Previous Section Back to Table of Contents Lords Hansard Home Page

Lady Kinloss: My Lords, before the noble Baroness sits down, perhaps she can say whether or not she will look into the case for more consultants for younger people suffering from dementia.

Baroness Cumberlege: My Lords, I apologise to the noble Lady. I shall certainly do that. I shall also take up her point regarding the leaflets for long-term care. They are around and I shall ensure that the noble Lady receives copies.

5.54 p.m.

Baroness Jay of Paddington: My Lords, with the leave of the House, I thank the Minister on behalf of my noble friend Lord Ashley of Stoke for her detailed and careful reply. On his behalf also I thank all noble Lords for taking part in what has been an authoritative if somewhat disturbing debate. Knowing the deep concern of my noble friend in this regard, he may want to return to some of the issues raised this afternoon. In the meantime, I beg leave to withdraw the Motion.

Motion for Papers by leave, withdrawn.

Social Security: Spending Plans

5.55 p.m.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, with the leave of the House I should like to repeat a Statement made earlier today in another place by my right honourable friend the Secretary of State for Social Security. The Statement is as follows:

"With permission, Madam Speaker, I should like to make a Statement on social security following from my right honourable friend's Budget Statement. Last year at this time I announced that social security spending would reach £88 billion next year and £92 billion the year after. Now I can announce that spending plans for those years have been reduced to £86½ billion next year and £90 billion the year after. This is the first time since records have been kept that social security spending plans have been scaled down. This reflects the impact, not just of lower unemployment and lower inflation, but also of my social security reforms. Nonetheless, social security

30 Nov 1994 : Column 644

on average now costs every working person £15 every working day. I am therefore announcing today further measures to curb the growth of expenditure and to help people off benefit.

"As my right honourable friend the Chancellor announced yesterday, we will implement in full the second stage of help with VAT as we promised last year. From April 1995, pensions will incorporate up to £52 for single pensioners and £73 for pensioner couples specifically to help with VAT on fuel. We will be letting people know about the extra help with VAT on fuel by means of a special notice in order books. We will increase help with cold weather payments and insulation grants beyond that previously planned. From this month payments for cold weather rise from £6 to £7 a week. They were to go up to £7.50 next November. But I shall in fact raise them to £8.50. We are also spending a further £45 million—£10 million more than I announced last year —to help insulate homes and improve fuel efficiency. It will provide grants for more than 60,000 extra households next year.

"A key aim of my fundamental review of social security is to improve work incentives. To help people out of dependency it is vital to do four things: to make work more rewarding than benefit; to help people with the transition from benefit to work; to persuade employers to hire the long-term unemployed; and to help create more jobs for the less skilled. I can announce a £600 million package, which addresses all four tasks.

"Family credit helps nearly 600,000 families in work. In October, I introduced a child care allowance which over time should help 150,000 parents with their child care costs. But the more people earn the less family credit they receive. Consequently, the incentive to move from part-time to full-time work is limited. So I am introducing a £10 a week supplement to family credit for those working 30 hours or more a week. And the least well off receiving housing benefit and council tax benefit will get the full value of the increase. This will cost £200 million and should help about 345,000 families. Family credit has proved its worth in helping families into work. But most unemployed people do not have children, so they are not entitled to family credit. But an in-work benefit might help them into jobs, too. I therefore propose to test run such a benefit through pilot schemes covering 20,000 claimants. If the pilots are successful we will consider introducing a national scheme.

"Many people who want to work are hesitant about accepting a job because of uncertainties about the size and timing of family credit payments, so I intend to speed up payments of family credit so that all new claims are dealt with in five days. Other people fear loss of help with their rent or council tax. So I shall let people who take a job after six months out of work keep housing benefit at their existing rate for four weeks, regardless of their earnings. And we will consult the local authority associations to ensure that entitlements to housing benefit and council tax benefit are revised speedily so that payments follow on seamlessly after the fourth week. The new back to

30 Nov 1994 : Column 645

work bonus, which I announced in October, will be of particular help for people who want full-time work. It will enable people working part-time on Jobseeker's Allowance or income support to accumulate a bonus of up to £1,000 payable on return to full-time work. This bonus will be tax-free.

"I am also giving employers an incentive to take on unemployed people. Any employer who takes on someone previously unemployed for two years will receive a one-year holiday from the employer's national insurance contribution. This change requires legislation so it will come in from April 1996. Assuming employers take on 120,000 people a year, they will benefit by £45 million.

"The greater the costs companies incur when they employ people, the less they can afford to pay or the fewer people they will take on. I particularly want to help less skilled people to get jobs. So I shall be reducing employers' national insurance contributions a further 0.6 per cent. for lower paid employees from next April; and I will raise all the earnings bands used to calculate employers' national insurance contributions by £5. To help companies concerned about high levels of sickness I can also announce that we will reimburse statutory sick pay in full where costs exceed 13 per cent. of a company's monthly national insurance bill.

