House of Commons Hansard Debates for 18 Jan 1989

Mrs. Teresa Gorman (Billericay) : I am sorry that there has not been a response to the advertisement. However, two mothers came to my constituency surgery and told me that they were more than £20 a week better off. I should be happy to dig out the names and addresses and send them to the programme makers.

Mr. Cook : I should be delighted to look at those cases. However, my general experience, having gone through many cases, is that while there are people who are £20 a week better off in terms of receiving family credit, I have yet to see a case where they are better off by even £2 a week once one takes into account the loss of housing benefit and free school meals.

That brings us to the other problem with family credit, which is that it is savagely means tested. Those who manage to claim it find that they lose it at the rate of 70p for every extra £1 a week in income. In short, those at the bottom of the earnings league end up on a rate of marginal

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taxation almost double the top rate of taxation on the wealthiest. As the Select Committee on Social Services pointed out in its report last October, 500,000 households--nearly every one of which has children--face marginal rates of taxation of nearly 70 per cent. The truth is that child benefit has as its greatest strength exactly what the Government persist in seeing as its greatest weakness. It is that it does not go down as the income of the claimant goes up. Therefore, it boosts the escape of the claimant from poverty instead of drawing him back into the poverty trap. That is the importance of child benefit and that is why it should not be sacrificed.

As I understand it, the Secretary of State seeks to sacrifice child benefit on the sole ground that it is not the cheapest way to relieve poverty. The first response by the Opposition to the argument that child benefit should be phased out or should not be uprated because it is not an efficient way of relieving poverty is that those of us who have watched at close range the hardship, anxiety and despair inflicted by the cuts in child benefit last April will not be taken in by any pretence by the Government that they are motivated by an anxiety to do more for the poor.

To freeze child benefit is an odd way to go about helping the poor because that benefit goes to the poor. It goes to six times as many families in poverty or on the margins of poverty as does family credit. One in 12 claimants of child benefit earns less than £5,000 a year and one fifth of the income of such households comes from child benefit. One in three claimants of child benefit earns less than £10, 000 a year and one seventh of the income of people in that group comes from child benefit.

It is curious that the Conservatives are rewriting the origins and history of child benefit. It was introduced in place of tax allowances precisely to target help to the poor, to provide a means of assisting the 1 million families with children that did not pay tax and therefore did not benefit from tax allowances. It was brought in to make sure that the benefit of a cash payment was of greater help to those who were poor than to those who were wealthy and who benefited most from tax allowances. The Labour Government were absolutely right to take the progressive step of converting tax allowances into cash benefits to help the poor.

The great mistake made by my colleagues in the last Labour Government was mentioned by the right hon. Member for Chesham and Amersham (Sir I. Gilmour) in his entertaining address to the annual general meeting of the Child Poverty Action Group. That mistake was not in converting tax allowances into child benefit, but in not keeping the old name of child tax allowance while continuing to pay the cash benefit. If they had done that, the history of child benefit over the past 10 years would have been quite different, because every time the present Government stumble on something that is labelled "tax allowance" their better instincts prevail and they uprate it. Every time they come to something with the danger warning "benefit", their reflex instincts take over and they cut it. How else can one explain the extraordinary contrast between a married man's tax allowance, which has gone up in real terms by 22 per cent. under this Government, and the fate of child benefit, which has been cut in real terms by 13 per cent.?

Since the uprating statement in October I have asked twice and now ask for the third time and demand an answer to the question of how the Government can manage to conclude that the cost of maintaining a wife has

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gone up by one fifth while the cost of supporting a child has gone down by one eighth. By what feat of mental gymnastics do they square those different treatments? The truth is that the Government have made no such calculation. They keep cutting taxes because that is the best way to help the rich. That is the other reason that prevents us from taking them seriously when they claim that they are freezing child benefit to help the poor. Their interest in helping the poor fades into invisibility when compared to their preoccupation with helping the rich.

A neat arithmetical measure of the Goverment's priorities is provided by what happened to the £200 million saved by the freeze in child benefit. The Secretary of State kept one third of it for means-tested benefits for the poor while the Chancellor of the Exchequer siphoned off the other two thirds to fund tax cuts for the better off. There we have it. Tax cuts take greater priority over the poor on a ratio of 2:1. The people who lose as a result are the children. They are the innocent victims of all the fashionable chatter about selectivity and targeting. A letter sent by a mother to the Child Poverty Action Group says :

"It is no use saying : the children shouldn't have been born in the first place'. The children are alive. They need feeding and clothing and treats. A happy secure funded childhood makes for a good adulthood".

