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In any case, there are two intervening transactions. The first concerns the cost of collecting the tax, which is generally 2 to 2.5 per cent. The other concerns the cost of administering child benefit. I do not know what its level is, but it is probably 1 or 2 per cent. In other words, probably between 4 per cent. and 5 per cent. is lost in the process of taking money out of the pockets of husbands and giving it back to their wives. I cannot see that that is part of Conservative philosophy or that it is any business of the state.
Mrs. Beckett : I am following the hon. Gentleman's argument with interest. As I understand him, he is saying that the state should not take a view as to how income is shared, distributed and used within the family. Am I right, however, in thinking that he voted for non-dependant deduction in the case of housing benefit, which takes money from the family on the basis of a contribution of teenage children to housing costs?
Column 694assume that he is making no contribution to the family's rent is simply flying in the face of reality. He almost certainly is making such a contribution. But this is something totally different : taking money from the husband in tax and giving it back to his wife. As I see it, that is no business of the state.
Another general point that I think is missed here is that we are spending £4.5 billion of public money on the administration of this benefit-- taking it in taxation, and giving it back to wives in the form of child benefit. The cost of administration and collection in the middle has to be borne. That is unfair, because very often it comes from people who do not have children and whose income is low, and goes to people who do have children and whose income is high. Increases do not benefit those on the lowest incomes. I believe--and this is perhaps a fundamental point--that it does not achieve its main objective.
An increase in child benefit would be of absolutely no help to families on income support or family credit. Family credit now applies a long way up the income scale. At 1988-89 rates, a family with two children under the age of 11 could have received family credit up to an income of £7,500 a year. In 1989-90 the income figure would be more than £8,000 a year. If those two children were 14 and 16, the family could have continued in 1988-89 to receive family credit up to an income level of £9,000 a year, which in 1989-90 money is £9,700. But a family with two children aged 14 and 16, earning below £9,700 a year, would not benefit by one penny piece from an increase in child benefit. That is a fundamental point.
Presumably those are the families whom we regard as needing help. Families trying to bring up children on incomes of £7,000, £8,000 or £9,000 a year certainly need help, and if there were any proposal to remove that help I should certainly vote against it. But what is proposed in the new clauses would be of absolutely no benefit to those families. Every penny they gained in increased child benefit would be lost either in income support or in family credit. It is of no use to people at the low end of the income scale whom we are supposed to be helping.
Mr. Robin Squire (Hornchurch) : Will my hon. Friend bear in mind that for poorer families and even not-so-poor families, particularly if the wage earner is unemployed or ill, child benefit is relevant? It is not just a case of saying that it cannot benefit them. It can benefit people in those specific circumstances.
Mr. Maples : My hon. Friend knows more about the workings of the social security system than I do, and he may be right. In effect, he is criticising the way family credit operates and if his criticism is valid, perhaps it should operate to provide a more regular stream of income. The non-indexation of child benefit has reduced it from £835 to £725. The £725 continues to be paid, so is a regular income. I was saying that people on low incomes do not benefit from the increases. There is another side to that which presents paradoxes. It is that everybody else pays more in tax than they receive in child benefit. Anyone with two children who earns £7,100 a year pays income tax of £751 and receives child benefit of £754--£3 more. If we uprate that to this year's tax rates, the answer might be slightly different. Anybody with one or two children who earns more than £7, 100 pays more income tax than he receives in child benefit.
Column 695Is it the business of the state to organise that sort of transfer through the tax and social security system? I do not believe that it is. The way to help those people, if they need help, is through tax reductions. The consistent theme of the Government's tax policy is to reduce the basic rate of tax. That is untargeted and goes to everybody, but those on incomes who can afford to take care of children should do so. Whether or not they have children is a free choice. If their incomes are insufficient, the social security system should make it up. It is not for the tax and social security system to differentiate between people and to decide how they are taxed and how social security is spent when they can make those decisions themselves.
There are one or two other fundamental misunderstandings about child benefit. Forty per cent. of the recipients of child benefit have incomes in excess of £15,000 a year--substantially above the national average. A further paradox is that people on low incomes without children are subsidising people on high incomes with children. Why should a single shop assistant earning £100 a week pay tax to subsidise someone earning £20,000 a year? I cannot see that that is fair in any way.
