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Lord Blackwell: My Lords, I think the latest spending increase has to be related to what is going on in the economy at the time. The relevant comparison now is what the expenditure increase of this Government is compared with that which was projected under the previous government. When the economy is growing, expenditure as a percentage of GDP is expected to fall. I believe it was expected to fall from around 41 per cent. in 1996 to about 37.5 per cent. in 2001. It is now expected to be about 38 or 39 per cent. of GDP. After the latest forecasts I expect it will be even higher. That is why I asked the Government if they would confirm a target of keeping public expenditure below 40 per cent. of GDP.

Earl Russell: My Lords, the noble Lord takes the previous government's spending limits a little more seriously than the former Chancellor of the Exchequer, who once told my honourable friend Mr. Bruce that they were for the birds. Perhaps the noble Lord was one of the birds!

I was amused by the comments of the noble Lord, Lord Bruce of Donington. He is a good parliamentary sportsman. I do not think he will mind my saying the thought that came into my mind. If he were at the gates of Hell and watched Satan opening them before him-- I mean nothing personal because this could happen to any of us--his first cry would be, "I exercised the veto". But I am afraid that really would not do him much good and I think he knows that himself.

I wish to mention one measure in the gracious Speech which has not been mentioned so far, and that is the measure to reduce the age of consent. I am extremely glad to see this measure coming back. I hope it will have a slightly quieter passage than it did last time. I congratulate the noble Baroness, Lady Young, on the care with which she has entered into consultation about details of some of the questions which arose last time. I thank also the noble Lord, Lord Williams of Mostyn, and his officials for the care which they have put into these consultations. It will not, of course, remove disagreement. We do not expect it to. However, it may at least narrow the area of disagreement and do something to lower the temperature.

Perhaps I may address one question to those who are thinking of opposing that measure. What do they hope will be the effect of success? A great many of them said then that they were not in favour of imprisoning 16 year-olds and 17 year-olds. They wanted the law simply in order to express disapproval. It was something of an eye-opener to read Matthew Parris's "Clapham Common" column, which is, I think, one of the great historical documents of the late 20th century, as well as

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a great piece of literature. It made me understand how difficult it is for anyone to lead a respectable sex life which they cannot avow in public. When that issue returns I hope that those points will be taken into account.

I should also like to mention briefly the draft law on sex discrimination and sexual harassment, recently offered by the Equal Opportunities Commission. I hope that that receives favourable consideration from the Government, although I appreciate that it can hardly be for the legislative programme of this Session.

My main area of concern must obviously be the welfare reform Bill and the points that go with it. My honourable friend Mr. Rendel, our social security spokesman in another place, recently said that social security has emerged as one of the most glaring gaps between our policy and that of the Government. That is truer of some areas of the welfare reform Bill than of others. I hope that pensions will be one area where that might be slightly less true.

I congratulate the Minister, the noble Baroness, Lady Hollis of Heigham, on the appearance of pension-splitting on divorce. The noble Baroness was in at the birth of that proposal and I am glad that she will have the chance to introduce it. However, as I am sure she will be the first to say, it will be an abominably complicated process. It may do more for women who have formerly been married and who have children than the Child Support Act has ever done or ever will do. However, the problem is that there is not enough to go round. Granted that that is so, it is right that the misery should be shared more equally, but we shall all have problems to address in that area.

On the stakeholder pension, we on these Benches have grasped the nettle of compulsion. I remember when I was 23, newly employed and entering into an occupational pension scheme, being absolutely furious to discover that the scheme was compulsory. Looking back on it, from the perspective of 40 years later, I am extremely glad it was. The principle of compulsion, after all, is well known in national insurance and I do not think there is anything so startling about it.

The difficulties are those to which the noble Baroness, Lady Turner of Camden, and indeed the Minister drew attention. What does one do for those with irregular patterns of employment who are unable to make up the regular pattern of contributions for that second pension? This, of course, will be further complicated by the proposals of the Taylor Report for the lower limit on national insurance, which are themselves good and constructive proposals. However, we have here two contradictory imperatives. I am sure that the Minister knows the problem. Indeed, she has already referred to it. I shall judge the success of what they do about pensions on how well the Government cope with that. I wish them luck.

For the rest, we on these Benches think that the welfare reform proposals rest on a largely mistaken diagnosis. They rest on the premise of defending modernisation, but I am not exactly clear what that is. I have never seen any government definition of it. It must mean either that everything new is for the better,

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which is a proposal too simple to be taken seriously, or it must be meant to be praise of a specific type of change. If it is the second, I should like to know what that specific type of change is.

