FAMILY ALLOWANCES AND NATIONAL INSURANCE (No. 2) BILL

HC Deb 02 April 1968 vol 762 cc182-295

Order for Second Reading read.

3.46 p.m.

The Minister of Social Security (Mrs. Judith Hart)

I beg to move, That the Bill be now read a Second time.

As the House knows, this Bill provides, in the main, for two things. It provides for an increase in family allowances, and it provides, in Clause 2, for the ending of the present provision for the payment for three waiting days.

I want to devote most of my speech today to family allowances and the protection of the poorest; and to the wider problem of poverty in our society and the contribution that this Bill can make towards ending that poverty. Rather than go through the Clauses of the Bill in their natural order, I will, if I may, say something first about the provision for waiting days and, therefore, about Clause 2. Clause 2 makes changes in the provision that has existed from 1946 for waiting days. I shall in a moment indicate our view of this Clause, but before doing so I would like to put it into its correct and relevant context.

The present provision works in the following way, embodied as it is in the 1946 Act. At the end of the first week off work, whether a man is sick, unemployed or affected by an industrial injury, he receives three days' flat-rate benefit (the National Insurance "week" being one of six days). He does not receive benefit for the first three days. At the end of his second week off work he draws flat-rate benefit for that week. At that time, after 12 days of sickness or unemployment, he becomes entitled to flat-rate payment for the first three days of his sickness or unemployment. If he continues to be off work during the third week, he then qualifies for earnings-related supplement in addition to his flat-rate benefit.

The Clause is concerned only with the payment for the first three days which, as I have explained, is made only to those who have been off work for 12 days or more. If there is a subsequent spell off work through sickness, injury or unemployment within 13 weeks, waiting days do not have to be served again and benefit is payable immediately.

This Clause has to be seen in the context of the very considerable change in circumstances since the 1946 Act. I have mentioned one; the introduction by this Government of earnings-related supplement from week three onwards. A second and very relevant one is the increase of employers' sick pay schemes, which now cover up to 60 per cent. of employees, but which tend to be concentrated more upon professional and clerical workers than upon manual workers, and to be operative more in some industries than in others. Trade union concern about these points is, therefore, very understandable.

The Government have always recognised that State provision for the first three waiting days must be seen in the wider context of the factors which I have mentioned. Given all the considerations of public expenditure involved, we think that it will be sensible to look very fully at this aspect of our structure of short-term benefits and, therefore, at the particular provision in this Clause. We shall have an opportunity to do this, because there will be a good deal of time before we move to Committee stage, which will not be taken before the Recess. That is what I want to say about Clause 2.

I want now to turn to the main provisions of the Bill concerning family allowances. The 3 s. family allowance increase embodied in this Bill dating from 8th October next follows the announcement by—

Lord Balniel (Hertford)

I am sorry to interrupt the Minister so very early in her speech, but are we to understand that Clause 2 is all that she is referring to during Second Reading? Will she not, for instance, refer to the principle of financing family allowances out of the Insurance Fund? This is a very important matter.

Mrs. Hart

I will not refer to that point, because the noble Lord often finds that he is under some misapprehension about the way in which the National Insurance Fund works. The relevant point here concerned the level of public expenditure, and, in this sense, public expenditure is measured both by direct Exchequer payments and by payments from the National Insurance Fund. But there has never been the slightest suggestion that family allowances would be financed out of the National Insurance Fund. We were concerned with the general level of public expenditure, whatever form it took and out of whatever moneys it was provided. I am afraid that I shall not be satisfying the noble Lord in following further the point that he has mentioned.

There are two essential reasons for the increase in family allowances which is proposed in the Bill. The first is a very clear and obvious one. It will be clear to certain hon. Members opposite as well as to my hon. Friends who have been concerned about the Government's commitment, given immediately following devaluation by my right hon. Friend the Prime Minister and further amplified in my own statement on 29th November on a previous Family Allowances Bill, to protect the most vulnerable from the consequences of devaluation.

On 29th November, I made it clear that we should be wanting to identify the groups that we regarded as being in need of protection, and also to indicate at what time we thought that it would be necessary to say what protection we would provide. I said: We see the most vulnerable as those with slender resources who are old or sick and those families which must support their children on very low incomes. It is these groups who must be given help at the right time."—[OFFICIAL REPORT, 29th November, 1967; Vol. 755, c. 458.] As the House will be aware, my right hon. Friend the Prime Minister announced in his statement in January that we proposed to increase supplementary benefits in the autumn of this year and that we regarded that as the fulfilment of our commitment to protect the old and the sick. Following the Chancellor's Budget Statement, this Bill now fulfils the rest of that commitment to protect those families who are amongst the most vulnerable because they have to support their children on very low incomes.

