House of Commons Hansard Debates for 20 Dec 1988

Madam Deputy Speaker (Miss Betty Boothroyd) : Order. I appreciate the fact that the right hon. Gentleman was able to say what he had to say within 10 minutes. Many hon. Members wish to speak and I hope that they will follow the right hon. Gentleman's example.

5.48 pm

Mr. Frank Field (Birkenhead) : I shall do that if I can, Madam Deputy Speaker. I wish to make only two points. I should first like to add to what my hon. Friend the Member for Livingston (Mr. Cook) said about Labour's record on pensions. I shall comment on that, because the Government say that they are so interested in targeting. They tried to question my hon. Friend's figures about the

Column 320

20 per cent. increase in real terms for pensioners. I am making a distinction between the increase in pensions and the increase in living standards.

If we consider the most vulnerable group of pensioners--those who during the period of the last Labour Government and this Government have been completely dependent on the state pension--we see that their living standards rose in real terms by 20 per cent. under Labour. Therefore, I should have thought that a Government who tell us that they are interested in targeting would have paid some attention to that fact and drawn the attention of the House to Labour's record. The Conservative Government's record stands up to scrutiny, but they have a largely untargeted programme wherein the largest gains in living standards among pensioners have gone to the richest. That is a strange form of targeting from the Government.

Secondly, I welcome the statement by my hon. Friend the Member for Livingston that the House will be given a clear opportunity early in the new year to vote on child benefit. My hon. Friend deployed the case against the Secretary of State, who seems to have an unhealthy prejudice against child benefit. The right hon. Gentleman does not say to the House, "under my stewardship, child benefit will not be increased," because he knows that, if he did, in no time some of us would have him in the courts. He has a duty each year to decide whether child benefit should be increased, given the changes in circumstances during the previous 12 months. Legally, he cannot make such a statement, but he shows in everything else that he says and in every bit of body language at the Dispatch Box that he is intent on not increasing child benefit. I agree with my hon. Friend the Member for Livingston. We shall have an opportunity early in January to deploy, and win, the argument against Conservative Back Benchers. If we have done our work and try to get Conservative Members to join us in the Division Lobby, and we fail, and if my hon. Friend the Member for Livingston is right about the prejudice on the Treasury Bench against increasing child benefit, we must accept the challenge. The Opposition and pressure groups outside must accept that challenge, or we will be presented every year with opportunities in the uprating or on Opposition Supply days to make a fuss, but it will only be gesture politics. We will know that the Government have no intention of moving down the line that we want. If we are not in business to perpetuate gesture politics, after January's debate we shall have to come up with new ideas and statements which do not just recite the old phrases that please us and some Conservative Members but take the argument into the enemy camp and challenge the enemy on its assumptions. If we fail to win the vote in January, we must start putting forward alternatives. My hon. Friend the Member for Livingston referred to the wall of resistance, which we will meet, to increasing child benefit.

As well as keeping child benefit, we should consider challenging the Government to reintroduce child tax allowances. People may say that that is an inconsistent position for me to hold. I favour abolishing all tax allowances and reducing the standard rate to between 12p and 15p in the pound. I am not, however, above a political or tactical manoeuvre, to score points and have a conversation with the electorate and, if successful, to ensure that the funds that exist in the form of a child tax allowance can be put back into the child benefit scheme by a future Government three years hence.

Column 321

Some will say that the group to lose out will be some of the most vulnerable, those who earn their poverty and do not earn enough to pay tax. It would not be impossible, however, to have a child tax scheme that allowed such people to opt for a cash payment. The majority of families could claim the tax allowance against their tax liabilities and those below the tax threshold could pick up a cash payment, just as happens with child benefit. I again emphasise that I am talking not about phasing out child benefit but about running the two schemes together. We shall face that challenge as an Opposition if we are serious about using the next three years to have a conversation with the electorate so that they trust us with the reins of Government after the votes are counted and do not return us yet again to the Opposition Benches.

As it will be a challenge to us, so, too, will it be a challenge to the pressure groups. We cannot expect them to trot out the same old arguments as though we live in the 1960s and 1970s. If my hon. Friend the Member for Livingston is right, as I believe he is, in describing the prejudice of the Secretary of State and other members of the Government against increasing child benefit during the life of this Government, they, too, need to put their thinking caps on and come up with proposals, which the Government may implement, which safeguard the child benefit scheme.

