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Mr. Meacher : It is a little early, so if the hon. Gentleman will allow me to make a few points, I shall gladly give way to him then.
Mr. Smith : I have a helpful suggestion.
Mr. Meacher : Well, I shall take the hon. Gentleman at his word, which may be a bit risky.
Mr. Smith : I simply wanted to suggest that if these are such important subjects for debate, the Opposition might occasionally choose some of them for their Supply days.
Mr. Meacher : A number of those issues arose when the Opposition were the Tory party. However, I was not seeking to make a partisan point-- [H on. Members :-- "Oh."] Well, I am sorry, I am not seeking to make a party political point but a much-- [Laughter.] The hon. Member for Taunton (Mr. Nicholson) should contain himself and try to think a little more reflectively about what I have said. I am simply making the point that many issues in our society are not properly debated in the House. The system of income and wealth, which is absolutely critical in a market system, is rarely debated. This afternoon's debate is an opportunity to take that further, and I shall do so. My first point, therefore, is that the share of national resources that is allocated to the poor has been declining not increasing, and will further decrease this year as a result of the Secretary of State's uprating of 25 October last year. The right hon. Gentleman likes to say--he says this in every debate and he said it again today--that total social security expenditure is now running at about £1 billion per week, but what he does not say is that the total expenditure has declined from 11.5 per cent. of gross domestic product in 1984-85--the middle of the 1980s--to only 9.7 per cent. now.
Part of the reason for that is, of course, the decline in unemployment, but the major reason is that, as one of their first acts in 1979, the Government deliberately broke the link between benefits and earnings. As a result, the quarter of the population which is long-term dependent on benefits has fallen further and further behind the living standards of the rest of our society. The right hon. Gentleman should be concerned that the Department of Social Security now gets a lesser share of national resources than in 1980, although there are 3 million more people on income support, nearly twice as many people unemployed and nearly 1 million more pensioners.
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Clearly, this squeezing of the lowest-income quarter of the population will be taken a great deal further year by year as long as this Government remain in power. That is obvious from the techniques of what I sometimes think of as the Tory demolition contractors, which are now all too apparent, and are manifested, yet again, in the orders.First, the Government strip out any earnings-related supplement so that only the basic minimum benefit is provided. That was done to unemployment benefit in 1982 and to invalidity benefit a month ago. The savings to the Government have been enormous. Of course, the other side of the coin is the loss to those entitled to benefit. In the case of invalidity benefit, Government savings will rise to a staggering £1.3 billion per year by 2025.
Secondly, the Government break any pension link with earnings so that poor families cannot keep up with rising living standards. Again, the savings to the Government from that device over the past decade have been colossal, as much as £20 billion, enough to fund the entire Government programme of tax cuts since 1979.
Thirdly, they chop universal benefit. That is why child benefit is being frozen for the third year running, leaving it to wither on the vine until the Government have the honesty and decency to admit that their ultimate intention is to do away with it altogether. Fourthly, the Government start means-testing contributory benefits. That is why the former Chancellor of the Exchequer toyed publicly with the idea of shifting to means-tested pensions. That is why the former Secretary of State for Social Security, the right hon. Gentleman's predecessor, made a stab at abolishing SERPS before he was forced by the public furore to be content with merely vandalising it.
Fifthly, the Government privatise wherever possible. Sickness benefit and maternity benefit have both been handed over to the private sector. Now SERPS is being partially privatised by the encouragement to contract out into personal pensions, with the usual bribe, at public expense, if people satisfy Tory ideology. With friends like that, the welfare state does not need enemies. It was for those reasons that John Hills, who is widely recognised as a specialist in these matters, in his comprehensive study of taxes and benefits over the past decade, found last year :
"Overall, the bottom half of the population has lost £6.6 billion of which £5.6 billion has gone to the top 10 per cent."
That is the reality behind the Secretary of State's smooth reassurances today. We have had 10 years of steady dismantling--an erosion here, a whittling away there, a whole series of minor and inexpensive improvements, which the right hon. Gentleman rattled off again today. Those things are held up to disguise major cuts. There is a constant reshuffling of the pack, but always with the same or fewer cards.
