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Sir Peter Tapsell (East Lindsey) : May I congratulate my right hon. Friend the Chancellor on announcing a strategy for growth which will be widely welcomed and which deserves support? Although a public sector borrowing requirement of £37 billion is high, should we not bear in mind the fact that in 1931, when the country last found itself in a similar economic predicament for somewhat similar reasons, the PSBR was 7.5 per cent. of GDP, which is a significantly higher figure than the 6 per cent. I take to be the percentage of GDP represented by £37 billion. In 1931, that justified a reduction in interest rates to 3 per cent. which makes his announcement of a cut in interest rates to 7 per cent. fully sustainable and a step which can be pursued downwards as time passes.
Mr. Lamont : I am grateful to my hon. Friend for his remarks and I am glad that he welcomes the reduction in interest rates. However, I must make the cautionary point that the PSBR, at some 6 per cent. of GDP, is, on a medium-term basis, far too high. When I look at what is happening in other countries, I am sure that it is in the best interests of everyone that it is brought down. [Interruption.] Hon. Members may disagree and people may argue about economic management, but, at the end of the day, the fundamental problem that remains is that debt must be paid for and interest must be paid. If we have too high a level of debt interest, it squeezes out other items of public spending.
I am grateful to my hon. Friend for his support for and approval of the reduction in interest rates, but I think that we should address the problem of the PSBR, and I will do that.
Mr. Giles Radice (Durham, North) : What assumptions about the level of unemployment for the coming year has the Chancellor given to the Government Actuary?
Mr. John Townend (Bridlington) : I congratulate my right hon. Friend on his courage and determination in tackling the problem of the growing budget deficit. His colleagues on the Conservative Benches believe that his package will increase confidence, stimulate investment, encourage exports, help the housing market and boost the motor industry. We now have a coherent economic policy for recovery, which we strongly support. Does he agree that it is now time for British business to take advantage of the lowest interest rates in Europe, low inflation, a competitive pound and incentives for investment and go out and sell?
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Mr. Lamont : I am grateful to my hon. Friend. The measures that I have announced on capital allowances are designed to promote private sector investment.
The motor industry very much wanted to be rid of the car tax. It is one of the most important manufacturing industries and, in recent years, its decline has begun to be reversed. With the receipt of foreign investment, its prospects are excellent. It is right and appropriate to encourage that industry in such a difficult time. The measures that we have announced on credits will help exports, so my hon. Friend is right to say that the depreciation of the pound gives our exporters a considerable opportunity. It is vital that business does not allow its own costs to get out of control, that it remains competitive, and that it takes advantage of the new opportunities that now exist.
Mr. Robert Sheldon (Ashton-under-Lyne) : I welcome the capital allowances concession that the Chancellor of the Exchequer has given. I would have preferred it to be more, but I am pleased that it is on plant and machinery. Up to four years ago, however, the Government believed that manufacturing industry presented no problem. In the past four years, they accepted that it was a problem, but they did nothing about it. Now, very late in the day, they are doing something and making some concession. Meanwhile, the industrial base of this country has shrunk alarmingly. We have lost 30 per cent. of our industrial base under the Government.
The measures announced are inadequate given that it is now assumed that the growth rate will be 1 per cent. next year instead of 3 per cent., as forecast at the time of the Budget, and there is a crisis in the manufacturing industry. Although the right hon. Gentleman has done something, he has not done enough.
Mr. Lamont : It is something that the right hon. Gentleman is able to give even a modified welcome to the measures, and I am grateful to him for that. He is quite wrong to say that we have not thought manufacturing to be important. It is, but we have to look at the economy as a whole, and manufacturing is a part of it--perhaps the most important part. We have always believed that it is important. The right hon. Gentleman referred to the modest growth forecast that we have made, and it is somewhat lower than most forecasters are projecting, but I believe that, in recent weeks, the prospects in the world have got considerably worse. It is therefore right that we should look to ways to help British industry to take advantage of the new situation. The right hon. Gentleman says that 1 per cent. is not enough. Of course it is not enough, but we cannot just conjure more growth out of the air. I do not know what the right hon. Gentleman would say about Germany, where the projection is that the economy will grow by 1 per cent. next year and by 0.5 per cent. the year after. This is a very rough world.
