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Mr. Prescott: I believe that my hon. Friend the Minister for Local Government and Housing met the hon. Gentleman on Friday to discuss the implications of the settlement and, as he knows, the Government have had considerable discussions with the Oxfordshire authority, particularly arising out of the capping position last year. I hear what the hon. Gentleman says. We are dealing with more than 400 authorities. All have similar problems and all are trying to deal with them. We are trying to provide a fairer system.
With regard to Oxfordshire, there has been a 4.4 per cent. increase in the education budget for Banbury--
Mr. Baldry:
But not in social services.
Mr. Prescott:
Yes, but the hon. Gentleman's constituency is to have a 4.4 per cent. increase in its education budget and the permitted budget increase is 3.1 per cent. That compares well.
Mr. Baldry:
What about social services?
Mr. Prescott:
I understand all the problems that local authorities face, and they are no more difficult in Oxfordshire than they are in other areas. We have to be fair in how we deal with the matter and in how we distribute national resources. That is what we have done. I have stated how the hon. Gentleman has fared, and that is our position.
Madam Speaker:
Thank you. We now come to the statement on social security uprating.
Social Security Uprating
4.30 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley): With permission, Madam Speaker, I should like to make a statement on the uprating of social security benefits and on the re-rating of national insurance contributions for 1998-99. I should also like to report on our objectives for reforming social security.
This is the first benefits uprating announced by this Administration and, unlike those of previous years, it will not be marked by a long list of cuts to the welfare programme--not that we are content with the size of the budget. We cannot be complacent when, despite growing prosperity, spending on social security has continued to grow. It now consumes one third of Government expenditure and is set to break through the £100 billion barrier before the end of the century. That is more than is collected in income tax, twice what is spent on the national health service and nearly three times what is spent on education.
As important, we are not content with the way in which the money is spent. The huge cost that is our legacy has done little to reduce the amount of poverty. The inability to harness social policy, to use it as a tool for change, has not only been the main driver of welfare spending but has resulted in the greatest social division for generations.
We are committed to breaking with the past. We are undertaking a systematic review of the welfare programme. The review is both necessary and timely. We need a modern welfare system to reflect modern circumstances. Our welfare-to-work programme will provide people with a route out of benefit dependency, and our comprehensive spending review will lead to the modernised system that we need. I will say more about that later.
First, we have immediate business. The House knows that we are required to review the rates of benefits and national insurance annually. Our intention for the year 1998-99 is to uprate most national insurance benefits, child benefit and benefits for disabled people and carers by 3.6 per cent. That is the increase in the retail prices index in the year to September. War pensions will also be uprated by the RPI.
As in previous years, jobseeker's allowance and the main income-related benefits will be uprated by the Rossi index, which at September had a year-on-year increase of 2.4 per cent. As hon. Members will know, the Rossi index is the RPI less those elements for housing costs. It is a more appropriate index for income-related benefits, where housing costs are, in the main, met separately.
Most rates of deductions in respect of non-dependants have been increased over and above inflation. That will reduce the benefit that is paid in respect of housing costs to claimants who have a non-dependant living with them. Taking forward that measure allows us to reverse the previous Government's plans to extend the single room rent restriction. The withdrawal of the extension, which would have restricted housing benefit to people aged over 25, has been welcomed both inside and outside the House.
That was a hard choice in maintaining our commitment to live within existing spending ceilings. It is important to remember that the mandate that we so recently received was based on a manifesto which committed us to controlling public expenditure.
I shall deal now with national insurance. We do not propose to increase the rate of class 1 contributions paid by employees and their employers, or the earnings brackets for the three lower rates of employers' contributions. The rates of class 4 profits-related contributions paid by self-employed people will also remain unchanged. The lower earnings limit for class 1 contributions will increase broadly in line with the basic rate of retirement pension, as will the upper earnings limit which applies to employees' contributions only. Similar increases apply to the lower and upper profits limits for class 4 contributions. The weekly class 2 contribution paid by self-employed people and the voluntary class 3 contribution also increase in line with that formula.
The cost of the uprating will be £2.45 billion. The maximum available Treasury grant for the national insurance fund will be set at £800 million. Most new rates of benefit and the changes made to national insurance contributions come into effect on 6 April next year. Schedules showing the new rates of benefit and the new rates of national insurance have been sent to all hon. Members today.