If there is one lesson that I have learnt from watching the Government's behaviour over 10 years it is that few Opposition Members can dislodge the Prime Minister when she has an idea in her head, although sometimes Conservative Members and supporters can do so. But when the Prime Minister puts the ball down, we can pick it up and run in a slightly different direction from the one she expected. If we are not to have three years of these sorts of debates, three years of exciting ourselves and rehearsing the same old arguments and three years of defeats for our constituents and poor families, we need not look over our shoulders, worrying about what the pressure groups will think. We must seek room to manoeuvre--the room allowed for us by the Government--and to secure victories.

I could not be more pleased not only by the quality of the speech of my hon. Friend the Member for Livingston but by the promise of a debate in the new year and the chance to put hon. Members "on the spot", if I may put it as gently as that. All of us must learn from the vote. If it goes our way, the Government will lose. If it does not, the challenge will be presented to all of us on the Opposition Benches and to pressure groups : what will we do for the remaining three years of the Parliament? Will we trot out the same old case, or will we think of something new so that, at the end of that period, we shall have delivered something to the people whom we represent? 5.57 pm

Mrs. Gillian Shephard (Norfolk, South-West) : I should like to make a few comments on hon. Members' observations on child benefit. We should emphasise that it remains a universal benefit to all families and will have to be reviewed in the autumn, as my hon. Friend the Minister said. My hon. Friend said also that there should be a judicious mixture of universal and means-tested benefits. We need to remind ourselves that, if the benefit were uprated in line with inflation, it would cost £200 million. We should ask ourselves whether it is right to continue to

Column 322

uprate the benefit while paying it to all families, including the super-rich, whom the Opposition have mentioned repeatedly in the context of tax cuts in last year's Budget.

Of course child benefit is much valued and needed by many families, but hon. Members must recall some of the media publicity which was given at the time of the last debate on this subject, about a month ago, to those receiving the benefit who said that they did not need it, that they were spending their benefit on antiques, ski holidays or gymkhana fees. Of course, those are anecdotal examples and represent a minority, but surely they mean that we should look at the system again. The debate after the recess will perhaps give such an opportunity.

Before the introduction of family credit, child benefit was undoubtedly a lifeline for the poorest families and a useful addition to the family budget for those on middle incomes. But this debate is taking place when the average take-home pay of a man with two children has increased by 30 per cent. since 1979 and when prosperity levels have been transformed in areas with good employment prospects. Given that fact, there is more than ever a sound reason for giving most help to families with children who need it most, via income support and family credit.

Next year, in addition to the £5 billion that will go to the neediest families, there will be an extra £70 million through, for example, a combination of child allowance, income support and housing benefit, and also help through the exceptional cold weather payment scheme which will be extended to families with children between the ages of two and five. That will help a further 500,000 families. But the debate is not about whether we should have child benefit or give help to the poorest families through income support and family credit, but rather whether in today's circumstances of increasing prosperity in large areas of the country we should continue to pay a universal perk to all families, even the super- rich. That debate should be pursued.

The "save child benefit" lobby claims, validly in my opinion, that the sheer permanence and ease of child benefit particularly helps the poorest families, a feature of whose lives is fluctuation of income and circumstances week by week. There are still far too many delays, errors and sheer complexities in claiming income support and family credit, and their take-up, although much improved, needs to be improved still further. I hope that the computer programme outlined yesterday and now well under way, and the Department's efforts to improve the take-up of all benefits, will improve the benefit system's responsiveness to families in real need.

A recent publication of tables showing the interaction of tax and benefits illustrates that the systems can no longer interact to create a combined deduction of 100 per cent. or more, which was clearly a ridiculous situation. But, as has already been said, attention must now be paid to the fact that, as the tables also illustrate, crossing a national insurance contribution threshold can sometimes mean the same thing.

Finally, it must be obvious to everyone that the real solution for families with children must lie in the continued strengthening of the country's economy and, in particular for families with children, the continued reduction in unemployment rates. We have seen recently that we have the lowest unemployment figures in the EEC. That strengthening of the economy, together with the judicious

Column 323

mixture mentioned by my hon. Friend the Minister, should provide the right sort of help to families who need it.

6.2 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire) : I am grateful for the opportunity to take part in the debate. Since being elected to the House I have spent some time taking part in debates such as this, but this one has a slightly different flavour from the others. The difficulty about debating important subjects based on uprating statements is that we tend to be bedevilled by technical detail and quantities of money that may or may not be needed. Therefore, it is not easy to discuss some of the interesting points that the hon. Member for Birkenhead (Mr. Field) raised. I have always felt that to be a matter for regret.