The freeze on child benefit makes it more difficult for that mother and all other such mothers to provide that happy, secure, funded childhood. The cut in the real value of child benefit logically implies a cut in their expenditure on their children. I invite all hon. Members who do not want to see that happen and who are not happy to see tax cuts funded at the expense of children to join us in the Lobby to save child benefit.

4.55 pm

The Secretary of State for Social Security (Mr. John Moore) : I beg to move, to leave out from "House" to the end of the Question, and to add instead thereof :

"notes with approval that the Government is providing over four and a half billion pounds for child benefit this year and that it has carried out its statutory obligation to review the level of benefit each year ; and welcomes the additional resources to be provided from April for low income families with children".

As always, we have heard an eloquent and in many ways amusing speech by the hon. Member for Livingston (Mr. Cook). I will take no lectures from any Opposition Member about the ways in which the Government, to the embarrassment of the last Labour Government, help families with children. Much of the hon. Gentleman's speech was buried under a great weight of collective amnesia. He seemed to have forgotten many of the antecedents of child benefit and many of the ways in which the Labour Government failed miserably, as the hon. Gentleman well knows, to help families with children. Much of his speech related more to child benefit than to the content of the Opposition motion, the indexation, or its absence this year, of child benefit.

It is important and germane first to try to remind the House of the record and background of child benefit because it is important to put the matter in perspective. The hon. Gentleman was right when he said that child benefit was introduced in 1975. The Opposition record on child benefit reminds me of earlier debates. It takes me back to the reality of Socialist economic failure at the time when the Labour Government lived in the unlovely embrace of trade union bosses. [Interruption.] Despite

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sedentary interruptions from Opposition Members, I shall remind them and the House of what happened in 1975. I agree with the hon. Member for Livingston that it is important for us to remember the basis for this benefit. [Interruption.] Opposition Members might be embarrassed by this. In May 1975 the then Mrs. Castle had to admit to the first problem connected with the introduction of child benefit. These are uncomfortable facts for hon. Members who might not have been present in the House at the time. She said that it was "impossible to launch the scheme until 1977, and this has been a great disappointment to me personally. It was certainly our original intention that the benefit would start in April next."--[ Official Report, 13 May 1975 ; vol 892, c. 336.]

That is April 1976. The idea was that the whole scheme would have been launched in the spring of 1977.

Mr. James Sillars (Glasgow, Govan) : Will the Minister give way?

Mr. Moore : Perhaps I could be allowed to proceed because we are under the pressure of time.

There was a detailed statement in May 1976 by Mr. Ennals, the then Secretary of State for Social Services. That statement was not greeted with great happiness by many Opposition Members who at that time were on the Government Benches. He talked about not starting the process of replacing child tax allowances with the new child benefit and said :

"Introduction of the scheme in its original form would, however, have imposed an excessive strain on the pay policy which is vital to the Government's continuing success in overcoming inflation." Later he talked about

"the overriding need to contain public expenditure and the borrowing requirement as a further plank in the Government's economic strategy,".-- [ Official Report, 25 May 1976 ; Vol. 912, c. 284-85.] He made it quite clear that, although the Government had wanted to launch the scheme in the spring of 1976 and again in 1977, there would be another delay. I shall come back to that.

Mr. Sillars : Can the right hon. Gentleman say what was the Budget surplus then compared with today?

Mr. Moore : I shall come to that, and to a comparison of support for families, to illustrate why the records are so different. The situation in autumn 1976 will be familiar to many of my right hon. and hon. Friends, including my hon. Friend the Member for Eastbourne (Mr. Gow). It is germane to today's debate, in which the Opposition suggest annual automatic indexation. In autumn of 1976, there ended what was called a three-month working party involving the Government and the TUC. Whether that was the product of "Solomon binding" or of Dr. Wittevene and the International Monetary Fund, there followed an announcement that the benefit would not be introduced in 1976 or in spring 1977.