The next point, which perhaps worries me most, is that the Government have to a large degree fallen for the notion of welfare dependency. In the Acheson Report, powerfully referred to by the noble Lord, Lord Roll of Ipsden, it is strongly stressed that benefit levels are too low to be compatible with good health. Indeed, there is a great deal in the report about what it terms "food poverty" on benefit. It is stressed that that is for many people a great deal worse because, not having cars, they have to add on the cost of bus journeys--if indeed there are any buses--to where they can obtain food. I am not altogether convinced that such low benefit levels have the attractive quality with which the Department of Social Security has always credited them. There is a certain implausibility about the notion of welfare dependency.

More generally, there seems to be a flaw running through the Government's thinking when they talk about "work for those who can"; namely, they believe that the way to get people into work is to change the social security system to encourage them to come off benefit. They have not gone so far as to use the Charles Murray phrase, "weaning them off" benefit. It appears to be government thinking that changing the benefits system is the best way to get people into jobs. It sounds like that. The Minister quoted the number of workless households as evidence of failure of the social security system. If that is not what she meant--and I should be very glad to hear that it was not--I should be glad to know what she did mean.

Obviously, there is a great deal going wrong. I have not been persuaded by anything in the Green Paper or any government statement on social security that matters are going wrong because of a failure of the social security system. It seems rather like blaming the ambulances for the casualties that they bring in.

The next matter that concerns me is the itch to compulsion. The manifesto merely said that if people did not take up welfare-to-work options, then life on full benefit is not an option. The Prime Minister, on the other hand, said in his Amsterdam speech that life on benefit is not an option. The Prime Minister has clearly won over the manifesto. We have an extension of total disentitlement, most recently in the new pilots for over-25s for welfare-to-work.

We really do need to think about what we are doing here. The Acheson Report has said that,

    "all policies likely to have an impact on health should be evaluated in terms of their impact on health inequalities".
That is a perfectly reasonable request. But if benefit levels are too low to be compatible with general good health, what should we say about those who receive no benefit at all? It seems, prima facie, plausible to suppose that that effect would be rather worse. But there is no specialist research on the effects of disentitlement to benefit. No government have undertaken any. I ask the Government to undertake such research in the course of

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monitoring the sanctions for welfare-to-work before they introduce any further measures of disentitlement to benefit.

In a Written Answer a couple of days before Prorogation, the noble Baroness, Lady Blackstone, told me that in studying the effects of disentitlement on welfare-to-work the Government did not have records of the percentage, whether total or partial, of disentitlement or the length of sanction. Given that statistical limitation, I do not see how the Government will carry out the study. I should like to see this done rather better.

Turning to the more specific measures that the Government are bringing in, there are changes in incapacity benefit. I entirely agree with the Minister, who spoke very powerfully on this matter, that there are people on incapacity benefit who could do some forms of work. If they are to be offered "carrots", I am strongly in favour of that and it is a good thing. However, when we start thinking about sticks or pressures, it is another matter.

If we look at the Government's analysis of the rise in numbers on incapacity benefit, we run into another series of questionable assumptions. Last time, the Government thought that a lot of people who were on incapacity benefit should not be and that they could save money by getting them off it. But the incapacity benefit leavers survey in progress found that only 40 per cent. of people leaving incapacity benefit got into work and only 20 per cent. of those disentitled to incapacity benefit got into work. However, almost half of all incapacity benefit leavers claimed a new benefit within six months. A great many, one-fifth of incapacity benefit leavers, were back on incapacity benefit at the time of the search. That suggests that the alleged saving has more or less disappeared.

I ask the Minister when we can expect the study to be completed. I was quoting from the DSS 1996-97 research handbook and there is a further instalment to come. In the light of that, I wonder whether the assumptions being made about savings are a little optimistic. One should have expected this rise in numbers. Statistics on ill health in the Acheson Report show a significant class link between poverty and ill health between the years 1945 and 1964. The figures were 17 per cent. for professionals and 48 per cent. for the unskilled. In addition, we know from many studies that unemployment has a bad effect on health. I wonder whether we find here not abuse, as the department has been tempted to think, but a serious medical effect. We should bear in mind that medicine has reduced mortality but has not succeeded in reducing morbidity. Here we have a failure in joined up government.