I know that the noble Lord will be particularly glad, because he has inquired from me on one or two occasions in the last couple of months when we intended to fulfil this aspect of our commitment. In each case, I replied that we would make our intentions clear at the right time. I hope that he will accept that, at what we judge to be the right time, we have made our intentions clear and that it is those intentions which are now embodied in the Bill.

We fully recognise two points. The first is that there is the inevitable increase in prices due to devaluation and that, within the ceiling or norm fixed for increases for lower-paid workers, incomes policy itself will tend to maintain the incomes of lower-paid workers at their present level or at an inadequately increased level. Therefore, we now propose this 3s. increase in family allowance to mitigate this and to assist all poor families to meet the increased costs which are liable to occur during the rest of this year.

It is the case that in this House generally there is almost complete agreement that it is vital, not only in relation to post-devaluation Measures but in more general terms, to concentrate more help upon poor families. Certainly I know that the noble Lord agrees that we should regard as a priority the need to assist those families which are living in poverty in our society today. I wish that there were always such a keen awareness outside the House about this. The difficulty is that poverty can be unobtrusive, how-ever desperate it may be. It does not always force itself upon the attention of the man in the street. But in this House we are clear about our objective, and such discussions and arguments as we have had in the past have been concerned with what is the right way to assist poor families.

There is a clear possible method in relation to wages. I stress again that throughout the incomes policy of this Government, there has always been a conscious and deliberate stress on the needs of the lower-paid workers. It was very interesting to observe that, yesterday, the T.U.C. and the C.B.I. were discussing together the problems of the lower paid workers and their respective views about movement towards a minimum wage. Whatever happens in the sphere of wages will be of crucial importance to the lower-paid worker and his family, but it must be clear that it is not in wages that we can find an immediate solution for today's problem of poverty.

Another possible method advocated by some hon. Members opposite and by some people outside this House was the proposition that we should move towards means-tested allowances of one kind or another and, at one stage, to means-tested family allowance. I do not propose to go into the arguments against that in great detail. I did that fairly fully when we discussed the last Family Allowances Bill in November which provided for the 7s. increase.

In any means-tested scheme, we face the urgent problem that the take-up is never anything approaching 100 per cent. and that, inevitably, according to the methods which have been used to try and publicise it, there is an important proportion who do not have their needs met by any means-tested allowance.

Then there is the problem of administration. One could be asked to embark upon immensely expensive new administrative schemes. Quite apart from keeping down the number employed in Government service, as we seek to do, we are confronted with a real and urgent problem of the use of manpower, particularly trained manpower. Apart from financial terms, the administrative costs in real terms of introducing new means-tested schemes would be quite out of proportion.

Thirdly, there is the problem of incentives. The moment that one draws a hard line and says that, above the line there will be no assistance from the State, one introduces something which is bound to have a sharp and real impact upon the desire of a man supporting his family to seek to earn a little more each week because, if he earns that little more, he may earn himself out of the scheme which has supported him hitherto.

For those reasons and a number of others, in the Government's view and in the view of more and more responsible people both inside and outside this House, the means-tested solution of family poverty is increasingly being disregarded and seen as an inadequate one.

Other proposals have been put forward, and I turn for a moment to that produced by the Conservative Political Centre by Mr. Barney Hayhoe, called "Must the Children Suffer?", to which the noble Lord wrote an extremely interesting foreword. It advanced a scheme which would link the automatic payment of family benefits to the P.A.Y.E. system. As I read it, it seemed extraordinary that apparently no account had been taken of two or three of the most obvious points. Let me merely mention that according to this scheme one would leave out totally the self-employed, and the self-employed include over 20 per cent. of the poorer families as we found them to exist in the Family Circumstances Survey. Over 20 per cent. of the families living at a level below supplementary benefit level were families in which the main earner was self-employed. These would be left out of Mr. Hayhoe's scheme completely.

Anyone earning less that £5 a week would be left out because he would not come within the P.A.Y.E. system. But let me point to the problem of the separated wife who is doing a job, earning less than £5 a week and whose earnings are supplemented by a maintenance allowance from her husband which is often pretty inadequate, if she gets it at all. She would be excluded under this scheme.

The main objection to the scheme—and, with the greatest respect, I think that the noble Lord should have looked at it rather more carefully before he gave it the kind of blanket support he did—is that this would be the State saying to the employers, "It is too difficult for us to help poor families, to introduce the new administrative staff to do this job, so you do it. You do all the complicated work of structuring the family benefit scheme in accordance with P.A.Y.E., and then at the end of each week give to each worker an amount that takes account of his tax commitments and his family responsibilities."

