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The point that I have just been making was made by my great aunt, Eleanor Rathbone, who was the hon. Member for the Combined English Universities 55 years ago. We were reminded of that truth 15 months ago by our much revered late colleague Sir Brandon Rhys Williams. Child benefit is part of a consistent Conservative policy towards families of which we as a party and the Prime Minister and all of the Cabinet can justifiably be proud.
Column 708The country has responded, and wants to continue to respond, to bold and generous leadership. Where can that be truer than in maintaining and developing the wellbeing of our greatest asset--our children? There is no better investment. There is no greater reward. I urge my right hon. and hon. Friends on the Front Bench to accept new clause 2. If they do not, I urge all right hon. and hon. Members to support it in the Lobby so that child benefit can again be the properly valued investment that, in present circumstances, only it can be.
Mr. Frank Field : I support new clauses 1 and 2. It gives me great pleasure to follow the hon. Member for Lewes (Mr. Rathbone) and, in a sense, his great aunt and the arguments that hon. Members on both sides of the House have presented in favour of increasing child benefit.
I have no intention of taking the time of the House by going over ground that has already been covered. Others have ably made the case for the new clauses. For two reasons I want to pick up on something that the hon. Member for Lewisham, West (Mr. Maples) said. First, he introduced a new note into our debate. If Eleanor Rathbone were here today, or if we could have a seance with her, she would say that we should be taking note of that change.
The debate is moving, and was neatly summarised by the hon. Member for Lewes. Those of us who support child benefit have to take into account the new element of rising living standards, and decide whether they have risen to such a degree that the proponents of a universal benefit have to re- think their position. I hope that no Opposition Members will deny the rise in living standards. It is why the Government win elections. People do not elect Ministers because they are better looking or more able than Labour Front Bench Members--as a group they are not. They elect them because the majority of people realise that the trough that is put before them is bigger than it was before and they are worried that if we touched down on the Treasury Bench that trough would either shrink or be removed entirely. Our case against the Government is that, at a time of record living standards since the industrial revolution, one group has been deliberately excluded and we cannot support the emergence of an underclass without conceding what the electorate has known for three elections--that living standards have been rising at a record pace. Therefore, we have to take on board that new element. I shall address the dilemma by answering the question that the hon. Member for Lewisham, West asked the right hon. Member for Aylesbury (Mr. Raison)--if we had £600 million, would we put it towards a universal increase in child benefit to make up the shortfall that has occurred under the present Government? I would do that without any hesitation but perhaps for different reasons than have been put forward so far.
I would fit a big increase in child benefit into a policy of taxation and incentives for those at the bottom of society as well as for those at the top. Despite the Government's rhetoric about freedom, and despite what the Prime Minister says about disengaging from the nanny state, she runs an enormous nanny state. Our tax system bribes people to undertake certain forms of expenditure to such a degree that half all personal income is exempted from taxation by way of tax allowances. I want the Labour party to be committed to a policy of phasing out all those tax allowances and introducing a standard rate of taxation
Column 709of between 12p and 15p in the pound. That policy would entail some losers. Child benefit has a crucial role to play, as one of the groups that will lose out will be low-paid workers with children. Such a taxation system would get rid of the nanny state that the Prime Minister supports so firmly, but if we are so keen on cutting tax rates at every level, there have to be some measures of compensation. It would not be a burden, as the hon. Member for Lewisham, West was suggesting, because such a reduction in taxation together with a significant increase in child benefit would be building floors--creating a society in which people could build through their own efforts without being penalised.
Maybe not in our minds, but in the minds of most of our constituents, there is a difference between claiming a benefit but losing it as one's income rises and paying tax. People make that distinction, but it is not the relevant point. Most of our constituents are also aware that the overlap between taxes and benefits creates major disincentives for those at the bottom of the scale. If we are keen on creating incentives for those at the bottom, as we have been for those at the top, we need a massive increase in child benefit accompanying other major reductions in taxation which will not benefit one penny those who are poorest. It would be foolish and deceitful for Opposition Members to claim that we can move people away from dependency on welfare without going through a very difficult, choppy and unpopular period. The only way in which we can lift people free of means- tested assistance is to phase out the benefits and provide no help whatsoever--in other words, punish--or to increase universal provision such as child benefit. Those who are claiming means-tested assistance would lose that benefit as we increase child benefit. That would be unpopular, but if we are ever to get millions of low-income families out of the nightmare of dependency on state welfare, we have to go through that phase. My view is very simple. I do not think that the hon. Member for Lewisham, West was right to say that he is winning the argument in the Chamber. He is losing the argument in the Chamber, but he may win the vote. If he wins the vote tonight, Opposition Members and Conservative Members who are friends of child benefit must face reality--the Secretary of State cannot stand up and tell us that he is opposed to child benefit and that only over his dead body will there be an increase in child benefit. If he does, he knows that he cannot fulfil the terms laid upon him by the Child Benefit Act to review the benefit impartially each year.
