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Baroness Hollis of Heigham: My Lords, I am delighted that my noble friend, who has led the campaign not just over this past year, but over many years for disabled people, feels able to welcome this chapter in the Green Paper.

My noble friend is right to say that the Green Paper tries to suggest to disabled people that they can have every confidence as we move forward together in consultation, in partnership with disabled people, to decide how best to adapt, modify and reform disability benefits. Where my noble friend is absolutely right is that disability living allowance will in future remain a national benefit. In other words, it will not be localised--that is, sent over to local authorities. My noble friend is also right to say that DLA will remain a national, universal benefit. In other words, it will not be means tested.

My noble friend referred to incapacity benefit and asked what was meant by "the money will be reduced". If we reduce the money spent on incapacity benefit, that will be a sign of success and not failure. It will mean that our strategy to help disabled people to remain in jobs, which is the best strategy possible, and our strategy to help disabled people to move back into work have succeeded. It will be a test of success and not failure. All existing claimants on incapacity benefit will be protected should and when the all work test be replaced by an employability test.

At the moment, incapacity benefit is an all-or-nothing situation. With 15 points you get your benefit; with 14 points you get nothing at all. It is a cliff edge. People with experience of disability know that disability is a continuum and a fluctuating experience. We need something far more sensitive to the real lives of disabled people, as they move in and out of work--voluntary work, part-time work or full-time work. Because of that we wish to develop those principles and those topics in conjunction with disability organisations and with the all-party disability group which my noble friend chairs in such a distinguished way. Along with civil rights for disabled people, we have promised a commitment, a contract and a new deal about which, together, we can rejoice.

Lord Tebbit: My Lords, is the noble Baroness aware that the Green Paper and the Statement appear to be strong on sweet words but that there is not too much evidence of parsnips, let alone butter? Can she turn her attention to look not merely to the right, as Ministers do these days--that is, at page 51 from which she quoted--but at page 50 where she will notice a series of success

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measures which could well be quantified numerically? Secondly, did she notice that she was able to give an assurance on behalf of the Chancellor--a long-term assurance, as I read it--that DLA will not be taxed or means tested? Why was she not able to give a similar reassurance that the old-age pension will not be so treated?

Thirdly, on the subject of disability, the Green Paper seems not to recognise that disability affects not only the individual but the family in which the individual lives. Does she not regard it as quite extraordinary that, while a travelling salesman is allowed the cost of his transport as an essential business expense, the spouse of a disabled person, who could not go to work unless there was a carer at home, is not allowed the cost of that carer as an essential expense in being able to get to his or her work? Will she have a word with this extraordinarily generous Chancellor about that matter?

Baroness Hollis of Heigham: My Lords, the noble Lord asked about DLA and said that I appeared to give an assurance on behalf of the Chancellor that it will neither be taxed nor means tested. What I said was that it will not be means tested. As I am sure he would recognise if he consulted his noble friend Lord Higgins, who is a former Minister of State in the Treasury, the Chancellor must always reserve to himself the position on taxation. There are no proposals to tax it, but that position must be reserved. The commitment in the Green Paper is to DLA not being means tested.

The noble Lord referred to disability and the tax changes. Like the noble Lord, I think that the position of carers is a crucial, sensitive and vital one in supporting disabled people within the family and within the community, and it is one that has too often been neglected. That is why I am sure he will join with me in welcoming the changes in the Budget introduced by my right honourable friend the Chancellor in which he allowed the same tax credit that married men currently enjoy for a disabled wife and dependent children to apply to a working wife with a disabled husband and dependent children. Certainly the Carers National Association has warmly welcomed the change and I am sure I can expect the noble Lord to do so as well. My noble friend Lady Pitkeathley is the chief executive of the Carers National Association and has been active in promoting its concerns. We will be looking at some of the wider issues affecting carers as the summer progresses. The noble Lord was quite right to draw those points to our attention. They will be looked at.