I also wonder about the Government's decision not to allow incapacity benefit for those who have not paid contributions in the past two years. It is possible that some of those people may be ill partly because of unemployment. All the material in the Acheson Report would support that. In some areas, such as South Kilburn, the ward next door to where I live, there are not the jobs. One does not get a job, because one can

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go round the treadmill of the job centre a thousand times and there is nothing there to apply for. No amount of changes in social security can alter that.

The Government need to wonder about the attempt to change SDA to a contributory system for those over 20. What will happen to students, most of whom will not have made contributions during that time?

I hope the Government will think carefully about housing benefit. A view is being put forward, most notably by Frank Field, that one needs to do something to control housing benefit, to give the tenant an incentive to shop around and seek a cheaper rent. But so far as I can see, it is a sellers' market. There is not much available in the way of cheap private rented accommodation and the tenant who is made to shop around by a cap on his financial resources tends to end up homeless, at greater expense to public funds.

If we examine what has happened to caps on housing benefit in the single room rent and the local reference rate, what tends to happen is that either the landlords stop letting to people who are on benefit--and the newsagents where I live are full of such notices--or in periods of high interest they sell the house, stop letting at all and make more money out of the interest on capital than they would ever have made by doing anything.

So before the Government go further down that route, I hope they will think twice and three times. I hope they will look at the research by Centrepoint, Shelter, the citizens' advice bureaux and a good many other bodies and think hard about it. We should like to see first some mending of the holes cut in the safety net which allow people to fall through. I am raising the case of 16 and 17 year-olds for my 10th successive Session. I do not want to beat my great-grandfather's record of 12 Sessions before he got the Jewish Disabilities Bill on to the statute book, but if I have to I shall. When are we to get the results of the review of the habitual residence test? The Minister promised that to me at the end of the Government's first Summer Recess. It was promised at the end of the second Summer Recess. I know that a European Court case is pending because I have some involvement in it, but I should like to believe that that review will eventually be concluded.

Finally, the Minister will remember the feelings that I expressed when the previous government removed the entitlement of some asylum seekers to benefit. I did not expect this Government to disentitle the rest. The Minister will say that they have been left with visible means of support, but this is in kind, more expensive, less suited to anyone's needs and is tied to a condition that they live in a specified place. This is closer to internment than benefit and we shall hear more of it in this Session before it is through.

10.16 p.m.

Lord Higgins: My Lords, it is a somewhat daunting task to wind up at the conclusion of a debate that has already lasted over seven hours and has included 34 speeches. I do not envy the Minister's task in replying to it. The debate has been remarkable for the fact that we have heard no less than five maiden

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speeches. There has been speculation as to the correct words to describe such a group. Looking at noble Lords opposite, perhaps "a phalanx of maidens" is appropriate. I hesitate to use the expression "block vote" given the number of trade union affiliations.

The noble Lord, Lord Evans of Watford, dealt with small businesses; the noble Lord, Lord Brookman, dealt with the steel industry; and the noble Lord, Lord Clarke of Hampstead, dealt with the Post Office. Therefore, in terms of the subject matter of this debate--industry--they could not have covered a wider spectrum of expertise. We look forward to hearing more from them in the future. The noble Lord, Lord Christopher, concentrated on pensions. My experience over the past year in this House is that proceedings on pensions tend to be more like seminars than debates and consist of the noble Baroness, Lady Hollis, the noble Earl, Lord Russell, and myself. Any additional reinforcements are greatly welcomed. We shall look forward to hearing from the noble Lord on that subject.

Perhaps the most remarkable maiden was that of the noble Lord, Lord Craigmyle, who spoke exclusively and rightly about marriage. I believe that in the context of welfare reform an increasingly important issue is the way in which those within or without marriage should fit into the social security system. His contribution was very valuable. I have already said that we look forward to hearing the other maiden speakers on many occasions. Alas, as a consequence of the Government's proposals for your Lordships' House the number of occasions on which noble Lords can hear further from the noble Lord may be limited. That is very greatly to be regretted.

I concentrate my remarks on the question of welfare reform. First, perhaps I may say a word or two on the presentation of government policy in two respects. First, there is deep concern about the way in which increasingly over the past year we have had government by leak. It has become almost standard practice for the press to say that the Secretary of State for this or that department will tomorrow announce this or that particular proposal. It is a worrying development. The technique from the point of view of the spin doctors is clear. If it is good news the Government get it out the day before and have a second bite at the cherry when the Opposition can say something on it. If it is bad news they anticipate what will be said and when it is criticised by the Opposition the next day the spin doctors say to the press, "That's all out of date." It is a discourtesy to the House and a worrying development.