Mr. Favell : May I repeat the question that I put to the hon. Member for Livingston (Mr. Cook)? As I understand it, the hon. Member for Birkenhead (Mr. Field) is arguing for universal benefits for all. Is he in favour of abolishing family credit?
Mr. Field : My argument makes it irrelevant. The increase in child benefit that I propose would lift most people free of claiming family credit. It would not abolish family credit but it would make it irrelevant.
The Secretary of State cannot get up and say what he really thinks about child benefit, therefore we have to use and interpret his political body language. It is clear that he has a deep hostility to child benefit. I will bet anybody any
Column 710amount of money that while the right hon. Gentleman is Secretary of State for Social Security there will be no increase in child benefit.
Are we to gather the clans and debate child benefit two or three times a year and go away satisfied, or are we to take the argument into the Government's camp? Such an opportunity will arise because when the Finance Bill returns to the Floor of the House I shall table an amendment to reintroduce child tax allowance. Of course the value of child tax allowance will have fallen because the basic rate of tax has been cut since 1979, at least nominally. But had child tax allowance been continued and increased in line with married man's tax allowance, the tax burden would not have been shifted from childless people and single people to those with children because we have not increased child benefit. That is why the reintroduction of child tax allowance is relevant.
If we are concerned about delivering resources to families with children, under this Government we have no choice but to take that route. Some would say that that was selling out child benefit. I repeat that I probably owe my place here to the work that I did with an organisation campaigning for child benefit. I am mindful of that, but I organised and helped that campaign on child benefit because I was interested in delivering to families real resources rather than token gestures.
We have a simple choice. If we are defeated tonight, either we can concede defeat and rejoice that we have put up another good fight, or we can become serious politicians about delivering resources to families with children. The only option that we have under this Government is to reintroduce child tax allowance. There will be life after Thatcherism, despite what the Prime Minister maintains, and another Government would have the opportunity to use resources committed to child tax allowance and convert them back into child benefit. There would not have to be the unhappy scramble of lobbying the Treasury for sufficient resources--£600 million according to the hon. Member for Lewisham, West--to make up the shortfall that has occurred under the present Government.
Mr. Moore : I always listen with enormous care to the hon. Member for Birkenhead (Mr. Field). I know that he would not wish to give the House inaccurate information. I do not think that he has seen the written question tabled by my hon. Friend the Member for Hornchurch (Mr. Squire) and answered on Thursday 20 April. It asks specifically if one can take into account the role of tax changes between 1978-79 and 1989-90 and the impact that the changes had on families without children to discover the amount by which one would have to increase child benefit to achieve the same impact. I am sure that he would want the House to know--he is honourable in such matters, especially in the way that he is putting his point--that one would have to reduce child benefit in the cases referred to by my hon. Friend the Member for Hornchurch, who is not unknown as being a supporter of child benefit.
Mr. Field : It is a terrific advantage that I have not seen that parliamentary answer. I shall come back to it on another day. I am sure that the Secretary of State would not want to stop me in mid-flow as I am about to complete my comments.
Column 711If we are defeated in the Division on the new clauses--I hope that we will not be--I hope that the seriousness with which we put our arguments will have been noted. We will be equally serious about amending the Finance Bill as the only opportunity under this Government to get resources to families with children is by reintroducing child tax allowances. I hope that the strength of our rhetoric will be matched by the voting during the Report stage of the Finance Bill.
Mr. Simon Burns (Chelmsford) : It is always a daunting prospect to follow the hon. Member for Birkenhead (Mr. Field) who is an acknowledged authority on social security. He made one point with which I can agree in principle, although not in practice. He said that positive efforts should be made to help children, rather than mere gimmicks. I suspect that the difference between the hon. Member for Birkenhead and myself would be in interpreting the principle. We should put the debate on child benefit in the context of the fact that between 1974 and 1979 the real-terms value of income support benefits for the family fell by 7 per cent., whereas in the last decade it has increased by 27 per cent. I think that I am right in saying that the hon. Member for Birkenhead, in a previous life with the Child Poverty Action Group, was critical of the Labour Government and their record on providing financial help to families. I part company with the hon. Gentleman on how one gives the maximum amount of financial help to the most genuinely needy children.
Mrs. Beckett : I do not want to distract the hon. Gentleman from the thrust of his argument, but I should put it on record that the figures he has quoted are a peculiar and motley collection of statistics. They include support given to carers of elderly people, not merely children. Also, they primarily reflect the number of people dependent on benefits because of the increase in unemployment.