It seems to me, as I am sure it must to the noble Lord, that if such a scheme were to be administered by the employers, it would at least double the amount of work they have to do each week in relation to each worker. The employers already have to make the P.A.Y.E. calculation and now they would be asked to make, in addition, a family benefit calculation, and then to put the two together and decide what actual amount the man should get at the end of the week. It would be a very serious matter for the State to say that it should be the responsibility of the employers to carry the administrative burden of the assistance the State is proposing to give to poorer families.

A third objection is that it is wide open to the anomalous situations that might occur—such as, for example, that of the husband who does not reveal at once to his employers or to the Ministry of Social Security or the Inland Revenue that he has separated from his wife and that she is now living on her own and not getting the full benefit of his earnings. It is exposed to the fluctuations in a wife's earnings, which can fluctuate from week to week and, certainly, from month to month. Finally, far from being a simple scheme, it would involve a complex inter-linking of four authorities: the employer; the Inland Revenue, which provides the code numbers; the Ministry of Social Security, which would be policing it, controlling expenditure and receiving information about the wife's earnings—because Mr. Hayhoe says the information about the wife's earnings should be fed into the social security machine; and the wife's employer. So there would be four people involved. I must confess that although I admire any attempts to find solutions that point new ways through the present labyrinth of provisions, I do not think this is a promising way forward.

There is, of course, the much wider question of negative Income Tax, of how, in the broadest possible terms, we can relate the payment of benefits to the extraction of tax. There is a very big question-mark about what contribution might be found in this kind of method. Again I would say to the House that, whatever the question-mark might lead to in the future, it is quite clear that at this moment in time, in this year 1968, negative Income Tax cannot give a solution to the problem of assisting families in poverty.

Therefore—and this is a very important thing to recognise—if we are intent upon helping poorer families, the only method available to us at this point in time is the method of family allowances. Let me reinforce that by reference to the work that was done by the Central Statistical Office and published in the February edition of Economic Trends in a paper on "The incidence of taxes and social service benefits in 1965 and 1966", which gives a wealth of information and the most detailed analysis of the impact of various taxes and benefits upon families in different income groups—poor, wealthy and in-between. Let me merely extract from the wealth of information given here the two points that are highly relevant to the thesis I am putting forward today. The first is this: benefits are very progressive in two ways; for each type of family the percentages decrease markedly as income increases, and within the same income range the percentages increase with the number of children in the family. Then, later: All benefits in cash form a much larger proportion of income at the lower than at the higher income levels and are thus very progressive. This was written, as my hon. Friend the Chief Secretary will know, before there was any question of applying give and take to family allowances. Even so, cash benefits given to poorer families were regarded as being "very progressive". Therefore they are infinitely more so when one has made the tax adjustments announced by the Chancellor in such a way that the real value of the family allowances is only going to be kept by the poorer families.

If we are concerned at this moment in time with the methods and techniques open to us, then the only solution is family allowances. I am completely aware, as I think every Member of this House is, of a very general public reaction to family allowances. I would only say that everyone in this House, on whichever side he sits, has a real moral responsibility, if he is concerned about family poverty, to seek to explain to the public that these are the facts, that family allowances are our only method of helping the poor family at this moment and that, with the adjustments that are being made in taxation, they are the means of concentrating cash benefits upon those families which need them.

I will now turn to the effects of this increase. It will be recognised that family allowances and taxation vary according to the family responsibilities of the man. One cannot make one simple statement that shows the position, because the situation will vary according to the level of income and the size of family, therefore I will pick out two examples which I think illustrate the effect very clearly.

A man with three children whose earnings are £12—one of our lower-paid workers—will now have, under this Bill, an extra 6s., representing a 2½ per cent. increase in his family income. A man with four children, also earning £12, will have an extra 9s., representing a 3¾ per cent. increase in his family income. At this point I have related the percentage increase in his family income only to the 3s. post-devaluation increase. If I relate it also, as I think I am entitled to do, to the 7s. increase which, although legislated for last November, only comes into effect this month, then the respective percentage increase in family income for these two cases will be 8½ per cent. and 12½ per cent. These are radical and substantial increases in the family income of the lowest paid in our society. They are to be recognised as such.

What will be the effect of the tax adjustments which my right hon. Friend the Chancellor indicated in his Budget Statement? The tax adjustments are designed to ensure that the value of the increased family allowance is fully kept only by those who need it. Therefore, it will again depend upon family size. To give examples, I take, first, again a married man with two children under 11 who is earning £12 a week. He will get the full benefit of the family allowance increases. A married man with two such children and earning £22 a week—that is, above average earnings; we must bear in mind what average earnings are at this point, because if we are concerned with a progressive system we are bound to be concerned about helping most those below average earnings and concentrating our help upon those who are furthest below average earnings—will not be left with any real benefit from the family allowance increase. A married man with three children under 11 will retain the full benefit of the family allowance increase at £13 a week; at £15 a week he will be 12s. better off, taking the family allowance increase and the tax together. If he is earning £17 a week, he will be 7s. a week better off. He will cease to retain any value from the family allowance increase only at the level of £23 a week.