Another point that is lost sight of is that the world has come a long way since 1979. People's disposable income has risen substantially. We know that the income of someone on average earnings has risen by 29 per cent., but that percentage is not usually translated into pounds per week. Somebody on average earnings is, in today's money, £46 a week better off than 10 years ago. Somebody on three quarters of average earnings is £34 a week better off and someone on half of average earnings is £22 a week better off.
Mr. Maples : I shall finish this point. Against that we are setting a non-indexation of child benefit of just over £1 a week. People at all levels of earnings--I agree that there is a different set of criteria for people out of work--are considerably better off in terms of take-home pay and disposable income than they were 10 years ago. When people have such increases in their disposable income the necessity for the state to provide for them is demonstrably diminished. It is right that we should expect people to use part of the increase in their disposable income to pay for items which perhaps 10 or 15 years ago they could not afford and which it was right for the state to help them with. To suggest that there is some moral compulsion on the Government to pay an extra £1.10 a week per child to somebody whose disposable income has risen by £34 a week during the past 10 years is difficult to swallow.
We are taking about increases in disposable incomes at low levels of earnings. In 1988-89 half of average earnings was £130 a week gross. The increase in the disposable element of that is £22 a week, so on earnings well below the family credit ceiling people have had increases of £20 to £30 a week in their disposable income. That sets in a much more realistic context the non-indexation of child benefit which amounts to £1.10 a week. Put in that context the sum is insignificant.
Column 696said that 40 per cent. of recipients of child benefit are on incomes of £15,000 a year. Let us look at disposable income. Can my hon. Friend tell the House what the disposable income is, after mortgage payments, of his constituents who are earning between £15, 000 and £20,000 a year? He will find that it is not very great.
Mr. Maples : I am reluctant to take issue in such sharp terms with a good and hon. Friend. If he thinks that it is the business of our tax and social security system to funnel taxpayers' money to people earning more than £15,000 a year, I am amazed. Last year average earnings were £13,200 a year, so we are talking about people on 120 per cent. of average earnings. We cannot help people who earn more than the average. It is arithmetically impossible. We cannot take money from everybody and give back more to everybody. All we can do is take money from people earning more than the average and give it to people earning less than the average. Even the hon. Member for Livingston would not go further than to suggest that he could make everybody equal. He certainly could not improve everybody's lot. The crux of my argument is the need for a means-tested system which is generous and operates reasonably and sensibly to help people who cannot afford to bring up children on their income. Family credit goes a long way up the income scale. In this tax year it will go to nearly £10,000 a year of pre-tax income for those with two children aged 14 and 16. That is about 70 per cent. of average earnings, which is about what average male manual earnings have been for a long time. A system that goes to that level is reasonably generous. Clearly, it could be more generous. If it is suggested that means-tested benefits should go further up the income scale than 70 per cent. of average earnings, we are getting into dangerous territory. It is almost what my hon. Friend the Member for Northampton, North (Mr. Marlow) was suggesting : to help everybody, above and below average earnings. Obviously we cannot do that. There is no point going beyond whatever average earnings happen to be.
A means-tested system that pays benefits to people earning £10,000 a year with two children is reasonably generous. I understand that the average payment to recipients of family credit is about £25 a week. Sixty per cent. of recipients--nearly two thirds--receive benefit of more than £20 a week. There must be a withdrawal rate and I understand that that is the criticism of the system. The trade-off between universal and means-tested benefits is that a means-tested benefit must have a withdrawal rate. To compare means-tested benefits with the hightest rate of tax is a fallacy because they are not the same. To receive benefit at the expense of other taxpayers, which is withdrawn as one gets better off, is fundamentally different from paying more money in income tax as one earns more money. One is a benefit and the other is a liability where people are paying tax. It is axiomatic that we cannot have a means-tested benefits system that does not have a withdrawal rate or, what would be worse, some sort of precipice-type cut-off.
The social security system reforms of the past two or three years mean that means-tested benefits are now based on after-tax income. In retrospect that is an incredibly simple and obvious reform. It escapes me why none of us came to that conclusion before. It has made a fundamental difference as the rates of withdrawal can never exceed 100 per cent. I realise, however, that once one adds together
Column 697housing benefit and family credit one can achieve high rates of withdrawal. It would be nice to be able to make those more moderate, but the only way of doing that would be to extend the benefit even further up the income scale to those earning more than the 70 per cent. of average earnings.
