House of Commons Hansard Debates for 13 Jul 1995

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We have a paradox. The Secretary of State-- of whom, I should have thought, most of us now have the measure--is serious about reforming the welfare state and wishes to cut growth in expenditure on it. A range of Bills has scrapped earnings-related supplements to national insurance benefits, cut benefits for disabled people and scattered asunder the remains of SERPS, but the daily cost of the welfare state to those in work has risen.

On one criterion it does not appear that the Secretary of State is succeeding. Welfare bills are increasing, but we can look at those figures another way. We know that the Secretary of State has made cuts: I am not accusing him of dishonesty or deceit. At general election time, the Government have always been clear about their programme. If ever a Government have had a mandate for their programme, it is this one.

After the latest round of cuts, the real budget for social security in the period 1994-95 to 1997-98 will rise by 1.3 per cent. The hon. Member for Colchester, North (Mr. Jenkin) is a member of Social Security Select Committee. When we were drawing up the report that forms the backdrop to our debate, he noted that the rapid upward push in the cost of benefits is continuing. Between 1997-98 and the end of the century--not many years--the real cost of welfare will rise by 2.1 per cent. That is another criterion by which to judge the Government.

Over the period of the Government's stewardship since 1979, the growth in the economy has been 1.9 per cent. After the latest rounds of cuts in welfare provision, the real cost will go up by 2.1 per cent. The Government's much-modified objective of controlling expenditure to below the real rate of increase in the economy is going to fail. I look forward to hearing how the Secretary of State will reply to that.

Their failure, of course, is not across a broad canvas; it is a failure on quite a narrow focus, on which I wish to make my contribution. I hope that it will be followed up by many other hon. Members.

The welfare state has three forms of benefit--national insurance benefits, for which we pay into the national insurance fund; what are called non- contributory national insurance rates or non-contributory, non-means-tested benefits, which go to people in certain categories such as parents who claim child benefit; and benefits that go only to those whose income is low and who qualify after a test of income. It is crucial that we consider which benefits are growing fastest and cause the most concern among not only the Government and Opposition Front Benchers but people outside such as my constituent who have to pay the bill. They wonder, if the present strategy continues, what scenario will meet us shortly after the turn of the century. Let me break down the figures. The Government's record up to 1992-93 shows that the real-terms growth in contributory benefits was 1.6 per cent. The increase in non-contributory benefits, many of which are disablement benefits, was 6.9 per cent.

What has been the real-terms rate of increase in the means-tested side of the welfare state? I hope that we shall note from the Secretary of State's response to this debate, if he is lucky enough to catch your eye, Mr. Deputy Speaker, that there has been a subtle change in the Treasury's approach to means testing. In the early

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Thatcher years, Ministers would wave their arms and legs and say that means testing was the way forward to concentrate help on those in greatest need and to target benefits. We hear a slightly different message from the Treasury Bench now, and I hope that we shall hear a development of that theme a little later in the debate.

Income support for pensioners has risen by 5 per cent. For those below retirement age, it has risen by 10.6 per cent. and for rent allowances it has risen by 15 per cent. Before the latest attempt to extend family credit to those without children, the figure for family credit had risen by more than 20 per cent. The Secretary of State's failure to control the social security budget is not a failure across the whole broad sweep of policy. His failure to meet his objective is caused by the great emphasis that the Government place on means-tested assistance.

Means-tested assistance is the destabilising part of the welfare state. The Secretary of State argued before the Select Committee that the present bill was not sustainable because of the impact that it would have on the functioning of the economy. There must clearly come a point when, if welfare bills are pushed up to a gigantic level, the economy is impaired. I think that the instability is caused by something much more important: the number of people whom we are now putting on means-tested assistance.

When I make a charge against that side of the welfare state, I make a charge against us--specifically the Treasury Bench. I am much tougher than the Secretary of State on fraud, and have no room for those who wrongly claim benefit. I am sure that other hon. Members will try to catch your eye, Mr. Deputy Speaker, and talk about how partial the Secretary of State still is to dealing with the issue as we would wish to see it dealt with, but he is a happy recidivist on that. Each time, he tries to take a tougher approach to deal with fraud and we are here to encourage him in that.

Means tests have a double effect on our constituents. First, they teach them to behave rationally and work the system--I shall give an example of that in a moment--and I do not blame my constituents or those from Colchester, where someone who wrote another letter is from, for doing so. They are behaving rationally within the framework that the House has set for them and in which they must operate. On the other side of the coin, some people decide that income support and means-tested benefits should be some form of basic income and that they should claim it and continue to claim it while they work and do all sorts of other activities. I am now talking about how it destroys people's sense of worth, their desire to behave as decent citizens and the importance that we stress on working, saving and being honest.