However, the agreement was--and this cannot be a comfortable memory for Opposition Members--that the child benefit plans of spring 1976 would take three years--I repeat, three years--until spring 1979 to introduce. That is part of the history of the benefit under Labour, who now criticise the Government for not indexing it this year. In 61 out of 62 months of Labour Government, there was a lower rate of child benefit, or its equivalent, than

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during the whole of the subsequent Conservative Government's period in office. That is the first history lesson.

One should consider also the totality of the situation. I do not deny the importance of child benefit, but it is but one part of the total support structure through which the Government seek to help families with children. The Opposition have given me an opportunity, in preparing for this debate to examine detailed records and the facts as between Labour's appalling record and that of the Government in supporting families with children. I refer to published facts that are consistent with the current breakdown, and I remind the House of the true position, based on figures that have not previously been published. The comparison is appalling, and I do not know how the Opposition have the temerity to initiate this debate.

Between 1974-75 and 1978-78, support for families with children dropped in real terms from £7.4 billion to £6.8 billion--a reduction in real terms of 7.3 per cent. One may compare that with the period in which my Government have been in office-- [Hon. Members :-- "Your Government?"] While we have been in office, support has increased-- [Interruption.] The Opposition do not like such comparisons being made. The figures show not a decrease, as under socialism, of 7.3 per cent., but an increase in real terms of 25 per cent.

Mr. Robin Cook : I assure the Secretary of State that we are delighted with his comparisons. He reminds the House that in three years the last Labour Government increased child benefit from nothing to £4 per week. As the right hon. Gentleman has seen the calculations, he will be aware that at today's values, that £4 produces a figure of £7.35 per week.

In three years, the Labour Government raised child benefit to £4 per week, but in 10 years the Conservatives have failed to increase that sum by a single penny in real terms. After being in charge of child benefit for 10 years, the Government are still 10p behind the level at which we left it after three years.

Mr. Moore : That is utter and complete nonsense. In 61 out of 62 months, Labour's policies of help for families with children and their support structure for tax allowances, family allowances and child benefit produced less than that provided throughout every month of the Conservative Government's subsequent period in office. Labour's record shows not only economic failure but an inability to observe the right priorities in supporting families with children. I complete my historical survey by reminding the House why child benefit is not automatically indexed, and why I took the decisions that I did this year, in the light of my statutory duty to review child benefit annually. I refer to the Child Benefit Bill's Second Reading debate on 13 May 1975 when Alec Jones, the then Under- Secretary of State for Health and Social Security, said : "The Social Security Act 1975 lays down formal provisions for annual review of benefits paid"--

and that Act established the basis of the benefit that we are now debating, which I make clear for the benefit of those right hon. and hon. Members who are ignorant of that fact. I repeat-- [Hon. Members : -- "Get on with it!"] I shall repeat it, because it is important :

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"The Social Security Act 1975 lays down formal provisions for annual review of benefits paid under that Act and requires uprating of those benefits in line with earnings or prices as appropriate. We do not propose that there should be anything similar for child benefit because it is a totally different kind of benefit, fulfilling a different purpose.

In the first place it is a new kind of benefit"--

Mr. George Foulkes (Carrick, Cumnock and Doon Valley) : On a point of order, Madam Deputy Speaker. At the start of the debate Mr. Speaker urged everyone, including the Government Front Bench, to be brief. Would it not be appropriate if the Minister at least moves on to the record of the present Government--

Madam Deputy Speaker (Miss Betty Boothroyd) : Order. That is not a point of order for the Chair. If there were fewer interruptions, the Minister might make progress.

Mr. Moore : The Opposition do not like being reminded of the basis of the statutory duty under which I act. I repeat the words of Alec Jones :

"In the first place, it is a new kind of benefit--a hybrid which amalgamates a social security benefit with a tax allowance. In the second place, most of the people receiving it will be people at work, and the benefit will simply form a tax-free addition to their earned income It will be raised from time to time in the light of inflation and other developments. But just as neither family allowances nor child tax allowances are subject to the rigid pattern of upratings that has been evolved for social security benefits nor will their successor benefit be."- -[ Official Report, 13 May 1975 : Vol. 892, c. 400-401.]