My right hon. Friend the Minister is obviously in a much better position than I am to respond to the specific criticisms of the hon. Member for Livingston about the statistics for take-up. The take-up rate is usualy quoted in terms of the percentage of eligible individuals taking up benefit. Some of those are entitled to very small amounts of benefit. The percentage of the eligible money that is taken up is much higher. I believe that I am right in saying that about 65 per cent. of the money available is being taken up, while it is taken up by only 50 per cent. of the individuals. That appears to show that those who are not taking up benefit are those who, on the whole, are entitled to relatively small payments and have relatively low entitlements.
However, those who are entitled to relatively large payments under the family credit system are taking up their entitlements. I welcome my right hon. Friend's efforts to encourage more people to take up family credit. I do not believe that any stigma should be attached to it. I do not accept that there is some sort of stigma attached to family credit that is not attached to child benefit because one does not have to ask for child benefit. There is no stigma, because, for example, employees can have family credit paid through their wage packets. One does not have to obtain a Department of Social Security book and collect it from the Post Office every week. I hope that more people will take up family credit because it is far more effective than uprating child benefit in helping people who need help. We have a crazy system of redistributing £4.5 billion--some 1 per cent. of our GDP--by recycling it through the tax and social security system. We have a system where those in real need--those on family credit or income support--would not be helped by either of the new clauses or by any uprating of child benefit. We should continue to move, as I believe we are, to a system of letting people who are able to look after themselves do so. The state should not be an unwelcome intervener in their financial affairs.
I do not believe that anyone coming down from Mars today, who was asked to deal with the difficulties of low-income families bringing up children, would reinvent the child benefit system. I find my second proposition even harder to believe than my first, which is that the cost of uprating the child benefit by £1.10--which has been under-indexed--would be in excess of £600 million a year. If the Government said to my right hon. Friend the Member for Aylesbury (Mr. Raison) or the hon. Member for Birkenhead (Mr. Field), "We have £600 million this year to spend on helping families with low incomes to bring up children", I do not believe that they would choose to scatter that money by paying £1.10 per week for each child. They would choose to target it. They do not like the word, but, if they were presented with the money and the option, that would be their choice.
I say to some of my right hon. and hon. Friends that I hope that they will take account of the way in which the world has moved on in the past 10 years and the extent to which disposable incomes have risen substantially at all
Column 698income levels. It is time that we stopped taxing middle-income people so that we can give them benefits. We should continue with the system of giving tax cuts to those who are capable of looking after their own affairs and giving generous help, through the social security system, to those who are not.
Mr. Alice Mahon (Halifax) : Having listened to the speech of the hon. Member for Lewisham, West (Mr. Maples), I feel depressed. If that is the attitude of Tory Members I certainly do not hold out any hope that either of the two new clauses will be passed. The hon. Gentleman's attitude reflects his lack of any real-life experience of bringing up a family on low income. I was also deeply shocked by his complete lack of understanding about the position in which many women find themselves. The hon. Gentleman would not give way to an Opposition Member, possibly because he knew that we would point that out. There was an absolute lack of understanding of the fact that the majority of children are brought up in a family by the mother. Even in families of middle incomes, husbands often do not pass their incomes to the women. My husband worked very hard, but he was still not well paid, so I have experience of bringing up children on a low income. I am possibly one of the minority who can pass on experience of the fact that that income in the middle of the week--I drew it on a Tuesday-- was a lifeline. When one is on a small income, if one needs an extra pair of shoes, is running out of food or has a bill coming in, child benefit is useful. The hon. Gentleman's lack of understanding of how an awful lot of people budget and manage their incomes beggars belief.
Late in the 1980s the Child Poverty Action Group carried out a survey that showed that one in five children lived on or below the poverty line. I found that a distressing survey and I felt deeply ashamed that I lived in a wealthy country which could produce such statistics. After that survey, all informed opinion pointed out that the freezing of child benefit would make the position for many children considerably worse.
I believe that it is worth emphasising the values of child benefit over and over again, and I hope that my hon. Friends will do the same. The money goes to the mother. The take-up rate is 98 per cent. The hon. Member for Lewisham, West did not put forward any argument to diminish the importance that people in receipt of child benefit place upon it. It does not affect the poverty trap and it is cheap to administer. The mother knows the value of child benefit, because often it is her only income.
I hope that common sense, compassion and care will prevail in this short debate on child benefit. Looking at the suits around me and considering the lack of any kind of experience of most hon. Members, I do not feel too positive about the outcome of the debate. If the Government persist in freezing over and over again what is a universally accepted valuable benefit, with the intention of allowing it to wither on the vine, they will go down in history as the Government who took us back to the Dickensian state of the 19th century and before, when we had ragged children as the norm rather than the exception. I hope that hon. Members will vote for the new clauses.