Mr. Burns : I was talking about family support. I did not target my comments specifically at children. I am sure that the hon. Member for Derby, South (Mrs. Beckett) finds the figures somewhat curious because they do not support her argument. They put fairly and squarely the real-terms support that the Government have given to the family over the past decade.
I find the present child benefit arrangements extraordinary because--I speak as a parent of a young child, so my wife benefits from the system-- 6.7 million families in Britain with 12 million children receive £7.25 tax free every week. Of the £4.5 billion--10 per cent. of the social security budget--spent on child benefit, £1 billion goes to 1.25 million families earning over £20,000 a year. I cannot understand, taking it to its logical conclusion, why the wife of a Member of Parliament or a Cabinet Minister should receive the same tax-free sum as the most genuinely needy members of society. I would be happy, as would my wife, for that money to be targeted towards those genuinely in need, because it would be of much more financial help to them.
Column 712person's allowance on the ground that it is worth more to higher rate taxpayers? Would he abolish the married person's allowance, the business expansion scheme and mortgage interest tax relief on the ground that they are worth more to higher rate taxpayers?
We are discussing the way to target the maximum amount of resources to the most needy in society. I believe that child benefit for families such as mine is unfair and is not the best way to use resources. That is why my right hon. Friend the Secretary of State was right to freeze child benefit for two years and, in the uprating this year, to target the money to the child allowance part of the other benefits. If hon. Members study the figures they will see that, over and above the uprating, he is increasing by 50p per child the amount available in income support and housing benefit.
Mr. Jeremy Corbyn (Islington, North) : I am glad that the hon. Gentleman has found his tongue after his long silence in Committee. Will he acknowledge that the position of children in Britain has become worse as a result of the policies pursued by the Secretary of State and that the failure to uprate child benefit has compounded the problem? Does he agree that even the change in the more recent announcements does not compensate for the loss? Will he recognise that child benefit is intended to benefit children? He has not yet mentioned children. He has talked about tax rates for adults. We are talking about a benefit directed towards children universally. Surely even he must accept that that is a good thing and a benefit to the nation's children.
Mr. Burns : I welcome the first part of the hon. Gentleman's intervention because it was made in complete ignorance. I think that I am right in saying that in the Committee on the Social Security Bill he failed to attend at the start of each of our morning sittings. If you look at the record you will see that you attended far fewer sittings than I did and that I contributed to the debates.
One has to look at the argument about children through the parents' tax position. The money is being given to the mother to spend on the children. My original point--I do not want to make a long speech--is that the current arrangement in which nearly one quarter of those in receipt of child benefit earn incomes in excess of £20,000 is wrong. The money could be better targeted by increasing other benefits so that those in genuine need benefit rather than rich families being given an extra tax-free allowance that would be worth more to them than the poorest families.
I shall support my right hon. Friend the Secretary of State in the Lobby tonight.
Column 713in Scotland, but I never earned an average wage. I worked for a well-known firm in Scotland, but I never earned an average wage of £250. Highly skilled engineers at that well-known firm still do not earn that much. Many people in my constituency make £86 a week, if they are lucky. I live in Linwood--every hon. Member is aware of the closure of the car factory--where there is still vast unemployment. Many wives rely on child benefit and would love the Government to show care and compassion by agreeing to uprate child benefit. Over 2.25 million children are living at or below the poverty level. The mothers of those kids are desperate and would prefer to receive child benefit every week rather than queue up, be means tested and plead and beg for money for their children. Child benefit should be a right, and tonight the Government have a golden opportunity to agree.
Since the Government took office in 1979, there have been 20 cuts in benefit for the family and yet the Tory party claims to be the party of the family. The Government offer the family despair and destruction and they do not care whether our children have as decent a future as children in other nations. Britain has the lowest level of public funding for child care in Europe, yet in its manifesto the Tory party claims to be the party of the family, which is a travesty of the truth.
Over the past 10 years, child benefit has fallen by 27 per cent. It is unbelievable and ridiculous that we are allowing mothers and children to suffer. Conservative Members must not forget that there are not many people walking the streets of Glasgow and
Strathclyde--where there is massive unemployment and poverty--wearing designer clothes or fashion suits from Savile row. They queue up at jumble sales and secondhand shops and buy their furniture secondhand.
The Government have a golden opportunity to redress some of the imbalances and injustices that have occurred since they took office, such as the massive cuts in social security and the punishing of the poor and needy. Conservative Members have an opportunity to ensure that child benefit is uprated. It is a good benefit and has a high take-up rate. They should stand up and be counted so that the children and the poor and needy have some extra in their pockets this week.
