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Ms Harman: Two pensioners who live together should receive two cheques at £10; a pensioner who lives on his or her own should receive £20. Administrative errors are inevitable when payments to 8 million pensioners are made. That is one of the reasons why we invested in a public information campaign, backed by television and newspaper advertising, which the hon. Gentleman has gone to great lengths to criticise. We want people to have the information about their entitlements.

Mr. Burns: What is the right hon. Lady going to do about the mistake?

Ms Harman: I have answered the hon. Gentleman's question. He is merely nit-picking. We are making unprecedented payments, which is a big change from the behaviour of the previous Government, who put tax on fuel. He has not decided whether we are paying too little or too much--he is still trying to find his role, and I look forward to the time when he has sorted himself out.

Last week, I announced nine new pilot schemes to find the best ways in which to get more automatic help to the 1 million pensioners who do not claim the income support to which they are entitled.

In the Budget, we are making an extra £1.2 billion a year available to give more support to children and to direct extra resources to the poorest children. All parents--both in work and out of work--have to bear extra costs and responsibilities in bringing up their children. Child benefit remains the fairest, most efficient and most cost-effective way in which to recognise those costs and responsibilities.

That is why, from April 1999, the Government will increase the amount of child benefit for the eldest child by £2.50 to around £14 a week. The same increase will be made to the family premium in income support, jobseeker's allowance, housing benefit and council tax benefit to ensure that low-income families also gain from the change.

As the Chancellor said on Tuesday, we can and should do even more on child benefit. If child benefit is increased in future, there is a case for higher-rate taxpayers to pay tax on it--that must be right in principle. We shall bring forward detailed recommendations for reform.

Some families need more help than others, and the case for additional support for children in poorer families is strong. However, that support needs to be provided on the basis not of family structure--whether there are one or two parents--but of the needs of the children. It is important that we provide better help when families need

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it most, which, as research has shown, is in the children's early years. I pay tribute to the research work carried out by the Joseph Rowntree foundation, which showed that the adequacy of benefits was a particular problem in relation to children aged up to 11, rather than to those aged 11 to 16.

That is why we are targeting extra help to the poorest families with younger children--we shall increase the allowance by £2.50 a week for children under the age of 11 in all the income-related benefits. That means that a family on income support with two children under 11 will be £7.50 a week better off.

The Budget shows that welfare reform is already happening in practice. We have set the direction, by building on principles that claim a direct lineage from the original chief architect of the welfare state. We have set the method, by applying those principles to a modern setting and by working with the grain of change in the wider society. We are making sound progress, delivering the results.

Next week, we shall publish our welfare reform Green Paper, to take forward the national debate on welfare reform for the 21st century.

This week's Budget and next week's Green Paper show that we now have a modern Government with a third way to tackle poverty and social exclusion, rejecting the right's view that one can tackle poverty simply by freeing up markets and relying on wealth to trickle down, and rejecting, too, the old left's view that one can tackle poverty simply by raising benefits. Instead, our approach, which is taken forward in the Budget, is to help people who can work to get work, so that they can look after themselves, and to free resources to invest in health and education and get better help to those who cannot work. This Budget has helped with work for those who can and security for those who cannot.

5.9 pm

Mr. Iain Duncan Smith (Chingford and Woodford Green): First, I must thank the Secretary of State for her courtesy in sending me a letter to outline some of the changes in the Budget. I appreciate that and I shall look at it in the next few days as those changes are implemented.

Like all Budgets, Tuesday's Budget will take time to bed down. Much of the previous Budget was welcomed at the time, but now, 10 months afterwards, a great deal of it is being rejected by many of those same pundits who welcomed it. This Budget is no different.

My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) made clear in yesterday's debate that Tuesday's Budget amounted to a series of broken pledges. It seemed to have been conducted by a system of smoke and mirrors; there was little detail as the Chancellor glided over some of the more complex changes, preferring to say little and suggest a great deal.

As the Chancellor kept repeating, everyone supports the idea of getting people off benefit and into work. Every hon. Member is bound to accept that as a key criterion for any Government in reforming welfare. The real question that we must ask is to what extent the Budget and the changes that we have seen so far will produce that effect.

