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Sir Ian Gilmour (Chesham and Amersham) : As has been said by my right hon. Friend the Secretary of State and by the hon. Member for Livingston (Mr. Cook), this is well-trodden ground, so I will not detain the House for long.
I want to examine the two arguments that my right hon. Friend advanced tonight and in our debate on 24 April for not uprating child benefit. The first argument was to rely on what Lady Castle and Mr. Alec Jones said in 1975. I find that argument extraordinary. Apart from anything else, the dates are wrong. What Lady Castle might have said in 1977 had she been Secretary of State would have been more relevant, but that my right hon. Friend should use Lady Castle at all is most odd. Twice a week for many years my right hon. Friend the Prime Minister has excoriated the Opposition for the appalling mess they made in government in the late 1970s. Why does my right hon. Friend the Secretary of State now take what they did in the 1970s as an example of what he should do now? To shelter behind Lady Castle is extraordinary, particularly as the Government now say--I hope that they are right, although I have no way of knowing--that the economy has been transformed under their aegis. Why should we seek to follow what the Labour Government, in their benighted days and their hopelessly incompetent ways, did in 1975?
Column 450That is as specious an argument as one could possibly find, except perhaps the next one advanced by my right hon. Friend when he talked about "the overall pattern" and his statutory duty. On 24 April he said :
"I do not have the choice of looking at child benefit in isolation. I must rightly consider the relationship between child benefit and the economic and social patterns of our country."--[ Official Report , 24 April 1989; Vol. 151, c. 722.]
During the past two years, what change has there been in the economic and social patterns of our country? Does he believe that too many children have been born? Does he wish to discourage that by cutting child benefit? It is important to know what social and economic patterns have changed. In the past two years substantial tax cuts have been showered around. Income tax allowance and every other allowance have been raised. The one thing that has not been raised is child benefit.
Mr. Moore : If my right hon. Friend looks at Hansard for 24 April, he will see that I illustrated for the two years in question precisely what had happened to families who were in receipt of substantial, net after-tax increases and the way in which in those years those families who did not so benefit benefited more than they would have done otherwise because of the precise policies that I had introduced.
Sir Ian Gilmour : I am grateful to my hon. Friend. That was just the intervention that I wanted. The Government have done nothing like enough for the really poor, but that is not what I am talking about. I am talking about the simple point that was made by my hon. Friends the Members for Northampton, North (Mr. Marlow) and for High Peak (Mr. Hawkins) : that people with children have greater expense than people without children. That applies at all levels of income. By refusing to uprate child benefit two years running, my right hon. Friend the Secretary of State is treating people with children worse than people without children.
I want to know what changes in the social and economic patterns of the country justify that. I cannot think of one. It is clear to all hon. Members that people at all levels of income have greater expense if they have children than if they have not. That is why we had child tax and family allowances before and why we have child benefit now. It is not good enough for my right hon. Friend to refer to the very poor, on which the Government's record is not all that good. That is why my right hon. Friend did not answer my hon. Friends the Members for Northampton, North and for High Peak. However, I am talking not about the really poor but about people with families above the level of family credit and income support. When tax cuts and income tax allowance are being showered all around, why should people with children benefit less than anybody else?
That is why, with great respect to my right hon. Friend, I cannot take him seriously when he talks about his review. If he reviewed things properly, he could not possibly come to that conclusion. It is not within the bounds of reason. It has only happened--to some extent this lets out my right hon. Friend--because the Government have an insensate desire to cut public expenditure. They think that child tax allowance is not expenditure but that child benefit is, so they cut it. That is not the decision of my right hon. Friend, but of the Government, and they are to blame.
Column 451At some stage the Government will have to deal with the problem of horizontal equity. My right hon. Friend the Financial Secretary singularly failed to do that the other night, and my right hon. Friend the Secretary of State has singularly failed to do so today. Until they do, they will be discriminating against people with children.
Mr. Charles Kennedy (Ross, Cromarty and Skye) : I want to follow on from the last point made by the right hon. Member for Chesham and Amersham (Sir I. Gilmour). There is no doubt that the central problem that has emerged in debate after debate on this issue--this is the third that we have had in the House this year ; one in January, one in April and again tonight--is the Secretary of State's inherently weak position in the Government.
