Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Peston: My Lords, why did the noble Lord leave out the second part of the sentence?

Lord Mackay of Ardbrecknish: My Lords, I am coming back to that.

Lord Peston: My Lords, that is the central issue.

Lord Mackay of Ardbrecknish: My Lords, I wondered whether the noble Lord had reached that page and was reading it with me. I am glad to see that the noble Lord, Lord Peston, was paying sufficient attention.

Some groups which traditionally have been looked at as poor have significantly moved out of the bottom decile. For the very simple reason that the decile is always there, some groups move out of it and some move in. That is the point I wish to address in a second or two.

I now want to look at one of the groups which has moved out. I refer to pensioners. Fewer pensioners are dependent on benefit; but those who are have seen their benefit income rise. The number of pensioners for whom benefit is their only source of income has dropped from 21 per cent. to 17 per cent. Almost nine out of 10 pensioners now have an income on top of social security benefits; namely, 88 per cent. of those recently retired and 85 per cent. of all pensioners. Almost eight out of 10 have income from investment and savings, which is up from six out of 10 in 1979; and that is worth on average £43 a week. Six out of 10—65 per cent. of those recently retired and 60 per cent. of all pensioners—have an income from an

1 Mar 2002 : Column 1550

occupational pension which is up from five out of 10 in 1979 and is worth on average £70 a week. Nearly half of all pensioners own their own homes, and a very great majority own them outright. Nearly all have access to the majority of common consumer durables such as telephones, central heating and the like. We have actively encouraged people to take responsibility for their own provision, offering flexibility and choice. Harking back to the Pensions Bill debate, Volume 1 of the report says on page 51:

    "The system should give clear encouragement to all income groups to accumulate private or occupational pension rights".

We have also protected poorer pensioners by providing extra help since 1988 worth over £1.2 billion a year.

Just in case noble Lords opposite do not believe me, I should like to quote my friend—I call him "my friend" because he is my friend although he is on the other side of the House in the other place—and that is Mr. Donald Dewar, the honourable Member for Garscaddon. He said:

    "There is undoubtedly evidence, which I welcome, that retired people are on average now enjoying many more resources and a higher quality of life. That is largely because of the maturing of state earnings-related pension schemes and occupational schemes and ... approved [personal] schemes".—[Official Report, Commons, 8/7/94; col. 606.]

I return to the point which I believe I have made twice that the bottom decile is always going to be with us, that the pensioners have moved out and some other people have moved in. By and large, the people who have moved in are the unemployed. That is obviously something which we have to look at very seriously. Before I turn to that, we have to look—and my noble friend Lord Jenkin of Roding drew this matter to the attention of the House—at all the indications of living standards before we come to the sort of pessimistic conclusions that the party opposite would like to draw. Living standards are in fact higher than the position of the unemployed in the bottom decile would suggest and certainly better than the position as described during most of this debate.

If we look at the expenditure of the group in the bottom decile as a whole, we find that they spend more than the group immediately above them. Consumer goods which were a luxury only a few years ago, are widely held. Half of the group in the bottom 10 per cent. now have cars. The number of those having central heating has almost doubled since 1979. Three-quarters have a telephone compared to fewer than half in 1979; and well over half have video recorders; and a fifth have home computers.

I am not complaining about that because I welcome it. But that is a little at variance with the picture which some noble Lords opposite wish to paint. It is interesting to note that of the 750,000 of the 5.7 million who reported nil or negative incomes, half of them spent more than the average for the population as a whole. That illustrates that the statistics on which this debate and a great deal of this report are based are not as straightforward as perhaps noble Lords opposite and the authors would like to pretend.

I return to a point made in the intervention made by the noble Lord, Lord Peston; namely, that changes in the labour market have had a major influence on the

1 Mar 2002 : Column 1551

distribution of incomes. Therefore, we have taken measures—which I shall come to—to address the adverse effect of those changes. There is one issue which I believe we should all applaud. I was interested to note that not much was made of it. I refer to the increase in women's employment. It is clear from Figure 28 in Volume 2 that women's participation in the labour market has increased strongly for each decile except for the bottom decile where the increase has been much less marked. That has shown through to the increased role the woman's wage has played in the family income.

Page 50 of Volume 2 of the report points out that for couples aged between 24 and 55 years, the 1979-81 male earnings were nearly 75 per cent. of the gross family income. By 1991 that was under 60 per cent. while the average female share rose to one-fifth. Women working full time in 1991 brought in an average of 42 per cent. of the family income. Increased female labour force participation tended to widen the overall distribution. Again, as regards that increase, the rise also contributed to the way in which the incomes of couples of working age, particularly those without children, moved ahead of other groups like single pensioners or lone parents. That is an example of the growth in inequality between different groups. There is a problem buried here—

Baroness Jeger: My Lords, perhaps I may interrupt the noble Lord for a moment. As an old woman in my 80th year, I ask the Minister to look at the reality. He has talked about a sixth of a number of people getting more of this or that. Will he tell me what I am getting a sixth of in my 80th year? Are women, especially widows, any better off than they were 100 years ago?

Lord Mackay of Ardbrecknish: My Lords, I am not going down that road. The idea that people are not better off than they were 100 years ago is not plausible. Indeed, the idea that they are not better off than they were 30 years to 50 years ago is not plausible, either.

I was coming to the main problem. I was surprised that not much was made of it. I refer to the rise of two-income families which I believe the noble Lord, Lord Eatwell, mentioned in his speech. I refer to the difference between the work-rich and work-poor households. The report itself says that in 1990 the same number of individuals of working age did not work as in 1975, but twice the number of households had no income from work. Over the same period the proportion of two-adult households where both worked rose from 51 per cent. to 60 per cent., but the proportion with no earners increased from 3 per cent. to 11 per cent. That is a very serious part of the problem identified by the Rowntree Report.