Hence, it will be seen that the increase is indeed concentrated on the worst off and that this is a correct way in which to ensure that Door families and those who are below average earnings are those that gain advantage from the family allowance increase.

Mr. Douglas Jay (Battersea, North)

I assume that at no level of income as a result of this combined change in family allowances and taxation will anyone be worse off. My right hon. Friend said that they are better off up to a certain level. Can we assume that above that level no one is worse off?

Mrs. Hart

Yes; that is indeed so. One result of the increase in family allowances—I was about to turn to this point—is that a group of people will for the first time come into the payment of Income Tax. I stress, however, that they will derive a net benefit from the changes. They will not be paying tax at the standard rate. These are the people along the margin for whom the increase in family income as a result of extra family allowances brings them just above the level at which tax becomes payable. They will pay tax at one of the reduced rates. Even though they will be paying tax where they did not previously pay tax, they will get more in extra family allowances than they will have to pay in tax. The great majority of this group will retain at least half of the value of the family allowance increase, and many of them will retain much more.

The House will remember that my right hon. Friend the Chancellor of the Exchequer said in his Budget Statement that the bringing of this small group—300,000 of them—into tax was something he regretted, but that he could not produce a sound scheme for their exemption from tax in present circumstances. He went on to say that he regarded a raising of the threshold of tax as a strong priority for a Budget in easier circumstances."—[OFFICIAL REPORT, 19th March, 1968; Vol. 760, c. 295.] I want to make one brief point about the effect which the proposals that the Child Poverty Action Group has been advancing over the last year or two would have had as compared with the kind of tax adjustments we are introducing. Any scheme which replaces tax allowances by increased family allowances is bound ipso facto to bring more people into tax. Under the scheme advocated by the Child Poverty Action Group, a married man would start paying tax at £8 8s. a week, however many children he had, and only those earning less than this would get the full benefit. Thus, a man earning £14 a week and with two children—this is an example that the C.P.A.G. has quoted—would under this scheme lose about half his family allowances in extra tax. I am in no doubt that the scheme we are adopting is a better one than the variant proposed by the C.P.A.G.

It is only fair to mention two particular aspects of the method that we are now proposing and of the relevance of family allowances to the problem of family poverty. It has sometimes been said—indeed, it is perfectly true—that one of the implications of the take-back provision in the family allowance system—namely, paying out family allowances universally and taking something back in tax from those whom one did not want to keep their full value—is that there is a transfer payment from husband to wife. The wife draws the family allowance. It is the husband, in normal circumstances, who will pay the extra tax. I think that this used to be regarded as a defect of this kind of approach. I do not regard it as a defect, because I am pretty sure that I am right in supposing that the vast majority of married couples who have children under family allowance age are couples in this day and age who discuss their joint budgets, where the wife knows what the husband earns, and where they have a rational attitude towards family finances.

In a minority of families—but, I would suggest, nowadays only a very small minority—this may not be the case. The husband may be keeping something back, may be not revealing the whole of what he earns, and may be keeping his wife on a pretty tight budget. Where this is so, it is probably quite a good thing that the wife has this element of extra income which is hers and which is drawn by her.

There have been a number of letters in the Press about family allowances. One or two have indicated this point very clearly indeed. Some wives have written to say what a difference it made in their weekly budgets, and therefore in the lives of their families, that on Tuesdays there was a bit of income that was theirs. I therefore believe that, where there is a slightly problem relationship between husband and wife, it is as well that the wife has this little extra income which is her entitlement; and in the great majority of cases I believe that there is discussion within the family as such, so that we need not worry about the fact that this is in reality a transfer payment from husband to wife.

Much of the public criticism of family allowances is concentrated on the notion that this is a State subsidy to the very large family. Nothing could be further from the truth. The figures thrown up by the Family Circumstances Survey of two years ago show that among those whose initial resources were below their requirements 64 per cent. were families of only two or three children—that is, absolutely dead average families in terms of their size. Only 36 per cent. were families of more than three children, and the considerable majority of these had only four children.

Let us be clear that we are not concerned today or in general terms in the House with family poverty arising purely from the fact that a family has a large number of children in it. We are concerned with the maladjustment which arises, and which leads to poverty, between a low wage and any kind of family responsibilities.

