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Lord Boyd-Carpenter: My Lords, I must begin with two confessions. First, I must declare an interest: as a retirement pensioner, I shall benefit in a modest degree from the improvement that this order makes in the retirement pension. Secondly, as some noble Lords may recall, I was Minister for (as it was known at that time) Pensions and National Insurance. I was responsible for social security for over six and a half years. In fact, I believe that it was for a longer period than any other Minister who has held the post. I therefore have a great deal of what might be called professional sympathy with my noble friend the Minister in dealing with these proposals.

In my time as a Minister, the up-ratings that we made were generally done by primary legislation—that is to say, by a Bill. They were contentious measures. Inevitably, the Opposition did then as they have done now: while welcoming the improvements, they asked for more. Equally, as the Minister has had to do today, I had to reject the proposals to improve the benefits to a greater extent than I was improving them. However, I can look back on the whole history of social security with a good deal of happiness, since benefits have steadily gone on improving—both in the actual quantum of benefit paid (in major benefits) and also with the adjustments and minor improvements which successive Ministers have made.

I know that the noble Lord opposite has criticised one or two points on this particular order. I shall not get in the way of my noble friend the Minister by trying to answer those points. It is his job to answer them. I know from my experience in office that nothing is more infuriating than sitting there listening to somebody else

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trying to answer criticisms of your proposals, not getting the answers quite right and queering the pitch all round. I note that the noble Baroness understands that situation.

Baroness Hollis of Heigham: Do not believe that for a moment.

Lord Boyd-Carpenter: Therefore I shall leave the points of criticism which she made—she always makes them very effectively, if she will allow me to say so—to be dealt with entirely by my noble friend the Minister in his reply.

I welcome the proposals of this order as a whole. They continue the steady improvement in benefits that we have seen over the years; they support a scheme which is of very great importance to a very large number of our fellow countrymen; and they do it on the whole in a highly intelligent way. I would not presume to say that I agree with every word of every detailed proposal. You have to have studied very closely the workings of the scheme to be able to form an intelligent view on the details of its administration. But broadly, this order gives good improvement to quite a number of our fellow countrymen, and maintains a scheme that is of vital importance to a very large number of them.

I was interested to hear what my noble friend said about fraud. He stated a very precise figure: £654 million was the figure he quoted. I do not know how it has been possible to work out that figure, since the essence of fraud is that it consists of transactions which are in greater or lesser degree conceivable. My noble friend may be able to tell the House how he arrived at the figure. I know it is substantial: it always has been, and to some extent I think it always will be. But it is the duty of a Minister and the Government to combat it; it is very wrong that money which gives such valuable help to so many people should go astray, even in much smaller amounts than £654 million.

I was also very interested in my noble friend's statement that it is the object of his policy to encourage employers, and to encourage workers to go back to work, and not to work the social security system so that it carries an inducement to remain unemployed. He stated that, on the contrary, the scheme is designed to encourage the restoration of employment in two ways: by giving, as this order does, some inducement to employers to take on additional labour—which is an enormously valuable thing—and by offering an inducement to those who are unemployed to make every effort to obtain work. I am sure that that is right. It is no doubt as a result of this policy that we are able to point today to a reduction in unemployment of half a million over the past year. This is a very real achievement by the Government of which they are entitled to be proud. I hope and believe that maintenance of this policy will continue this effect. This order is one of the most important matters with which your Lordships' House has to deal. It affects a very large number of our fellow citizens. It operates a system which, for all its sometimes rather trying complexity, is carefully worked out, with improvements made by successive Ministers over the years. It is a system of which we in this country have every reason to be proud. I hope that your Lordships will approve this order and

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send it forward as a means of relieving hardship and providing help to those who need it most in an intelligent way. It is a most important measure, and I wish it well.

6 p.m.