Exactly the same techniques are apparent in the uprating that we are debating. Clearly the Government have broken their promise that the poor would not lose under the poll tax when it is introduced in two months' time. There is a shortfall between the 20 per cent. of the poll tax that everyone, however poor, will be made to pay and the extra income support that is supposed to compensate. Let us take a local authority charging exactly what the Government claim will be the average poll tax--Kingswood in Avon. A couple there on income support
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will have to find £39 a year to make up the shortfall out of what is supposed to be the minimum income necessary for basic living expenses.In the Prime Minister's constituency, in the London borough of Barnet, a similar couple will need to find an extra £55 a year, more than £1 a week. In neighbouring Haringey, a couple on the income support poverty line will be made no less than £151 a year worse off by the poll tax. I have the entire list of local authorities. The figures are large everywhere. Even those losses are likely to be exceeded in the event because they are based on the Government's published poll tax figures, which everyone knows are laughable under-estimates. The true figure could well turn out to be 25 per cent. higher, or more. The real point, however-- I cannot emphasise it strongly enough--is that the very poorest people in our society should not have to pay poll tax at all.
Mr. Edward Leigh (Gainsborough and Horncastle) : Just to confirm the point, does the hon. Gentleman consider that there should be no relation between what someone on income support pays and the expenditure of his local council, and that no pressure whatever should be put on that local council to keep spending down to essential levels?
Mr. Meacher : I certainly do not think that people living on £35, £40 or £45 a week should be made to suffer in any way, whatever their local authority does. We have a ballot box. It is perfectly possible for the people in the borough to vote out a local authority if it acts in a way contrary to their general interest.
Mr. Leigh rose --
Mr. Meacher : I do not want to get into a general discussion of the poll tax. I just make the point that the hon. Gentleman is very unwise if he believes that the poorest people should be targeted--if I may use a Government word in a slightly different way--in order to punish local authorities. We totally repudiate that view.
Mr. Jeremy Corbyn (Islington, North) : I noticed that while my hon. Friend was talking, Conservative Members were muttering, "Haringey?" and asking, "Who runs Haringey?" I am a former member of Haringey borough council. I am not ashamed of it, because I, while I was a member, and subsequent members of the authority did our best to provide a high and satisfactory level of social services, housing development, community development and recreational facilities, for which the borough was penalised by the Tory Government and continue to be penalised by them. It is now vilified for the level of poll tax that will be set for the proportion of expenditure that the authority itself controls. The high poll tax in inner and other London boroughs comes about solely because of the Government's past treatment of inner London local authorities and inner urban areas throughout the country.
Does my hon. Friend agree with me on those points?
Mr. Meacher : My hon. Friend is right : the basic reason for high expenditure in poor areas in inner London is unquestionably, first, the acute level of social need, and secondly, the sharp cuts in rate support grant by the Government, from about 61 per cent. to about 47 per cent. However, I do not wish to enter into a wider discussion of
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the poll tax. It is not appropriate now. I simply make the important point that the poorest in our society should not be targeted for penalties under that tax.Not only are the Government failing to protect poor
tenants--although that is certainly true--but they are turning a blind eye to the rip-off that landlords will make out of the poll tax. There is at present no obligation on a landlord to reduce the rent that he charges at the changeover from rates to poll tax, even though that rent includes a rates element that will soon be defunct. I want to quote one case given to me by a citizens advice bureau, which makes the point :
"Client is a pensioner living in very poor standard private rented house (outside toilet, only one tap, no bath.) The client has paid a weekly rent which has included rates and water rates. Now had a letter from landlord saying she must pay these separately and had a bill from Yorkshire Water. Landlord has not made any corresponding reduction in the rent' she pays."
We have consistently urged the Government to introduce legislation to outlaw that practice, but the Government have refused. They have not even sent a letter, or asked local authorities to send a letter, to all private tenants to warn them that they may be double-charged. That abuse has already netted some £40 million for landlords in Scotland in the past year, and it is expected that landlords in London will pick up a £90 million bonanza in the coming year because of that loophole. Since there are nearly a million private tenants on housing benefit, the total rip-off to landlords at the expense of tenants may turn out to be over £400 million.
It is extraordinary that the Minister of State can be so lax about this malpractice when his own borough of Kensington and Chelsea has the highest percentage of private tenants of any local authority--29 per cent.--rising in south Chelsea, I believe, to 39 per cent., and also the highest number of houses in multiple occupation, where undoubtedly the worst abuses will occur. I beg the right hon. Gentleman to reconsider that issue, as it is crucial that he acts to prevent that abuse from hitting some of the poorest tenants and other poor people in our society.