Mr. Robert Howarth (Bolton, East)

How many families, because they have only one child, will not benefit from the Bill?

Mrs. Hart

I do not have those figures. I have only the figures relating to children who come within the scheme. I am completely aware that there can be a real problem for families with only one child. It follows, as a matter of logic, that the problem of the one-child family living on a low income is less than that of a family with two or three children. However, there is clearly a problem here. It has not been covered by family allowances, but I agree that we must regard it as a problem.

I conclude with a brief approach to the causes of poverty because we have been talking up to now about what the Government regard as being our only method of assisting this problem at the moment, given the techniques and the system available to us. We need to go much further and look at what causes family poverty and seek solutions to the causes themselves. This can obviously be difficult. It seems to me that there are basically three causes. The first is a very simple but intractable one. It is that a man happens to work in an industry which pays very low wages. Here what I was saying earlier about what might open up in future about wage provision is relevant.

The second is that a man may be disabled, partly disabled or subject to frequent illness; the sort of man with an ulcer who is unable to hold down a job which pays a decent wage. This is a particular problem and it is important that we should identify it in clear terms because if we can do that we will be that much nearer finding a solution to it.

The third is what I would broadly categorise as the socially maladjusted, and this can cover many things; the ex-prisoner, the man of perhaps low intelligence, the man with psychological personality defects and any one of the complex factors that tend to lead to problem families. The more solutions that we can find and the more straightforward our manner of identifying the causes of poverty—such as the industry which pays low wages or the disabled or partly disabled—the more manpower, skill and resources we should in future be able to devote to what is bound to be the time-consuming task of finding individual solutions to the individual problems that arise in the case of maladjustment.

We do not have the answer to any one of these three problems here and now. That being so, our only method of assisting is through social benefits. The only method of social benefits which is correct now is that of family allowances, in the context in which we make the sort of taxation adjustments we now propose. In these terms, we are able to recognise that the provisions made in the Bill are the correct way for the House to seek the answers to the problem of assisting those poor families with whom I know the whole House is deeply concerned.

4.24 p.m.

Lord Balniel (Hertford)

With one remarkable omission, the right hon. Lady gave a thoughtful and clear explanation of what is a rather sad little Bill. This small Measure is no more than a rescue operation for the Family Allowances Act, 1967, a Measure which received the Royal Assent on 20th December, a mere three months ago, and the benefits of which are only just coming into operation during the current month.

Over the weekend the Leader of the House told us that we had had the Wilson Government Mark I and that now we must prepare for the Wilson Government Mark II. The Mark I ran out of steam, as was clearly exemplified by the four new hon. Members who took their seats today. Similarly, the Family Allowances Act, 1967, has run out of steam, and what we are debating now is the Family Allowances (No. 2) Bill. I fear that this simile is a very unhappy one for hon. Gentlemen opposite, because it is clear from their No. 2 Bill that they have learned the wrong lessons from their mistakes of the past.

Indeed, in this Measure they are compounding the errors of the past with new mistakes and new misjudgments. The Bill gives increased benefits at a time of rocketting price increases and at a time when it is the declared intention of the Government to hold wage levels below the expected rise in prices. It gives some marginal help to the poorer families in the community and we will of course help the Bill in its passage through the House. However, we have a duty to look at the shaky principles on which the Measure is built. With all the eloquence, skill and care of the right hon. Lady, she was not able to hide the structure of the Bill. The broad structure is that it increases family allowances but still leaves one-quarter of a million children below the poverty level as defined by the Supplementary Benefits Commission.

The broad structure of the Bill is that it means higher taxation, with 300,000 people being brought into the tax net for the first time. They are all people on the lower income scale. It means, according to our calculation, that 250,000 people will move up in the Income Tax scales from the lower rates to the standard rate. The broad structure of the Bill, which was dismissed in literally one sentence by the right hon. Lady, is that there is to be a cut in the availability of sickness, unemployment and injury benefits.

When the Government introduced their Measure in November, I criticised what seemed to me to be a lack of coherent social strategy. The fact that within a few weeks the original proposals have proved inadequate—with the Minister having to return with a new Bill and introduce a new method of financing family allowances—goes some way to proving my point.