Mrs. Marion Roe (Broxbourne) : The question whether child benefit should be automatically uprated understandably raises strong emotions. As the hon. Member for Livingston (Mr. Cook) said, child benefit has been around for almost a decade and a half. It is a universal benefit, so there is no problem claiming it and it makes a useful contribution to the income of every family with children. However, the fact that child benefit is simple, universal and easy to claim does not constitute a reason for unfailingly increasing its value in line with inflation every year.
If one is to rely on targeting benefits, it is essential that the help reaches those who need it. Conservative Members who regard uprating child benefit as an expensive and imprecise way of helping families in genuine need must be reassured that take-up levels of family credit will rise and that my right hon. Friend the Secretary of State will take whatever steps are necessary to inform those who are eligible of their rights.
Column 714It amuses me that at a time when the Labour party is on the verge of unveiling its repackaged tax policy and when phrases such as "fair" and "relevant" rates of tax are all the rage among Labour Front Bench spokesmen, the hon. Member for Livingston is supporting an uprating of benefit that is unfair and unrelated to income. I fully support the argument of my hon. Friend the Member for Lewisham, West (Mr. Maples), so I shall not waste the House's time by repeating the case that he made, but it hardly seems fair that millions of working people on modest incomes should be paying taxes to fund the £1 billion cost of child benefit for 1.25 million families who are earning more than £20,000 a year. Where is the fairness in that? If the Labour party believes that people on higher income should pay higher rates of tax, why does it not follow through the logic of its argument by accepting that those same people on high income simply do not need increased child benefit? The fact that three quarters of the families who benefit from increases in child benefit have incomes above male average earnings is eloquent testimony to the utterly indiscriminate nature of child benefit. We have all heard stories of how well-to-do, middle-class families spend their child benefit on extravagant luxuries and sometimes items that have no connection with their children. On any objective analysis, millions of parents in receipt of child benefit have no need for that money. Undoubtedly they are grateful for it, but, none the less, they regard it as a windfall, a bonus or an extra. I do not believe that the Government should distribute huge amounts of taxpayers' money to those who do not need it. It is curious to see the Labour party defending a system that gives an awful lot of money to an awful lot of people who would not think twice before spending the equivalent of a month's child benefit on a meal out or a couple of compact discs.
Not only does child benefit go to those who are perfectly able to look after themselves and their children, but, to make things worse, increases in child benefit have no impact on the incomes of those in real need--the people on income-related benefits. Given that child benefit already costs the nation £4.5 billion a year, we should be absolutely convinced that benefits will go to those in need before supporting proposals to index link child benefit each and every year.
I see no evidence that uprating child benefit is a cost-effective way of helping those families that need help most. The fact that some people do not claim the income-related benefits to which they are entitled is not a reason for putting even more cash into universal benefits. Far better results for many more families in real need can be achieved simply by making a greater effort to promote income support and family credit. I very much hope that the Government's social policy will follow that course.
Mr. Cyril D. Townsend (Bexleyheath) : I am a stranger to social security debates. I take the view, as do a number of my colleagues, that normally just a few dozen hon. Members on both sides of the House understand the more obscure points of social security and, alack, they are not saying what they are thinking ; they are merely saying what they have been told to say.
This debate is significant. It marks where we are as a Government and where we are tending in social terms. I remember hearing, when in opposition, my Front-Bench
Column 715colleagues explaining to the House how important this new child benefit would be. Above all, we were told, at last something would be done about the poverty trap, which we were all busily discussing at the time. We were told that it would be a simple system, that there would be a high take-up rate, and that it would be easy to administer. It was a time of considerable inflation, at levels far greater than today. No doubt my right hon. and learned Friend the present Secretary of State for Health had that in mind when, speaking in Committee on the Child Benefit Bill in 1975, he introduced an amendment for the statutory uprating of child benefit every six months in line with inflation. His words are worth remembering : "I cannot see how a reputable case can be raised against that proposal."--[ Official Report, Standing Committee A, 24 June 1975 ; c. 150.]
To catch the flavour of those days, I point out that my right hon. Friend the then Leader of the Opposition wrote a letter in February 1978 to the National Council for One Parent Families, saying : "We are impatient to implement the child benefit scheme fully. This measure will do more than any other single benefit to help families in caring for their children".
A number of things have changed since that letter was written, one of which has been pointed out by the hon. Member for Birkenhead (Mr. Field). In 1987, he wrote a letter to The Times, saying : "If we leave to one side how poverty is defined, there is general agreement across the political spectrum that, over recent years, there has been a significant increase in the numbers on low incomes. Child benefit directly relates a family's income to the size of its responsibilities."