Column 699the Member for Aylesbury (Mr. Raison) made his argument so effectively, I shall not need to detain the House for long. As the hon. Member for Halifax (Mrs. Mahon) said, child benefit has a number of considerable advantages and has a 98 per cent. take-up. It is paid to the women, to which my hon. Friend the Member for Lewisham, West (Mr. Maples) objected. He did not give much reason for that. It seemed just neo liberal dogma that the state should not do such things. The fact is that the overwhelming majority prefer it paid in that way. Until recently, if not still, the Conservative women's organisation was in favour of such method of payment. I do not believe that some sort of dogma about what the state should or should not do should interfere with what most people want and what many people believe is sensible and right. As my right hon. Friend the Member for Aylesbury said, it loosens up the poverty and unemployment traps, and it is fair. Since the days of William Pitt, it has been generally realised that it is more expensive to have children than not. If William Pitt had been here this afternoon and heard my hon. Friend the Member for Lewisham, West, he would have thought that he was the man from Mars and would have rubbed his eyes and ears with astonishment at what my hon. Friend said.
Against the formidable arguments in favour of child benefit the Government have two. One is that it costs a lot of money, and the second is that benefits should be targeted, but, in fact, it does not cost a lot. It is worth comparing child benefit with expenditure on other allowances. Child benefit costs £4.5 billion, the single person's income tax allowance costs £9 billion, the married man's income tax allowance costs £14 billion, the wife's earned income allowance costs £3.5 billion, the mortgage interest rate relief costs £6.5 billion and private pensions cost £10 billion. Against all those figures I do not believe that £4.5 billion for children is excessive. Furthermore, as my right hon. Friend the Member for Aylesbury has said, child benefit is the only benefit that the Government and my hon. Friend the Member for Lewisham, West favour targeting. All the other benefits are universal, so why should the Government and my hon. Friend pick on children? Why should they be the first to go to the wall? Therefore, the Government's first argument is not right. Child benefit is not relatively expensive.
The Government's second argument is that it is more important to give money to the really poor, but there are several answers to that argument. As I understand it, only one third of the money that is saved by not uprating child benefit is going to the really poor this year ; the remaining two thirds is not being paid out. Even if the Government's argument was right, why should money for the really poor be paid at the expense of other families with children? Above all, why should it be paid at the expense of the nearly poor? If the Government feel the need to help the really poor--I am glad that they do--why should not that money come out of general taxation rather than from child benefit?
It is well known that targeting does not work. I welcome my right hon. Friend's new campaign--or relaunch--and I hope that it will be successful. The figures suggest that things are getting better, but no one pretends that there will be anything like such a big take-up of the new benefits as there is of child benefit.
Column 700It is slightly misleading to say that child benefit does not help the really poor or that, conversely, not putting it up does not hurt them. That is a source of argument between my hon. Friend the Minister of State and myself. During our previous debate on this subject I said that, by not putting up child benefit, the Government would hit
"some of the least well-off people".
When my hon. Friend wound up the debate he said :
"It is not true that, by not uprating child benefit, we shall hit the least well-off."--[ Official Report, 18 January 1989 ; Vol. 145, c. 365, 384.]
I wrote to my hon. Friend after that debate to point out that I believed that he had misled the House, inadvertently of course, and that he had got it wrong. He wrote me a letter back of, I am sure he would agree, remarkable ambiguity and obfuscation. I wrote two more letters to my hon. Friend, but he did not reply ; he is a busy man. It is, however, worth analysing what he said, not because he misquoted me--that happens to all of us, but my hon. Friend could have admitted it--but because I had said that "some" of the least well off would be hit, while he said that it was not true that the Government would hit the least well-off. It is true, however, that not uprating hits some of the least well off.
My hon. Friend's answer was based on at least three false assumptions. First, because of the take-up of the means-tested benefits some of the least well-off do not take up the benefits and therefore they are hit by child benefit not being uprated. Secondly, entitlement is too restricted and there is too much red tape on means-tested benefit.
Recently someone wrote to me whose husband is a theatre technician without regular work. The family is ineligible for family credit because the work is too irregular and is ineligible for income support because of the earnings rule. Those people are hit, and my hon. Friend the Member for Lewisham, West should bear such cases in mind. As a result of that letter I tabled a question and my hon. Friend the Under-Secretary of State admitted that there were a number of people in such circumstances.