The proposals of the Measure were, in the first place, ineffective and inadequate in that they left one-quarter of a million children below the poverty line. They were also introduced by the Government and debated by the House on a totally false financial premise. We were informed that the gross cost of the increased family allowances would be £124 million and that the net value which was to be given to families by increased family allowances would be £80 million. The then Minister without Portfolio, the right hon. Member for Leyton (Mr. Gordon Walker), who was responsible for the Social Security Review, said in July of last year: In April, 1968, we shall increase the existing family allowance by 7s. for second and subsequent children. He went on: The cost of the increase in family allowances, net of tax and other adjustments, will be about £83 million in a full year".—[OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 56–7.] The whole of that Measure was debated by the House on the assumption that £83 million of additional help would be given to families. However, devaluation came hard on the heels of that legislation. The right hon. Gentleman the Prime Minister, within one month of the Royal Assent being given to the Bill, announced his intention to recover the full cost of family allowances from taxpayers on the standard rate and lesser amounts from taxpayers paying at lower rates of tax. This cut the net value of family allowances from £83 million to £30 million.

I said in that debate that I thought it was a constitutional impropriety that the Government were not prepared to tell us how they were going to finance their Bill. I was very suspicious as to how they were going to find this finance for such a substantial increase in family allowances. When I referred to it as being a constitutional impropriety the Minister said I was talking rubbish. This time, however, I am glad that we have been informed how this Bill is to be financed. The Chancellor of the Exchequer has said: We propose to meet the net cost of this further increase by a small change in National Insurance benefits. He went on to say: We propose to discontinue the payment for the first three days of sickness, injury or unemployment which is at present made after a period off work has lasted for a fortnight."—[OFFICIAL REPORT, 19th March, 1968; Vol. 752, c. 266.] After three and a half years of the Social Security Review the method which the Government have chosen for financing their efforts to eliminate child poverty in this country is to discontinue the payment of the first three days of insurance benefit for those who are ill, injured or unemployed for a fortnight.

Mrs. Hart

The hon. Gentleman will have heard what I said at the beginning the debate, and I really would advise him in his own interest to avoid any too elaborate comment on this particular occasion and to wait until we reach the Committee stage.

Lord Balniel

This is a Second Reading debate and I must confess I was astonished that the right hon. Lady did not refer, beyond one single sentence, to the most controversial element of the Bill. I am bound to say the words of the right hon. Gentleman the Chancellor of the Exchequer are very clear to me. If the right hon. Lady is prepared to make art alteration she should have told us of that at the present stage.

Mrs. Hart

It is important that the House should be quite clear about what I said. I said that we thought it would be sensible to look very fully at this aspect of our structure of short-term benefits, regarding it in the context of the particular factors I mentioned, and to look very fully at the particular provision in this Clause; and I said we were going to have plenty of time and opportunity to do so before the Committee stage. So the noble Lord should not jump to any hasty assumptions about it.

Lord Balniel

The only assumption to which I have jumped is that the words of the Chancellor of the Exchequer in his Budget speech were the intentions of the Government. I state our position perfectly clearly. It is our intention to vote against this part of the Bill on the Committee stage. I will enlarge on the reasons for this later in my speech. If the right hon. Lady the Minister is making a substantial change or is to add a new gloss, or is going to make new con cessions, then we shall, of course, consider them when we reach the Committee stage. But on the Second Reading debate we can only go by what the Chancellor of the Exchequer has said. We can only reach our own conclusions on what is in the Bill at the moment.

It seems to me that the Government now have an almost obsessional desire to chalk up black marks. Last month the Government introduced a Bill, the first since the National Insurance Scheme came into operation, in which there was an increased insurance contribution and no increase in insurance benefits. They are surely chalking up another black mark on this occasion. This is the first occasion since 1931 when a Government has cut sickness and unemployment benefit.

I would like to look first of all at the method of taxation drawback by which the Government will partially finance this Bill, because I have very considerable reservations about the method they have chosen. The Government have now embarked on the introduction into the field of family allowances of what the right hon. Gentleman the Prime Minister on 16th January last described as the principle of selectivity. The right hon. Gentleman the Chancellor of the Exchequer has described it as: selectivity in a civilised and acceptable form."—[OFFICIAL REPORT, 17th January, 1968; Vol. 743, c. 1800.] To be blunt, to my way of thinking it is neither civilised nor acceptable to leave a quarter of a million children living below the supplementary levels. What the Government are really doing is dressing up with long words which few people can understand the simple fact that it is continuing to pay out universal benefits and is paying for them by increasing taxation. It seems to me nonsense to pay out in the previous Bill £124 million, to pay a 7s. increase in family allowance, and then draw back £90 million in taxation. On top of this, in this Bill an additional £55 million is being paid out for an increase of 3s. in the family allowance; and if I am right the Government are drawing back £40 million by way of taxation.

All this tremendous movement of money is to give small sums of money to a limited number of families. After all this tremendous increase in taxation there will still be families living in poverty. It seems to me nonsense to bring 300,000 taxpayers into the tax net for the first time by lowering the threshold of taxation when surely every argument today is that we should be raising the threshold of taxation. It seems to me very sad that at the same time the Government are having to raise into the standard rate of taxation about 250,000 families.