Sir Michael Grylls (Surrey, North-West) : Is my right hon. Friend aware that there will be a warm welcome for his decision to encourage capital projects and to give the green light to them ? It can truly be said that the Government are rolling out the cement mixers, and many people will think that that is quite right at this time. I want to ask the Chancellor about a particular problem with regard to investment. Although his investment incentives will be welcomed, there is a problem for small
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and medium-sized firms, which are encountering difficulties in getting the right support from the banks because the banks themselves have got into trouble in recent years. Will he look at this problem, because, if firms do not have support for their productive investment, it will be difficult for them to take advantage of the situation as the country comes out of recession ?Mr. Lamont : What I have announced on capital allowances applies right across the economy ; it applies to all purchases of plant and machinery, not only manufacturing. It is not just of help to the construction industry ; it is of help to engineering, and metal-based industries in particular.
My hon. Friend mentioned banks. I very much hope that the reduction in interest rates today and the 2 per cent. by which I have reduced interest rates since 16 September will be passed on by the banks. Last year I had cause to discuss with the banks whether small businesses were getting the benefit of interest rate reductions, and the banks assured me that they were. Recently, I have been concerned to discover that some banks are operating a floor for interest rates beyond which they will not reduce them. I hope that they will consider this position very carefully.
Mr. Frank Field (Birkenhead) : Recently, the Chancellor said that every Government action would be evaluated as to its effect on increasing employment. In pursuance of the question asked by my hon. Friend the Member for Durham, North (Mr. Radice), may I ask, first, how many more people will be in work one year hence ? Secondly, when he said that pensions and other benefits would be fully indexed, the House assumed that he meant that all other benefits would be indexed. Was the House right in assuming that ?
Mr. Lamont : The answer to the second question is yes. When the hon. Gentleman asks me how many people will be in work, or out of work, in a year's time, he knows that not only can I not but we never do make a forecast for unemployment. However, as a result of the measures that we have taken today, the outlook for growth and jobs is definitely better.
Mr. George Walden (Buckingham) : Is my right hon. Friend aware that his statement deserves to generate confidence not only on the Benches behind him, which is useful, but also in the country? Does he agree with me that the main reason that this country is in a bigger hole than many other countries is our debt overhang, which is due overwhelmingly to housing debt? Therefore, while I understand the pressures that have driven him to throw another £750 million at housing, will he avoid giving the impression to the country that we can reflate our economy by reflating our housing and building some spurious prosperity on houses--which cannot, incidentally, be exported? Mr. Lamont : My hon. Friend makes an extremely telling point, and a very correct analysis, which he has made on earlier occasions. He will understand that the £750 million for the purchase of empties is not to reflate the housing market ; it is to take the overhang of properties off the market. I agree with my hon. Friend's analysis.
I believe that the main thing that has been holding back recovery in this country, as in the Scandinavian countries, some of which have had recessions just as long as we have
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--indeed, Sweden is in the third year of recession--and as in north America, is the overhang of debt, which does not exist in continental Europe to the same extent. The measures that we have taken will help, but I agree with my hon. Friend that the position of housing is absolutely crucial. We would be making a great mistake if we simply tried to have a great house price boom again.Mr. William Ross (Londonderry, East) : Is the Chancellor aware that the Unionist party is happy that he has reasserted his view today that the public sector borrowing rquirement must be kept under firm control? But I confess that seeing the PSBR for the current year rising from £28 billion to £37 billion between March and November could not, by any stretch of the imagination, be described as keeping it under firm control, especially when the right hon. Gentleman also said in his statement today that he expected it to rise next year. Can he say what it will be in cash terms in 1993-94?
Will the right hon. Gentleman also, when looking at the sums that should go to housing, ensure that a large proportion of those sums is directed to housing associations, which seem to make better use of the moneys than can be said of some public bodies that receive them? Will the Chancellor look carefully at the situation of the north of Ireland block grant? In the past, certain sectors have lost money because of the need to pay compensation to those who suffered from terrorist violence. As that has simply meant hardship for those who suffered from terrorist violence in one form or another, may I ask him to consider the possibility of financing all such extra compensation sums from the contingency fund, which should, of course, be used for the defence of the realm? If compensating those who suffer from terrorist violence is not part of the defence of the realm, what on earth is?
Mr. Lamont : My right hon. and learned Friend the Secretary of State for Northern Ireland will have noted the hon. Gentleman's points. I am indeed aware of the controversy and argument, but the hon. Gentleman will forgive me if I do not get drawn into that today.
The hon. Member talked about the PSBR and outturn and asked why it was not kept under control. He should realise that the main reason for the increase in the PSBR is falling tax revenues. It is not expenditure. It is largely in the ratio of 6 : 1 of falling tax revenues. The hon. Gentleman put his finger on it when he said that it is difficult to predict the outturn for the PSBR. For that reason, he will perhaps understand why I do not accept his invitation to predict it for next year, though I shall be doing that at the time of the Budget.