Lord Mackay of Ardbrecknish: My Lords, I shall try to reply to a short but interesting debate. I am grateful to my noble friend Lord Boyd-Carpenter for his support. I am relieved that we do not have to do this every year by primary legislation. To do so may take us a little longer than it will take us this afternoon. I also suspect that it is an indication of the increasing complexity of the social security system since my noble friend was responsible for it. I shall try to deal as quickly as I can—and, dare I say, in no particular order —with the various points that have been raised.

I begin with the in-work benefit measure and the question asked by the noble Earl, Lord Russell, about the progress of the jobfinder's grant. If he does not mind, perhaps I may write to him about that particular matter. As far as the new in-work benefit measure is concerned, we intend to pilot it in order to test the effectiveness of different approaches. Such an in-work benefit may cost a great deal of money. Obviously, before it moves to national coverage it is important to ensure that it does what we want it to do. At one stage in her speech the noble Baroness referred to unforeseen consequences. One thing that is true about social security is that sometimes we amend something for the best of all possible reasons only to find that it has a negative consequence which is much more damaging than has been envisaged. It seems to me that that is one of the problems we face in attempting to fine tune a complex system.

The noble Earl, Lord Russell, returned to the question of 18 to 24 year-olds. With some trepidation, I give my answer. No doubt he will compare the text with previous answers that have been given. My only hope is that he does not have with him the previous answer papers so he can interrupt me to tell me that what I say is different from previous answers. In all seriousness, the lower rate of benefit for single 18 to 24 year-olds helps to reflect the lower earning potential of this group compared with older single people. We feel that it is reasonable to give them a lower rate in order to preserve their incentive actively to seek and retain the kind of work that may be available to them in their age group.

The question about share fishermen is more complex. As the noble Earl perhaps knows, European Community quotas and the Sea Fish Conservation Act may result in share fishermen having to make claims for benefit simply because of the way that the Act operates. Share fishermen are able to claim family credit and income support in the same way as other self-employed people if their income is that low. In addition, the share fishermen's Class 2 contribution, which I believe the order before us is about, uniquely enables them to claim unemployment benefit although they are counted as self-employed. Because unemployment benefit is a daily benefit, share fishermen may be entitled to it for any day that they are unable to work, subject to the normal

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rules which are to do with weekly earnings. If there is anything further that I can add I will certainly put it in writing to the noble Earl. However, it is a complex issue. I am not even sure—this is an awful admission to make to the House —exactly where we are at the moment in relation to tie-up days in the fishing industry.

The noble Earl asked me about the SSP percentage threshold scheme. A change to the percentage can be made only by affirmative regulations. The power to do that is to be found in Section 159A of the social security Act. That is no different from changes to the present small employers scheme.

The noble Earl also asked me about funeral payments. I believe that he put down a marker as to his behaviour, good or bad, on future occasions depending on whether my behaviour was good or bad in his light. The current proposal to introduce a limit of £875 towards the cost of a social fund funeral are being considered by the Social Security Advisory Committee. My right honourable friend Peter Lilley, myself and my colleagues will carefully consider any recommendations that that committee chooses to make once its report is received. I shall bear in mind the point that the noble Earl makes about uprating.

The noble Baroness, Lady Hollis, discussed two related issues which I will take together since they both refer to housing. I believe that the noble Baroness implied that the private rented sector was not a tenant's market and therefore a tenant would not be in a position to bargain down rents. I believe that to be a pessimistic view. To relate housing benefit, as we intend to do, to the generality of local rents should mean better targeting of taxpayers' money. Tenants will have an incentive to find cheaper accommodation, or at least not to accept accommodation which is much more expensive than they would ever be able to afford if they were not on housing benefit, and accommodation that many other people in work and not on benefit would not be able to afford. It makes for that pressure. It also makes for pressure on the landlord. Some landlords will undoubtedly have looked at the potential for housing benefit delivering up to them whatever rents they have agreed to set and tenants have agreed to accept. We believe that bearing down on rents which are markedly higher than the generality of local rents will be an incentive to both tenant and landlord to reduce the very considerable increase in cost in this particular part of housing benefit.