The Government like to pride themselves on being the party of the family, yet two of their actions--or, perhaps, omissions--in the orders strike at the heart of the family. The Government have not protected the poorest against the poll tax--as I have said--and, by freezing child benefit for the third year running, they have refused to find even an extra 50p for the family budget. That is not just mean but plainly dishonourable.
In its 1987 manifesto, the Tory party promised :
"Child benefit will continue to be paid as now, and direct to the mother."
Four months later, the Government froze it, and it has remained frozen ever since despite the pantomime of a yearly review. The Government have now cut the real value of child benefit by a fifth. The Secretary of State now has the distinction of reducing total family benefits for the average family to the lowest level in the EEC, except for Ireland, Greece, Spain and Portugal. In Britain, weekly family benefits for a couple with three children under 12 are £21.75, whereas in France they are £43.30-- almost exactly twice as high. After listening to what the right hon. Gentleman said today, I must say that one of the more pitiful sights on
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these occasions is to watch him being forced to dismiss child benefit and to expound on the merits of family credit or diverting to other needy groups, when he knows perfectly well that other needy groups--which I shall come to in a moment--have not had the uncovenanted increase that he pretends.The right hon. Gentleman knows as well as anyone that family credit is riddled with defects. Child benefit has a virtual 100 per cent. take-up, whereas family credit achieves only 50 per cent. The Government formerly talked of targeting--now the word focusing is all the rage--but that focused benefit reaches only half of those for whom it is intended. Child benefit is cheap and easy to administer, but family credit is much more expensive and difficult. The last round of advertising recruited claimants to family credit at a cost of about £120 for every additional applicant.
As my hon. Friend the Member for Leeds, West (Mr. Battle) said in an intervention, child benefit does not contribute to the poverty trap, whereas family credit does, despite the Secretary of State's lengthy answer --and as do all means-tested benefits. I do not know whether it makes the right hon. Gentleman squirm to be forced by the Prime Minister to argue for things that he does not believe in, but it makes me squirm to have to listen to him being so dishonest.
Mr. Robert G. Hughes (Harrow, West) : The hon. Gentleman sought to make a comparison between this country and our European neighbours. Does he agree that the picture that he painted looks less convincing when one adds what he forgot to mention--that no other European country has anything like family credit?
Mr. Meacher : Family credit goes to about 340,000 people. There are 12 million children in this country and there are similar totals in receipt of the equivalent of child benefit in those other countries. Family credit is a drop in the ocean. If the hon. Gentleman believes that that makes any difference to the overall question of the amount of money that societies in different parts of Europe are prepared to give to all families, he should reconsider.
Mr. David Nicholson (Taunton) : Will the hon. Gentleman take into account the fact, that, in Germany, Italy and Greece, child benefit arrangements are means-tested and that other countries do not have the same universal arrangement as ours? Does the Labour party plan to means-test child benefit?
Mr. Meacher : No, we certainly do not, because it is unwise and we do not accept it. The levels of the means-tested benefits that the hon. Gentleman mentions are substantially higher than those in this country, so I suspect that the average family in those countries still gets considerably more than the average family in this country.
We also strongly object to the downgrading of statutory sick pay. I use the term "downgrading" deliberately. This further chipping away at an already eroded benefit is typical of the Government's emasculation of the benefit structure. As the Secretary of State fully explained, employees now get the full statutory sick pay rate as long as their earnings are over £84 per week. From April they will get it only if their earnings are over £125 a week.
To sugar the pill for the low-paid--that is the most euphemistic phrase that I can think of--the lower rate of
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sick pay is to be increased by a magnificent 25p a week more than is needed to compensate for inflation. The Secretary of State made enormous play of that, but I suspect--I do not want to be patronising--that he would hardly stoop in the street to pick up such a paltry sum.This act of unstinting and abundant magnanimity has to be balanced by more than equivalent cuts elsewhere in the sick pay uprating. Hence, the higher rate is being cut to the tune of £3.55 a week less than the amount that is needed to compensate for inflation. The right hon. Gentleman did not make that clear. The handling of the net effect of all those manoeuvres is characteristic of the Government. The Secretary of State parades the extra 25p as if it were generosity beyond the dreams of avarice, but the Government are clawing back £70 million to £80 million per year out of the whole shabby contrivance. The Government's excuse for the change is that, since statutory sick pay started in 1983, the earnings threshold for the higher rate has been raised only in line with prices and not with earnings, so a much bigger rise in the threshold is now justified. That is fine. That means that the Government are at last coming round to the belated recognition that the logical basis for uprating earnings- replacement benefits is an index of average earnings rather than prices. The trouble is that under this Government, logic is partisan, selective and always rather self-interested.