The curious thing is that it has been linked with another presentation device: to repeat as though new something which has been announced several times before. I pointed this out in the debate last week, as the noble Baroness will recall. And what do we find today? A large chunk of the noble Baroness's speech is a repetition of what was in the Chancellor of the Exchequer's last Budget speech as though it were new. Even stranger perhaps, the wording of the gracious Speech seems reminiscent of what was said only a few days before in the prorogation speech. The general presentation of government policy--it is an important parliamentary matter--gives some cause for concern.

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I said that I wished to concentrate on social security issues. However, perhaps I may say a few words on some of the other points raised. There has been much publicity in the past few days as regards the European Union and tax harmonisation. I had much sympathy with the view put forward by the noble Lord, Lord Stoddart, who pointed out that the whole basis of our parliamentary system, albeit now largely the responsibility of the House of Commons, rests on the control of money--the granting of supply, in particular the ability to raise taxes or to make expenditure. If that is being shifted elsewhere by way of tax harmonisation, inevitably the power of Parliament must be reduced. That is worrying.

I was somewhat worried by the Chancellor of the Exchequer's broadcast this morning. When talking about tax harmonisation he seemed to be totally unaware of the situation with regard to valued added tax and the sixth directive. When winding up, perhaps the Minister will tell us the up-to-date position as regards our resisting any proposal to remove zero rating on value added tax. I declare some historic interest since it was a tax that I had the pleasure--it is not quite the right word--of steering through the House of Commons originally. We need to know exactly how much control we still have.

In many ways this is a difficult debate because it has covered such a wide range of issues: industry, economic and social affairs. But there has been a fascinating debate within a debate which was started about halfway through the proceedings by my noble friend Lord Skidelsky and taken up by a number of noble Lords, in particular the noble Lords, Lord Shore and Lord Desai. It raised a number of important issues. Given my history I am tempted to go into the matter. However, I shall pick up only one important point which links the economic situation to social security. My noble friend Lord Skidelsky is, I think, universally recognised as probably the greatest authority on Lord Keynes. I pointed out recently that Lord Keynes's views are becoming more and more fashionable under the present Government. Lord Keynes was remarkable in his general theory of bringing together the important relationship between savings and investment--not ex post savings and investment, which are always equal, but the disparity between ex ante savings and investments.

In that context the way in which the Government are developing their policy of more and more means testing is creating a serious deterrent to saving. People within a wide range of incomes will feel that if they are to have this kind of social security system they will not find themselves any better off if they save than those who are more profligate, do not save, and end up on the social security system. That covers quite a wide range of issues. I see some assent from noble Lords opposite.

It is equally true in relation to those making provisions for pensions. There will be a serious danger that unless people receive a very large pension, they may well feel that it is scarcely worth contributing because they will end up on means-tested benefits. Therefore, that is a particular aspect of the matter--the

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link between the economic side of things and the whole question of savings and investment with the social security system.

I turn to the main points about the Government's welfare reform programme. It is becoming increasingly clear now what the outlines are. In my view it is also absolutely clear that it is not the programme on which they fought the election. They were very clear then. There was speech after speech by the present Prime Minister, when he was in opposition, saying very clearly, "Our intention is to cut the social security budget in order to spend more on health and education." It is absolutely clear that they have failed in that attempt. Indeed, far from being cut, the social security budget has gone up and up. It would be helpful if the Government would admit that that is so because at the moment it is clouding the entire debate on welfare reform.

Of course, it has been said, "We did not say we were going to cut it absolutely. We were merely going to cut it as a percentage of GNP or as percentage of spending." At Question Time the noble Lord, Lord McIntosh of Haringey, was saying just that. I can find absolutely no trace whatever of any statement by any Minister of the present Government in opposition, or in the manifesto, saying that they meant they would merely cut it as a percentage of GNP or of public spending. If that is wrong, perhaps the noble Baroness will write to me and tell me so.

The reality is that even in terms of a percentage of one or other of those two variables, the Government still are not succeeding. There are a number of reasons. If anything, the actions they have taken have increased expenditure on social security--notably £1.5 billion on the working families tax credit.

The relationship in terms of a percentage of national income is going in the wrong direction because the Chancellor has admitted that the growth rate will be significantly less than what he first predicted. Therefore, on both those grounds, the Government have not succeeded in what they said they were going to do. We shall now see an increasing number of relatively minor matters which are considerably to the disadvantage of particular groups of people.

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