We are faced as a country with a growing problem of poverty in our inner cities. The family credit way forward is not a working option. To start with, the form on family credit--I do not have the latest document but the one that I have from my social security office has 15 pages--is a Becher's brook of a form, and we should do better. It is not good enough. The take- up rate is only 50 per cent. We can take any other walk of life. Suppose that we were told that a shop was open for only 50 per cent. of normal shop hours or that a train service was only half operating. They would not be taken seriously and would not be seen to be going concerns. Family credit falls into that category.
There is one personal point which, surprisingly, has not come up before in this debate. We are talking about index linking. I think that it is recognised that index linking is the norm. We have a row about pensions-- should they be based on historic rates of inflation or forecasts of inflation--and the Government are winning that hands down, but no one is saying, "How terrible it is that they are index linked". In personal terms, every right hon. and hon. Member has his parliamentary salary, car allowance and London allowance index linked. All those who will vote against the new clause tabled by my right hon. Friend the Member for Aylesbury (Mr. Raison) and his colleagues will be saying, "What applies to me in 1989 does not apply to those mothers in my constituency who are struggling to bring up families. Other factors have crept into the argument. The situation is entirely different."
We have heard about those well-heeled ladies who are worried that they are getting child benefit when they do not need it. Letters from them have not been filling my postbag. If they did, I would say to them, "This benefit
Column 716must be physically collected." I have sometimes collected it on behalf of my wife. One has to go to the post office, perhaps on a wet and windy day, stand in a queue and collect it. I would say, "If you are well-heeled and you and your children do not need child benefit, stay at home shampooing the dog or watching EastEnders. Do not waste time". I am told that the great system quietly puts the money aside and it goes back into the common wheal, and no time and effort are wasted by the bureaucracy finding out why Mrs. Jones has failed to collect her benefit. There is, therefore, an easy solution. This is a serious debate. The family is under great strain in this country and throughout the western world, and I need not enlarge upon that point. The divorce rate, the number of children in care and child poverty are up. Here we have a system that does something about the poverty trap. If we are genuine in our belief that the family is the basic social unit of our society, is it not incredible that we are allowing the financial support for it to diminish over the years? My right hon. Friends must reply to this point : how can we claim to be looking after families when, year by year, we have singled out child benefit to be reduced?
There is also the wider point of where we are tending to go as a Government and a party. What has been the point of running our economy more efficiently and getting greater wealth rippling out through society if we are not prepared as a nation and a Parliament to tackle those pools of poverty that disgrace our cities, if we are not prepared to take note of how many people are homeless in Greater London, sleeping in miserable cardboard boxes, and if we are not prepared to notice that poor families in our towns, cities and constituencies are suffering and we are supposed to represent them? Winston Churchill had a good phrase. He used to talk about bringing in the rear guard, meaning, in social security terms, looking after those who have fallen behind. If year by year we cut child benefit, or, worse, if in the next Parliament we chop it off altogether, we are not bringing in that rear guard--it will fall further behind and become increasingly isolated and vulnerable.
Mr. Marlow : If I may, let me take the House back to the eloquent, if in my belief mistaken, speech of my hon. Friend the Member for Lewisham, West (Mr. Maples). He seemed to be saying that it was wrong to give benefits to those who were earning more than, say, £15,000 a year. He is an intelligent and civilised man and I expect that he would accept that that is to a certain extent simplistic. He almost suggested that there is a zero sum and that there are those in our society who are financially givers and that there are those who are takers. It is not like that at all. The reality is that we are all givers--we are all taxpayers.
I believe that the basis of the case of those of us who support new clause 2 is that even for those who are on more than £15,000 a year--which is hardly the wealthy in this day and age and many have very large mortgage commitments--we would like the net take by the state, that is, net of allowances and benefits, to be less from those with children than from those without children. Knowing what a civilised man my hon. Friend is, I would expect him to support that objective.
Let us suppose that two young people set up home and decide to settle down together. There are two mouths and two incomes. A child is born. There are three mouths and,
Column 717most typically, one income. Is this the time to freeze or--if I may interpret--to reduce still further their relative financial situation? I believe that it is not, and I think that my hon. Friend will believe that it is not. Housing costs are at an all time high and young couples, some of whom in my hon. Friend's terms are relatively wealthy, have stretched their finances to the limit to get on the housing ladder. Rising interest rates have seen those costs rise still higher-- higher than they would have feared and higher than they would have imagined. No one would start a family in order to acquire, or for the sole purpose of acquiring, child benefit, but given the massive financial and other pressures which today discourage young people from having children, it would seem to me to be the politics of bedlam to make life even more difficult. I imagine that it is hardly part of the Government's policy that the race should begin to die out.