The second assumption is that means-tested benefit, if it is claimed, will go where it is meant to go. That is true of family credit, but that is not necessarily true of income support. That benefit may stick with the husband and never reach the wife. The third assumption, to which my hon. Friend the Member for Broxtowe (Mr. Lester) has drawn attention, is that money is all that matters. Security, however, is equally important. The great advantage of child benefit is that the recipient knows that she will get it, but that is not the case of people who zoom in and out of eligibility for means- tested benefits.
Apart from all the other disadvantages of not uprating child benefit, it is clear that the Government have hit some of the least well-off by their actions. That is why I deeply regret their actions of the past two years, which I believe have been shameful. Children in Britain from two-parent families are more likely to be poor than similar children in any other comparable country. That is not true of children from a one-parent family, which I welcome, but the first fact is shameful. The Government should deal with it straightaway. At the very least they should accept new clause 2, and after that I hope that they will make up for the upratings that they have missed in previous years.
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Mr. John Battle (Leeds, West) : The last time we debated this issue was 18 January. At that time the Secretary of State tried to convince the House that child benefit went to too many people who did not really need it. That was the core of his defence for arguing that it needed to be targeted. No doubt I have anticipated the right hon. Gentleman's reply to this debate. In January he came out with the rather surprising assertion :
"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."
That statement was echoed today because of the emphasis given to average earnings. We should handle the computation by average earnings extremely carefully.
As the hon. Member for Lewisham, West (Mr. Maples) said, it is not commonly known that the average earnings figure in January, when we last debated this issue, was £258 per week. Many of the people that I represent get nowhere near that figure as part of their weekly income. I look somewhat askance at the idea that they are somehow pulled into the average.
In today's edition of the Financial Times an article reminds us that the wages of Britain's managers have gone up substantially. Surely such increases pull up average earnings without necessarily suggesting that those earning below that figure have had any increase in wages. Such people's income could be decreasing, although those at the top find that their incomes are increasing. That is the difficulty of computation by average.
As a result of the Secretary of State's claim that
"70 per cent. of the families who stand to gain from child benefit have incomes above average earnings"--[ Official Report, 18 January 1989 ; Vol. 145, c. 361.]
I tabled a question asking him to spell out exactly who are the 70 per cent. who receive the benefit. That percentage is a striking figure as it suggests that many people are on above-average wages, especially as the benefit is given to those with families. The reply I received modified the earlier statement as it said that the 70 per cent. mentioned did not include those on means-tested benefits. I went to the statistical section of the Library and asked it if it could help me with the 70 per cent. figure. On its computation it found that 48 per cent. of potential recipients have above average earnings. It also said that even if those 1.5 million families who are so poor that they claim means-tested benefits were taken out of the calculations, at best only 60 per cent. were on above average wages.
The hon. Member for Northampton, North (Mr. Marlow) intervened earlier to say that gains represent the favourite figures. I believe that the quality of the official information available to the House and to the country is crucial when we are making decisions about the benefit and taxation system. Such information means that people are plain about where they stand.
It seems to me, to give it the best interpretation possible, that the Secretary of State has really tried to create the impression that those who receive the child benefit do not really need it because they are doing so well, yet when we consider the individual incomes of people we can see that that is manifestly not the case. What I am saying has been graphically demonstrated already by the right hon. Member for Aylesbury (Mr. Raison). This Government occasionally apparently operate on the principle that the truth is a matter of presentation rather
Column 702than of facts or information. Sometimes we receive a form of statistical fiction that reduces people to and computes them as an average rather than relating to their real circumstances and the incomes on which they have to live.
In fact, the element of child benefit is absolutely vital to the income support of the poorest section of the population. The failure to uprate the child benefit actually pushes poor people into means-tested poverty. I asked a question about how many more people would be pushed into needing means-tested benefit because the child benefit was not upgraded. The Minister replied that there was an estimated increase in those claiming family credit, as a result of not uprating child benefit, of between 20,000 and 25,000 families, so that about 80,000 people in our society are affected. If the effect of the shift from child benefit to family credit is interpreted in the amounts of money that the Department of Social Security is actually paying out, also revealed is the fact that a reduced sum is paid out by the Department to those on the lowest income, be they on family credit or child benefit, or a combination of both. I asked the Secretary of State how much extra spending on family credit was attributable to the freeze in child benefit. He replied that when the 1989 uprating was announced it was estimated that the total cost of the family credit uprating would be £128 million, of which £23 million was directly attributable to the 45p added to the child benefit rates as compensation for the child benefit standstill. By parliamentary question, I pressed the matter further by asking what would have been the cost last year of uprating child benefit in line with earnings. The reply was that it would have been £260 million for the financial year 1988-89, net of savings on other benefits.