That is the basis on which I seek to carry out my statutory duty. In the Bill's Second Reading debate on 7 July 1975, Mrs. Castle said :

"There is a difference between routine national insurance benefits and this new benefit. Indexation of the child benefit is inappropriate. National insurance benefits are major means of support when earning capacity is interrupted, but the child benefit is a tax-free supplement to families whose major source of income is earnings. Clearly maintenance benefits must be capable of moving automatically in line with changes in the cost of living. The child benefit is in a different category ... A statutory duty is placed on the Secretary of State to examine the rate in the light of the overall social and economic policies."--[ Official Report, 7 July 1975 ; Vol. 895, c. 238.]

That is the statutory basis on which every subsequent Secretary of State has decided each year what he ought or ought not to do with child benefit. That basis has remained unchanged.

It is in that context that the review took place. I shall explain to the House why I exercised my statutory duty in the way that I did. First, I sought to exercise it in the context of the present Government's economic success. That success has provided for greater priority than that given by previous Labour Governments to expenditure on social security. We now spend a larger percentage of our nation's gross national product on social security.

As I have illustrated with detailed figures, we have given a higher priority to expenditure on families with children : we have raised it by 25 per cent., in contrast to a Socialist reduction of 7.3 per cent. We need to understand--I know that Opposition Members do not understand it, but I am sure that my right hon. and hon. Friends do--that that success comes from prudent economic policies. This relates to the point raised earlier by the hon. Member for Glasgow, Govan (Mr. Sillars).

We must be cautious with growing budgets. Let me remind the House of the context in which our debate takes

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place. In 1989-90, the Government propose to spend £51.1 billion on my budgetary responsibilities--an increase of £3.5 billion, well in excess of the £2 billion in the uprating. The amount would, of course, have been considerably more had it not been for a happy reduction in unemployment. I will not put such economic success in jeopardy. We must also look at the new structure of benefits that has been in place since the spring of 1988. Both family credit and the income support arrangements create a new structure of family premiums. That does two things. First, it gives any Minister in my position an opportunity to try to target additional resources more effectively--as we were able to do in the spring of last year with the extra £200 million for both income support and family credit, as well as another £70 million next April. We are thus able to reach the 1.6 million families, and the 3 million children, who would not benefit from the simple uprating of child benefit because of the way in which their benefit is offset.

Moreover--this is in no way to deny many of the obvious advantages of child benefit--the new arrangements highlight some of the dilemmas surrounding child benefit's poor targeting. Conservative Members have pointed out many times in the past that 70 per cent. of the families who stand to gain from child benefit have incomes above average earnings. Of the £4.5 billion that we spend on child benefit, £1 billion goes to the 1.25 million families who are earning over £20, 000.

Mr. Charles Kennedy (Ross, Cromarty and Skye) : Is the Secretary of State seriously suggesting that lack of sufficient tageting--as he sees it- -through the mechanisms of child benefit is causing more child poverty than lack of effective take-up in the family credit system that he has introduced?

Mr. Moore : I know that the hon. Gentleman is serious about this. But I am trying to illustrate the factors behind any Secretary of State's statutory judgment in relation to the combined package that we are now able to target, without ignoring the large sums that we are still rightly putting into child benefit.

I cannot ignore my statutory duty ; indeed, as the hon. Member for Birkenhead (Mr. Field) rightly said in an earlier debate, I must not ignore it. I must be aware of what is happening in the rest of the economy--what is happening to earning and taxes. I must recognise that 80 per cent. of those in receipt of child benefit are taxpayers, and that the real take- home pay of a married man on average earnings with two children has risen by 29 per cent. under the present Government. I shall not contrast that with the 1 per cent. rise in real terms under the Labour Government.

Let me illustrate the impact of my decisions in the past year, when I took my earlier decision--as opposed to the decisions in the uprating statement. Average gross male earnings to April 1988--and we should remember that over 70 per cent. of potential recipients of child benefit earn more than the average--rose by 9.7 per cent. If the tax changes made by my right hon. Friend the Chancellor are taken into account, the figure becomes 11.6 per cent. That means another £18.86 a week net in wage packets, rather than people not receiving 30p a week extra on child benefit. We are still talking about half the overall spending on families with children.

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I have covered the previous year ; what about the earnings for the year that we are in now? I cannot anticipate the judgments that my right hon. Friend the Chancellor will make in his 1989 Budget, but if we use the published assumptions on earnings based on those in the Government Actuary's Department it seems that the increase in average gross male earnings will again be more than £18 a week. Given that, are the Opposition seriously arguing that the living standards of families with above average earnings will be threatened if child benefit is not increased by 45p?