I wish to concentrate on one aspect of child benefit and that is the part of child benefit that replaces child tax allowance. I do not know whether my hon. Friend the Member for Lewisham, West or my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard)--who is not here at the moment--are against child tax allowance. I asked them the question. I know that there were a lot of Members who wanted to speak and perhaps they felt that it was not appropriate to answer it at that time. Let me try to sell them the concept of child tax allowance--let me even try to sell it to my right hon. Friend the Secretary of State.
When we had child tax allowance, it was universally approved and universally acceptable. There might have been people who were against the family allowance, there might have been people who said, "Why give money to people just because they have children?", but nobody was against the child tax allowance.
Why should we return to it? First, it allows people to keep more of their own income--a philosophy that is very close to the Government's heart. Secondly, it takes people out of tax, which is particularly important for wage earners seeking to support large families. It is a powerful incentive against dependence--if I may say so, pure Thatcherism. Maybe I have sold it to my hon. Friends, maybe not. If I am trying to sell it to the Government, let me try a more machiavellian approach. At a stroke, by reintroducing child tax allowance, we would reduce the amount of money taken in tax and, at the same time, reduce Government expenditure. I am offering to the Government, overnight, the ability significantly to reduce Government expenditure as a proportion of gross national product. They should grasp that opportunity with both hands.
Child tax allowance was--as child benefit is--the only fiscal measure that recognised the additional burden of families with children at all levels of income. As I intend to support new clause 2 later this evening, I shall probably be in trouble with the Whips--not much, because they are a fairly civilised bunch--but as I am known to be ambitious let me try to curry favour with them at the same time. May I quote my hon. Friend the Member for Watford (Mr. Garel-Jones)? He said, quite rightly :
"Child benefit was introduced to take the place of the old child tax allowance They were there to achieve some sort of equity at all income levels for families with children as compared to families without children."--[ Official Report, 3 February 1981 ; Vol. 998, c. 204.]
Column 718He was right then in 1981. Although he has taken the Trappist vows, let me encourage him by saying that the point he made then is equally valid now. It is particularly valid for the very large numbers of near poor. The Government's policy is targeting. In general, I support that policy, particularly if it hits the right target. But we have a problem with the near poor, especially those who are seeking to maintain their independence, be they elderly or be they families. The problem is that every time we miss the target, we hit the finances of the near poor.
On the Government's own terms, let us look at the argument behind this debate--targeting. If child benefit is frozen, it is decreased. As hon. Members have already said, we are transferring resources from those with children to those without children. Is that what the Government want from targeting? The married man's tax allowance, as has been said, has increased by some 22 per cent. in real terms since 1979.
My hon. Friend the Member for Lewisham, West said that tax rates have been reduced. That is true. My hon. Friend is, no doubt, very proud of that and I am sure that my hon. Friend will go along with me and be quite modest about it and say that, of course, the married man's tax allowance has not increased by 22 per cent. in reality because there has been an 8 per cent. reduction in levels of taxation and it has therefore only increased by 14 per cent. That is not bad--it is an increase. But child benefit has gone down by 12 per cent. and, as I have said before, benefits and allowances are two sides of the same coin.
The question before the Government is that if they want to target--and we should want to target--why target by taking resources from those with more mouths to feed and give them to those with fewer mouths to feed? I am an easy man--a simple man, some might say. I have said that I intend to support new clause 2. However, if my right hon. Friend would undertake to the House that he wll target--as a Conservative should target--and accept the new clause, or, if he will not accept it, will give some indication to the House that we will go back to the system of child tax allowances, I am sure that I and a lot of my hon. Friends would be satisfied.
We must have a flexible approach to the provision for families. We are faced with the fact that, whatever happens in terms of income or other changes, we have indexing and uprating. The hon. Member for Birkenhead (Mr. Field), who is not in his seat, pointed out that we are now enjoying record living standards. The situation has changed since the introduction of child allowances. When they were introduced, we were living in a high-tax society. We are now living in a much more prosperous and low-tax society, which calls for alternative ways of directing aid to the poorer families in our society.
There are two fundamental reasons for rejecting the new clause. First, no targeting is involved. The top 5 per cent. of earners receive the child allowance in exactly the same way as the bottom 5 per cent. My hon. Friend the Member for Bexleyheath (Mr. Townsend) says that the top 5 per cent. should stay at home and wash the dog. The fact is that they do not. They go out and obtain child allowance ; 98 per cent. are claiming it, whether they need it or not. Members of Parliament who, like myself, have children have a disposable income of £300 a week and do
Column 719not need extra money in child allowances. Those on low incomes, on the other hand, genuinely need the money and we should target it to their benefit, as my right hon. Friend the Secretary of State is trying through family credit to target those who are worse off. That is what we should be doing, and I welcome the fact that my right hon. Friend is using the media very effectively to seek to encourage a better take-up. I hope that he will succeed.