So clearly, that group in particular is affected and clearly it is unemployment and changes in the labour market which are key factors. Surely we all agree that the most effective way of raising living standards and the prospects for unemployed people of working age is by helping them to return to work. In Chapter 3, Volume 1, the report makes a number of policy suggestions. Noble Lords will not be surprised that some of them, but not all, accord with the Government's own policy initiatives. Indeed, there are some on which we have

1 Mar 2002 : Column 1552

been working for a number of years. For example, in 1992 we reduced the number of hours required to qualify for family credit from 24 hours a week to 16 hours a week. Now we have 200,000 families receiving family credit in that band of hours. Many of them had previously received income support.

In 1993 we introduced the Family Credit Helpline so that people could have easy access to information about how family credit and other benefits could help them to be better off in work. Last year we removed one of the major stumbling blocks preventing families returning to work through our help with childcare costs in the in-work benefits, and I am grateful to the report for welcoming this decision.

We also announced at the tail-end of last year a further raft of reforms in the Budget. From July 1995 the £10 premium in family credit will make full-time work more attractive for those working 30 hours or more a week. We are at one with the report when it highlights in volume 1, page 48, the transitional period between benefit and work as a source of risk for the claimant. It says:

    "Those moving off income support into work may be entitled to in-work benefits like family credit or continued help from housing benefit. The calculation and payment of all in-work benefits should be speeded up as much as possible to reduce the potential gap in time in payments from the two systems."

From April 1996, to remove uncertainty at the point of moving into work, people who take a job after six months' unemployment will be able to keep their housing benefit at their existing full rate for an extra four weeks. Also, local authorities will be encouraged to arrange any continuing in-work housing benefit award within this period. We also aim to speed up the payment of family credit so that people in work will get this extra help more quickly. We are starting this process from April 1995, and from April 1996 we expect almost all new claims for family credit to be arranged within five working days. From October 1996 the tax-free back-to-work bonus of up to £1,000 will be a considerable help in smoothing a family's income flow on taking up work.

The report speaks of encouragement to employers to take on more unemployed people and we have announced ways to help in that direction. From April 1996 employers will have a one-year holiday from the employer's national insurance contribution for every person they take on who has been out of work for the previous two years. This April, employers' contributions will be cut by 0.6 per cent. for all employees earning under £205 a week.

The report acknowledges the importance of family credit in Volume 1, page 44(b) and we are indeed introducing this radical innovation in social policy. It begins by approving family credit for families with children and says that these could be extended, for instance, with the equivalent of family credit for childless couples and single people without children. Indeed, we know that family credit has been successful in helping families with children return to work and stay in work. Now we are going to test whether the same principle will work for couples and single people without children who constitute the majority of the

1 Mar 2002 : Column 1553

long-term unemployed. From October next year we shall be setting up a substantial pilot study in eight locations of an in-work benefit for this group, which will run for three years. We shall be publishing a consultation document in the spring of this year about how that pilot scheme is going to proceed.

All the initiatives I have mentioned do not come cost free. My right honourable friend the Chancellor and my right honourable friend Peter Lilley have announced these incentives and they have also announced that they will cost together some £700 million, which because of the other prudent housekeeping we have undertaken in the social security budget we are able to fund. We believe that will help and when it all comes on-stream something like 750,000 people will benefit in the course of a year.

Turning from these measures concerning employment and unemployment to one of the very closely related aspects also drawn, quite rightly, to our attention in the report, I shall speak now about training and education. I found the analysis of the importance of education and training very interesting, and in particular its role in improving employment opportunities and increasing income dispersal. The report itself says in volume 2, page 44:

    "Between a third and half of the growth in earnings dispersion over the 1980s can be explained by higher wage premiums commanded for greater levels of experience and/or educational qualifications ...

    Qualification premiums increased particularly for young (16-30) workers.

    The widening in qualification differentials came despite a substantial increase in the supply of qualified workers, suggesting that demand for them was increasing even faster."

Those findings led directly to the recommendations in Volume 1, chapter 3, best expressed by the phrase:

    "it is imperative that we upgrade our skills as a nation and take maximum advantage of new technology".

We have introduced policies which will ensure that people are able to take advantage of opportunities available to them through education and training. The reform in education through the national curriculum and an emphasis on vocational skills offers greater choice to parents and better education for children. There are more young people than ever staying on in education and training—about 90 per cent. of 16 year-olds and three-quarters of 17 year-olds. One in three people are now benefiting from higher education, compared to one in eight when the party opposite left Office. Support for training measures has been doubled, even after inflation is taken into account, since 1979. This is precisely what the Rowntree Report recommends. It particularly directs our attention at the groups of youngsters giving most concern when they enter—or perhaps do not enter, which is the worrying point—the labour market. We have taken account of the research by the National Institute for Economic and Social Research quoted at page 40 of Volume 1:

    "that the quality of much of our non-elite education also lags behind our competitor countries."

Tackling that comes from increasing standards through the national curriculum, monitoring these standards through sensible testing, especially in the

1 Mar 2002 : Column 1554

earlier years of school, of the basic skills of reading, writing and arithmetic and, later in school, providing a framework of educational training and qualifications, designed to help this group in particular to acquire practical and marketable skills that they will need if they are going to enter this new labour market. GCSEs and GCEs deal with general education, NVQs provide job-related training and GNVQs provide broad vocational training. All these things are absolutely essential if we are going to see the workforce in our country gain the skills and the training to face up to the challenges of a new world—the challenges of new technology and the challenges of the Pacific Rim and places like that.

I have covered in the main many of the points raised, although perhaps not all. I want now to turn—

Next Section Back to Table of Contents Lords Hansard Home Page