I greeted with enthusiasm the announcement of a debate made by the hon. Member for Livingston (Mr. Cook). He made an expert and interesting speech which will repay study when it is printed in the Official Report. I exhort the hon. Gentleman to make the motion that he plans to put before the House as broad as possible to enable us to have a wide-ranging debate. There is a need for that, although I understand that the hon. Gentleman's main intention is to try to get his hands on the vote for child benefit and in that regard, too, I would encourage him. One thing that has come out of today's debate--it does not always happen--is that there is a cross-current of opinion between the Government and Opposition Benches on the future of child benefit and whether the argument about universality versus selectivity has been won or lost in the Government's mind. I hope that the Government will say something about what is in their mind for child benefit in the longer term. I too know, as the hon. Member for Birkenhead said, that there are legal difficulties because the Secretary of State has a statutory duty to look at the situation afresh each year, making it difficult for him to make blanket political statements in the House. But it also makes it fiendishly difficult for those of us who take a genuine interest in some of these detailed questions to make assumptions and judgments about what is in the Government's mind for the future. I hope that the Government will find some way of telling us whether it is their genuine intention to freeze child benefit or universal benefits generally for the foreseeable future. It is right that we should know that. However, I fully understand the difficulties that the Secretary of State may have in being as explicit.

The whole question of universality has gone by default, and that is a mistake on the part of Opposition Members. The hon. Member for Livingston said that if these benefits had been treated as child allowances they would have suffered an entirely different fate at the hands of this Administration, and that is true. Selectivity inevitably leads to the familiar and well-rehearsed problems of poverty traps, means testing and take-up rates. Worrying developments have accrued from the new system introduced in April. Some of the reforms have simplified the system--one of the Government's key objectives. The social security staff who operate the system are finding it easier. It must also be recognised that some of the new levels for child credits, income support and the family

Column 324

credit system are making an impact once the problem of take-up is resolved. It would be foolish not to recognise that. However, there are severe and substantial problems in some other areas which relate directly to the problem of selective benefits in general. We often forget that one of the principal reasons for the original Beveridge report was the importance of the horizontal distribution of income throughout the lifetime of a Parliament. There were periods that could easily be marked as times when extra finance was necessary. Starting a family is an obvious one to choose. Therefore, the Beveridge plan was an attempt to try to redistribute money along those lines. That is an incontrovertible argument which is as true now as it was then. That should be borne in mind in addition to all the other arguments about cheaper administration.

If we are to start on a great debate about the relative merits of universality versus selectivity, the Government will have to take into account other available tax reliefs such as mortgage tax relief and pension tax relief, because they are an important part of the argument. There is a value in universal benefits that goes beyond their financial impact and that is part of the social cement ; part of the collective provision that we all accept in other areas which prevents social division. There is a host of arguments that we should have an opportunity to deploy in the House in their wider context, not necessarily within the technical detail of an uprating statement such as we are debating tonight.

Today's debate has been focused, understandably, on child benefit, but I am also worried about the position of some pensioners. There has been the usual barney about whether the last Labour Government paid more or less than what the present Government are paying. That is all very instructive, but I have heard it before. Leaving aside such banter, I believe that there are substantial problems for pensioners who rely exclusively on state pensions, particularly the more elderly. The Government have recognised those problems and have put £200 million into the system. Although I do not think that that goes far enough, it is none the less a step in the right direction, and as such I welcome it.

If the Government are to tell us their view on the continued universality of child benefit, they will also have to address the question of the general increase in wealth. We need to bridge a gap, particularly for those exclusively on state pensions. Of course we need to price-protect the increases, but we must protect a particular generation of pensioners before people can start claiming state earnings-related pension in 20, 30 or perhaps 40 years' time. I shall be all right when I retire, but the present generation of pensioners are suffering and will continue to suffer. Their suffering must indeed worsen in relative terms, because, if the Government and the Chancellor are to be believed, the country's general wealth is increasing quite fast. Pensions are being increased in accordance with the increase in prices, but that does not give pensioners the opportunity to share in the general increase in wealth that is available to everyone who happens to be in work rather than relying on a price-protected benefit.

Having announced a £200 million increase, the Government will be forced to come back year in, year out to deal with the problem--which I accept will disappear when SERPS comes into effect substantially. The problem should not be minimised. It does the Government no good to beat their chests about what they are achieving for the

Column 325

average income of the average pensioner. It is cold kale to pensioners in my constituency and others, who are at the sharp end and are forced to live on a state retirement pension and nothing else, to hear what the average income increase has been over the past five or 10 years.

The social security advisory committee has recognised the problem and I support its views. I do not go so far as to say that £5 billion is needed so that we can put all the money back into pensioners' pockets immediately ; that would be an unreasonable request. From time to time, however, in appropriate circumstances, there must be an uprating that goes beyond what the retail prices index demands. Otherwise, pensioners will find themselves inexorably losing out on the country's general wealth creation.