The second letter says:

"I am 59 years of age and was made redundant in August, 1994 (for information this was the 7th time I have been made redundant since 1976). In the past, I have always managed to obtain employment, mainly due to my knowledge and management skills. However, although I have applied, written, and telephoned over 300 companies during the past 10 months seeking any form of employment, even down to collecting empty trolleys at supermarkets or cleaning

offices/factories, I have had no success mainly due to my age." The person goes on:

"My wife and I have always been great believers in helping ourselves as against making claims against the State and, therefore, when I was unemployed in the past we used our savings, plus our

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then borrowing power, to pay our bills, rather than claim benefits. This obviously has meant that we have not had a holiday for over 10 years.

As my wife presently works between 40 and 48 hours per week and has a net wage of an average of £100 per week we are unable to claim any benefits other than unemployment benefit. We are advised by the benefits agency that, due to my wife working over 16 hours per week, once my unemployment benefit ceases in August 1995, we shall have to exist on her wage, or, as suggested by the social benefits and employment offices, my wife should cease work and my claim for benefit would then be considered . . .

I am informed that, based on current benefit figures, my wife and I would receive approximately £100 a week plus possible mortgage interest assistance, that being applicable when I reach 60 years of age in September of 1995."

Is it not absurd that rather than that man's wife continuing to work for £100 a week, he can draw benefits of perhaps £125 or £150 a week if his wife stops working? Would not it be better for him to be able to continue to draw unemployment benefit and for his wife to continue working? The cost of that to the taxpayer would be a third of what will happen under the rules in September, when his wife will be forced out of work because they will be better off on benefit. They are skint, they have used their savings and they are afraid that their house will be repossessed. They continue in the letter: "We have already had to live through the loss of our 2 daughters in 1969 and the loss of our home now would be more than we could stand."

They will stop working and will draw three times as much in benefit. It will appear as a saving in one account but, the following week, it will appear as a deficit and help to explain why the Secretary of State cannot control the budget as he wishes. There is nothing dishonest about those people. As the House has just heard, they have worked hard all their lives, scrambled for jobs and used up their savings. They will now behave rationally within the rules that the Government have set. It often pays not to work and to work the system.

Others, of course, feel differently and are not quite so conscientious as that person from Colchester; they feel that income support and housing benefit are there for the taking as of right. They think that it is a basic income that people should use, and they add to it whatever income they can get from work.

The means-tested side of the welfare state is the fastest growing side. It penalises people if they get a job, confiscates their savings and taxes honesty. It cannot be sensible for a country to have a welfare state, the fastest growing part of which has those effects on human character. We have lived through an important time in which the Secretary of State, with a clear vision of what he has wanted to do, has come to his Department, seen the enormous opportunity to apply his own ideas and ideology and bring about change. Yet as I said at the beginning, the figures do not look good given his objectives for the welfare state.

We can all learn lessons from this tale. I do not believe that we can control public expenditure, or the largest part of it--a third of all the money contributed by taxpayers--if we have a strategy like the one pursued by the Government, which pushes more and more people on to means tests and then finds it impossible to control that part of the budget. It is impossible to control it because, as I described using the example of the gentleman from Colchester, it is rational. The only option is to work the system, and doing so, in that instance and many others,

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increases the cost of welfare not onefold but threefold, and people feel a failure because they have been unable to get a job. They must now exist totally on benefit--something that the family from Colchester have fought all their lives.

Other people believe that welfare is an easy touch. I welcome the statement that the Secretary of State made recently--and, I believe, the other eight that he has made--on clamping down on fraud, but he has a long way to go.

The Select Committee is considering that matter with deadly seriousness. It is easy enough to pick on single mothers and those who work on the side-- although the Secretary of State has not quite got the measure of either of those yet in the fraud clampdown that he has announced--but we are equally worried about the fraud that sophisticated gangs must be perpetrating against that £90 billion budget. It is inconceivable that the budget is somehow gated by behaviour characteristic of the garden of Eden. Given what we know about City fraud and fraud in financial institutions, it is unthinkable that similar techniques are not being used against our budget of £90,000 million.

I believe that we do not yet have the measure of people committing that type of fraud. I fear that the task will be fraught with danger for those officers who begin to get a grip on it. Not so long ago, some people were sentenced to life imprisonment for shooting officers who were checking up on MOT frauds. We shall be tackling very nasty, very vicious, very violent people who are uninterrupted in their activity in ripping off our £90,000 million social security budget on a mass scale.