The Government are using the earnings link to raise the threshold in order to disqualify hundreds of thousands of workers from the higher rate of statutory sick pay. However, when it comes to the earnings link for the uprating of pensions so that millions of pensioners will qualify for higher pensions, the Government do not want to know. Logic is fine for the Government as long as it leads to cuts.
Mr. Tim Smith : Let us be quite clear about Labour policy. Can the hon. Gentleman confirm that the logic of his argument would be to increase the starting point for the payment of national insurance contributions by the increase in earnings, thus increasing it at a faster rate than over the past 10 years? That would disqualify more low-paid people from benefit.
Mr. Meacher : Not at all. It is right that in general we should link contributions and benefits to earnings as far as it is possible to do so. We have certainly made a fundamental commitment, of which the hon. Gentleman is well aware. We believe that pensioners ought to maintain their share of rising living standards. National insurance contributions, which are a percentage of incomes, are based on buoyant income. That is why there is such a large surplus in the national insurance fund. We support that general principle as a means of ensuring that people in need maintain their share of the community's rising living standards.
When we take the fiddle on statutory sick pay into account, it becomes possible to net out the whole balance of expenditure over this benefit uprating. The Government are currently increasing expenditure on disability and carers' benefits by £100 million. They are helping low-income families with the five new measures that the Secretary of State announced in the uprating statement, which was repeated today, and that will cost £70 million. They are providing a small number of concessions for pensioners, which will cost £15 million. The total is £185 million.
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I readily acknowledge that the Government are also spending £100 million on raising income support levels for people in residential care and nursing homes. The Secretary of State slipped over the point that that does not anywhere near match the rise in inflation and could thus be construed as a cut in real terms. It still leaves a problematic gap between benefits and charges of up to £50 a week, and it is usually treated separately from the benefits uprating. For that reason, I do not include it here, and I think that that is right. On the debit side, the Government are saving £250 million on child benefit and, as I have said, a further £70 million to £80 million on statutory sick pay. That gives total savings of about £325 million. Despite all the paraphernalia of minuscule extras with which the right hon. Gentleman sought to adorn his uprating statement and with which he regaled us, the stark truth behind the orders is that, overall, the Government are not giving the poorest quarter of the population any extra money at all. They are relieving a very large part of the population of about £140 million. We all know the old adage :"I fear the Greeks even when they bring gifts."
That takes on a new meaning under the Government. When the Government or the Secretary of State give us something, we would be well advised to count our fingers afterwards.
Mr. Newton : In the course of the past few minutes, the hon. Gentleman appears to have slipped into a proposition based on the assumption that all recipients of child benefit are among the poorest people in the population. If he does not think that, he could not justify his last sentence. However, we know that a surprisingly large part of any payment of child benefit goes to those with earnings of over £20,000 a year. Secondly, he has totally ignored the major increases in benefits for older and more disabled pensioners, which were made last October, and he has ignored the abolition of the earnings rule, both of which lead to significantly greater expenditure in the forthcoming year than in the present year. The cost is £600 million in a full year, and it was £300 million last year. Another £300 million has to be found this year. To be fair, the hon. Gentleman should take that into account in his presentation of these matters.
Mr. Meacher : I shall deal shortly with disability benefits and the earnings rule. I certainly acknowledge the right hon. Gentleman's point, but I made the same point to him, that I suspect that the great majority of the benefit does not go to the lowest quarter of the population that we are considering.