In January, the right hon. Gentleman attempted to swathe himself in legislative complexity about how tied his hands were. He followed that with further arguments to which the hon. Member for Livingston (Mr. Cook) alluded in his speech in April. Tonight, he has, in a sense, ignored the core of the debate, which is that the Government were defeated in the other place after the arguments had been comprehensively trailed. Rebellious Conservative Back Benchers, Cross Benchers and the various Opposition groupings prevented them from mustering a persuasive argument to justify the attitudes that they have taken over the past two years on child benefit.
The right hon. Member for Chesham and Amersham is right to remind us that this has been a two-year process. When the decision not to uprate was first made, there was some allusion to the fact that it should be viewed only in the context of the financial constraints and the economic decisions of the Government in that year. Then it was repeated, and now the Government are attempting to knock out a Lords amendment. If left further unchecked, it is clearly the Government's intention to allow child benefit to wither on the vine and die. It is as simple as that, and that is why it would be a good idea to fire a shot across the bows not just of the Department of Social Security, but of the Treasury. A substantial rebellion by Conservative Members would constitute such a shot.
The Secretary of State treated us to a trip down memory lane when he spoke about the mid-1970s. In that context, I quote from an editorial in the Financial Times. It appeared at the end of last year, and in a sense it puts the historical context of the debate in much fairer and fuller relief than did the Secretary of State. The editorial says :
"Much of the opposition to child benefit reflects a misunderstanding of what it is meant to achieve. It is said to be poorly targeted because it is received by rich as well as poor mothers. Yet it was a replacement for child tax allowances. Nobody argues that personal allowances are poorly targeted because both high and low earners receive them."
The Financial Times put the case with considerable cogency. However, only three years earlier, in June 1985, the Green Paper, entitled "Reform of Social Security", put it with even greater cogency and more persuasiveness :
"The Government accept the case for continuing the system of child benefit. It is right that families with children at all income levels should receive some recognition for the additional costs of bringing up children and that the tax benefit system should allow for some general redistribution of resources from those without children to those who have responsibility for caring for them."
Column 452There we have the Government's own words.
The Prime Minister is continually alluding to the previous Labour Government. The Secretary of State is willing to go all the way back to 1975 and cite the actions of the Labour Government to justify being forced to carry out actions. Why does he not go back to 1985 and to the words of his Department's Green Paper on the reform of social security? If he and his Department no longer subscribe to what they said three years ago, as opposed to what Labour Ministers said 13 years ago, that further underscores the need to answer the question posed by the hon. Member for Northampton, North (Mr. Marlow). The hon. Gentleman asked the Minister whether, if he no longer accepts that argument, he therefore accepts any continuing and viable future role for child benefit.
The Minister is asking the House to reject an amendment passed in another place. That is consistent, if his argument has any force--I do not think that it has much--with the longer-term thinking of the Minister and his Department. He has manifestly failed to tell us clearly about his long-term thinking, and from his demeanour at the Dispatch Box it is clear that he has no intention of telling us. That is as strong and powerful an argument as any that could be advanced for upholding the decision made in another place.
The House may have been treated to one swansong earlier in respect of the poll tax and the Secretary of State for the Environment. This shabby exercise for the third time this year by the Secretary of State for Social Security would be a fitting epitaph on his ministerial tombstone.
Mr. John Maples (Lewisham, West) : The hon. Members for Ross, Cromarty and Skye (Mr. Kennedy) and for Livingstone (Mr. Cook) spoke about the old system of child tax allowances. Such allowances were valuable to the Labour Government because under that Government tax rates were incredibly high. If we still had a system of child tax allowances and my right hon. Friend the Secretary of State for Social Security had indexed them for the last 10 years, the Opposition would criticise us for reducing their real value by cutting the rate of income tax. Therefore, they should be careful about how they use that argument.
This debate used to be something of an annual event, but this is the fourth time in the last four months--three times here and once in another place-- that the subject has been debated. Two things characterised those debates. The first is that the arguments on both sides do not change very much and the second, and perhaps more pertinent, is that those who continually argue for the annual uprating of child benefit fail to take into account the way that the world has moved on in the last 10 years. That has happened in two respects. First, we have seen the ability and willingness of people to shoulder more responsibility when they can afford to do so. Secondly, we have seen the quite extraordinary degree to which real take-home pay has increased at all levels of income.