From that answer it is clear that the amount saved by the failure to uprate was 10 times the amount offered back in the assistance to family credit. It does not take a mathematical genius to deduce that a large sum has been taken out of the system of income support to the poorest people, either through the family credit system or child benefit. The scale of the cut in income as a result of freezing the child benefit has meant real hardship for families.
It is worth reminding the Minister that, for those who receive the lowest 10 per cent. of income, one fifth of that income is child benefit. Since that benefit has, in effect, been cut four times since 1979, it is also true that the overall level of benefits has been reducing.
Although some Conservative Members say that the problem is solved by tax cuts, they do not acknowledge that many people now receive such low pay that they do not pay tax, being totally dependent on the benefit system. In that sense, tax cuts cannot redistribute income in the way that Labour Members like to see happen. It is surprising to hear some Conservative Members say that the Government should not even be involved in the principle of redistributing income. We should remember that the number of families living in poverty in what still is a relatively wealthy country is a reflection of the Government's policies.
Other hon. Members have given positive reasons to support the payment of child benefit : it is more efficient to administer as a universal benefit ; its rate of take-up is very high ; the payment of the benefit is prompt, reliable and regular ; it is paid to the mother ; and people know where they are with their income from week to week. Child benefit is a vital form of regular income support to the poorest ; it is a major element in family budgeting.
Column 703An issue that still hangs over from previous debates, haunting them, as it haunts this debate, is the quality of the official information given in the debates and in answer to our questions. The Government continue to misrepresent the facts so that they can make cuts in social security spending. It should be said in this House and outside that the price of such reductions is paid by the poorest members of our society.
The Secretary of State for Social Security has assured us previously that he does not intend to let child benefit wither away by never uprating it again, but he must prove what he says. It is up to him to demonstrate that he will not let it wither away. One way in which he could do that would be to accept the new clauses.
Mrs. Gillian Shephard (Norfolk, South-West) : The aim of both new clauses is to commit the Government now to uprating child benefit in line with inflation and to be effective from April 1990. The aim is seductive in its limitation and obviously chosen for that purpose, but I believe that it should be resisted. Changing circumstances have benefited the vast majority of people in work in this country, particularly the increase in prosperity of the average working man over the past 10 years. Significant tax cuts have also contributed, with improved employment prospects for many people in large areas of the country. This situation surely means that the Government should review child benefit, as they are statutorily committed to do, and not have the outcome of that review pre-empted, as the new clauses seek to do.
I believe that such an aim was held when child benefits were first introduced. When she was Secretary of State for Social Services, Barbara Castle said that the benefit was a tax-free supplement and therefore not a major means of support to families whose major source of income was earnings. She said that indexation was inappropriate, and that she thought Parliament would wish to be flexible about the emphasis it put on different factors of family support in future. In other words, the aim when the benefit was introduced was that it should be reviewed in the light of changing circumstances, and that is what the Government are committed to doing.
Mrs. Shephard : My right hon. Friend would know much more about that than I. It has certainly been the consistent aim of this Government's social security policies that the benefit should go to those in the greatest need. I maintain that, by definition, that aim cannot be fulfilled by the universality of child benefit. It seems curious that anybody purporting to argue for fairness, justice and an equitable use of taxpayers' money could possibly support a benefit which pays nearly £1 billion to 1.25 million families earning £20,000 or more a year. Yet the benefit does not provide anything to people on family credit and income support.
Mr. Marlow : As my hon. Friend is aware, child benefit partly replaced the child tax allowance. Would my hon. Friend like to see the child tax return? That would probably satisfy some of the concerns.
Mrs. Shephard : I am arguing that the Government should review their policy of uprating at the appropriate time, which is next autumn, in the light of the circumstances pertaining then, and in line with the original intention. I am not, as my hon. Friend appears to be, arguing for a thorough-going change of the system.
Mr. Simon Hughes (Southwark and Bermondsey) : The hon. Lady started her speech by saying that the average income has risen over the past 10 years, as it has. If we are to review what social security payments should be made, should we not also remind ourselves that the gap between the most well-paid and the least well-paid has increased substantially in the same 10 years? Therefore, the relative benefit to the poorest of a fixed rate benefit such as child benefit is much more substantial and much more needed now than it was 10 years ago.