Mr. Nicholas Budgen (Wolverhampton, South-West) : If interest rates of 7 per cent. on 13 November are appropriate, how could interest rates of 10 per cent. have been appropriate on 13 September? Should we not all be profoundly grateful for black Wednesday, and would not the best thing that my right hon. Friend could say to increase confidence be that we shall never ever return to the ERM?
Mr. Lamont : I do not agree with my hon. Friend's analysis. He will be aware that we have options open to us as to how far and at what speed we wish to defeat inflation. I have made it clear--I have done so before and I repeat
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it--that I believe that in recent months, which does not mean in the whole of the last two years but recently, as a result of the direction in which German interest rates were going, our policy was not wholly appropriate for this country.Mr. Budgen : The Chancellor did not say so at the time.
Mr. Lamont : But I made it clear very quickly indeed. My hon. Friend should recognise that the fact that we might have over-achieved on inflation in the short term was not something that would have brought other than advantage and gain for this country. We cannot, as some of my hon. Friends sometimes seem to think, opt out of the battle against inflation. It remains extremely important indeed.
Mr. John Garrett (Norwich, South) : Does the Chancellor agree that this modest boost to the economy is being paid for by an absolute cut in the standard of living and quality of life of many hundreds of thousands of public sector workers, many of whom receive the lowest pay in this country?
Mr. Lamont : Public sector wages in the last two years have done better on average than those in the private sector. Many public sector workers also have greater security of employment than is the case in the private sector-- [Interruption.] --not in all cases, but in some. I believe that, given the choice, it is right for the Government, rather than to cut services, programmes, the provision of health and the provision of education, to economise just for one year on our current spending. Is that really so unreasonable?
Mrs. Marion Roe (Broxbourne) : I add my congratulations to the Chancellor on his statement this afternoon. At a time when he has, rightly, been concerned first to help the economy, his statement is also good news for the health service. Does he agree that his announcement shows the Government's continuing priority for the health service, as has been demonstrated since 1979? Does he further agree that the large NHS programme will be good not only for patients but for the construction industry and for jobs?
Mr. Lamont : I am grateful to my hon. Friend for her comments. The capital programme in the NHS will be at record levels next year. My hon. Friend is also right to refer to the number of patients who will be treated and about the level of activity. There will be an increase next year in activity of about 2.5per cent. and an increase in expenditure overall in real terms of about 3 per cent., demonstrating clearly the Government's continuing commitment to the NHS. That is amply demonstrated by the fact that total expenditure since 1979 has gone up by the astonishing figure of 65 per cent. in real terms.
Mrs. Alice Mahon (Halifax) : How will a 2 per cent., cut in the wages of hundreds of thousands of public sector workers, including nurses, whom the Chancellor has betrayed by these cuts, help the economy to recover? I assure him that services are affected when morale is low. Is he not aware that, when nurses cannot pay their bills, that is reflected in how they do their work? Is he further aware that by hitting the public sector in this way he is particularly hitting women, who are in the low- paid sector, more than anybody else? He is making low-paid workers pay for the incompetence of the present miserable Tory Government.
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Mr. Lamont : I tried to explain to the House why, in my view--I believe that the whole country recognises this--some economies must be made. Expenditure and borrowing must be cut back. We have a choice of acting on capital spending, on programmes or on the salaries and wages of those employed by Government. To say that they will have an increase of from nil to 1.5 per cent. for a 12-month period, given what is at stake, does not seem an unreasonable policy or an unreasonable request for the Government to make.
Mr. Nicholas Winterton (Macclesfield) : I am happy to tell my right hon. Friend that I am pleasantly surprised by his autumn statement-- [Interruption.] --and I shall have no difficulty in voting for it. He knows that my devotion to the manufacturing sector is total. For the first time for some years, he, as Chancellor, has injected confidence into both manufacturing and construction in Britain. His reduction in interest rates, his reintroduction of capital allowances, his relaxation on spending of capital receipts and his abolition of the special car tax will be very welcome indeed.
May I take it that this will be the first of many pronouncements by my right hon. Friend, whose credibility has been restored by his statement this afternoon, and that he and the Government finally recognise that manufacturing industry is the only real source of non-inflationary economic growth?
Mr. Lamont : I am tempted to say that I am pleasantly surprised by my hon. Friend's remarks-- [Interruption.] --and particularly by his comments about voting. I have always believed that manufacturing was important, contrary to what my hon. Friend seems to think I thought. As I say, I have always regarded it as an important part of the economy, and it is obviously the key part in relation to international trade.