The cuts and the dismantling of the social security underpinning of our society do not stop here. I pay the right hon. Gentleman the compliment of saying that he is something of a master magician. He specialises in two tricks, one of which is the constant recycling of old money and endless exercises in the redistribution of poverty so that one group's gain is another's loss. However, it is called the provision of new money. The other trick is to flash a whole array of cards announcing trivial increases in marginal benefits before the bemused eyes of his onlookers while keeping the joker firmly tucked up his sleeve. The right hon. Gentleman did that today. In this case, the joker in the pack is the Government's sudden and unilateral abolition of the additional pension to invalidity benefit. In his statement on disability benefit--for which, I might say, disabled people have waited 10 years--the right
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hon. Gentleman took us all round the houses about how he was going to do this, that and all the other to improve the lot of the disabled. But about the abolition of the earnings-related pension he kept very mum indeed. We can now see exactly why. He bragged about how he was increasing expenditure on disability benefit by £300 million a year by 1993, but he did not tell us that the figure would then fall steadily to nil by the year 2000 and would continue to fall steeply over the following 25 years. So, overall, the Government are making a colossal saving at the expense of disabled people. The answer that the Minister of State gave me a fortnight ago--in Hansard of 26 January--shows clearly that over the first quarter of the next century the Government will rake off a staggering £9 billion by way of reductions in disability benefits. The disabled people's organisations have certainly made clear their intense disappointment with the Government's review, but even they had not anticipated that what was called a review could turn into ransacking and plunder on such a scale.The last issue that I want to raise concerns pensioners. I want to repeat the central point about this uprating order : if the Government had not peremptorily ended Labour's link with earnings, a single pensioner, in two months' time, would be getting a pension of exactly £60 a week. As it is, he or she will get only £46.90--£13.10 less per week than Labour provided for. Similarly, a married couple would be getting a basic pension of no less than £95.80, whereas they will actually get £75.10--a full £20.70 less. I accept, of course, that there is in Britain one person over 60 who thinks that pensioners are getting a very good deal, but, of course, the Prime Minister does not actually have to live on the old-age pension. It is not as if the Government did not have the funds to give more help to pensioners if they wanted to do so. Last April, the cumulative total in the national insurance fund was touching £10 billion. In 1988-89 alone, it grew by £2.25 billion. Yet, instead of paying higher pensions--which are desperately needed, as more than half of all pensioners live on, or only very slightly above, the poverty line--the Government are currently trying to reduce the surplus by giving money back to people in work. Indeed, the cost to the national insurance fund of the 2 per cent. bribe to personal pension schemes is already £1.5 billion over budget. If the Government had so chosen, that sum could have been used, instead, to double the pension increase that we are debating under the order.
Sir George Young (Ealing, Acton) : I am sure that the hon. Gentleman does not wish to mislead pensioners, who may be following the debate. In the first year of any Labour Administration, would the link be restored?
Mr. Meacher : Indeed. I am very glad that the hon. Gentleman understands what we have been saying repeatedly. I am very glad that he is now tuned in. We have said that we shall restore the link. There is no question of retrospective payments. [Hon. Members :-- "Ah."] Of course there is no question of retrospective payments. There can be no question of retrospective payments. However, we have said that we would restore the link with earnings, so that, over a 10-year period, pensioners would get an extra amount of the magnitude about which I have been talking.
Sir George Young : Will the hon. Gentleman give way?
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The Government say that they believe in targeting, but it is now becoming all too clear that what they mean is targeting their friends in the City for bonuses for privatised schemes, at the expense of pensioners, who are being given the meanest possible increase that the Government can get away with.
I began my speech by saying that the debate was about the share of national resources allotted to the poorest quarter of the population. I think that it will be widely accepted that in this country there is a majority view that the divide between rich and poor is now too wide and should be reduced. It is because the Government have repeatedly and deliberately widened that divide, and have no intention whatever of closing it, that we shall vote against the orders.
4.55 pm
Mr. Timothy Raison (Aylesbury) : At the beginning of his speech, the hon. Member for Oldham, West (Mr. Meacher) made one point on which I should like to comment. He said that the House is not really very good at discussing strategic issues. Some of his examples were a bit far-fetched, but I think that we suffer from the fact that we do not discuss taxation and public expenditure together anything like as much as we should. That has particular relevance and force in the context of the subject about which the House will not be surprised to hear I intend to speak--child benefit. The history of child benefit is that it is a replacement both for a social security benefit and for a tax allowance. I shall come back to that.
In his opening speech, my right hon. Friend made a number of points with which I am entirely happy. The uprating that he is introducing is useful in many respects. He is a Secretary of State for Social Security who cares deeply about what he is doing, and he is held in very high regard by the House. Having said that, however, I must say that I think he is wrong in respect of child benefit. Every year, in the public expenditure plans, we make provision for an uprating of child benefit in the following year. Every year, the Secretary of State is required to review the level of child benefit. Every year for the last three years, this review has taken place, and every year for the last three years the result has been no uprating. I am bound to say that, with each year, our election pledge to continue to pay child benefit as at present sounds a little more hollow. It is time that we changed this policy.