Mrs. Shephard : The system of family credit and income support, targeted as it is, is much more effective in helping people at the bottom of the income scale than a universal benefit such as child benefit.
Mrs. Shephard : I am going on to tackle that point. The hon. Lady is right to point out that the take-up of family credit has perhaps been disappointing, but my right hon. Friend the Secretary of State last week announced both a thorough-going publicity campaign to bring family credit to the notice of all those who might benefit from it and, much more significantly, a simpler form on which to make the claim. The original form was difficult to understand and use. The combination of these two initiatives will increase the take-up significantly.
The combination of the changing circumstances that I have outlined and the effective and vigorous campaign now mounted by the Government over the take -up of family credit gives credibility to the Government in their aim to review the situation in the autumn. It will then be possible to make a judgment about the changing circumstances and about the effectiveness of the take-up of family credit. I support that aim ; and these new clauses, which would pre-empt that review, should be resisted.
Mrs. Margaret Ewing : I shall endeavour to be brief and I shall not follow the line adopted by many others of going through a series of complex statistics, because I feel that many of them have not added to the debate but have rather detracted from the basic principles that underpin our comments and the way in which we vote. My hon. Friends in the Scottish Nationalist party and Plaid Cymru will be supporting both the new clauses.
Targeting tends to dominate our debates on social security payments and how we allocate benefits. One of the tragedies is that, basically, no one disagrees with the concept of targeting benefit on to the people who most need it. However, the problem is that targeting has failed miserably. It can be effective only if we have a much more progressive taxation system. Comparing this debate with what happened in the Budgets last year and this year shows that the Government are bringing in a regressive taxation system that benefits the rich and penalises the poor. Until we can have a progressive taxation system, we
Column 705have to look to the continuation of universal benefits to ensure that benefits reach those on the lower incomes who most desperately need the assistance that we can give them.
In my intervention in the speech of the hon. Member for Norfolk, South-West (Mrs. Shephard) I said that family credit has a take-up level of only 40 per cent. It is all very well for the Government to argue that there is now a massive advertising campaign to encourage people to take up this benefit, but it has been in existence for some time, and there are many reasons why people do not pursue it. One of the main reasons is that it is means tested and people have to go through a complex procedure to obtain it. All the monitoring of how the family credit system is working shows that the means- testing aspect is one of the key reasons for the low take-up.
I have no faith that the advertising campaign will have the impact that hon. Member for Norfolk, South-West suggested. If she believes that there should be additional assistance to people in the lower income groups, she should be supporting the new clauses, if for no other reason than that the Government should take account of the reality in which so many of our constituents live.
The hon. Member for Lewisham, West (Mr. Maples) said that there is no moral compulsion on the Government to increase child benefit. However, I believe that there is, not least because the Government made it clear in their manifesto that they intended to continue to pay child benefit. While we may go into the niceties of their language, those of us who read the manifesto understood it to mean a regular uprating of child benefit. That commitment was widely welcomed. The other moral compulsion is that the Tory party claims to be the party that supports families. The continuation and uprating of child benefit is a major aspect of supporting family life in the United Kingdom.
I support the arguments advanced by the right hon. Member for Aylesbury (Mr. Raison). He referred to the community charge rebate system and to the fact that the Government anticipate that a large number of people in the poorer income groups will be eligible for such a rebate. It is well seen that he does not represent a Scottish constituency because those of us who do know that many of the poorest families, irrespective of the fact that they may have had the largest rebate made available to them on the community charge, are worse off than they ever were. For many of the families this is compounded by the freezing of child benefit. More and more of them are forced into the poverty trap by a whole series of measures introduced by the Government.
Women Members of Parliament should speak not only for their constituents but for women throughout the whole of the United Kingdom when arguing for the uprating of this benefit. One of the sadnesses of my life is that I am not a mother, but I do not begrudge paying my tax if it will be targeted on children. I come from a happy family home. We had to budget carefully and tightly. I remember how important the family allowance was to my parents, who ensured that my brother and I had the opportunities that they wanted for us. If having 41 women Members of Parliament is a major advance for women, all 41 of us should be in the same Lobby tonight, fighting for the women of the United Kingdom to ensure that they have the opportunity to bring up their children on the level of
Column 706income that we would wish them to have. Therefore, I urge all women Members of Parliament to support these new clauses.