For that reason, I call for officers of the highest quality--of Special Air Services quality and rewards--to undertake that task for us, for I fear that it may not be that long before the Secretary of State has to come to the Dispatch Box to announce what has happened to some of the officers in his Department when they do get to grips with fraud in that sector.

Mr. Malcolm Wicks (Croydon, North-West): Does my hon. Friend agree that, if the Secretary of State's recent estimates about the scale of fraud are correct, it must mean that, during the stewardship--to use one of my hon. Friend's favourite words--of the present Government, billions and billions of pounds have been fraudulently used? Is that not a matter of great concern? In spite of the platform rhetoric at seaside resorts every year, the Government have effectively been soft on fraud.

Mr. Field: I like teasing the Secretary of State that he is soft on fraud and soft on the causes of fraud, but he is getting better and we should encourage him in that endeavour.

My hon. Friend is absolutely right. We have always heard such rhetoric from the Conservative party at elections and at party conferences. Given the partial nature of the current measures, if they had been introduced in 1979, not only would we have ensured that improved anti-fraud measures were now in place but huge tranches of money would have been saved for taxpayers. My constituent who pays £130 a month in taxes on her three days of work a week is the type of person who has been cheated.

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I do not believe that the Government have a strategy other than cutting entitlement and, late in the day, trying to screw down on fraud. If we are to bring the budget under control successfully, we must propose an alternative programme.

In conclusion, I shall mention three things that I believe that we must do. Before the millennium, we shall receive the full force of taxpayers' opinions about what they want to happen to public expenditure. The thought that we can maintain public expenditure at the present level is an illusion that politicians should not have. Opposition Members may pretend that it will not happen--and allow public opinion to hit us in the face--or try to devise strategies whereby we leap ahead of where the electorate will be in a few years' time and set out an alternative stall.

I hope that we shall consider carefully the proposal of hiving off the national insurance side to a corporation or perhaps, to use a more friendly phrase, an organisation run by the punters themselves--both contributors, employers and employees--with the Government having a say. That organisation would set rates of benefit and gradually take over what is currently the national insurance system.

It would cover the whole of that sector in time, but it would, for example, tackle the problems that the letter that I have just read reveals. If people could quickly requalify for insurance benefit when they were unemployed, as they could under the 1911 scheme, many more people would be prepared to take risky jobs, hoping that the job would last long enough that they at least got their insurance credits back so that they could again benefit. We know that, if they received benefit, their wives and other members of the family could continue to work and they would not get caught back on means-tested assistance. We know that, once most of our constituents are on means-tested assistance, it is almost impossible for them to break free.

The second long-running reform is to ensure that everyone has at least one pension other than the state retirement pension: in other words, universalise private provision of pensions; everyone will have to be in. If Tesco can run a pension scheme that admits part-time workers after the first hour of work, everyone can run an equivalent scheme, or at least allow people to opt into a national scheme that provides such coverage.

The final thing that we must do if we are ever to control the estimates that we are debating today is to change totally the culture of income support, which is that of a passive agency, paying out benefit, into one that is proactive, helping people back into the labour market.

I propose that everyone on income support who is below retirement age should be expected to draw up career plans and use their income support payments to achieve those objectives.

In previous debates, my hon. Friend the Member for Croydon, North-West (Mr. Wicks) has given us a powerful example of why that change should occur. He gave us the example of a single parent in his constituency, visiting her income support office, saying to officers that she wished to become a traffic warden. The officers fell about laughing. They said, "You've got it wrong, love. Our job's to pay out money; it's not to help you get a job."

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That is an appalling state of affairs. Those officers were behaving properly. Their job was to pay out money, not to help claimants achieve the objective of getting back into work.

I know that problems are involved with such a scheme, such as how to ensure that child care is available--which probably goes beyond giving a few people already receiving child care, vouchers worth £1, 000 a year. However, we must change that culture of drawing benefit and then merely existing on benefit if we are to achieve significantly greater success than the Secretary of State in controlling growth in social security expenditure.

I finish as I began. The Government have made wild claims about the way in which the social security budget, the largest of any Government budget, will be controlled. Their first objective was to hack it back, then it was to cut it in real terms, then it was to control the increase in real terms and then it was to cut it enough so that in real terms it was growing slower than the real long-term growth in the economy.

The figures that I gave at the beginning show that the Government have failed on all those objectives. I do not present those figures merely to crow at the Government. This is an immensely serious debate. The social security budget is the largest part of expenditure to which taxpayers contribute each week with their hard-earned money, and the Government have failed to control it. I hope that, before the general election, we shall make proposals that show that there is an alternative to the present regime.