But we also have services and financial services. We have a diverse economy. I believe that the measures I have taken today will help construction, the engineering sector and manufacturing in general. I am pleased that my hon. Friend is pleased.
Mr. Alex Salmond (Banff and Buchan) : When the Chancellor described Scotland, Wales and Northern Ireland as territories in his statement, was that an official Government description or a Treasury forecast of the fate that will befall our country if we allow Tory economic policy to continue to depopulate it?
Will the right hon. Gentleman confirm that the adjustment to the Barnett formula means that the Scottish Office will have £60 million less next year than it otherwise would have had? If that spending squeeze is combined with the investment project concentration in the south-east of England, is not the Chancellor's announcement more a dash for votes in the Tory heartlands than a strategy for growth? If the Chancellor had not lost £2,000 million in a single afternoon, what would he have spent it on today?
Mr. Lamont : The answer to the hon. Gentleman's question is, no, Scotland will gain more than it would have done. The change that has been made in the formula as it applies to Scotland merely brings the formula in line with the population, as determined at the time of the census. That means that, since we have been making reductions in
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the survey, the reductions that apply to Scotland have been less than they might otherwise have been, so perhaps the hon. Gentleman should not be quite so dismayed.I am sure that the hon. Gentleman will welcome the fact, and make it widely known in Scotland, that there will be a £70 million package of construction-related work over the rest of the present financial year ; that Scottish Homes will benefit from new investment resources amounting to some £70 million over the next three years ; and Scottish business rates will be reduced next year by £68 million. Taken together, those three measures represent a £340 million boost for Scotland over the next three years. Go and tell everybody in Scotland about it.
Mrs. Angela Browning (Tiverton) : I congratulate my right hon. Friend. Does he agree that the package that he has announced today will be extremely helpful to the small business sector? As he will be aware, in the south-west, and particularly in my constituency of Tiverton, we have only small businesses ; we do not have large companies. They will welcome the reduction in interest rates, help with exports and, particularly, the increase in the first year's capital allowances, along with other measures that he has announced. Does he also agree that, in the 1980s, the small business sector created 1 million new jobs and we shall look to that sector again in the future for the creation of wealth and new employment opportunities? The statement will be greatly welcomed in Devon.
Mr. Lamont : My hon. Friend is absolutely right. Small businesses are the backbone of this country's economy. One of the great achievements of the 1980s was that so many small businesses were created. I note that, even today, despite the recession and insolvencies, VAT registrations for 1991 were slightly up on the previous year's. Anything that can be done to encourage small businesses is obviously welcome. Some of the measures, such as capital allowances, might be thought to apply only to large businesses, but my hon. Friend is right to remind us that capital allowances also benefit small businesses, which will also benefit from the reduction in interest rates.
Mr. John Gunnell (Morley and Leeds, South) : The Chancellor has announced that £1.9 billion will go to the health service. I note from the papers that he has distributed that £300 million that comes from so-called efficiency gains. What sum also comes from income generation by the NHS? Is any of the so-called new money for the health service a transfer from Department of Social Security funding?
Mr. Lamont : The money for care in the community will involve some new money as well. There will be £140 million for care in the community. The hon. Gentleman points out that we are assuming some efficiency gains in determining our budget. Why on earth not? Surely one should assume that, as we always have in the past and always do everywhere in the public sector. What we are assuming on income generation and efficiency gains is not out of line with what has been achieved in the past. That is why the settlement for the health service is realistic and will enable the health service to go on improving provision.
Mr. John Butterfill (Bournemouth, West) : Does my right hon. Friend accept that, at a time when many in the private sector have been suffering short-time working, cuts in pay, and even redundancy and unemployment, he got the balance absolutely right when he suggested that we
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should have restraint in public sector pay, accompanied and balanced by the fact that those who rely on the state for their income benefits are protected? That will give great pleasure to my constituents, so many of whom are pensioners. Will he share my hope that, when we vote on the question of restraint of the pay of Members of Parliament, we shall be supported by Opposition Members?Mr. Lamont : I am grateful to my hon. Friend. He is absolutely right to say that we should restrict public sector pay to preserve services. The Government will be recommending a zero increase in the pay of Members of Parliament, and I hope that we shall get the support of Opposition Members.
Mr. Tony Banks (Newham, North-West) : How will the £750 million to be used by housing associations for the purchase of properties be distributed throughout the country? Why has the Chancellor of the Exchequer specifically ruled out the spending of the £5.1 billion accumulated capital receipts?