We have debated child benefit so often in the last few years that I do not intend to run through all the arguments--I will simply itemise them. There is the fact of the poor take-up of family credit, as against child benefit ; there is the fact that child benefit does not lead to the poverty trap in the way that selective benefits do ; there is the fact that it goes directly to the mother ; there is the simplicity and certainty of child benefit, as opposed to the complexity and uncertainty of means-tested benefits ; there is the history of child benefit ; there is the long tradition of help in this country for all those who bring up the children ; and, as I have said already, there is the fact that when it was brought in, it was intended very clearly as a replacement not only for a benefit but for a tax allowance.
All this is familiar, but it is very important. Of course, as always, we come back to the argument : why provide a universal benefit and not be selective? This rings false when we look at tax allowances, which are the other half of the
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equation. After all, we provide tax relief on mortgages--the main effect of which is probably to push up the price of houses--for everybody, regardless of income. We provide tax relief on pensions contributions for everybody, regardless of income. We have now actually brought in a benefit by which we provide tax relief on private health insurance for people over 60, regardless of income. In all these cases, it may even be argued that the richer one is, the greater the benefit in tax allowances. I do not think that it is possible to continue to argue that there is something wrong with the unselective nature of child benefit while at the same time continuing to accept, and even to introduce, a new tax allowance that provides specific help for those with private health insurance. I do not think that that is sustainable.I have some sympathy with the view that some of these tax allowances should be cut. However, that is not the Government's position. The Government have brought in a new allowance, yet they say, at least by implication, that we have to think in terms of pruning child benefit in real terms. I do not think that that is on. The one certainty is that bringing up children involves additional cost. That has always been recognised in this country. I realise, of course, that child benefit goes to some people who certainly do not need it, but its advantages are so great that that is a price worth paying.
What about this year's review? After all, the Secretary of State is required, each year, to look at the special circumstances of the year ahead. Let me again say that the money for an uprating was allocated in the public expenditure round for this year, so there is no question of an additional call on public resources. There are special reasons why there should be an uprating this year. I believe that it should be automatic, but in the present situation we have to look at the special circumstances--the relevant considerations--as the Act requires.
Some of this is political but some of it, much more importantly, is a matter of basic concern for our fellow citizens. The first special reason for an uprating is that it would offset the impact of the community charge, particularly on those people who are just above the rebate level. These are the people in my constituency who have been paying rates of £300 to £400 but who, as a couple, will face a community charge of £700 to £800 a year. There is transitional relief but that will be of no more than limited help in these cases. Many people will be affected, and they are beginning to come to our surgeries and to write us letters because of their special circumstances.
The House will recall, how, in 1988, we had to face up to the consequences of the Social Security Act 1986 and its effect on housing benefit. Hon. Members will recall the flood of letters that we received then and the flood of people who came to our surgeries saying, in particular, that the capital limit for housing benefit introduced in that Act was causing considerable problems. I should like my right hon. Friend the Minister for Social Security to let us know what will happen to transitional payments on housing benefit from April 1990. As well as that, we can recall the fact that, under pressure, the Government had to give way and, quite rightly, make concessions.
I believe that the Government will be faced with a much greater storm as a consequence of the community charge than they experienced as a consequence of that Act. The Government will have to make concessions. The simplest way to do that would be to recognise that the people who will have most difficulty as a result of the community
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charge, in the categories which I have mentioned, will be those who have to pay the cost of bringing up children. If we can do something to meet that cost by, even at this late stage, uprating child benefit, we would have a useful measure and something that would be entirely inside the terms of the Act.The Government are clearly worried about wage pressure. My right hon. Friend the Chancellor of the Exchequer and others are making clear their concern about this. An increase in child benefit would do something--not everything : I am not trying to exaggerate--to help to head off the problem of wage pressure.
Furthermore, there is a growing campaign for tax relief on child care costs. I do not agree that there should be such tax relief, because I think that it would be unfair if the women who go out to work derived benefit not only from the income from that work but from tax relief, while mothers who stay at home to look after their children get nothing at all. That would be unfair. The simple answer to this is to approach it in a different way--by an increase in child benefit, which goes equally to the mother who goes out to work and to the mother who stays at home to look after her children. That would be neutral, which is as it should be.
Mr. Corbyn : Is there not the serious problem of a shortage of pre- school child care places? As a result, many private nurseries charge exorbitant fees, which people are forced to pay because there is no other way to have their children looked after. They naturally look to tax relief to offset that cost whereas a better solution would be larger and better statutory state provision of pre-school facilities for small children, who benefit from it in many ways.