My hon. Friends who support the new clause believe that there is no alternative means of protecting the poor and worse-off families. There is an alternative. We should be turning back the pages of history and re- examining the proposals on tax credits in the 1972-73 Green Paper. If we work towards an integrated tax and benefits system, we shall be working towards a progressive method of aiding families with children, whereby those who are worse off get the most and those paying 40p in the pound in tax do not receive benefit. That is a proposal for the future, and the new tax reform proposals will help us to achieve that.
Under a tax credit system, a woman could be given the credit for her children, which would overcome one of the major objections. Child allowances should be paid to the mother. I commend those considerations to the House.
The new clause does not solve the problem ; it is too rigid for the future and I shall vote against it.
Mr. Favell : Anyone listening to the debate might go away with two misconceptions. The first is that the debate is about the abolition of child benefit, which it is not. The Government are committed to retaining child benefit. The second misconception is that the inflation-proofing of child benefit--that is what it is all about--will somehow benefit the very poorest, which it will not. If the new clause is passed, 3 million children and 1.5 million families will be not one jot better off.
The thrust of the Government's social security proposals has been to target benefit on those in the most need. I shall be grateful if my right hon. Friend the Secretary of State will tell the House just what the Government have done for the very poorest.
Mr. Lester : I support all those who have spoken in favour of the new clause and congratulate my right hon. Friend the Member for Aylesbury (Mr. Raison) on the able way in which he introduced the subject. My hon. Friend the Member for Northampton, North (Mr. Marlow) hit the nail on the head : if child benefit were still a tax allowance, there would be no argument about indexation. It would have been indexed along with all the other tax allowances. It is because the House decided, in order to reach those who do not pay tax, to change to child benefit--which should be called child credit--that we have this argument every time.
My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) pointed out the variations in the amounts that go in tax allowances and in child benefit. Perhaps it would help if we renamed child benefit "child credit" and presented the Treasury with the fixed amount
Column 720of credt for the majority, which converts automatically into a fixed tax credit, and attributed to the budget of the Department of Social Security only the sums that went to people who do not pay tax. That might help people to understand that child benefit is a hybrid measure. Our argument is not with my right hon. Friend the Secretary of State ; it is whether the element that goes to those who pay tax should be a tax allowance while the rest is added to my right hon. Friend's budget.
Another point that has not been made clear is that child benefit is a poverty-preventive benefit. It is all right to talk about those in need and about targeting the very needy, but the fact that child benefit is paid to many families--some with apparently high incomes--is poverty-preventive. In the London area in particular there are families on average incomes of about £11,000 a year who, because they have heavy mortgage payments, may have a net income that would bring them within family credit. Because they have a mortgage, however, they are not allowed to claim it. They may have a net income less than the maximum for income support, but, because they are in work, they are not allowed to claim income support. More than 60 per cent. of families with incomes of less than £15,000 a year benefit greatly from child benefit. I cannot believe that a benefit that is easy to understand, popular, fair, poverty-preventive, family-friendly, incentive-friendly, inflation-friendly and targeted to people who genuinely need it is withering on the vine in this way.
Denmark, which subjected child benefit to proof of need in 1977, removed the means test in 1987 largely because of the disincentive effect. Do not let us make the same mistake. I hope that all my hon. Friends will support the new clause.
Mr. Squire : It is no criticism of hon. Members on both sides of the Chamber to suggest that there is an element of predictability about the debate. I suspect that my speech will be subject to the same criticism. I echo those who have said how much we miss Sir Brandon Rhys Williams, who always made his mark in debates such as this. It is only fair to congratulate my hon. Friend the Member for Bexleyheath (Mr. Townsend) who, in a return to a subject in which he was notorious--if that is the right word--a few years ago, powerfully argued the case for uprating child benefit.
There are various issues that divide the Conservative party from time to time. We usually manage to find a compromise. On this issue, however, we seem to be having to struggle to find a compromise. Perhaps a tax allowance is the answer. Several of my hon. Friends have argued forcefully the case against the present system, essentially on the ground that they dislike the idea of people with higher incomes receiving the benefit. It does not seem to matter that only 5 per cent. of taxpayers pay the higher rate. It does not even seem to matter that, as we know from last year's figures, 60 per cent. of child benefit goes to those earning less than £15,000 per annum, which I do not necessarily regard as a high income. Presumably, my hon. Friends would support that take-up ; we have not reached 60 per cent. take-up of family credit. In considering the direction of benefits, my hon. Friends who object to the uprating of child benefit should recognise that it reaches the poorest, even if it also reaches the richest.