Mr. Lamont : I explained the latter point in my statement, when I said that we had in the past encouraged local authorities to pay off debt. The hon. Gentleman should remember that the disagreement between myself and Opposition Members on that issue has always been based on the simple fact that letting local authorities spend their receipts adds to public spending. We must bear that in mind. I decided that a relaxation was in order, but it must be limited. I decided to do it in this way for the reasons that I gave. The distribution of the £750 million will be the subject of an announcement by my right hon. Friend the Secretary of State for the Environment, who is consulting the Housing Corporation about it.
Mrs. Judith Chaplin (Newbury) : I welcome my right hon. Friend's decision to abolish car tax. Does he agree that that will help not only British car manufacturers but all businesses which must spend money on cars?
Mr. Lamont : My hon. Friend is right--it will help all purchasers of cars. They were very much helped in the Budget by the first step that I took when I halved car tax. My hon. Friend may remember that I also increased the capital allowances. Specific limited capital allowances apply to the purchase of motor cars by businesses, and I increased those by a considerable amount in the Budget. So three distinct and, I hope, important measures have helped the car industry, both in my Budget and in this autumn statement. The car industry was pressing for that, so I am sure that it will be widely welcomed. In tax terms, it also makes sense.
Ms. Joyce Quin (Gateshead, East) : Will the Chancellor give us his balance of payments forecasts for this year and next year? In the calculation of next year's balance of payments forecast, has he made any allowance for the Government's proposed pit closure programme?
Mr. Lamont : When the hon. Lady looks at the published documents in the Table Office, she will see the provision in the programme of the Department of Trade and Industry. I hope that it does not sound too Irish-- [Interruption.] I must be careful because I have a difficult paradox to tell the House. Provision has been made both
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on the basis of a certain number of pits being closed and of pits being kept open. We have allocated a substantial amount of money in the second year of the DTI's programme, as the hon. Lady will see. The projection is that the current account deficit next year will be some £15 billion, but I expect that the depreciation will gradually have a favourable effect on the current account. I know that the hon. Lady follows these matters closely and understands them. One would expect to get the adverse effects before the beneficial effects.Sir Anthony Grant (Cambridgeshire, South-West) : Has my right hon. Friend ever heard such a moaning, miserable, Jeremiah-like, negative performance as that which we heard from the hon. Member for Dunfermline, East (Mr. Brown)?
I appreciate the warning of my hon. Friend the Member for Buckingham (Mr. Walden) against a housing boom and housing debt, but is my right hon. Friend the Chancellor aware that in his statement he recognised that the higher priority now is for economic growth to restore confidence in the construction industry and housing market? What he has said today will go a long way to help that hard-pressed sector. I welcome the reductions in interest rates that he has announced, but will he bear in mind the fact that the essential ingredient for a thriving economy in the long term is a low interest rate policy?
Mr. Lamont : Of course, what my hon. Friend says is right, but he must bear it in mind that interest rates are not just part of industry's costs, but a tool of economic management. They control the growth of money in the economy and are, above all, the key weapon in the fight against inflation. Without low inflation, businesses--big and small--will be destroyed.
I am grateful that my hon. Friend supports what I have managed to do today. I believe that the housing and construction industries have faced serious problems, and although I have been able to reduce interest rates--in some ways the single most important factor for housing and construction--I thought that it was right to take additional measures.
I entirely agree with what my hon. Friend said about the hon. Member for Dunfermline, East (Mr. Brown).
Mr. Peter Mandelson (Hartlepool) : The right hon. Gentleman gave the go-ahead for the Jubilee line in London, which may well bring a boost in morale to those living in the south. Will he itemise the specific, named capital projects for which he will give the go-ahead in the north to give a similar lift in hope to my constituents and people living in surrounding constituencies?
Mr. Lamont : There will be twice as many road starts next year as this year. That will benefit construction and the road building industry all over the country. In my statement I listed a number of projects--
Mr. Lamont : Several of those projects were not in the south-- [Interruption.] I am afraid that I will not identify where the projects are constituency by constituency, let alone town by town or village by village. What I will say is that the whole country will benefit. I do not make decisions on the basis of log rolling, which the hon. Member for Hartlepool (Mr. Mandelson) seems to think is the only appropriate way of making them.