The most pressing need is to develop our approach to people of working age. They are responsible for supporting their children. Their actions while in work will determine how adequate their income will be in retirement. The best we can do for people of working age is to give them the opportunity to work. That is our first objective for welfare reform.
The wage motivation to work is for most people compelling--with the best will in the world, benefits can never be a substitute for earnings. Equally, there are also very strong non-wage motivations for working which, in total, reflect and influence the shape of society. Work enables people to be in the mainstream of society, to make their own contribution, to develop their potential, and to offer a positive role model for their children. Work also provides access to social networks and to new opportunities for advancement. None of this is new. It could be argued that making work the best form of welfare has always been the objective of social policy, but the facts show that the current social security system fails actively to promote a return to work.
An indifference to social policy, and an assumption that unemployment is a price worth paying for economic success, have meant that millions of people have been set aside from the labour market and condemned to a life of dependency. Our objective is to root out that worklessness and to give all people of working age a chance to enjoy economic opportunity. That is why our new deal programme extends beyond the unemployed. We need to give lone parents and sick and disabled people worthwhile help. We also need to make sure that, where possible, work pays, and that tax and benefit systems encourage work, not deter it.
That is why we have a Whitehall task force on tax and benefits to help deliver the Government's pledge to streamline and modernise the welfare system. It is why we are introducing a minimum wage. It is why we are looking carefully at every benefit to see whether it helps or hinders people in achieving their aspiration to be in work. We are seeking totally to recast the aim and operation of welfare, and to make it clear that work, rather than benefit payment, is the right solution,
economically and socially, for people of working age. We will continue to support those people who cannot work.
The second group needing our attention is children. Our objective is to ensure that all children are supported, wherever possible, by their working parents. Nearly 3 million children now live in workless households, which represents a threefold increase since 1979. The best way to support these children is to ensure that their parents are working. They benefit from the lasting financial security that work ensures and from role models which help them to learn how they can live independent lives when they grow up. Our new deal for lone parents will help to tackle the problem by providing a comprehensive package of back-to-work help for lone parents.
Effective child care arrangements are vital, as nine out of 10 lone mothers would work if they could afford child care. The Government are committed to a national child care strategy, which will help parents, especially women, to balance family and working life.
Child support maintenance will have a major part to play. Receiving regular maintenance payments helps lone parents to work, independently of all other powerful influences on their ability to work. We must also reach a point at which an absent father's failure to provide proper financial support for his children is regarded as socially unacceptable.
Our ambitions do not stop at people of working age, because it is also essential to help pensioners. On average, pensioners' incomes have grown over the past 20 years, but the gap between the poorest and richest pensioners has widened. Moreover, projections show that the gap will continue to widen unless urgent corrective action is taken. Our objective is to promote financial security in retirement in a way that enables people to build up a stake in their own provision.
It is clear that the difference between richer and poorer pensioners is a result of the extent to which the former have had access to second-tier pension opportunities, and have taken advantage of the chance to save during their working lives. Secure income in retirement will be achieved when people of working age realise that the more that they and their employers make contributions to their own pension, the greater will be the reward when they retire.
Work--to fund savings--is the best form of pension provision, which is why we have launched our pensions review. That is also why we are consulting on stakeholder pensions and developing citizenship pensions, which will extend the opportunities for good-value pensions to the 8 million people who are poorly served by current arrangements. Our review will also begin to address current inequalities between the opportunities of women and men to have adequate pensions.
We are taking action to ensure fair treatment of pensions on divorce, giving greater rights to women who have contributed to the build-up of pension by supporting their husbands in the home.
We are determined to tackle the situation in which nearly 1 million pensioners do not take up the income support to which they are entitled. We have already commissioned research to establish the reasons why they do not take up that support. From April, we will begin pilot exercises to discover the best ways of delivering income support to older citizens.
As our manifesto has made clear, the Government believe that pensioners should share fairly in the nation's increasing wealth. That is not merely a long-term aim. We have already reduced VAT on fuel, and, from next year, we will abolish the gas levy--showing that we will act quickly.
In his pre-Budget statement, the Chancellor announced the winter fuel payment, which will pay pensioners £20 and the poorest pensioners £50. Those payments will be made in time for winter fuel bills and will be on top of normal pensions payments, which will be uprated next year, as I have already announced.
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