I saw a worrying leader in The Guardian recently--around the end of last month--which mentioned a sudden inexplicable drop in the number of people claiming benefits. Have the Government any explanation? They may say that the unemployment figures have fallen. Of course we cannot obtain as detailed and accurate statistics as we used to under the old 1983 system of data and statistics provision. I am also worried about staff requirements. I am worried by some of the conclusions of the Moodie report, by what the National Audit Office has said about the conditions in which staff work and by the comments of the Public Accounts Committee in its statement last month. Nevertheless, if the motion is pushed to the vote, which I understand is now less likely to happen, I shall support the Government as far as they go--on the strict understanding that it is only because they have given more money to elderly pensioners. 6.14 pm

Mr. Michael Jack (Fylde) : I pay tribute to the thoughtful comments of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who spoke with care and compassion--as have other hon. Members on both sides of the House.

So far we have not heard much about how the massive increase in Government expenditure associated with the upratings is to be paid for. I understand that £1 in every £3 of the Government's expenditure goes into social security ; when the Labour party was in government the proportion was £1 in £4. We have heard the Government criticised for not spending the substantial revenues that the Chancellor appears to have at his disposal on matters identified by Opposition Members. The Chancellor has, I think quite cleverly, pointed to a strategy of repaying debt, reducing the cost of servicing that debt and thus enabling us to fund social security expenditure prudently. Some 25 per cent. of my constituents are pensioners, and they warmly welcome the upgrading. But, while everyone clearly benefits, some people are left in some form of need. I welcome one part of the upgrading statement, and some comments by Ministers have been important in underpinning the position of the basic state pension in our benefit structure. There is a view that as people have more occupational pensions the state pension becomes less important, but I believe that the state pension is crucial because it is ultimately an insurance against life's chances. Someone in a good job may be ill and thus unable to realise his full income potential. His occupational

Column 326

pension would necessarily fall away, but the state pension would be there to guarantee at least some income for working people who run into difficulties.

We have heard comments about income support and family credit, and the hon. Member for Roxburgh and Berwickshire mentioned the Beveridge report. Beveridge stated :

"The third principle is that social security must be achieved by co- operation between the State and the individual. The State should offer security for service and contribution. The State in organising security should not stifle incentive, opportunity, responsibility". The report spoke of "encouragement for voluntary action", and the uprating of family credit plays up to that. It means that families will be supported to the tune of some £5 billion a year. A family earning up to £9,000, with two children aged 12 and 14, could receive help via family credit.

As the hon. Member for Roxburgh and Berwickshire pointed out, we have heard a certain amount of banter across the House about who did what. Pensioners, however, greatly value the present Government's contribution in respect of inflation. They know that an uprating of 5.9 per cent. will be, by and large, the rate of inflation over the 12-month period. What the Opposition's argument has missed out is the dynamic effect. It is all right uprating and catching up in 12 months' time, but when the Labour party was in government and inflation reached double figures there was no catching up in the intermediate period. That was when the real value of pensions disappeared. Labour also contributed to a reduction in pensioner income by changing from the historical to the forecast method. But I do not want to get stuck in too sterile an argument. Some wider issues to do with pensions can also be raised.

We should remember that the Government have a large commitment to those who are coming into pension--people who contribute to their occupational pensions and are coming up to retirement. About £10.7 billion worth of tax-based assistance goes to people who are saving through pensions. So when we discuss the Government's commitment to pensioners we cannot ignore that other side of the equation. I want to talk for a moment about pensioners' incomes. It is interesting to discover that 150,000 married couples and single pensioners over the age of 65 pay higher rate tax, so that sort of income has spread a long way up the spectrum.

Mr. Kirkwood : They are only a tiny minority.

Mr. Jack : Perhaps, but about 50,000 of them pay capital gains tax. They represent the leading edge of the spread of wealth. However, I take the Opposition's point that, to counter-balance this, 1.9 million pensioner tax units have occupational pensions of less than £1,000 a year. That shows that there is a management problem and that, welcome as the uprating of pensions is, we have to manage the gap between some who depend only on state benefits and others who are extremely well off. I would encourage debate about that.

My mother, who lives in a rest home, sold her house and lives on the income she receives and on attendance allowance. In spite of all that, she ends up paying tax. She receives a small occupational pension of £1,500 from my father's estate, and ends up paying £9.95 a month in tax. Although my hon. Friend the Minister is not responsible

Column 327

for Treasury matters, I implore him to suggest to the Treasury that we may be able to help pensioners by removing them from the tax bracket in which they now find themselves. That is rather a sore point.