I remind the House that child benefit has never been intended to cover the whole cost of bringing up a family. There are strong arguments, with which I agree, for preventing basic income maintenance benefits from losing their value against prices : people are genuinely dependent on them to meet their basic needs. But Governments of both complexions--I stress the word Governments--have accepted that different considerations apply to child benefit. It is a supplement to the major source of income--for most people, earnings from work--and each decision about its level must take account not only of changes in the cost of living but of the massive increase in prosperity for families generally in recent years.

Sir Anthony Meyer (Clwyd, North-West) : The one issue that my right hon. Friend does not seem to be addressing--perhaps he intends to address it later--is the fact that child benefit goes to the mother. That, surely, is an important consideration.

Mr. Moore : I entirely agree. That is why I have tried to stress that we are talking not about the abolition of child benefit, but about its non-indexation this year. We are talking about the expenditure of £4.5 billion. I also remind my hon. Friend, who I know is very interested in these matters, that family credit also statutorily goes to the mother.

Mr. Timothy Raison (Aylesbury) : My right hon. Friend has stressed the importance of looking at current circumstances when making a decision. Does he accept that it is a current circumstance that the number of people who pay income tax is much too large and that the tax threshold is much too low? That in itself is surely a compelling reason for raising child benefit.

Mr. Moore : My right hon. Friend draws attention to points with which I know that my right hon. Friend the Chancellor will be concerned, and I in turn shall draw them to his attention when he comes to make his Budget judgment.

Mr. John Battle (Leeds, West) rose--

Mr. Moore : No, I really must proceed.

These, then, are the reasons for my decision on the level of child benefit for this year : first, our commitment to spend taxpayers' money in ways that can be fully justified ; secondly, our creation in the new income- related benefits of a better mechanism than ever before for directing additional resources to those who really need them ; and, thirdly, our recognition that working families generally are benefiting enormously from the increased prosperity brought about by the Government's prudent management of the economy.

I have a statutory commitment to conduct a careful review of the level of child benefit each year. I have not

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shirked that responsibility, nor will I shirk it. However, we also have a binding electoral commitment to ensure that child benefit will continue in its present form. That manifesto pledge has been and will be honoured to the full. What do the Opposition offer in return? They talk about child benefit being uprated automatically, but in office they insisted that that could not be justified. They talk about increasing resources for child support, but in office they crippled the economy and were forced to cut support for families with children. Worst of all, they talk about helping those in need, but they want us to increase child benefit, which would do nothing for the neediest and would give most help to the better-off.

It would be charitable to describe the Opposition's thinking as hopelessly muddled, but if such persistent wrong-headedness is Socialism, it is a Socialism that carries irresponsibility to the point of immorality. The present Government are succeeding where the Opposition failed in promoting an economy that is delivering a higher level of child support than when we came to office, and in directing those resources to the families who need them most. The Opposition have the effrontery to carp at that. I invite the House to join me in welcoming it.

5.19 pm

Mr. Frank Field (Birkenhead) : I want to draw a lesson from what my hon. Friend the Member for Livingston (Mr. Cook) said, to make an observation on what the Secretary of State has just said and to end with a challenge.

My hon. Friend the Member for Livingston drew attention to the speech of the right hon. Member for Chesham and Amersham (Sir I. Gilmour) at the Child Poverty Action Group's annual general meeting and to the lesson that the right hon. Gentleman drew from the Labour Government's stewardship when child benefit was introduced. He said that the Labour Government made an error when they called the benefit child benefit instead of calling it a tax allowance. That was a good debating point to make here, and no doubt it was a good debating point to make at the Child Poverty Action Group's annual general meeting. However, that is not the real lesson that has to be drawn from the Labour Government's stewardship.

Labour Back Benchers, together with Conservative Members, tabled amendments to have child benefit indexed. Labour Members were assured by their Whips and by Government Ministers that there was no need to press the amendments. Now we see the folly of accepting that advice. I make that point not because I wish any hon. Member to appear in sackcloth and ashes during today's debate--I am too cynical to expect that--but because I wish to lay down a challenge to Conservative Members.