As far as income support mortgage interest (ISMI) is concerned, I listened with interest to what the noble Baroness had to say. Everybody seems to forget, including regrettably the Council of Mortgage Lenders, that if an individual is on income support for nine months, at that stage income support mortgage interest help from the taxpayer will come in again. We are saying that for the first nine months people ought to insure themselves against any eventuality, such as unemployment, occurring in that period. I have said on a number of occasions—I make no excuse for saying it again—that the present system helps only those who are on income support. There are still people who find themselves unemployed and without recourse to income support. Because their spouses work, or they have

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capital above the limit, or they have some other income, they are not eligible. Obviously, they are not protected by income support mortgage interest. Currently, 150,000 unemployed home owners do not qualify. If one looks at the whole field of home owners, something like two-thirds would not qualify for income support.

Is suggesting that perhaps insurance might be a good idea such a terribly wrong thing? After all, everybody who buys a house is rightly expected by the building society to take out insurance against something happening to the house itself. Is it not wise to suggest that people should take out an insurance which will help them in much more difficult circumstances than does the current income support mortgage interest if something happens to them?

Another question that I hear being asked is whether such insurance policies exist. For example, Abbey National has indicated that somewhere in the region of 40 per cent. of new borrowers take out an insurance. That was before we announced the changes that we would make. The Association of British Insurers has confirmed that something like one third of all new borrowers take out insurance.

There is evidence of new insurance packages coming into the market place. As I said, a direct one—not through a building society—from a reputable company offers payments as low as £4 per £100. The cost of insurance to the average borrower based on that policy would be something like £12 per month. As I said, that would give people wider cover than is available under income support.

As I equally said and underline, we are covering the first nine months and very many people who become unemployed—in fact the majority of them—get back into work within that period. The taxpayer will cover for those people who go beyond the nine months and obviously have used up their insurance entitlement.

With regard to fraud, my noble friend Lord Boyd-Carpenter asked me how we worked out the figure of £654 million. That is the amount of fraud that the Benefits Agency identified last year and stopped. He is quite right that no estimate can be given—other than a guestimate—of the total extent of fraud; but on last year's figures that is the kind of level which the Benefits Agency managed to stop.

The noble Earl, Lord Russell, asked me about targets. We are asking the Benefits Agency to shift the emphasise from detection and investigation, which is what it has been doing to date, toward prevention and deterrence. He will appreciate that prevention and deterrence are much more difficult to quantify except that we shall not detect the same level of fraud as we do at the moment. There are a number of schemes, including the link-up with the Post Office, where payment will be made by what we believe will be a much more secure and efficient system.

I was asked why the lower earnings limit for national insurance had not been increased further. The lower earnings limit for national insurance is linked in law to the rate of the basic retirement pension. It is set at the level of the basic pension, rounded down to the nearest

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whole £1. From April the rate of the basic pension will be £58.85. The lower earnings limit therefore is £58. That is the logic behind that measure.

The noble Baroness, Lady Hollis, spent some time in her contribution reading out some payments which have not been up-rated since various periods in this Government's term of office. Those are not by any means the major components of the benefits systems. All the main benefits to widows, war pensioners, people on income support, and so on, have been up-rated. Frankly, if the benefits that the noble Baroness read out so dramatically to us had been up-rated, I am sorry to tell your Lordships that it would not have made a great deal of difference to the amount received by most recipients. We believe that by targeting the increase on the major benefits, we are targeting it on the people who need help.

I heard the noble Baroness say that she looked forward to having the opportunity to improve the welfare state. I noticed at one stage in her speech that she mentioned breaking the links with earnings, which is a recurrent theme. That is fine, but the noble Baroness should be aware that this year, for example, whereas the benefit up-rating has cost £1.5 billion with linkage to prices, linked to earnings it would cost £3.3 billion. Over the period when the link has been prices and not earnings, the amount of additional money—if I heard aright and a promise was given to up-rate according to earnings—would have been £9.7 billion.

Those of your Lordships who have been keeping track of all those figures—

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