5.19 pm

Ms Liz Lynne (Rochdale): I want to praise the report by the Select Committee on Social Security. It is very constructive and it has a great deal of common sense in it, especially the call for more regular information on expenditure and growth and the recommendation for more research, which is needed for the wide range of benefits that we are discussing. The most radical idea in the report is that Government Departments should estimate the cost of their policy decisions on the social security budget. I sincerely hope that the Government will take that idea on board. There are so many areas that such estimates could cover, including housing and employment. The abolition of the wages councils obviously had a tremendous effect on the social security budget. The Government spend £2 billion subsidising low-paying employers and they top up the earnings of 1.7 million people. Far from the Government learning from the abolition of the wages councils, they have taken matters a step further and we now have the jobseeker's allowance. On Report in another place on the Jobseekers Bill, the Government opposed an amendment that would have given the right to every person to turn down a job for which the wage was lower than benefit. In other words, the Government have rigged the labour market, because benefit will be stopped if the claimant does not take the low-paid job. Employers will be able to offer wages lower than the wages that they offer at the moment, because they know that unemployed people will have all their benefits cut unless they take the low-paid job.

For single people and couples with no children, the introduction of the jobseeker's allowance could mean that they will live below the poverty line. I know that the Government are introducing pilot schemes to look at

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benefits similar to family credit for those with no children and for single people. Already, however, couples with children have to have their earnings topped up by family credit and the family credit budget is continuing to soar; it has doubled in the past four years. Employers are exporting their wage bills to the taxpayer, which is totally unacceptable.

The same point applies to housing. If Government Departments had to estimate the cost of their policy decisions on the social security budget, would the control of council house receipts remain? I very much doubt it. If that policy were adopted, unemployed building workers could get back into work. Other employers would be able to take on people, because the knock-on effect of houses being built would be to the benefit of suppliers to the building industry. If councils were allowed to spend the receipts, there would be low-cost, local authority housing, which would stem the rise in the housing benefit bill. It must make economic sense for the Government to adopt that policy.

The Select Committee stressed the disturbing growth in means-tested benefits; it talked about the unemployment trap and about the low-income employment trap. The Committee looked, but it failed, unfortunately, to recommend that the tax system should be looked at at the same time as benefit reform. By close integration of the tax and benefit systems, the effects of unemployment and the poverty trap would be somewhat mitigated.

At the time of the Budget, the Liberal Democrats suggested that we should take 50,000 low-income earners out of the tax system, which would have helped with the family credit bill. I know that, with all the publicity last week, another report by the Select Committee on Social Security, which dealt with the compensation recovery unit, was somewhat ignored. Reforms would reduce the injustice suffered by personal injury victims and would mean that, instead of the money being clawed back by the Treasury from the victim, it would be clawed back from the employer. That proposal would be revenue-neutral for the Treasury. I would be grateful if the Minister, when summing up, would refer to the proposal.

Another area that has been well documented in the past few days is benefit fraud and I welcome the Government's initiative on that, although it has to be said that they have introduced many initiatives, but have not followed them through. The initiative will not be taken seriously by the claimants who are defrauding the system unless they can see that tax fraud is treated equally. I welcome the survey by the Department of Social Security and its estimates of the money that is lost in benefit fraud. I would like the Treasury to carry out a similar exercise on tax evasion. How can we persuade people in a lower income bracket and those who defraud the benefit system to be honest when people at the higher end defraud the tax system? The main aspect of the Select Committee report which I welcome is that all Government Departments should assess the cost of their policies on the social security budget. That is the way in which to get the social security budget down instead of penalising the people whom the Government penalise at the moment--the unemployed, who will be affected by the cut from 12 months to six months of benefit, and disabled people. I hope that the Government will look seriously at the initiatives set out in the Select Committee report, which I commend to them.

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5.26 pm

Mr. Tony Banks (Newham, North-West): I say for the record that the London borough of Newham is the most deprived local authority area in England and Wales, according to statistics from the Department of the Environment. As someone who represents and lives in the area, I can bear witness to the general level of poverty in the east end of London--in Newham, Stratford, Upton Park and West Ham. Strangely, I get far angrier-- it is not synthetic anger--than my constituents when I see the poverty that they have to deal with.