I simply cannot believe that anyone who favours this Lords amendment, or any of its predecessors, if given £650 million by the Chancellor of the Exchequer to spend on trying to help families with children, who are in some financial difficulty, would choose to spread it around at a rate of £1.10 a week and not concentrate it on those who need the help. Most of the people who receive child benefit do not need the help.
Mr. Hawkins : If my hon. Friend would like to target child benefit only at the lower paid, as my right hon. Friend the Secretary of State clearly would, why do we not abolish the married man's allowance and target that at the lower paid as well? Why do we not do the same with mortgage interest tax relief?
Mr. Maples : Often, when I used to speak in debates on the economy and taxation, I used to argue strongly for the elimination of all personal allowances and a reduction in the rate of income tax as a compensation. Mortgage interest tax relief has been frozen and we have recently introduced restrictions on deductions for pensions. My hon. Friend had better be a little careful about that argument. The main piece of reality that the proponents of the Lords amendment fail to take into account is the enormous increase in real take-home pay during the past 10 years. During that period, the real take-home pay of someone on average earnings has increased by 31 per cent., or £52 a week. The pay of someone on three quarters of average earnings has increased by 28 per cent., or £38 a week. At all levels of earnings, people are substantially better off. People can and should devote part of that increased wealth to taking more responsibility for their own affairs.
In the context of such increased earnings, the failure to index child benefit, which would mean £1.10 per child per week, must be insignificant. The policy that I believe my right hon. Friend the Secretary of State has followed for the past two years, and which I hope he will continue to pursue, is that child benefit should be frozen and that we should give generous help to people on low incomes with children through the family credit and income support systems. For the others, we should, by the control that that exercises on public spending, reduce their liability to income tax.
Mr. Frank Field : We keep hearing figures about take-home pay and what has happened to it during the past two years. Will the hon. Gentleman confirm that there were similar increases in take-home pay in the two years prior to that which he is quoting, and that is why the Conservative party won the general election? Is the hon. Gentleman saying that the Government were wrong to increase child benefit in those two years?
There is one misconception about uprating child benefit. It is that in some way it helps poor families with children. That is the one group of people who are not helped at all. Any increase in child benefit is automatically corrected by a reduction in income support or family credit. As people can now receive family credit on an income of up to £10,000 a year if they have two teenage children, it follows that anyone who earns less than that will gain no benefit by an annual or other uprating of child benefit. Moreover, almost everyone above that level will pay more in income tax than they get in child benefit. The way to help them is not to increase child benefit but to reduce their liability to tax.
This is the old argument of universal against means-tested benefits, which the hon. Member for
Column 454Livingston (Mr. Cook) was rehearsing on the radio this morning. What he did not tell the public then or earlier in this debate is that the natural and inevitable corollary of a universal social security benefit is high taxation to pay for it. I think that we should move away from that, give generous help to people in need and leave others to take care of themselves. It is no business of the state to have one of its agencies take money out of the pockets of husbands so that another agency of the state, after the expenses of both, can put it back in the pockets of their wives.
Nor is it any business of the state to put up everyone's tax so that we can raise everyone's benefits. We have a crazy system. We take £4.5 billion a year in tax out of the pockets of husbands and give rather less than that back to their wives through the social security system. We have a system in which low earners with no children subsidise high earners with children. We have a system by which increases in those benefits are of no use whatever to the families on lowest incomes and in the greatest need.
I cannot believe that anyone would reinvent a system of child benefit to try to help families in financial difficulties. It is a holdover from days of penal taxation and the idea that the Government know best how to run people's lives. It fails to take account of how real incomes have risen and it fails to leave people alone to run their own lives. We have now had this debate four times this year and several times over the past few years. I hope that this will be the end of them because out of the four debates this year, the Government may have won only three of the votes, but they have won four of the arguments.
Mr. Raison : I am grateful to my right hon. Friend the Secretary of State for two things : first, that he accepted that this debate is about the principle of regular uprating of child benefit, and that is the course that the debate has taken ; and, secondly, for his confirmation of what we all know--that money is provided in the public expenditure White Paper for the uprating of child benefit. There is no question of our asking for something that was not planned for. The plan allows for uprating, and we should adopt it.