If one adopts a system of this kind one greatly increases the weight of taxation to deal with a numerically small problem. The Government have adopted a system which is really placing a rigid dogma of universal benefits above what I would regard as humanity and common sense. If instead of this absolute Niagara of universal benefits which are paid out only to be clawed back one could concentrate help where it is most needed one could transform the situation. For instance, with a sum of £25 million one could give £1 per week extra to every child living below the poverty line.

Mr. Robert Howarth

This is all very interesting, but I wonder how long the problem of which the noble Lord speaks has existed with regard to very low income families and why it was not tackled, say, three and a half years ago, or even before that.

Lord Balniel

The problem is greatly accentuated now by the period of stagnation, by short-time working and the increase in unemployment. I am not saying that during the tenure of office of the Conservative Party every social reform was dealt with—of course not—but, because it was not dealt with 10 or 20 years ago, is that a reason for the House of Commons not to try to tackle the problem today? One remembers what hon. Members opposite were saying only a few years ago when they were in Opposition. Was this what they promised the country they would do—increase taxation, bring more people into the tax net and leave more children under the supplementary benefits level—when they were talking of the guaranteed incomes scheme?

Did not the last Chancellor of the Exchequer say just before the General Election: The whole basis of our case is that the increased social expenditure will be financed out of a growing expansion of British industry, We shall not cash cheques until the money is in the bank. Was the last Chancellor of the Exchequer or the Prime Minister—although I suppose his words are of total disinterest to the House—saying that he would finance improvements in social benefits out of increased taxation?

Mr. Douglas Houghton (Sowerby)

The noble Lord cannot be as stupid as he sounds. Surely he can understand that what he calls increased taxation is merely using the vehicle of taxation to recover part of an additional social benefit from those who are not fully in need of it, or are only partially in need of it. Cannot he see that?

Lord Balniel

I can see it perfectly clearly. I am sorry that I have not the enormous knowledge that the right hon. Member for Sowerby (Mr. Houghton) has of this subject, but I can see a great difference in principle in, on the one hand, allowing a person to keep a higher proportion of his earnings and, on the other hand, paying out a benefit which is decided at the discretion of the State. There seems a difference in principle between giving a benefit by the State and clawing it back out of increased taxation and the alternative of allowing people through reduced taxation to keep a higher proportion of their earnings.

Mrs. Hart

We must be clear about this. The noble Lord is aware that the poorer families we are talking about cannot be assisted through taxation because they are not within taxation limits.

Lord Balniel

I do not understand the relevance of that contribution.

What I found rather disappointing in the Minister's speech was that, although she has studied the alternative proposals which have been put forward, she seemed to study them from a most negative viewpoint. The House will recall that when we last debated this subject I suggested using the P.A.Y.E. system as a means of channelling more help to the poorest families, as a means of creating a new family benefit system. Although the right hon. Lady poured cold water on it, I mentioned that this is a system used in other countries. I understand that it is used effectively in Denmark.

Since then, as the Minister said, Mr. Hayhoe has produced his pamphlet, "Must the Children Suffer?" I was flattered and pleased to be asked to contribute a foreword to what I regard as constructive thinking on the part of Mr. Hayhoe. He outlined a scheme of using the P.A.Y.E. system as a means of helping poorer families. I am not in any way dogmatic, and I certainly don't think this is the only specific solution to this problem. I find his concept of an income-related family benefit intellectually far more impressive than the kind of universal allowance incorporated in this Bill. There is nothing discreditable in this kind of viewpoint. This is the kind of viewpoint of the right hon. Member for Sowerby, a Minister previously responsible for the Social Security Review. This is a viewpoint he reiterated relatively recently in a most interesting article in The Times.

Mr. Houghton

I am sorry to interrupt a second time. I was advocating the use of the taxation system for positive benefits under conditions of stable incomes which one gets among the old and widows to a far larger extent than men in work. The real mischief of using the P.A.Y.E. system to supplement benefits for men at work is the fluctuating level of their income.

Lord Balniel

This most certainly is a problem. I do not say that this is something which can be introduced overnight, but I do not think it is anything like as complex as the Minister made out in her speech. It is one of the problems—she mentioned others—which certainly will have to be considered if the Government are thinking of introducing a scheme along these lines.

I must confess that in my preface I was mistaken in one respect. I said that I thought the argument against flat-rate universal increases was already won. I suspect that it is won everywhere in the country except in the Parliamentary Labour Party. I wrote that the 1967 Family Allowances Act must historically be an example of a thinking which fossilised many years ago. Little did I imagine that within three months of the Family Allowances Act the Government would have to give birth to an almost identical Bill.