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Sir Michael Neubert (Romford) : Does my right hon. Friend understand that any small disappointment that may have been felt because he was unable to announce an unequivocal go-ahead for the Jubilee line extension today is more than offset by the widespread approval throughout our great capital city of his decision to reserve the money for it? Will he and his ministerial colleagues accept the thanks and congratulations of Londoners on the fact that they have remained faithful to that major infrastructure project? Will my right hon. Friend warn the bankers that if they balk at coming up with their contribution they will not be forgiven?
Mr. Lamont : I am more than usually grateful to my hon. Friend for his contribution. We shall keep faith and hope that the bankers will also-- that is important. The Jubilee line is a major project that will provide thousands of jobs in the construction and engineering industries, and will be of great benefit, not just in London, but to firms up and down the country.
Mr. Dennis Skinner (Bolsover) : Is the Chancellor aware that when he talks about a public sector borrowing requirement of £37 billion-- probably rising to £50 billion the following year--one of its biggest component parts is the £30 billion that is paid to keep 3 million to 4 million people unemployed? If the right hon. Gentleman tackled that problem, he would be halfway to solving all his Budget problems.
In the twilight of his Chancellorship, the right hon. Gentleman has today introduced a spiteful mini-Budget that attacks the lowest-paid, taxes nurses and others in the public sector, and hammers women--who are mainly low-paid workers. He should have clawed back the £29 billion that went to the richest 1 per cent. of the population under previous Tory Budgets. If he had taken back that money from the richest 1 per cent., he could have ensured that the national health service, pensioners, the low-paid, and the education and housing sectors benefited. Instead, he has lined the pockets of his City friends, and wants the workers to pay the tab.
Mr. Lamont : Unlike the hon. Gentleman, I do not believe that one can simply spend one's way out of recession. The hon.Gentleman said that we did not need to have a PSBR problem but that all that was necessary was a series of employment-creating measures. He said that
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that would eliminate the PSBR problem and the recession. That is nonsense. If that were the solution and the right approach, there would be no public deficit problems and no recession in any country in the world. That is not the way to approach the problem.Mr. Bob Dunn (Dartford) : I welcome my right hon. Friend's reference to the preservation of the national roads programme and the ultimate creation of money for the Jubilee line. I also welcome his commitment to involve private sector capital in transport projects across the country. Will he bear it in mind that there is a successful precedent for such a policy in the construction of the Dartford bridge, which was built by free enterprise using private money, has been completed and is now running on time?
Mr. Lamont : My hon. Friend makes a good point, but I am afraid that our regime for private finance has been extraordinarily complex and arcane. I know that many people have felt that it was designed more to frustrate private financing of infrastructure than to encourage it. It was something of a minor miracle that the Dartford bridge got the go-ahead as a private sector project. We want to encourage more Dartford bridges which is why we have now finally made what I think will turn out to be decisive and clear changes in the rules to facilitate more construction in the longer term.
Mrs. Jane Kennedy (Liverpool, Broadgreen) : I welcome the increases in line with prices in the invalidity benefit, but how does the Chancellor intend to raise the £240 million that he mentioned in his statement by tightening up on invalidity benefit? Does he intend to tax the benefit in future, or does he intend to interfere with doctors' judgments?
Mr. Lamont : My right hon. Friend the Secretary of State for Social Security is to make a statement immediately after this statement which will cover the hon. Lady's point.
Mr. Win Griffiths (Bridgend) : On a point of order, Madam Speaker.
Madam Speaker : Order. As the hon. Gentleman is aware, points of order are taken after statements and the business statement.
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Social Security
5.7 pm
The Secretary of State for Social Security (Mr. Peter Lilley) : With permission, I wish to make a statement on social security following directly from my right hon. Friend's autumn statement. As my right hon. Friend the Chancellor has announced, spending on social security in each of the next three years will be £79.8 billion, £82.9 billion and £87 billion.
That is a gauge of the Government's commitment to the needy, the sick, the elderly and to families. Despite the intense pressure on the social security budget we will maintain support for those hit by the recession, we will focus additional support on the most needy. and we will keep our pledges to families and to the elderly. I can today announce that all major benefits will be increased fully in line with inflation. Subject to parliamentary approval, benefit rates will therefore go up by 3.6 per cent. next April. The basic retirement pension for a single person will increase by £1.95 a week to £56.10, and for a couple it will rise by £3.10 to £89.90. Unemployment benefit will increase by £1.55 for a single person and by £2.50 for a couple, and I propose to make no other changes to that benefit.