My right hon. Friend talked about support for children as a judicious admixture of child benefit, family credit and income support. I accept that, and it is right that it should be such a mixture. Surely the essence of the case is that if child benefit is not uprated it will lose its meaning and we shall have only the means-tested benefits of income support and family credit to rely on, and we shall lose something that is of enormous benefit to large numbers of people who do not find the business of having children something that is easily borne. That is the heart of the matter. It is vital that child benefit should be looked at in the context of the tax and social security systems as a whole. It is no good separating one from the other. The Government seem to be favouring targeting, but we already give indiscriminate, untargeted tax relief to occupational pensioners, to mortgage holders, to single persons, to married couples and now to people who take up private health insurance. The only targeting about all that is that those who get the most by and large get the
Column 455largest tax relief. It is not possible to give all those forms of financial support to those groups and then, for those with children, who clearly are bearing extra cost, gradually phase out the form of support that helps them--child benefit. It must be accepted that the erosion of child benefit, which is what we are talking about, will do enormous damage to children.
We debated the other day a different approach--a return to child tax allowances. That is not a good approach, and I do not support it. Over the years, child benefit has proved to be the right answer. I shall not go into the reasons at length, but we know that there are several powerful advantages. First, as has been said, it does not create disincentives or the poverty trap. Secondly, it does not have the problems of take-up which persist with family credit. Thirdly, it does not require an elaborate system of means testing, nor does it induce the dependency that goes with that. Fourthly, it helps non-taxpayers and taxpayers alike, particularly the
not-quite-poor--those just above the level at which they will receive means -tested benefit.
Fifthly, child benefit goes to the mother, which is something that the Conservative party has always stressed. In a world of family breakdown, mounting divorce and far too many one-parent families, the certainty of child benefit--the fact that it comes without means testing--is one of the most powerful arguments for its being maintained, and maintaining it must mean uprating it. It represents a commitment for which the Conservative party has stood for a long time.
I shall conclude by quoting some words of my right hon. Friend the Prime Minister which support that contention. In a written answer, she stated :
"It has for long been the view of all parties that our tax and benefit systems should recognise the needs of families with children, and should differentiate between such families and those without responsibilities for children. Child tax allowances achieved this but gave no help to families below the tax threshold. Family allowances did not recognise the first child. Child benefit, which replaced both allowances, was introduced in 1977 with the support of all parties. I am glad that, even in the very difficult circumstances of this year, we have been able to increase child benefit by about 10 per cent. and so honour the pledge given by my right hon. Friend the Secretary of State for Social Services on 28 July last year."--[ Official Report , 17 March 1981 ; Vol. 1, c. 55 .]
That quotation illustrates clearly the principle that there is a difference between those who have children and those who have not. It is the job of our tax and benefit systems to have regard to that. That is why I hope that the House will support the proposal of my right hon. Friend Lady Faithfull.
Mr. John Marshall : Much of the debate so far has revolved round the principle of whether child benefit should be uprated next year, but the amendment goes much wider than that. The amendment says, in effect, that there should be no discrimination in favour of the poorest children in the community. It provides that family credit and child benefit must be uprated at the same level. Surely we want to concentrate our assistance on the poorest within the community. The amendment prevents us from doing that. For those drawing family credit, the amendment will be of no benefit. We want a system that helps the poorest and ensures that future increases do not necessarily go to those at the top.
Column 456We know that half those receiving child benefit are earning above-average wages. About 500,000 of those receiving child benefit are paying tax at the rate of 40 per cent. It seems wrong that we should be encouraged by the other place to say that those people should receive the same increase as people in receipt of family credit. It is much better that the poorest in the community should receive the extra assistance that they need. My right hon. Friend the Member for Chesham and Amersham (Sir. I. Gilmour) quoted statements from the past. Over the past two years, family credit has been introduced to help a greater number of children in need. That is one of the Government's greatest achievements, and I welcome it. We should concentrate our assistance upon those in greatest need rather than scatter it around like confetti, giving money to many of those who do not need it.
Mr. Marlow : Very briefly, I have some sympathy with my right hon. Friend the Secretary of State because he is trapped within the system of Government expenditure. I am talking to my right hon. Frind so I am sure that he is listening even though he is offering me the back of his head. Not for the first--no, I will not say that. I put it-- [Interruption.] I have been told to behave myself. I put it to my right hon. Friend that I have some sympathy with him because he is trapped by the system of Government expenditure. My right hon. Friend is given a budget and he is told, "Here are all your priorities, here are your needs and here are your problems. This is the amount of money that you have got. How are you going to deal with it?" As my hon. Friend the Member for Lewisham, West (Mr. Maples) said, quite rightly, my right hon. Friend has concentrated the resources available to him on the poorest, the most needy in the land. That is what he has done. But where my hon. Friend the Member for Lewisham, West is wrong is on this score. If my hon. Friend needs that money--if he has to have it--he should not take it from other people's children. He should get it from somewhere else. What he ought to do is to look at Government expenditure overall, not just on the basis of my right hon. Friend's Department. If he did that, we would come to a different conclusion and have a different answer.
