterday betrayed, in a grotesque blunder, that he had not the first idea of how the national insurance fund works? In the entire debate, there has been nothing positive from the Benches opposite. Noble Lords sit there bankrupt of ideas and bereft of a lead.
Many of the ideas put forward today have been positive and offered in a constructive spirit. We shall reflect upon them accordingly. Others have been less constructive or more critical. We are absolutely 341 committed to change in the direction which I have outlined to your Lordships today. We shall shape a system which provides a better service of a kind which we believe the vast majority of people want, one which directs help accurately and positively where help is genuinely needed, a service which will provide for our future and that of our children and grandchildren.
I think it was the noble Lord, Lord Grimond, who said, in effect that the Government have nothing if not guts. Being the noble Lord he is, he phrased it rather more eloquently and elegantly. The Government do indeed have guts. We have determination, and we have vision as well. Those qualities are abundantly clear in all our major Green Paper proposals. They will be no less clear in our carrying them through. I commend our proposals to your Lordships.
§ 8.18 p.m.
§ Baroness Jeger
My Lords, perhaps I may say to the noble Baroness that if there is one thing I congratulate her on, it is her stamina. She has been a very lonely lady today. I think the emptiness of the Government Benches and the paucity of Government speakers indicate that the Tory Party do not care about social security and do not understand it. They do not care much about these proposals. It is a pity that nobody spoke up in favour of the Government's proposals in the whole of this long debate. The noble Baroness Lad): Lane-Fox, who is very loyal and very courageous, had her criticisms to make, and we know she often speaks up for people in need. The noble Baroness, Lady Trumpington, tried to make some joke out of the absence of proposals from this side of the House—
§ Baroness Jeger
It was not a joke? Bad luck! My Lords, in my generosity, I thought it must have been a joke, because if the noble Baroness had looked at the Order Paper for today, she would have seen that the business for today is a discussion on the Government's Green Paper, and I think we would have been very much out of order if any of my noble friends or I had dared to talk about the Labour Party's proposals for social security. That is not on the agenda and we are very interested in keeping in order.
I asked the noble Baroness some questions and I admit that she has had a difficult and rotten day, so I shall not repeat them again. She has promised to write some letters. She reminds me of a previous Minister who had her job and who after some of our debates wrote more letters than St. Paul. The most important question that I put to the noble Baroness—and I hope that I shall get an answer some time—was when I asked whether this whole exercise is based on a nil cost, and how much the Government will save by these proposed changes. The second important point which she did not answer, was when I said that I hoped she would tell us how irrevocable are the announcements that have been made in the Green Paper, if the Green Paper is really to stay green. I wrote down that the noble Baroness said that the Government are absolutely committed to these proposals. So, my Lords, where is the consultation? Where is the compassion? How will we enable the people who are 342 most affected by these proposals to join in the discussion if the noble Baroness gets up in the House and says, as she did—if she wants to contradict me she can, but I wrote it down and I am not a bad reporter in my old age—that the Government are absolutely committed to these proposals? She has not told us what is to happen to the cash limits on the social fund and what is to happen to people who have become casualties at the wrong end of the financial year.
I asked her also whether the funds were to be organised locally so that some improverished areas would have a larger budget than other areas. None of these important questions has been answered. But as I said at the beginning of my speech, if I were to persist in moving for Papers we would be here for a long time and the Papers would amount to a very heavy load. Therefore, I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.