Child benefit will be £10 for the first child and £8.10 for each subsequent child. In addition to uprating all benefits, we will keep our promises to focus increased support on those in greatest need. Last month, the Government boosted the income support rates for pensioners, by £2 for a single pensioner and by £3 for a couple. From next April there will be a increase in the real value of income support. Thereafter, no one on income support will be required to contribute a minimum of 20 per cent of the local government taxation charge, as people have up to now, but the increase in basic income support levels introduced to match that liability will be maintained. That is worth on average £1.40 a week for a single person under 25, £1.60 for a single person over 25 and £2.80 for a couple. That means that the disposable income of an unemployed couple on income support will actually increase by an average of £5.20 a week next April, and the disposable income of an average 80-year-old couple on income support will be £9.35 more than it was last April, taking their income support over £100 a week for the first time. The uprating itself will cost £2.5 billion next year and the real increase in disposable income for those on the income-related benefits is worth a further £1 billion.
It has been possible to meet these commitments in full only as a result of a searching scrutiny for savings in all my Department's programmes. My first priority has been to find savings that do not involve curtailing entitlement to benefit. I have therefore subjected my Department's running costs to rigorous examination, while maintaining my Department's full commitment to the citizens charter and enhancing capital spending, which will rise by £159 million over the next three years, bringing total capital expenditure to more than £1 billion in that period.
A major component of running costs is the payment of benefits by order book or giro. That is markedly more costly than payment through the banking system. I therefore propose to encourage more customers to accept payment of benefits directly into their bank or building society accounts. In addition, my Department will be
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working closely with the Post Office to improve efficiency and reduce theft and fraud involving order books and giros. This, along with fraud elsewhere in the system, can involve very substantial sums of money. I have already announced my determination to tackle fraud and abuse of benefits. Those who defraud the system have nothing in common with the vast majority of honest and genuine claimants, and every pound lost through fraud means less for those in real need. I therefore plan to step up the fight against fraud. I am increasing our investment in fraud work by £10 million a year. This, aided by better use of our existing resources and new techniques, will have an expected return of £100 million a year. I am today laying the regulations withdrawing income support from those--be they new age travellers or others --who are not even actively seeking work. I will consult the local authority associations on a new initiative to encourage local authorities to stop fraudulent claims for housing and council tax benefits. By taking those measures, I hope that the total of fraud identified and stopped will increase to nearly £1 billion each year.It is also necessary to look carefully at how well benefit spending is focused on those whom Parliament intended to help. There has been a significant increase in the numbers on invalidity benefit and in spending on it. There are now more than twice as many people drawing this benefit as in 1979, at a cost nearly two and a half times as great. By 1996 invalidity benefit will cost well over £7 billion a year. Against that background, I intend to tighten up the administrative and medical procedures for controlling this benefit. That will ensure that medical examinations are better targeted and that more effective action will be taken when people fail to attend for their examination or are found to be capable of work. Those changes are expected to reduce spending by £240 million over the survey period. A major research study into invalidity benefit was launched last year. Some results have been received, and others will be received during 1993. I shall consider those results carefully as they become available.
I have also looked at two aspects of war disablement pensions. Officers receive more compensation for a given disability than other ranks. There is no reason why they should. I therefore intend to abolish rank differentials for disablement pensions, by moving everyone up to the rate for officers. That will benefit nearly 200, 000 war disablement pensioners who will gain by up to £5 a week. This will be made possible by the second change, which is to bring the rules for noise-induced hearing loss more into line with the industrial injuries scheme. As under that scheme, awards will no longer be made to those whose noise-induced hearing loss is assessed at less than 20 per cent. disablement. But I can assure the House that no existing war pensioner will suffer a reduction in the cash that he or she is currently receiving. These proposals will now be discussed with the Central Advisory Committee on War Pensions. I also intend to introduce two minor savings measures. I propose to increase the top rate non-dependant deduction in housing benefit and income support, but to freeze the three lower rates. I propose also to freeze the higher rate of statutory sick pay, as most employees who benefit from it are covered by occupational sick pay schemes. These enable me to make a number of modest, but worthwhile, improvements. I plan to increase by £10 per week all but one of the income support limits for those
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with preserved rights in residential care and nursing homes. I plan to extend the severe disability premium to those sharing a household with a blind person. I am increasing the amount that carers may earn without affecting their benefit. I am giving £1 million to help hospices and more money to help severely disabled drivers. We are also introducing improvements in the benefit arrangements for orphans. I believe that those measures will be widely welcomed. I now turn to the social fund. By using loans, we can help far more people with a given amount of money than if it were given as grants. Improved repayments of these loans enabled me last week to announce an extra £8 million for the social fund discretionary budget for the current year. Together with a further injection of cash, that means that I now expect next year's budget to be up 12 per cent., at £340 million. That is a 50 per cent. increase in two years.In accordance with my statutory duty, I have carried out a review of national insurance contributions. The national insurance fund is obviously affected by the state of the economy. However, the Government do not propose to make changes to national insurance contributions for next year other than normal adjustments for inflation. That reflects our determination to minimise the burdens on employers and employees. Instead, we intend to seek powers to keep the national insurance fund in balance by drawing as necessary on a new, limited, Treasury grant. That grant will give us useful flexibility in managing the fund during a downturn in the economic cycle. I intend to introduce a Bill shortly to make provision for the grant. The Bill will also provide for the new age-related addition for personal pensions. Personal pensions have proved outstandingly popular. This addition will remove a potential distortion. It fulfils our manifesto commitment and it will ensure the continued success of personal pensions.