I am unmoved by talk of the need to crack down on fraud, not because I am in favour of fraud, but because I am far more concerned about people who do not receive benefits to which they are entitled. I am more concerned about them than I am about those who are trying to get more out of the system than they should. I am a great supporter of those who want to crack down on fraud, but I am an even greater supporter of those who want to make sure that the benefits go to those who need them most and that people are receiving what they are entitled to.

I do not understand how some people in my area exist from breakfast to dinner--assuming that they get either a breakfast or a dinner. They have to live on levels of income that Members of Parliament have no experience of whatever. Members of Parliament will spend more on the Terrace this evening --so will I--than some individuals have to spend in a week. I am not claiming that I am impoverished--far from it. However, when I hear Members of Parliament going on about levels of benefit and about how we need to ensure that they are appropriate, I realise that there is a great stench of hypocrisy, as ever, hanging around this place.

More than 18,000 people in Newham are unemployed and there is an unemployment rate of 19.5 per cent. Some 85,592 people in the borough depend on income support. Unemployed people make up 41 per cent. and lone parents make up 19 per cent. of income support claimants. Those figures show the extent of the poverty in my part of the east end. This evening I draw attention to the changes that will be introduced on 1 October in respect of mortgage interest payments.

Mr. Frank Field: The figures that my hon. Friend has cited from his borough are very interesting, because they are the exact opposite of the national figures, which show that the number of unemployed people drawing benefit is exceeded by the number of people heading single-parent families and trying to raise children on their own. That illustrates the fact that recent labour market policies have decimated jobs to the extent that inner- city areas do not reflect the national average, which shows that twice as many single parents are drawing benefits compared with unemployed people. In our areas, there are twice as many unemployed benefit claimants as lone parent benefit claimants.

Mr. Banks: As usual, my hon. Friend makes an excellent point and we all defer to his expertise in such matters.

Speaking as a lay person, I would like the Secretary of State and his Ministers to sit in my advice surgeries and hear what is going on. I want them to see the situation for themselves, instead of sitting in Departments and receiving advice from civil servants. I am not suggesting that the Secretary of State and his Ministers do not visit

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offices in their constituencies and listen to people's problems, but if they could visit the east end, be a fly on the wall and listen to people's stories, perhaps they might show greater concern for low levels of benefit rather than constantly making accusations and creating the impression that people are living the life of Riley on income support or social security benefit. It is certainly not the sort of life that I would want to lead--even on the most generous level of benefits currently available.

I want to ask the Secretary of State about some of the changes to come into effect on 1 October. It appears that most people under 60 years of age who buy a house or take out a loan for repairs after 1 October will receive no income support assistance with mortgage interest or service charges for nine months. That is outrageous. Ministers have been lobbied about the matter and some groups have been granted a reprieve. As I understand it, they will be classed as existing borrowers. But what about recently deserted or widowed people, who will be included in that group only if they have children? We believe that the decision will cause great hardship to many women in my area who have spent years as carers and so do not have any employment. The Minister must consider that point. There is also the question of the standard rate of interest. Income support mortgage interest is currently calculated on the actual amount of interest. The change to a standard rate of interest for all claimants will be set at the average mortgage interest rate for probably an annual period. Those with high interest rates will have a shortfall, which benefit will not cover, and that will affect particularly those people on low incomes who end up with expensive loans. That will create enormous problems in my area.

Assistance with accumulated arrears is to be abandoned. Interest will no longer be paid for arrears built up during the initial non-payment period and that will lead to increased debt and homelessness. The Government's excuse for abandoning that assistance is that the calculations are very complex--but so are the calculations for child support, and it has not been abandoned. The calculations could be made if the Government had the political will to do it. I return to the effect of the changes in Newham. After 1 October, they will take effect slowly and insidiously over two or three years as new claims are made and more people are affected by the restrictions. Last year, Bow county court dealt with 4,000 mortgage repossession cases. Where do people go after that? They turn to the local authority. I get very angry with the Government for deflecting those problems to the local authority, which then has a statutory obligation to try to house the people whose homes have been repossessed.

Bed-and-breakfast accommodation comes into play. We are still spending millions of pounds on the provision of short-term and bed-and-breakfast accommodation. The Government simply shift the problem from their jurisdiction to that of the local authority. Conservative Members then talk about high rent arrears and empty local authority housing stock. They say that the problems are the responsibility of the local authority and they ask why

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nothing is being done. The Government think that they are dealing with the problems, but they are not: they are simply shifting them somewhere else.