Mr. Tim Rathbone (Lewes) : I am pleased to follow the hon. Member for Moray (Mrs. Ewing), who was advocating action within this House, by her party, for the benefit of this nation as a whole. I hope that we hear many more arguments from that corner of that Bench on that subject along that theme.
I support my right hon. Friend the Member for Aylesbury (Mr. Raison) who spoke to new clause 2 admirably. I remind my hon. Friend the Member for Lewisham, West (Mr. Maples) of the way in which, only in 1975, child benefit was introduced with all-party support. It was welcomed as an implementation of the requirement
"to make relief in cases where there are a number of children a matter of right and a matter of honour."
That was stated categorically by William Pitt 200 years ago, as my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) pointed out. Conservative Members have welcomed child benefit, particularly as a partial implementation of the Conservative Government's Green Paper initiative for a full tax credit scheme, which grew out of some of the thinking and studies of my late hon. Friend, Sir Brandon Rhys Williams, who contributed so much to arguments in this sphere and who we miss most particularly today. My right hon. and hon. Friends argued in favour of the inclusion of child benefit in annual uprating reviews so that it would at least be kept in line with inflation.
Child benefit replaced child tax allowance, which replaced the family allowance. If child tax allowance had continued, it is inconceivable that it would not have been increased as other tax allowances have increased. The same argument applies to child benefit.
Much of the discussion this afternoon has centred on the pros and cons of means testing and targeting, as with family credit, versus universality, as with child benefit. My hon. Friend the Member for Lewisham, West made a careful analysis of that, and the thrust of his argument was supported by my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard).
I shall make five points which cut through to the truth. I hope to puncture some of the misleading statements that have been made and, with all due deference to my hon. Friend the Member for Lewisham, West, the misleading claims that he made.
First, it is misleading to claim that richer people gain a greater reward from universal child benefit. Child benefit is a cost to middle and high income earners without children. It is a benefit to middle and low income families with children and it does not make much difference to richer families with two or three children, or to poorer familes without children. The only real anomaly lies with richer families with four or more children but, for heaven's sake, it must be better to use overall taxation policy to establish tax takes from them than to do away with child benefit for all.
Secondly, as right hon. and hon. Members on both sides of the House have pointed out, universal benefits are far cheaper to administer than family credit, which, I understand, still costs £3.80 for each £100 of benefit, compared with £1.40 for basic retirement income or £1.90
Column 707for child benefit. Moreover, that cost does not include the extraordinary, but welcome, £7 million promotion cost for family credit, which is not needed for child benefit.
Thirdly, targeting is surely a means of getting benefit to those who need it, not just aiming them in the right direction. Child benefit has a 98 per cent. take-up. In other words, it does not arrive with 2 per cent. of people who should get it, but we do not know where that 2 per cent. falls. Family credit reaches only 50 per cent. of eligible employees--253,000 people--and 24,000 or so self-employed people. That means that 253,000 employees' families and an unknown number of self-employed people who should be getting it are not. That is a translation of percentages into people, and the picture is quite horrific.
Fourthly, means-tested benefits create poverty traps, disincentives to work and incentives to dependency, and they erode pride and independence. Universal benefits do not, as my right hon. Friend the Member for Chesham and Amersham ably demonstrated. They are also more secure sources of income in the hands of the people who need it most--the parents of the child.
Fifthly, universality is valuable per se because it is a mark of a civilised society. It applies to Government services, whether they be street lighting or the police, and it applies to many Government benefits such as pensions. Why should it not apply in the same civilised way to benefits for children?
In the absence of a better, more benign, more efficient and more effective form of family assistance, child benefit should be uprated in line with inflation and linked to tax allowances not frozen to death.
The last remaining question has to be, "Can the country afford it?" Although it is included in the public expenditure projections, as my right hon. Friend the Member for Aylesbury said, that question has still to be answered. Whatever the cost, it is not a fresh burden. Rather, it is a transfer of purchasing power from people who, because of their larger income or smaller families, can afford luxuries to those who, because of their family size and circumstances, may go short of basic necessities.
To some extent, child benefit involves a redistribution of wealth--but only in a small way--both vertically and horizontally. Vertically, the redistribution is between the better off and the less well off ; horizontally, the redistribution is between people on each level of income according to whether they have children to support.
Mr. John Marshall (Hendon, South) : My hon. Friend talks of redistribution through child benefit. Does he accept that 500,000 recipients of the benefit pay tax at 40 per cent.? What is redistributive about people on a lower income paying tax to finance higher child benefit?