Fuller details of the uprating, national insurance and other measures have been given in two written replies to my hon. Friends the Members for Hertfordshire, West (Mr. Jones) and for Tiverton (Mr. Browning). Those replies are available with the autumn statement briefing in the Vote Office and will be published in the Official Report.
My right hon. Friend the Chancellor has set out a tough and realistic programme for public expenditure as a whole. Within that total I have sought to make savings, particularly by bearing down on operating costs and fraud. I have sought to curb programmes that might otherwise pre-empt the resources needed to sustain recovery in the longer term. As a result, we have been able to protect benefits for those hit by the chill wind of world recession, to channel increased support to the most needy and to keep the pledges that we made in April. I commend our plans to the House.
Mr. Donald Dewar (Glasgow, Garscadden) : Let me begin by welcoming the general uprating of benefits by 3.6 per cent. It is not so much a cause for satisfaction as a cause for relief when measured against the rumours that were allowed to run.
Let me also register my personal relief that the Secretary of State has not acted in the spirit of his speech to the Tory party conference, in which there was so much
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talk of subsidised scroungers and the something-for-nothing society. To say that the preservation of the status quo is presented to look like progress is, I think, to make a fair comment on the Government's record.Notwithstanding the Secretary of State's complacency, will he recognise that, for many, life on benefit is anything but easy? Last year, income support was uprated by 7 per cent. ; this year, the uprating is 3.6 per cent. Does the Secretary of State accept that, whatever the technical reasons for the change in the Rossi index, many will feel a cold wind blowing in the new year? Retrospective indexing is, of course, a comforting method when inflation is falling, but now, with the emergence of a very different picture, does the Secretary of State recognise that he is leaving pensioners' living standards vulnerable to rising inflation in the coming year? The underlying rate of inflation in the year to September was 4 per cent. Is that not a better estimate of pensioners' costs, given that most of them do not have mortgages? Does the right hon. Gentleman accept that bonfires will not be lit following the news that a married person's pension is to rise from £86.70 to £89.90? I hope that the Secretary of State has noted and studied the Rowntreee report, by Professor Jonathan Bradshaw, which was published earlier this week. The report underlined the difficulty of making ends meet at current income support levels. Does the right hon. Gentleman accept that there is little room for comfort when-- according to the report's findings--a couple with two children under 11, living in a council house, need an extra £36 per week to fund an austere low-cost budget? There are no signs that this Minister and this Government have any visible or active commitment to tackling the problems of poverty.
I note that the Secretary of State intends to cut £240 million from invalidity benefit expenditure over the survey period. A few minutes ago, one of my hon. Friends asked the Chancellor a question that I shall now ask the Secretary of State. Is he, in effect, challenging the professional judgment of general practitioners, and does that imply that there will be new instructions on certification by doctors? If so, will the right hon. Gentleman give details? If not, exactly what kind of changes is he contemplating?
Will the Secretary of State now come clean about the hidden agenda in connection with invalidity benefit ? Are there plans for legislation to reduce average payments of the benefit, and to bring it into tax ? Would that not mean that an additional 70,000 people whose only income is invalidity benefit would have to pay tax ?
Mr. Nigel Evans (Ribble Valley) : That is a scare story.
Mr. Dewar : I shall be delighted if the Secretary of State tells us that it is a story without foundation, and rules it out. I shall wait with interest to see whether he does so.
I note that the Secretary of State is laying regulations to withdraw income support when it is held that a claimant is not actively seeking work. Those changes will not only affect new age travellers, as Ministers often imply ; they will affect all applicants for unemployment benefit. Will the Secretary of State tell me what advice on the matter, and on that specific proposal, was given by the Social Security Advisory Committee ?
I welcome the changes in war disablement pensions to put other ranks on a footing with officers, which
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