Mr. Field: I am grateful to my hon. Friend for giving way again. Last Friday I visited Salford, where the citizens advice bureau provides a service in the courts for people who face homelessness through repossession. That work underlines the point that my hon. Friend made earlier about people receiving the entitlements that they deserve. The CAB finds that many people who face eviction because of mounting debts--the situation will worsen when the changes are introduced--are not receiving their proper entitlements. There may be minor savings initially but, as my hon. Friend pointed out, there is a massive increase in public expenditure when people whose homes have been broken and whose families have been torn asunder are placed in bed-and-breakfast accommodation.

Mr. Banks: My hon. Friend represents a constituency that is not dissimilar to my own, and he has seen the evidence. We are not making up the stories. The changes will not affect our personal circumstances, but they will affect the people whom we represent. Members of Parliament have a duty to bring those facts to the Secretary of State's notice. Instead of listening to arid discourse from departmental staff, he should listen to those who represent the people who are most affected. That is why we bring our cases to the Secretary of State.

The Secretary of State for Social Security (Mr. Peter Lilley): In addition to bringing the cases to my attention--I have listened attentively to his comments and I know that his argument has a great deal of force--has the hon. Gentleman had any success in persuading his own Front Bench to increase the level of benefits? Did he hear his leader say this week that benefits should be altered and that there should be massive reform of the welfare state, so that benefits out of work are less than what people receive in work?

Mr. Banks: Only time will tell whether I am having any success. I assure the Secretary of State that I would be far happier taking my case to a Secretary of State of my own political persuasion, because I am sure that my colleagues understand the problems better and would take a far more realistic approach to the level of benefit. I shall be honest with the Secretary of State: my argument will not alter--in fact, I shall be twice as angry--if a Labour Government do not address the problems of the east end, because the people of the east end have loyally supported the Labour party for generations. They are entitled to expect assistance from a Labour Government whom they elect. I am sure that they will receive that satisfaction. But if they do not, I assure the Secretary of State that my voice will be raised most stridently on their behalf. However, I suspect that my support will not be needed to the same extent that it has been needed since 1983.

I shall not detain the House much longer. I seek clarification from the Secretary of State about two more issues in the context of the estimates debate. I understand that the new in-work benefit pilot, the earnings top- up, is a benefit like family credit, but for people without children. It is a means-tested top-up for people on low

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wages. It will pay up to £54 per week, with an average of £23 per couple and £19 for a single person aged 25 and over. It amounts to a subsidy for low wage rates.

Conservative Members ask what a minimum wage will cost, but what is it already costing the taxpayer to subsidise rotten employers who pay lousy, stinking, strip-out wages? No one in this place would work for such wages. They would laugh; they would not even get out of bed. If Members of Parliament were offered that sort of rate for a BBC or an ITV interview, they would turn it down. Of course, I would not turn it down; I would do it for free, as hon. Members well know--but that is another matter. Money does not interest me in the same way as it interests so many on the Government Benches. We are talking about ludicrous wage levels, and we are asking the taxpayer to subsidise rotten employers. The sooner we get a decent minimum wage in this country, the better. In the end, it would be a saving for the taxpayer.

In the earnings top-up pilot scheme, a number of areas have been selected, but none of those is in London. I would like to know rather more about that. Even though I do not over-approve of the idea of subsidising rotten wages, why has not any area in London been chosen? There are plenty of rotten, low wages paid in London.

The Secretary of State announced new initiatives to combat fraud on 11 July. I made the point at the beginning of my speech that I am not here to support fraud, but I am also not here to support this hue and cry about fraud and its use as a divisive mechanism in our society. The idea that, nudge, nudge, wink, wink, anyone receiving social security is on the fiddle, seems gradually to be creeping into the public consciousness. It is expressed so often in vulgar opinion. I might add that I heard my hon. Friend the Member for Birkenhead (Mr. Field) talk about his article in The Sun . I understand that it pays very well for articles, incidentally.

Mr. Field: I am still waiting.

Mr. Banks: My hon. Friend is waiting to be paid. Perhaps he needs a good agent. I am quite prepared, for a reasonable remuneration, to hurry it along a bit.

The Sun is one of those newspapers that tends to suggest that somehow people who are on benefit are getting some sort of handout to which they are not entitled; it is really a fraud being perpetrated on the population at large. It is very dangerous to use such words and give that impression.

We understand that fraudulent claims cost the taxpayer £1.4 billion a year and it is absolutely right that something should be done about it. But when do we hear Ministers waxing about the number of people who fiddle their Inland Revenue claims, or employers who fiddle national insurance? Where are all the initiatives to bang that stuff out? Such white-collar fraud in the City, by employers and by those who are evading tax, amounts to billions and billions of pounds and makes the fraud on social security seem like money in the old back pocket.