The hon. Member for Livingston (Mr. Cook) posed a question to us. He said that, if we believe that the cost of looking after a wife or catering for a wife has gone up by a fifth, and that the cost of catering for a child has gone down by a fifth, we should support the Government. But it is more vivid than that. The Government, this Government, our Government, are committed to reducing taxes in future. If they reduce, as we hope that they will do, taxes in future, they reduce taxes for everybody. But they have got to get that money from somewhere. They might get part of that money from increased revenue, but they will possibly get some of that money from reductions in Government expenditure in other areas.
If child benefit is not being increased in line with inflation, the reality is--as the hon. Gentleman and the whole House know--that it is being reduced. So to reduce taxes, which we want, money is to be taken from families with children and given to those without children. That is manifest nonsense. However hard-line a Tory one may be, and I am looked on as being a hard-line Tory--[ Hon. Members :-- "No. Withdraw."] All right, I am not a hard-line Tory, I am a soft-line Tory. I am a wet.
Column 45711 pm
If Sherlock Holmes were a member of the parliamentary Lobby and a sketch writer and he was sat up in the Gallery looking down on us, he would refer to tonight as being the night of the unanswered question. My right hon. Friend, in his remarks, said that when child benefit was introduced there was a commitment from time to time to increase child benefit. I have asked my right hon. Friend, but I am afraid that I was not dignified with a reply. The hon. Gentleman--far more important than me--on the Opposition Front Bench asked the same question. Many of my hon. Friends on this side of the House want to know, need to know, are required to know the answer to that question tonight before we vote.
Question put, That this House doth disagree with the Lords in the said amendment :--
The House divided : Ayes 290, Noes 234.
Division No.310] [11.01 pm
Alison, Rt Hon Michael
Arnold, Jacques (Gravesham)
Arnold, Tom (Hazel Grove)
Baker, Rt Hon K. (Mole Valley)
Baker, Nicholas (Dorset N)
Banks, Robert (Harrogate)
Bennett, Nicholas (Pembroke)
Bevan, David Gilroy
Biffen, Rt Hon John
Blackburn, Dr John G.
Blaker, Rt Hon Sir Peter
Body, Sir Richard
Bonsor, Sir Nicholas
Boscawen, Hon Robert
Bottomley, Mrs Virginia
Bowden, A (Brighton K'pto'n)
Bowden, Gerald (Dulwich)
Boyson, Rt Hon Dr Sir Rhodes
Braine, Rt Hon Sir Bernard
Brown, Michael (Brigg & Cl't's)
Browne, John (Winchester)
Bruce, Ian (Dorset South)
Buchanan-Smith, Rt Hon Alick
Buck, Sir Antony
Carlisle, Kenneth (Lincoln)
Chalker, Rt Hon Mrs Lynda
Channon, Rt Hon Paul
Clark, Dr Michael (Rochford)
Clark, Sir W. (Croydon S)
Clarke, Rt Hon K. (Rushcliffe)
Coombs, Simon (Swindon)
Cope, Rt Hon John
Currie, Mrs Edwina
Davies, Q. (Stamf'd & Spald'g)
Davis, David (Boothferry)
Douglas-Hamilton, Lord James
Emery, Sir Peter
Evans, David (Welwyn Hatf'd)
Field, Barry (Isle of Wight)
Finsberg, Sir Geoffrey
Fishburn, John Dudley
Fookes, Dame Janet
Forsyth, Michael (Stirling)
Fowler, Rt Hon Norman
Fox, Sir Marcus
Glyn, Dr Alan
Goodson-Wickes, Dr Charles
Gorman, Mrs Teresa
Grant, Sir Anthony (CambsSW)
Greenway, John (Ryedale)
Griffiths, Sir Eldon (Bury St E')
Griffiths, Peter (Portsmouth N)
Gummer, Rt Hon John Selwyn
Hamilton, Hon Archie (Epsom)
Hamilton, Neil (Tatton)
Hampson, Dr Keith