Most of us will not achieve office. Most of us will exert our influence as Back Benchers. Influence can be exerted now and again. It cannot be exerted constantly. Influence can be exerted tonight in the Division Lobby. Influence can also be exerted by means of amendments that are to be moved in Committee during consideration of the Social Security Bill. I ask Conservative Members not to go down the road that Labour Members went when child benefit was introduced and accept the gentle assurances of Government Ministers and the Whips. I am sure that the intention is noble, but its delivery is feeble.

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We have some power tonight, and we shall have some power later this Session. I hope that Conservative Members will exercise their influence as Back Benchers. I hope that they will accept that it is an illusion to think that most of us will achieve office, let alone high office. We are sent here to represent our constituents as Back Benchers and to vote accordingly. That is the lesson that I have drawn from the introduction of the child benefit scheme.

I was lost, as I expect other hon. Members were lost, when the Secretary of State read out reams of figures. I am sure that he meant us to be lost. The figures sounded very good, and I do not doubt for a moment that they were correct, but what was missing was a comparison between families with children and taxpayers without children.

Although it may be difficult for Opposition Members to accept, there has been a substantial increase in living standards, not since 1979--in their first two years of office, the Government achieved the extraordinary distinction of reducing national income--but since 1981. Therefore, it is not hard for Ministers to give figures showing how the living standards of families with children have increased, but the crucial point is how their increase in living standards compares with that of other groups. Despite all the Secretary of State's figures, that comparison did not feature in his speech, for one simple reason : that a comparison of families with children and other taxpayers shows that the rise in living standards of those who are responsible for the next generation has been much lower than that of taxpayers without children or of taxpayers who are single.

Mr. Gerry Steinberg (City of Durham) : My hon. Friend says that the majority of people now enjoy a better standard of living. Is it not true, however, that those who depend on child benefit now have a worse standard of living than they had in 1979?

Mr. Field : My point is that many of those who depend on child benefit have not done as well as other people. One reason why the Conservative party wins elections and the Labour party does not is that, although many of our constituents have had a rough deal, the majority of the population have not. That is the starting point for many of our debates. Until we take that point on board, we cannot make the point that the relative standards of living of families with children--whether they be rich or poor--have declined, compared with those of the childless or single. Our charge against the Government is that, almost by accident, they are creating a tax and social security system that discriminates against those who are responsible for bringing up the next generation.

Before the last election, the Prime Minister gave an interview to, I think, "Woman's Own", in which she said that she did not accept that there was anything called "the community". I ask Conservative Members to consider where this Governement's policy is leading the Tory party. Without recognising it, the Government are failing to distinguish between taxpayers with children and taxpayers without children, with the result that there is no distinction between the state, at the very top, and ordinary individuals at the bottom. We have got rid of voluntary organisations--of a network of countervailing forces. Although the Government are strong in rhetoric about the family, they are weak on delivery, and the tax and benefits system is now beginning to work against those with children. There

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is nothing between the top, which is the state, and the bottom--autonomous individuals. The Government have not consciously pursued that policy, but that will be its result. That is another reason why Conservative Members should be cautious before they rally too quickly to the flag and support the Government's amendment. I end with a challenge. The Opposition are running a high-risk strategy, and I support it 100 per cent. The strategy involves holding this debate and supporting amendments that are to be moved in Committee during consideration of the Social Security Bill, asking Parliament to approve a regular uprating of child benefit. Let us suppose that, on this occasion, Conservative Members do not rally to the flag and that later in the Session there is a miserable response from Conservative Members on this issue. That message will be read clearly by those who sit on the Treasury Bench.

If our strategy fails--it is not, perhaps, so important tonight ; it will be much more important when the amendments that are made in Committee to the Social Security Bill are debated here on Report--and we see that a large number of Conservative Members are not willing to vote for child benefit against the advice of their Whips, both we on this side of the House, supporters of child benefit on that side of the House and groups outside the House will have to consider what we must do if we are to defend and promote the interests of families with children. Shall we continue to be voted down in debates such as this and when amendments to every Social Security Bill are tabled, or shall we take the debate into enemy territory? That is not a point that I wish to pursue tonight, but that is the inevitable outcome of a high-risk strategy--one which I support, but one which I believe none of us should duck if it misfires.

5.28 pm

Sir Ian Gilmour (Chesham and Amersham) : The hon. Member for Livingston (Mr. Cook) pressed Conservative Members to vote with him this evening. The hon. Member for Birkenhead (Mr. Field) gave us some deeply felt advice on the same matter. I shall respond later to those invitations. First, however, I shall deal briefly with the merits of the case.