I would be much more impressed by the Government's determination to crack down on fraud if they took an even-handed approach; if they were as rigorous in trying to deal with Inland Revenue and national insurance fraud as they are with respect to the payment of benefits. I want to ask the Secretary of State a specific question about home visits, because I notice that, in the endeavour to cut fraud, there is talk of 300,000 extra home visits

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across the country. When a home visit is deemed to be required--for example, when the person involved is a single parent--are they planning to reduce income support until that visit has taken place? This is important. I want to know whether my constituents will lose while they wait for a home visit. Although 300,000 extra home visits are planned, I suspect that the Department will soon start saying that it has not got the staff for them. I do not want to find that potential claimants are penalised for waiting for a visit when there are simply not enough Benefits Agency staff to ensure that that visit takes place.

I return to the question of those who do not get the benefit to which they are entitled, as my hon. Friend the Member for Birkenhead said. From Government figures, we estimate that in Newham something like £12 million a year in means-tested benefits is simply not being taken up. What is the Secretary of State going to do about that? When he shows as much enthusiasm for ensuring that people who are entitled to benefit get benefit, I will be equally enthused by his attitude towards some of the other things that he constantly talks about, such as fraud and targeting benefits on people who are most entitled to them.

Perhaps those points put a little flesh on these bare estimates. They come as a witness from someone who has to deal with a whole range of poverty. The worst poverty of all that I have to experience in the east end is the poverty of expectation. The people I represent have a very low level of expectation. I want to ensure that their sights are heightened and that they have a vision of a better society in which they can receive a decent level of benefit when they need it. That is what we want, and I am quite sure that, when my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) is the Secretary of State for Social Security, that is exactly what we shall get.

5.44 pm

Mr. Jeremy Corbyn (Islington, North): It is a pleasure to follow my hon. Friend the Member for Newham, North-West (Mr. Banks), who explained well the plight of the people whom he represents and the poverty throughout the east end of London. Indeed, one would find similar levels of poverty in every inner-city region in England, Wales and Scotland. The Evening Standard report on the levels of poverty in London makes very grim reading. Within a 15-minute car journey from this House, one can find people living third-world levels of existence, health and expectation in a supposedly wealthy and prosperous society.

The Government complacently preside over a social security budget which they claim is growing very fast, and say that it cannot continue to do so, yet at the same time, statistics have shown that, since the Government came into office, the biggest growth in inequality of any industrialised country, the biggest growth in poverty among industrialised countries and the biggest growth of the super-rich among industrialised countries have all been in Britain. That is a direct result of a taxation system and policy that has given huge tax breaks and rewards to the already very rich and soaked the poor to the extent that they now pay more in taxation than ever before. The poorest 10 per cent. of the population, who tend to reside in the inner cities, although not exclusively, have seen their living standards fall by at least 14 per cent. over the past decade and more, and it is getting considerably worse for them.

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Within that context, we must measure the Government's proposals and plans. I am fed up with social security debates being dominated by two factors: the costs of the social security system and the question of benefit fraud that goes with it. I have no time for fraud, any more than any other hon. Member. The speeches of my hon. Friends the Members for Birkenhead (Mr. Field) and for Newham, North-West outlined that. The Government have an obsession with dealing with the idea that somebody has over-claimed 10 quid on housing benefit or somebody has worked two hours more than he is allowed under the benefit rules and therefore is a serious fraudster.

Meanwhile, high levels of white-collar crime go on and huge syndicates are at work defrauding the housing benefit system. The London Labour boroughs got together as a consortium to try to sort that out, with precious little thanks or support from the Government for doing so. In fact, the Government condemned the boroughs for allowing such fraud to exist in the first place. It was not the assiduousness of the Department for Social Security or of the Secretary of State that sorted that out, but the inner-London boroughs.

Mr. Frank Field: Does my hon. Friend recall that some of the London boroughs wishing to bring prosecutions against landlords and landlords' agents who were ripping off the housing benefit budget to a tune which I do not think that the House yet properly understands, and were told when they presented their information to the Serious Fraud Office that it did not understand enough and that the boroughs should bring the cases. Yet those boroughs either have been rate-capped or face capping and therefore do not have the funds to bring the desired prosecutions. Is that not an extraordinary state of affairs?

The Government say that they are serious about fraud, but when certain London boroughs support them and become serious about tackling it, and there is a chance of bringing into court some very rich people who are taking enormous sums out of the housing benefit budget, the case falls to the ground because nobody wants to foot the bill for the prosecution.