"Housing benefit and income support for mortgage interest combined now amount to £11 billion. They have doubled since they were introduced in 1988. The UK is almost alone in paying 100 per cent of rents through benefit. As a result, tenants have no incentive to choose the less expensive of two dwellings nor to negotiate over the rent level. And landlords may be tempted to push up rents for those on benefit. Rent officers determine whether rents are within reasonable market levels and help is not normally available above that. But in many areas the market level is largely determined by those on housing benefit. The average private rent in the deregulated sector is around £75 per week. But housing benefit meets rents of over £350 per week. Taxpayers on modest incomes, meeting their own housing costs, resent subsidising rents higher than they can afford for themselves. And people on housing benefit should have similar incentives to those paying their own rents when deciding what they can afford.

"I shall introduce a new scheme next October. New claimants and those moving home will be entitled to housing benefit for the full rent up to the average rent for similar properties in the area. Housing benefit will only cover 50 per cent. of the portion of rent above that. Existing claimants in their current tenancy will continue to receive full housing benefit as at present. Local authorities will be given funds to be able to reimburse more than 50 per cent. of the rent above the average in cases where they think there is special need.

"Prospective tenants will want to know how much housing benefit is payable before they agree a tenancy. So we will consult the local authority associations and the Institute of Rent Officers about how to produce this information. At present people

30 Nov 1994 : Column 646

who are away can claim housing benefit for up to a year, even if their home is empty. In future, we will limit this period to 13 weeks except for people with exceptional reasons, such as those in hospital.

"Taxpayers pay the mortgage interest of people on income support. Since 1979, this expenditure has risen from £31 million to over £1 billion. And the scheme has major drawbacks. First, until I imposed a cap, it covered any size of mortgage, from cottages to castles. Next April I intend to reduce that cap to £100,000. Secondly, the generosity of the scheme for those out of work can create huge disincentives to move back into work. But to extend help with mortgages to people in work would be immensely costly. Thirdly, since income support cover is paid direct to lenders, the scheme is simply bailing them out from their bad lending practices. Lastly, the present system discourages individuals from taking out private insurance and stops lenders insuring all their loans. Nonetheless, private insurance has spread significantly. I believe that insurance of mortgages should become the norm. So for anyone taking out a loan after 1st October 1995 we will pay income support mortgage interest only after the first nine months. I believe that insurance for this nine month period will be readily available. Indeed, I expect that many lenders will incorporate it in their loans at very modest cost.

"Existing mortgage holders qualify at present for 50 per cent. of their interest payments for the first 16 weeks. But as this money is paid to borrowers, it is not always passed on. In practice, most people who lose their job and are unable to meet their mortgage payments return to work within a few months. And most private policies make no payments in respect of the first few weeks. As a result, lenders rarely repossess, even where the borrower is not covered by income support. I therefore propose that no payments will be made for existing mortgage holders, who start an income support claim, for the first two months. For the next four months, the payment of 50 per cent. of mortgage interest, currently made to the borrower, will be made direct to the lender. Thereafter, mortgage interest will be paid in full, as at present. We will consult the Social Security Advisory Committee, mortgage lenders and insurers about circumstances which cannot be covered by insurance. I am confident that the insurance market will respond, that lenders will behave responsibly, and that sound lending will ultimately contribute to a healthier market.

"The fight against benefit fraud remains a top priority. Last year our crackdown saved a record £654 million and caught a record 300,000 cheats. But prevention is better than detection. We want to stop fraud happening in the first place. That requires a secure system of payment. We are working with the Post Office to create an automated system of payment, probably involving a payment card, dramatically to reduce fraud involving pension books and girocheques. We are seeking private sector finance for this major initiative which will strengthen the whole Post Office network; although the system

30 Nov 1994 : Column 647

we choose must be easy and acceptable to use, especially for pensioners. Nine companies and consortia have put forward proposals to be prime contractors for a system which could be in use in 1996.

"However, most fraud involves people giving false information about their earnings and circumstances, so we will be making more checks on circumstances. We will be doing more home visits. And we are piloting a scheme in London so that local authorities can cross-check information about their housing benefit claimants. This will cost £100 million a year, but it should save over £2.5 billion over three years. I am also tightening some rules.

"I have already acted against avoidance of national insurance contributions by employers who pay earnings in various non-cash forms. It undermines the whole basis of the NI scheme. Such practices are devious. I have already put a stop to fine wine wage packets, precious stone salaries and a number of other ruses. I give due warning that I will take further action as and when required.

"Separately, I will be limiting the grant paid through the social fund for funeral payments. The level of payments for funerals through the social fund has grown by 6 per cent. a year above inflation. Costs have risen from £18 million in 1988-89 to £61 million this year—a more than three-fold increase. Funeral payments cover the whole cost, so funeral directors can force up cost to customers on social fund knowing they are unlikely to obtain better quotes. I have taken action to stop families claiming via remote relatives on income support. I propose next April to limit the maximum payment to £875, which is the average payment last year.

"Madam Speaker, the measures I have announced today mark a further radical step in my reforms of social security. My aim is: to improve incentives, to focus help on those most in need, and to stop social security outstripping the nation's ability to pay. I have set out a £600 million programme to help people out of dependency and into work. I have fulfilled our promise to help pensioners and others cope with VAT on fuel, at a far more generous level than anything suggested by the Opposition. And I have put forward sensible plans to tackle the rapid growth in housing benefit. Any party which shrinks from these problems is unworthy of government. This Government have the courage to tackle them. I commend these measures to the House."

My Lords, that concludes the Statement.

Next Section Back to Table of Contents Lords Hansard Home Page