Mr. Raison : That is a whole new topic. As it happens, I was Chairman of the Select Committee on Education, Science and Arts when it produced a report advocating a substantial expansion of nursery education, so I agree with the hon. Gentleman, but I do not want to go down that path.
I have given the reasons why I believe that child benefit should go up. It is true that the additional child benefits resulting from one year's uprating would not offset all the needs about which I have spoken. However, it would more do so if we had uprated child benefit every year, and it would more do so now if we were to uprate child benefit in a way that includes an element for catching up on our failure to uprate it in the past.
Increasingly, I believe that we could go much further, again if we are willing to look at the tax and benefits systems together. As the House knows, the taxation of husband and wife is about to be separated--on the whole, an admirable measure. There is to be a married couple's allowance and a similar allowance for unmarried couples who have children. I thought it would be interesting to ask what the cost to the Exchequer of these allowances will be. My right hon. Friend the Chancellor of the Exchequer replied : "The direct revenue cost of the married couple's allowance in a full year at 1990-91 levels of income is estimated to be £5 billion. If the allowance were to be given only to married couples where either the husband or wife was a 65 or over, there would be a saving of about £4.5 billion."--[ Official Report, 20 December 1989 ; Vol. 164, c. 241. ]
In other words, the married couple's allowance is absorbing just about the amount of money that it costs to provide child benefit in any one year. We should seriously
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consider the possibility of scrapping these allowances and doubling child benefit. That could be done without any net cost to the Exchequer.It so happens that I am a strong believer in conventional, traditional, orthodox marriage, and in itself I like the idea of the married couple's allowance. On the other hand, if I look at the real problems in society, I find it impossible to deny that those who have children clearly have costs that do not arise simply from the fact of being married. Therefore, I put it seriously to my right hon. Friend the Secretary of State, as I would, if he were here, to my right hon. Friend the Chancellor of the Exchequer, that they should look at the different ways in which we are providing help to families. They should take this opportunity to see whether, by scrapping the married couple's allowances, we could double child benefit, which would have enormous advantages. Nobody can say anything about targeting, because the married couple's allowance, like all the other tax allowances, is non- targeted.
Mr. Christopher Hawkins (High Peak) : I agree with everything that my right hon. Friend has said, except his last point. The danger of getting rid of a tax allowance and turning it into child benefit is that the Government would continue to freeze it. The irony of the present problem is that, if child benefit had remained a tax allowance, we would have increased it by more than the rate of inflation and said what a good thing that was because it was part of our overall strategy of reducing taxation. However, because we converted a tax allowance into a benefit, it is a bad thing to increase it in line with inflation.
Mr. Raison : My hon. Friend has a strong point. The answer is that the arrangement about which I am talking would have to be statutorily compulsory, and the trouble about child benefit, as we know, is that it has been optional. We would have to have a firm guarantee, by some means or another--perhaps something like the Rooker-Wise amendment--that this would be an automatic process, and that would meet my hon. Friend's point.
By this approach, we could have a real means to help those with children. Many of our other anxieties would disappear. I have already mentioned child care, but in this way we could also provide help for single parents without having an allowance that is seen by some as an incentive to become single parents. Many other advantages would flow from this, and nobody could argue that we were abandoning a system of targeted benefits in favour of untargeted benefits.
I appreciate that such a change would have substantial consequences, and I do not expect the Minister, when replying, to say that the Government accept all that I have said. But they should at least take note of the fundamental changes that I have outlined. While many complications may be involved, we must get away from the annual refusal to uprate child benefit. It does the children and our party no good. I hope that my right hon. Friend has enough wisdom and understanding to appreciate that the policy we are pursuing is wrong, and that he will make sure that we change it.
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5.10 pmMr. Archy Kirkwood (Roxburgh and Berwickshire) : It is a pleasure to speak following the right hon. Member for Aylesbury (Mr. Raison) who made a powerful and impassioned speech, the majority of which I supported wholeheartedly. He has a notable record as a champion of child benefit and did that cause much justice in the way that he deployed his case.
Today, I think for the first time, the Secretary of State came up with what could be described as a relevant consideration. I have complained to his predecessors that child benefit has been frozen willy-nilly and without the semblance of an argument to justify that course. I was confused by the right hon. Gentleman's argument today : although I recognised the sense of his case generally, he seemed to suggest that, because average earnings have been increasing and money is therefore available to the average family with children, that is a relevant reason for freezing child benefit this year.