My hon. Friend the Minister has shown compassion in his dealings. I know from my dealings with pensioners that one of the problems with the uprating statement is that it cannot, by definition, deal with some anomalies that have arisen because of the changes in social security arrangements. I shall not go though a litany of cases, but I ask my hon. Friend to honour his pledge in the foreseeable future and to knock off some of the rough edges that have become evident as we have become used to the new system. Some pensioners require help ; others have considerable wealth at their disposal.

I want to put the uprating into another context. We must never forget that people who work pay for those benefits. Today, 2.3 national insurance payers per beneficiary bear the burden of our social security system ; by the end of the century that will have dropped to 1.8. The Government are right to get to grips with the problem of what we spend this large sum on, so that the burden may be properly borne in future.

Much as I support my hon. Friend's announcement about Motability, and much as I support the enormous amount of work that he has done to help the disabled, my plea is that he will examine the cases put forward to him which involve the relationship between income support, the transitional arrangements and the other benefits that go with them. I do not want my hon. Friend's fine record to be marred by a series of cases of people losing benefit because of changes in other benefits.

The benefit uprating statement is to be warmly welcomed. It clearly shows the Government's commitment to helping those in need, and it forms a useful platform from which to go forward and make further improvements.

6.25 pm

Mr. Jack Ashley (Stoke-on-Trent, South) : The hon. Member for Fylde (Mr. Jack) diplomatically said that the Minister had a fine record, but asked him to look at the problems of the disabled. I am glad that plea was made. The hon. Member for Fylde mentioned rough edges ; disabled people get a rough deal from this uprating. It is deplorable that the Government should add to the heavy burdens of disabled people by today's tardy uprating.

Income is a major problem for almost all disabled people. I suggest three requirements. First, basic needs should be met, regardless of what else happens, such as changes in a person's disability or in the Government. Secondly, additional costs should be covered. Thirdly, there should be a basic income good enough to live on.

The Government have failed disabled people on those three counts and the uprating has done nothing to change that. Social security benefits are crucial for disabled people. Most of them have been affected by the 1988 changes. The citizens advice bureaux surveyed people on social security and concluded :

"The overriding impression of the April changeover has been the distress and lack of understanding caused by administrative confusion and poor communications. Not all those surveyed were disabled, but it is very likely that the

Column 328

elderly disabled were amongst those most distressed and finding greatest difficulty understanding the blows that were hitting them." That is a strong statement.

The nature of the transitional payment has not been fully understood by some disabled people. Many of them do not realise that a transitional payment means that they will get no increases in 1989 to cope with inflation. Some of them will not receive increases for many years. The most severely disabled people face a period of declining real income--a terrible thing.

A major disaster for disabled people has been the replacement of the familiar, understood and targeted additional cost payment with the simplistic disability premiums. Disability is an individual matter and the additional cost payments were related to individuals, which was important. Premiums are group payments. The Government were warned by my right hon. and hon. Friends that these payments would be inappropriate, and so they are. They are based on averages and so cannot be adequate for the worst cases.

The disastrous consequences were concealed last April by the provision of transitional payments ; but unfortunately for the Government, and even more unfortunately for severely disabled people, sharp increases in mortgage payments have shredded these transitional payments coverages. A glaring example is that of the disabled owner-occupier with a rising mortgage bill who has received no additional cash in hand to pay for it. All that has happened is that the part of the money labelled income support has increased and the part labelled transitional payment has decreased.

Disabled people with rising rents do not have their transitional payments squeezed and that is as it should be. The treatment of owner-occupiers is anomalous and unjustified and it is hitting and hurting. The Minister must bear responsibility for that.

Ministers have claimed that many people are better off as a result of the 1988 changes. That was only because of the transitional payments and there is no doubt that those have turned out to be a Government confidence trick. Regulation after regulation has meant blow after blow for those people. A few days in hospital or a temporary change of circumstances can lead to the end of transitional protection. Whatever the change, it makes disabled people worse off and none of the changes can make the disabled man or woman better off. For disabled people, there is no Santa Claus in the Government and the House should recognise that.

The issue of disability costs is a nightmare for disabled people and a challenge to the Government, but before the Government act they must look again at the survey findings of the Office of Population Censuses and Surveys which show that additional costs are £6.10 a week on average. That figure must not be allowed to become part of the accepted disablement fact file. The Disablement Income Group was astonished by that and the detailed critique that it produced must be taken into account by Ministers.

The Government--and the Minister of State in particular--while accepting that 6 million people have been identified as disabled, have tried to whitewash the importance of that by saying that a significant proportion are only slightly disabled. The Minister said that at his press conference. If the Minister is right, he must acknowledge that the low figure of £6.10 for average

Column 329

additional costs arises because those who were surveyed include many slightly disabled people with low additional costs. The logic is impeccable. Severely disabled people who have higher additional costs--in some cases, very high additional costs--are not covered. The Minister must accept that.