Mr. Corbyn: My hon. Friend is right. He makes a very important point with which I hope that the Secretary of State will deal when he replies. Those big fraudsters should be taken to court and the Government should ensure that the resources are available and that the Serious Fraud Office takes the cases. Whenever there is a growing problem to the extent that the Government cannot handle or control it, they pass it to local authorities. At the same time, the Government make damn sure that local authorities do not have the resources necessary, then criticise them for not solving the problem. Local authorities are the perfect enemy for a Tory Government. It is like an obsession for them.

The large increase in housing benefit expenditure does not benefit the tenant. The budget has grown because of rent deregulation in the private sector, the rapid increase in housing association rents and the almost as rapid increase in local authority rents. Local authorities do not benefit from administering the housing benefit budget but are penalised for so doing. I am glad that the Select Committee will examine the burden on local authorities

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of administering a housing benefit budget and all the grief that goes with it, when those authorities are not given the resources to perform that task.

It is extremely depressing that, any time that we want to examine part of the welfare state, yet another agency is created. Such agencies have succeeded in ensuring large job losses, with fewer people doing the work-- often, less efficiently than in the past. The Government's attitude to people who have dedicated much of their lives to making the social security system work is to make sure that those people end up working for an agency, then to change their contracts of employment and conditions of service.

Government statistics often claim that UK pensioners are at least 33 per cent. better off than they were when the Government came into office. That figure varies--depending on which Minister one talks to, or on which television or radio programme he appears--between a low of 32 per cent. and a high of more than 45 per cent. I have never met pensioners who are better off to that extent. I do not doubt that some extremely wealthy pensioners are doing better than average, but the majority do not have huge occupational pension incomes--if they did, they would be taxed on them anyway.

Many elderly widows have no income other than their state pension and housing benefit and are often badly off. They have been penalised by the breach in the link with earnings made by Geoffrey Howe in 1980, who called it his greatest achievement as Chancellor of the Exchequer. We can imagine his aspiration. He succeeded in robbing every pensioner in the country of about £20 per week by breaking the earnings link and substituting one with the retail price index. Ministers predict that the pension level will become nugatory by the end of this century. That is a standing invitation to everyone in middle age to make some sort of private pension arrangement, because that is the only way of guaranteeing a reasonable income on retirement. That attacks the principle of the state pension. Likewise, we witnessed the Government's use--or abuse--of the Government Actuary in the 1980s, to reduce the value of SERPS and thereby increase market opportunities for the private pensions industry.

I do not apologise for strongly supporting the principle of a high-level state pension and a fully funded SERPS that can eliminate poverty in retirement years. There is no security in private pension schemes sold by high-pressure salesmen working only for commission. A lot of tragedies are waiting to happen in the next 15 or 20 years. I hope that someone will be around to pick up the tab for the tragedies that will occur as those schemes collapse.

The Government have done much to make the benefits system more complicated and less effective, including the tragic removal of benefits from 16-to 17- year-olds, changes in the housing benefit system, family credit and now the publication "Piloting change in Social Security: Helping people into work". The Government deregulated the labour market so that hourly wage rates, particularly for young people in service industries, are shameful and a disgrace. People throughout the country are being pushed into jobs offering wages of £2 per hour or less. The Government know that it is immoral for people to work for such low pay but, instead of doing something about it, such as restoring the wages council system or supporting a national minimum wage, the Government--to assuage

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their guilt--introduced family credit and now propose a wider variety of top-up measures, to subsidise low-wage employers. That is a disgraceful vista.

Some extremely prosperous and profitable firms are deliberately paying low wages because they know that they can get away with it. People in the worst situations will have to apply for social security benefits to top up those low wages, and that is wrong. I strongly support a national minimum wage, which should be fixed at half male average earnings, at about £4.20 per hour.

Large numbers of people who suffered accidents at work and became invalids now face the most rigorous medical checks possible in the interests of cutting their immediate and long-term benefits. Government expenditure predictions show that they expect to spend less and less on invalidity benefits, mainly in respect of injuries arising from accidents at work.

Will the Secretary of State comment on the operation of the habitual residence test, which he introduced after his idiotic speech to the Tory party conference, when he said that he would stamp out benefit tourists from Italy? He tried to put on an Italian accent and to speak Italian. He used xenophobic arguments to introduce his test.

I will tell the right hon. Gentleman how it works. People who go abroad to visit their families, work, or see sick relatives in west Africa, the Caribbean or anywhere else return to this country to be told that they do not merit benefits. They lose income support and the right to receive housing benefit. They can become homeless and children may go hungry--all to appease a xenophobic audience at a Tory party conference.

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