The Government's decision not to uprate child benefit is shameful. My right hon. Friend the Secretary of State made a very good case, in party political terms--the best that could possibly be made. However, his case must be pretty bad if he has to rely on Lady Castle for support-- particularly as, if I am right, he opposed Lady Castle at the time, which makes her even less of a prop for his argument. To have failed to uprate child benefit two years running is to give oneself, to say the least, a most unenviable record.

It is shameful not to have uprated child benefit in a year when tax benefit was showered on the rich. I also believe that it undoubtedly fiddles an election pledge. It has hit some of the least well-off people and it appears to have been done--my right hon. Friend will obviously not agree with this--not on the merits of the case but in pursuit of some obsessive dogma of curbing so-called public expenditure.

I welcome what my right hon. Friend said about what was being done to target more money to the least well-off. I would describe it as fairly good news that a third of the money that is illegitimately being saved on child benefit

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will be channelled to means-tested benefits, but as the Secretary of State knows--and as the Minister for Social Security in a previous debate implied--means-tested benefits are not in any way a substitute for child benefit. We need both universal and means-tested benefits--what has been described as "a judicious mixture." Means-tested benefits can never be a substitute because, while the figures that my right hon. Friend gave were reasonably encouraging, family credit will not reach a great many people ; the forms that they must fill in are too complicated, people will not understand them and what is proposed cannot be achieved. So means-tested benefit cannot be a substitute for the great universality of child benefit, which is its most important advantage.

I used the phrase "so-called" public expenditure. Figures that the Chancellor of the Exchequer gave me last year showed that 70 per cent. of the £4.7 billion expended on child benefit went to people who paid more in income tax than they received in child benefit. In other words, for those people, child benefit was a tax allowance. That is why it should be called a child allowance or child credit, and it should not come out of my right hon. Friend's social security budget.

In connection with the 70 per cent. of people who pay more income tax than they gain in child benefit, I should comment on the intervention of my hon. Friend the Member for Richmond and Barnes (Mr. Hanley), who wanted to be here but who has unfortunately been called away.

It is extraordinary that some of my hon. Friends should worry about child benefit going to the rich when they do not worry about greater tax cuts going to the rich. They do not worry, either, about mortgage tax allowances --far more of which go to the rich--or about superannuation tax going to that section of the community. They do not worry about far greater sums going to the rich, yet they get het up about £7.35 going to each child of the Duchess of Westminster. That is illogical and inexcusable, and such arguments will not wash. What about the 30 per cent. of the people who get more in child benefit than they pay in income tax? For them it is a genuine cash benefit of an old-fashioned kind and is valuable to them. Would my right hon. Friend say which he is more proud of doing--cutting tax allowances for the 70 per cent. or cutting the cash benefit for the 30 per cent.? Neither seems to be a battle honour which anyone would wish to seek.

I listened carefully to my right hon. Friend's speech and I was pleased with what he said about the Government's record. But his comments did not answer the hon. Member for Birkenhead, who said that the Government were discriminating against families with children. There is no argument why other tax allowances should go up while this one goes down.

My answer to the invitation from the hon. Member for Livingston to vote with him is that the Opposition motion could not have made it easier for hon. Members on these Benches who favour child benefit. It is well worded and in a perfect world I have no doubt that droves of Conservative Members would vote for it-- [Interruption.] --although some of the more reactionary of them probably would not. In that perfect world we would vote purely on the words of the motion, which would create a nightmare for the Whips and probably make them redundant. Indeed, such a course might have even more important disadvantages.

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But we do not live in a perfect world. We have party affiliations and so on, and they sometimes put constraints on us in the Division Lobby. I am far from thinking that one should be slavish in obeying the Whips and behaving like a party automaton, even on Labour Supply Days, which are more matters of demonstration than decision-making occasions.

I imagine that, if some new issue cropped up--this has probably happened to me in the past--I might vote with the Opposition on a Labour Supply Day. But this, alas, is not a new issue because this is not the Government's first offence. They are now hardened offenders in these matters. This has become a long-running saga. This is not an issue on which we need to demonstrate, because people know where we stand. When the Bill returns on Report, my right hon. Friend the Member for Aylesbury (Mr. Raison) and I and other of my hon. Friends will, I hope, table an amendment which will be in order, and on that occasion I shall vote for that amendment.