I suspect that there will be few years in the near-to-middle future when that will not be the case. In other words, if it is a relevant consideration now, and if it applies next year, child benefit will remain frozen for years to come. If so, the right hon. Gentleman should say so. It would be more honest of the Government to admit that, rather than continue with annual charades and uprating statements seeking to defend the freezing of child benefit. I endorse everything that the right hon. Member for Aylesbury said about that, and I will not rehearse again the important positive arguments that he adduced in favour of child benefit.
I wish to deal principally with the effects that the uprating will have on the elderly. Last March, there was an uprating of 5.9 per cent. The year-on -year inflation increase was 7.6 per cent. last September, and that is the figure that we are now discussing for basic increases in the state pension. Considering the monthly inflation increases that have occurred since April of last year--some monthly increases have reached 8.3 per cent.--and looking ahead, not even a 7.6 per cent. increase will measure up to the real increases in inflation that basic state pensioners will have to face after April. That is why it is inevitable, for at least another 12 months, that pensioners who rely for their income on the state pension will see their standard of living eroding.
The right hon. Gentleman cannot, in all conscience, allow that to happen year after year. There is a respectable argument for considering going back to the link with earnings. I would not go as far as the hon. Member for Oldham, West (Mr. Meacher) in that respect. The inexorable erosion of the standard of living of pensioners cannot be countenanced by the Government, who will have to do what they were forced to do last October, and I welcomed the one-off payment which they gave and which did not affect transitional relief. That was a payment of £2.50 or £3.50 to certain retired people who were in particularly straitened financial circumstances. The Government will have to take that action with monotonous regularity unless they recognise the ongoing real needs of pensioners. The Social Security Advisory Committee pointed out to the Government years ago that they would occasionally--not every year--have to redress the balance between earnings and price increases if they were to be anything like fair to pensioners who struggled for their day-to-day existence on the basic state pension.
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The increases to which the Secretary of State refers regularly in respect of pensioners with occupational pensions are welcome, and in the next century there will not be a problem if things go according to plan. That, too, is to be welcomed. But nearly 60 per cent. of present-day pensioners rely for more than 75 per cent. of their income on state benefit. The right hon. Gentleman cannot ignore that, or he will be ignoring generations of pensioners, between now and 10 or 20 years hence, who will suffer terribly unless the Government do something for them.I am disappointed that the Government have not found a way to extend mobility allowance beyond retirement age. The age cut-off point is now 66. If the Government feel that it would be too expensive to do that immediately, they should accept that in cases where the payment of mobility allowance to people over retirement age would prevent them from having to be institutionalised--a precedent exists for taking such action with social fund community care grants--limited change could be made as a first step. All sorts of improvements could be made, but we should be opposed to having age discrimination built subliminally into the benefits system. Some of the changes that the Secretary of State announced are imaginative, but there is force in the argument that he has been engaging in some sleight of hand by moving the money around, rather than trying to argue the case for more funds from the Treasury. I am not privy to the inside negotiations that he conducts with the Treasury, but a strong case exists for improving matters for the elderly and needy, and I hope that he is arguing strongly on their behalf privately, if he is not doing so publicly.
Mr. Matthew Taylor (Truro) : My hon. Friend makes an important point about the mobility allowance. In rural areas such as Cornwall, pensioners who are capable of looking after themselves and living alone, but who are unable to do so because they are not mobile, are isolated without such an allowance. They find the cut-off point hard to understand, and I cannot justify it to them when they come to my surgery.
Mr. Kirkwood : My hon. Friend makes a helpful intervention. He and I, along with many Conservative Members, represent rural constituencies and are well aware of the problem.
We must take note of the increased fees that are having to be paid for residential accommodation for the elderly. I welcome, as far as it goes, the £100 million improvement that has been made, but I fear that difficulty will arise. I also appreciate that it is not the normal category of expenditure that we consider when uprating statements are made.
It appears that the Government have changed their policy of positive discrimination in favour of the behaviourally disturbed elderly patients in residential homes as opposed to the simply frail elderly. In the last four or five years, the increased payments made in the dementia category--the really severely behaviourally disturbed elderly--have suffered and the positive discrimination that such cases enjoyed in 1986 has been eroded to the point where the payments available after April from the DHSS to meet fees will be equal as between the frail elderly and the behaviourally disturbed elderly. I have been conducting a lengthy and worrying correspondence with a constituent of mine who runs a
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