In his speech this afternoon, the Minister praised the independent living fund. Surely he blushed when he did that because the figures reveal the reality. Only £125,000 has been paid to a mere 355 people. On my estimate, that is about £353 each on average. Five hundred and seventy -four people have been rejected and 1,574 people are being considered. The social security changes took place nine months ago. As a safety net, the independent living fund is too late and too full of holes.

What matters basically to disabled people is how much money there is for normal living and the OPCS survey revealed just how badly disabled people fare. In 1985, when the survey was carried out, the average non-pensioner disabled couple, after allowing for additional costs, received just £91.70 a week compared with £136.50 for a non-disabled couple of working age. For pensioners, the gap was smaller, but still significant. It was £83.70 compared with £93.70 and, at that level, £10 is a fortune. Those stark figures reveal the tough, harsh and hard life led by disabled people, with their reliance on social security. The Government have failed to honour their promises and have failed disabled people. It is a sad, sorry and shameful record.

6.34 pm

Mr. Michael Irvine (Ipswich) : I am sure that all hon. Members, irrespective of party, are anxious to do their best for pensioners in need. They are, after all, the generation that saw us through the second world war and preserved our national freedom. It is right that we should make proper provision for those pensioners who need support. How best to do that? The Opposition call for more--and they call for more across the board. It is far more difficult and far more complicated than that.

I am inclined to think that my hon. Friend the Minister was right when, in his opening speech, he called for a judicious mix of across-the-board benefits and selective, targeted benefits. I have no doubt that it is right for the Government to maintain the basic state retirement pension in real terms. The question is, what should be done with the extra money beyond that which becomes available? If the extra money is squandered in across- the-board benefits, it means that less money is available for those who really need it.

Pensioners are a disparate lot. Sadly, there are those who are in real need, but there are also many well-to-do pensioners. There are many who have paid off their mortgages, who have received substantial lump sums on retirement and who benefit from quite substantial occupational pension schemes. If we pay across-the-board benefits, the inevitable effect will be that money and benefits go to many who do not really need them. It follows that less is available to help those who really do need them. I have no doubt that the extra money should be targeted, but I agree that targeting is not as easy as it seems at first sight. There are dangers and difficulties about targeting, which have to be avoided.

Take-up is one such difficulty. Family credit is an example of that, because far too few families are taking

Column 330

advantage of family credit, which was introduced especially to assist them. The other major disadvantage, apart from take-up failure, is the danger of creating a poverty trap.

A more constructive approach should be adopted to see how far those two difficulties can be overcome. We should be looking for a way of targeting benefits and, at the same time, overcoming the difficulties and drawbacks. Leaving aside the argument about targeted benefits as opposed to universal benefits, far more time should be spent on the task of ensuring a better take-up of targeted benefits and on introducing further improvements in the taper system, which has proved so useful in overcoming the poverty trap. We should approach the matter along those constructive lines.

Many Opposition Members--I exempt specifically the hon. Member for Birkenhead (Mr. Field)--see the matter in black and white. They believe that universal benefits are the only way forward and they call for more without realising that there is more to it than that. The Government who do the best for pensioners will be the Government who keep inflation under control and who generate the prosperity and economic growth to provide the wherewithal to improve pensions. The Government will do best for pensioners if they give extra benefits to the pensioners who need them most.

6.39 pm

Mrs. Margaret Beckett (Derby, South) : We should have had a roll of drums when the Minister rose to speak today. Increasingly, the uprating statement serves the function of a magician's cloak. It is flashed before our wondering eyes, as the Minister makes dramatic gestures and mumbles incomprehensible incantations in which a few mystical words can be heard-- words like "targeting" and "dependency". His Back Benchers, who know precisely when to cheer, although perhaps not precisely what to cheer, give tongue. Then, with a confident smirk, the magician finally whisks away his cloak. The stage is empty ; the great illusion is complete ; the welfare state has quietly disappeared and the amazed members of the audience turn to each other and say, "How did he do that? I did not see it go." [ Hon. Members :-- "Here he comes."] I welcome the Minister of State back to the Chamber.

We are here to puncture the great illusion and to tell the House how the trick is done, and before it is completely finished. Like many tricks, it requires the audience to suspend their disbelief. Let us begin by dispensing with the idea that we misunderstand the extent of the Government's generosity. We understand it only too well. We understand that the Government follow assiduously in the footsteps of their famous supporter, Jeffrey Archer, who wrote "Not a Penny More, Not a Penny Less."