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For obvious reasons, I shall say nothing about the welfare reforms that are likely to come in the Green Paper--they are likely to be produced next week and we will wait to discuss them--but I find it strange that Tuesday's Budget contains a major change in the tax system, which affects social security, but we have to wait until the Green Paper is published, after the Budget, to find out to what degree those reforms have affected the Chancellor's thinking. No doubt the Minister of State will tell us all when the time comes.

The real question for the Secretary of State and her right hon. Friends is to what extent they expect unemployment to fall--she suggested that it would. Will the right hon. Lady now commit herself to a figure, a proportion or a percentage by which she envisages unemployment falling as a direct result of all the changes that she is implementing in the new deal? So far, we have had little commitment on that and if the right hon. Lady wants to give me a figure, I am happy to give way and allow her to do so.

We intend to monitor closely the pilot programmes designed to encourage disabled people back into work. There is much detail to be considered there. I shall wait to find out how that scheme progresses before deciding whether it is successful. Anything that assists disabled people to get back to work or to get more meaningful employment has to be welcomed; the question is to what degree the scheme will work and how it will be targeted. We will wait and see how it develops.

I shall deal with three or four of the major changes that have taken place.

Mr. Hope: I am grateful to the hon. Gentleman for giving way and I welcome the hon. Member for West Chelmsford (Mr. Burns), who has decided to take his seat on the Opposition Front Bench this afternoon--he is obviously back in favour. If the Conservative party ever reached Government again, would they repeal the working families tax credit now that a Labour Government have introduced it to help the poorest families?

Mr. Duncan Smith: The hon. Gentleman is back on his usual form. He has been passed information from someone on the Government Front Bench and been told, "It's your turn to intervene." The only serious question that he has been able to come up with is, "What will you do when you get back into government in five years' time?" I cannot understand why Labour Members, who have been in power only for some 11 months, are so petrified about the Conservatives getting back into power. I shall answer the hon. Gentleman's question when the Government answer how they will explain to the British public that they have reneged on every pledge that they made before the election. When we get into government next time round we will do what is necessary to put the mess right, but let us get back to national insurance reforms, which are in the Budget, rather than the nonsense in which the hon. Gentleman is engaged.

The purpose of the change is to reduce the cost of employing low-paid workers. To some degree, the changes will undermine the Government's claim to be encouraging a high-skill economy in which people have high levels of training and there are opportunities for all--the claim covers not only the low paid but those on

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average and just above average incomes. The Chancellor announced that employers would not pay national insurance contributions on the first £81 of an employee's weekly earnings and above that would pay a single rate of 12.2 per cent. on every pound up to £440.

The new Labour Government claim as another of their top priorities that they will turn Britain into a high-skill economy. There is a problem here--I hope that the Paymaster General, who I welcome to his position, will deal with it in his reply--as to some degree the change will clash with the pledge.

Surely by also increasing the national insurance rate, the Chancellor has directly increased the cost of employing workers who have the higher skill levels and those who would move to higher pay with on-the-job training. That could put a question mark over their employment. That fact has been recognised in the past 24 hours by a number of companies, including J. Walter Thompson, which represents an industry that is close to the heart of new Labour--it is a case of spinners in a spin--and which has said that the national insurance

I hope that the Paymaster General will deal with that when he replies.

That problem is compounded if we take into account the impact of the national minimum wage on the Budget changes. That wage will reduce the number of people earning between £60 and £80 a week by artificially inflating weekly take-home pay. As the Deputy Prime Minister noticed many years ago, that will force more employees up into the 12.2 per cent. band, as the differentials shuffle upwards. It will represent an extra cost to employers and create another barrier to work. I hope that the Paymaster General will give us some figures and some idea of what the Government calculate will be the impact of that change, given the others implemented in the Budget.

Employers are likely to respond to the change by hiring more part-time workers so that hours worked are restricted and the new earnings totals do not breach the earnings limit. Coopers and Lybrand has predicted that the present bunching of employment at just below £64 a week will shift to £81 a week. Again, perhaps the Paymaster General could tell us what calculations he made when considering that matter and how the Government intend to alleviate that effect.

Apparently, according to old new Labour, that sort of move would have been regressive in the run-up to the election. In the past 10 months, it has been attacked endlessly, yet implemented, and I would therefore be grateful if the Paymaster General could clear the matter up.

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