Clearly, one could not possibly vote against the Opposition motion, because it is totally unexceptionable. Equally, it would be extraordinarily difficult to vote for the Government amendment, which seems to be a threadbare piece of pathetic prevarication. I certainly could not vote for it.

The Government's action is deeply regrettable. In taking it, they have lost the high ethical ground of politics. They have forfeited any claim to be the party of the family--surely an expensive price to pay for a rather trivial piece of dogma.

5.36 pm

Mr. Charles Kennedy (Ross, Cromarty and Skye) : I am sure I speak for all Opposition Members and, I hope, for at least several Conservative Members when I say that it was a great pleasure to listen to the remarks of the right hon. Member for Chesham and Amersham (Sir I. Gilmour). Moving from the higher ethical considerations to which he referred to the lower form of practical survival which tends to dominate considerations in my party, I shall have no difficulty in voting for the Labour motion at the conclusion of the debate.

I share the reaction of the hon. Member for Birkenhead (Mr. Field) and of the right hon. Member for Chesham and Amersham to the speech of the Secretary of State. Although Hansard may prove me wrong, by my count the right hon. Gentleman referred on no fewer than double-figure occasions to the way in which statutory obligations had obliged him to behave in the way he has on this occasion towards child benefit.

The Secretary of State pointed out at the Tory party conference last autumn that his was still the biggest spending Department of the Government. For such a Minister, commanding that degree of resource and decision-making effect, to refer half-heartedly, if not shamefacedly, to the way in which statutory obligations had boxed him into making a decision in this case, it must be evidence that he recognises that the strength of argument, moral and political, is not with him.

When giving figures, the Secretary of State went back sufficiently far in history to refer to dates when my mother

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was receiving child benefit for me. He erected legislative complexity to cover his ministerial complicity in this matter. It is worth rehearsing the principles under which the scheme was supposed to operate. Child benefit was based on equity, in terms of being a tax allowance. Some Right-wing thinkers in Britain today refer to families having children as another example of consumer choice. As the hon. Member for Birkenhead explained, there is more to it than that. Children are an investment for the future for any nation and there must be a recognition by the nation that the burden of income must reflect the burden of social responsibility. In the longer term, the burden of social responsibility must be adjudged as resting emphatically with those who bring up the next generation. It is not enough to view the arguments about child benefit and the economic status which should be attached to children in terms of the distribution of wealth to families as falling somewhere between the decision to buy a Porsche or a compact disc player. To use the tone of the concluding remarks of the right hon. Member for Chesham and Amersham, decisions about child benefit are more ethical than that. Much of the complex financial argument which the Secretary of State used ignores the founding principle that the purpose of child benefit was not necessarily in the first instance to target resources on the poor. He is hitting at a target which was never erected as the practical symbol of the benefit. The purpose of the benefit was to target resources on families with dependent children. Therefore, much of the Aunt Sally which the Secretary of State erects simply to knock down to justify his position is not the Aunt Sally that was erected in the first place by hon. Members of all political persuasions who supported the benefit in principle when it was first introduced. Child benefit is, comparatively speaking in the social security system, cheap to administer, and it has a very high take-up rate. According to the figures quoted by the hon. Member for Livingston (Mr. Cook), the 60 per cent. or more of people who, for whatever reasons, are not taking up family credit to which they are entitled rely particularly on the automatic nature of child benefit support. Child benefit lifts low-income families out of means-tested benefits. The Government are supposedly committed to the family and to lifting people out of this dreadful, diseased and debilitating dependency culture against which we hear so much Right-wing rhetoric. Yet the freezing of child benefit for consecutive years runs counter to the principles on which it was founded and the principles on which the Government's policy is supposed to be founded and promulgated. We also hear much about other aspects of social provision in this country--for example, health, education, social security and social services. We are told that we should look increasingly to the United States of America to see what the great enterprise culture is doing and, to some extent, apply any lessons which can be learned by adapting them to the British context.

America relies heavily on a means-tested benefit called aid to families with dependent children which is intended to help poor families. Studies have shown that, between 1973 and 1984, the income of families with children declined in real terms, particularly for low-income families, but also across the entire income range. In 1985 a report from the Congressional Budget Office stated that households with children account for more than two thirds

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