The Government who tell us that they have lavished £1,800 million on increased national insurance benefits--although only £1,500 million is in increased benefits and not for increased numbers--are the same Government who made a profit last year of £3,000 million from national insurance contributions. That was money raised in contributions--some hon. Members have drawn attention to this--over and above that paid out in increased national insurance benefit. Twice as much money went to the Treasury as went into the pockets of pensioners, widows or the sick. Moreover, the same Government will clear a further £2,000 million and more this year from increased

Column 331

national insurance contributions--almost £1,000 million more than they will pay in national insurance benefit increases. That is quite apart from the running total of about £6,000 million that they clear every year because of the break of the link between pensions and earnings.

We are talking not about an increase but about a redistribution of benefits, and many of those benefits are frozen. Sadly, the majority of Conservative Back Benchers--there are some most honourable exceptions-- applaud the second freezing of child benefit in cash terms because the benefit goes to the wealthy. We know, however, that they are the same Back Benchers who cheered and waved their Order Papers when the Government gave £4,000 million almost exclusively to the wealthy in the Budget.

The hon. Member for Norfolk, South-West (Mrs. Shephard) referred to the extra £200 million on child benefit as a universal perk. With great respect, I remind her that she and her hon. Friends voted for inheritance reliefs in the Budget for just 2,000 already wealthy people. That was not a universal perk but it was a perk that was rather well worth having. Does the hon. Lady really believe that that money is better going to those 2,000 people than to 12 million children? Today, I read in the press that top management salaries have increased by 30 per cent. this year. Will those who object so strongly to such people getting £7.25 a week in child benefit have anything to say about them getting £500 a week in extra salary? I very much doubt it.

I have not the slightest doubt that the Conservative Back Benchers who call for the means-testing of child benefit would applaud means-testing of the basic pension, the Christmas bonus or any other benefits for pensioners, with the same enthusiasm and for the same reasons. They object to universal benefits, clawed back in tax from those who do not need them, because they tie up resources which, freed to pay for tax cuts, could be targeted exclusively to their friends and supporters.

In July 1980 we were told the Government intended to uprate child benefit each year to maintain its value. In 1984, the then Secretary of State drew attention to what he called the need for "rough equality of treatment" between tax allowances and child benefit. It has become very rough indeed. As my hon. Friend the Member for Livingston (Mr. Cook) pointed out, child benefit has fallen by 7 per cent. in real terms since 1979, while tax allowances have substantially increased.

Child benefit remains the best way of lifting families out of the poverty trap. Increases in means-tested benefits trap more families into dependence. As always, when cuts are made, it is the poor who get £70 million of the savings in child benefit while the Treasury pockets twice as much.

Child benefit is not the only indicator of the Government's long-term intentions. The Chancellor was kind enough a few weeks ago to draw our attention to the difference between pledged benefits, which are at least frozen in real terms and stand still in line with prices, and unpledged benefits which, like child benefit, can be frozen in cash terms without changing the law.

The widows' payment is now worth almost £600 less than the uprated benefit it replaced, and it is frozen again this year. The lone parent premium on housing benefit is frozen. The earnings rule for pensioners--I am sure that Conservative Members remember that the Government

Column 332

were going to abolish it in 1979--has been frozen. The earnings rule for the spouses of the retired or disabled has been frozen as has that for carers. The occupational pension level that wipes out entitlements to unemployment benefit has been frozen. The hon. Member for Fylde (Mr. Jack) mentioned the need for incentives, but all the earnings disregards have been frozen.

The maternity payment from the social fund, specifically targeted only on the poorest mothers, was first cut in half, as compared with what the poorest used to get, and was then frozen at £85--£85 to meet the whole cost of having a child, for which two years ago a mother in the same circumstances could have obtained perhaps £180. Not a penny more is available in supplementary grants. Most of the benefits that I have cited are not just frozen this year ; they have been frozen for five years or so, representing a steady erosion of their value. The poorest unemployed--those on income support--have had their living standards cut. That is especially true of those who are childless because their basic benefit has not even been increased in line with inflation, as the Government admit.

Those whom the law does protect--the pensioners--have had their staple income frozen in real terms. They are standing still at best, while those in work forge ahead. The House should consider the long-term impact of that standstill, and I pay tribute to those Conservative Members who have begun to do that. If the pension of 1948 had been uprated only in line with prices, the basic pension today would be just over £18 a week for a single person and nearly £33 a week for a couple. That is less than half the basic pension today, and 2.3 million get only that basic pension. On average, a single pensioner spends about £15 a week on food--hardly an extravagant figure--so pensioners would have about £3 left for fuel and all other expenses if previous Governments had pursued this Government's policy.