Lord Shore of Stepney: My Lords, I congratulate my noble friend and the Government. This is an important Statement and it is very helpful to all of us to have a restatement of the general principles of the welfare state and indeed of some of the main policies which are already in train or being adopted.

However, I have one reserve to express and one question to ask. The reserve is really about the effects of the welfare-to-work measures, of which I accept there are quite a number, on the reduction of unemployment. I think the effects will be quite small. The main effects

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in reducing unemployment will be achieved, if they are achieved, by successful macro-economic policies, of which the exchange rate is one, but by no means the only one. The lack of mention of demand management as being one of the keys to the whole economic situation is to me a matter of profound regret.

The question I want to ask is quite a short one and it is about the options for a second pension. I wholly accept that we must have a second pension; I wholly accept that savings have to be increased; and I wholly accept that it has to be compulsory. But I should like an assurance from my noble friend that, in considering what kind of pension this should be, we will keep in play the possibility of amending and improving SERPS as the basis for the second pension rather than shooting off into the stratosphere with the ill-defined stakeholder pension which may or may not be of equal merit.

Baroness Hollis of Heigham: My Lords, my noble friend raises two points. The first concerned the welfare-to-work measures and a reduction in unemployment. He is worried that the effects may be quite small and that unemployment will better respond to macro-economic policies such as demand management. I am sure that, to a degree, that is true but our experience over the past 20 or so years has been that whenever unemployment has receded--when the economy has picked up through good and effective demand management--certain groups of people have been left stranded on the beach. In other words, when employment improves, some of those who previously were left unemployed do not come back into the labour market. From our experience they have disproportionately been disabled people; they have been men in their fifties from areas of former heavy manual work; they may sometimes be young people from ethnic minority backgrounds; they may be people with low skills and low literacy qualifications.

Our experience has been that demand management, while of course an important part of economic management, is not enough to refloat those people who have been left beached back into the labour market. That is why we need the targeted effects of the new deal for young people, for the long-term unemployed, for disabled people and for lone parents.

My noble friend asked about SERPS and the stakeholder pension. We will be bringing forward a Green Paper and we expect to see major legislation in this Parliament. Within that context, we will welcome the contribution of my noble friend.

The Earl of Onslow: My Lords, I have glanced briefly at the document, but I hope that any comment that I make will not be just a glance comment. What has struck me very forcibly is that throughout this century welfare and social security have been advanced by one party or the other more or less equally, be they the Liberals of 1905, Chamberlain in 1925, the 1935 Act and so on. The only thing that has become absolutely clear is that every single cash forecast has been quite horrendously wrong. It is stated that old age pensions in 1905 were expected to cost £2.5 million, but in four

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years they cost £5 million. I know that the cost of the disability allowance was way in excess of what we thought it was going to be. Nobody, least of all myself, would complain about the extra cost because it is obviously necessary. But when the numbers are done, can the Government do basically what President Kennedy did as regards going to the moon? The estimate of the cost was put at x million dollars and he simply added a nought to the end of it. The project then came within budget. Whatever we do about welfare will cost a great deal more than was envisaged at the time. Can we always bear that in mind?

Baroness Hollis of Heigham: Yes, my Lords.

Lord Randall of St. Budeaux: My Lords, I should like to say how impressed I am by this Green Paper. It is imaginative and visionary. If we can go ahead with it we shall have a better society, which is something that most of us in this Chamber would wish to see.

When one looks at the costs of welfare and extrapolates them, one must conclude that it is inconceivable that we can continue spending at the present rate and with the huge growth rates in the future. Something has to be done. Again, I compliment the Government on taking action.

I have a question for my noble friend. The change is very comprehensive and it will affect many people. I believe, generally, people are not keen on change. I believe that there will be a big reaction. I noted in the Statement that Mr. Field said that reform is non-negotiable. I welcome that. However, does my noble friend agree that we must proceed with this programme although it will be politically very difficult at times? The reason is that what the Government are doing is absolutely right.

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