Column 721More than one of my hon. Friends said how difficult it was for their wives, who seem to be forced to go along to claim child benefit. I realised that child benefit was a universal benefit, but I had no idea that it was compulsory. Clearly, things have advanced somewhat, and my hon. Friends' wives are being dragged, kicking and screaming, to the post office to claim the benefit--a horrible thought. They do not have to claim child benefit and, more seriously, if that is their concern we should change the arrangements through the tax system, not by messing around with the benefit system. For reasons that some of my colleagues have advanced, child benefit remains the most effective way of tackling family poverty. With a take-up of about 98 per cent., it is the only income that many women receive in their own right. Most important-- this point has not been stressed in the debate--it is worth the same, whether one is in or out of work. That means that, over the next decade, when we will wish to encourage many more people back into work, it will not have the negative effects of the poverty-employment trap whereby people lose money simply by coming off benefits, compared with what they might earn in employment.
There is a danger of family credit being viewed as a panacea. I unreservedly welcome the campaign that the Government have just announced. I wish to see a higher take-up. But that cannot solve the problem. We must welcome any reduction in the 250,000 families who are estimated to be eligible for family credit but are not currently receiving it. In their wildest, most optimistic moments, my right hon. Friend the Minister and his colleagues do not imagine that the take-up will remotely approach the present take-up for child benefit. Every family that is not receiving that benefit will lose out under a system of increasing family credit only.
An article in The Times of 25 March suggested, among other things, that the Government were considering stopping the payment of child benefit to better -off working mothers. I am the last person to suggest that The Times is invariably a paper of record. I hope that, in this case, the Ministers have been wrongly quoted. In the relief of poverty, particularly for single mothers, child benefit will be as critical in the 1990s as it has been during the 1980s. In the United States, an almost permanent under-class was created because of an almost total reliance on means-tested benefits. We want to avoid that. If we want to encourage people back to work, we must use the available weapons, and there is no better weapon than child benefit. We talk a lot about the value of the family, but surely it should also have some cost to society and to the Government. It is not a phrase that should be trotted out when we want to say something about the family, but not backed up in any way by money. The intellectual argument for continuing to freeze child benefit is, presumably, that is should ultimately disappear or become relatively irrelevant. There is an intellectual argument for doing away with it. There is an intellectual argument for the case put forward by my hon. Friends who agree with me. There is no intellectual argument for freezing it as it is at present.
The first aims of any benefit system are to make receipt more certain and future escape from poverty more likely. That is the power of child benefit. It does that at present. That is why it is necessary and why I hope that hon. Members will support new clause 2.
Mr. Moore : I will try to move at a reasonable pace, because I appreciate that the House is anxious to move on. An awful lot of points have been made and I should like to address the three inter-related themes or sets of arguments that I have detected. The first surrounds those who misunderstand--some genuinely and some wilfully--the history and the purpose of child benefit. Then there is a set of arguments surrounding those--of course they had to be among the Opposition--who want to use the Government's decision this year to pervert the truth of the Government's outstanding record and their commitment to the family. The third strand of the debate surrounds those who, with their deep and long commitment to helping families with children, are worried that the present judicious mix of child benefit, the new income support and family credit structure may be a less effective way of targeting help than through higher universal child benefit. I shall try briefly to address those three arguments. It is important to remind the House of the history, and, as the hon. Member for Birkenhead (Mr. Field) said, of what we are debating. We are debating a 1975 statute and I, as Secretary of State, have a beholden duty to the House and to the country to seek to put it into effect. I shall briefly discuss what it replaces. It has been a constant theme in the debate on child tax allowances and family allowances. It is also critical to remind hon. Members about what we never sought it to be.
My right hon. Friend the Member for Aylesbury (Mr. Raison), whose speeches I always enjoy, indelicately said that child benefit was introduced by Pitt and dropped out for a period during the 19th century. Pitt introduced CTAs in 1799, and they dropped out in 1805, not to reappear again until 1909. Ninety four out of 100 years is more than just a period. My right hon Friend legitimately asked us to go back to the beginning of the debate on child benefit. It is essential to do so. It lies at the back of the puzzlement of the hon. Member for Livingston (Mr. Cook). He continues to say that questions have not been answered about the nature and role of it.
I remind the House of the agreed basis upon which I, as Secretary of State, seek to put the arguments behind the introduction of child benefit. I will quote from the late Alec Jones in the debate in 1975, and I will also quote Mrs. Castle. She made it absolutely clear that the Social Security Act 1975 laid 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--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."
She went on to state :
"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, c. 330-400.] The position was made clear. At the conclusion of the debate, after our late hon. Friend, Sir Brandon Rhys Williams sought to intervene, Mrs. Castle went on to say :
"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