We know that the Government prefer to talk only about pensioners with extra savings or extra pensions, which we welcome and applaud and which we did much to foster. But the Government are steadily whittling away the foundation of retirement incomes--the basic pension. The Minister accused us of being obsessed with the basic pension, but it is the Government who described the basic pension as the "main source" of income for most pensioners. The 30, 40 and 50-year-olds who put money aside for extra independence in retirement are putting back what the Government are taking away. They are running to stand still.

We can guess what the Minister will say : he will say that we exaggerate. He will say that we are mean-spirited not to welcome the extra money going into benefit. He will gloss over, if he mentions at all, the fact that the Treasury pocketed twice as much in national insurance contributions as the Government paid out in increased national insurance benefits.

As we are talking about the Government's generosity, let me remind the Minister of an answer that he gave me on 15 November. I asked him just how much of the real increase in social security expenditure since 1979 was due to benefit upratings in excess of pricing increases. Of the nine years, he was able to identify three in which such increases had taken place. In 1980, supplementary benefit child scale rates were amalgamated and the uprating exceeded inflation by about £3--a sum that I accept was worth having. In 1981, mobility allowance went up by a

Column 333

princely 70p and in 1983 one-parent benefit went up by 25 whole pence more than the increase in prices. The Government have increased benefits by more than the rise in prices only three times in nine years.

I have no doubt that the Under-Secretary of State will tell us that, although the Chancellor of the Exchequer claims that we are more prosperous and successful than ever, that prosperity cannot be shared with pensioners, the low-paid, widows, the sick and the unemployed without it being imperilled. He will deploy all the clever phrases devised by a Government who can cut housing benefit transitional protection of £2.50 by £2 and call it an erosion factor. But he and the Government know that this uprating statement is just another swirl of the magician's cloak and that backstage the demolition men are hard at work.

6.50 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Peter Lloyd) : This combined debate on uprating and re-rating has enabled hon. Members to raise a wide range of issues, but it has left me little time to respond to each point.

Before I mention some of the general points that have been made I wish to re-emphasise the Government's impressive record. Since 1979 spending on social security has risen by one third in real terms. That is not magic, as the hon. Member for Derby, South (Mrs. Beckett) described it. She wrapped herself in the magician's cloak instead of examining the figures in detail. That figure includes a 24 per cent. increase in spending on the elderly and a 90 per cent. increase in spending on the sick and disabled. Of course, a considerable amount of that is explained by the fact that the benefits go wider--more people are receiving them. But they must be paid for, and they can be paid for only by a successful economy. Those impressive figures mean that more people are being helped, and many of them are being helped much more than they were under the Labour Government. Spending next year will increase by 7 per cent. over this year, so we are continuing to find additional resources. But we are determined to ensure that the extra money goes where it is most needed. We have honoured our pledge to maintain the real value of pensions. I acknowledge that we have not linked them with earnings, as the Labour Government did, but on two out of five occasions the Labour Government fell down on their pledge. We want to make a pledge that we can honour. The hon. Member for Livingston (Mr. Cook) was right to say that there was a 20 per cent. increase in state pensions under the Labour Government--[ Hon. Members-- : "Hear, hear."] I hope that he and his colleagues who are cheering will be equally frank and admit that under this Government pensioner incomes have increased by 23 per cent.--an increase of 3 per cent. a year since 1979 as compared with 0.6 per cent. a year under Labour. It is clear from the figures that it is much better to be a pensioner under this Government than it was under the Labour Government.

Furthermore, there are fewer pensioners on low incomes. In 1979, 38 per cent. of pensioners were in the bottom 20 per cent. of incomes. By 1986, the proportion had dropped to 24 per cent. A statistic that will interest the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is that for pensioners' incomes compared with

Column 334

average earnings. In 1974, the figure was 55 per cent., in 1979 it had dropped to 53 per cent. and in 1986 it rose to 60 per cent.

Mr. Kirkwood : Will the Minister give figures for the proportion of average male earnings for those years?

Mr. Lloyd : That was the figure for average earnings. The Conservative Government have introduced the pensioner premium on income support, and next October we shall add £2.50 and £3.50 to the pensioner premium for older pensioners and the disabled.

The Opposition pour scorn on family credit as a targeted benefit, but their scorn is somewhat premature. Although the case load--260, 000--is less than we had forecast, spending is up to forecast. We had intended to spend about £400 million. It is clear that the benefit is better targeted than we envisaged.

The figures show that the benefit reaches even more of the less well-off than we had hoped. We want to do even better. We are to have a take-up campaign on television because the benefit is not well enough known ; it has not had enough time to establish itself fully. It will take a little longer than it should because the Opposition, instead of promoting it, have consistently decried it.

Next Section

Home Page