The Minister seemed very negative in her approach to these kinds of schemes, but I have noted on the Government benches a very different kind of thinking developing. For instance, the Chancellor of the Exchequer in the debate on public expenditure said: Next year, however, I hope to introduce full selectivity for family allowances I underline these words— and to do it in such a way that people who are not in real need of them do not draw them at all."—[OFFICIAL REPORT, 17th January, 1968; Vol. 756, c. 1800.] That is totally different from what is embodied in this Bill. It bears some resemblance to the kind of scheme I have been talking about. If the Chancellor really meant this and it was not a slip of the tongue, it is something quite different from what the Minister of Social Security is introducing.

First, it is very different in time-scale from the kind of arguments which were advanced against me in the last debate. When I put forward my proposals for introducing the scheme which I outlined, the Parliamentary Secretary indicated that he thought it would be nine years at least before it would be possible to link the structure of family allowances to P.A.Y.E. I have never believed that that kind of time-scale is necessary. The adaptation of the P.A.Y.E. system, although not completely simple, seems a relatively simple concept.

The Joint Parliamentary Secretary to the Ministry of Social Security (Mr. Charles Loughlin)

I want to get clear what the noble Lord means by P.A.Y.E. system linking. The statement I made about the nine years was made in relation to a proposal for Income Tax in reverse.

Lord Balniel

I am glad to hear that the Parliamentary Secretary does not think that relating it to P.A.Y.E. would take anything like nine years.

Mr. Loughlin

No, I said it cannot be done.

Lord Balniel

The Chancellor is hoping to do something like it next year. [HON. MEMBERS: "No."] He said so. I know that there are administrative difficulties, but hon. Members opposite must not imagine that what they are doing is administratively simple. They have increased family allowances three times since last October. The first was for the fourth and subsequent children last October, then again this April, and now again for next October. They have always been overtaken by price increases. If hon. Members opposite imagine that this is cheap and administratively simple, they should think again. Earlier this week I read that Mr. Cyril Plant, General Secretary of the Inland Revenue Staff Federation, had said: The Chancellor's decision to add 3s. to family allowances will force us into 1 million hours of overtime in the next three or four weeks. The problems of recoding are enormous. We have just finished a massive programme of recoding as a result of the last increase in the allowances. Now we have to start all over again. Over and above that recoding are the additional problems of bringing people into Income Tax.

Mr. David Winnick (Croydon, South)

rose—

Lord Balniel

I cannot give way any more.

Does the Minister agree with the statement of policy by the Chancellor that it is his hope next year to introduce full selectivity into family allowances and to do it in such a way that people who are not in real need of them do not draw them at all."?

Mrs. Hart

The hon. Gentleman will remember what my right hon. Friend the Chancellor said in January about the importance of relativities, and what I have just quoted my right hon. Friend as having said about the levels of income at which tax becomes payable. He will therefore realise that my right hon. Friend and I are of completely one mind in seeking to introduce this method of relating the value of family allowances to the income of the family.

Lord Balniel

I hope that that has made clear to the House what the position is to be in the future. We shall study the right hon. Lady's remarks with care.

I now turn to that part of the Bill which was not referred to by the Minister—the cut in sickness, unemployment and injury benefit. According to the Explanatory and Financial Memorandum, this will save £17½ million in a full year, and it is being used partially to finance the net cost of the family allowance increase. We must be quite clear that except where employers make it good the cut will hit at the longer-term sick and the chronic sick, because the present position is that no benefit is paid for the first three days unless the illness or unemployment has lasted for a fortnight. The Chancellor describes it as a small change, but I wonder if he realises that for a married couple where the breadwinner is ill or unemployed for more than a fortnight the loss of benefit as a result of the Bill will amount to £3 13s. This figure is arrived at by the following calculation. The weekly rate is £7 6s., the daily rate is arrived at by dividing that figure by six, giving the sum of £14s. 4d., which, multiplied by three, gives £3 13s. A married couple with one child will lose £4 5s. 6d. during that period of sickness, and the bigger the family the greater the loss. I very much doubt whether such families in which the breadwinner is unemployed or sick will agree with the Chancellor that it is just a small change which can be dismissed in a sentence or two in the Budget.

What consultations were there with employers and the unions before introducing the change? What statistics are available to show the extent to which the loss of benefit will be made up by the employer? I hope that as many employers as possible will make good the cut, but it is being introduced in a thoroughly unfavourable climate and without any warning. It comes at a time when the Government are piling burden after burden on the shoulders of employers—Selective Employment Tax, higher petrol costs, higher postal charges, higher telephone charges, higher fuel costs, higher taxation, and the increase in the insurance contributions. The list of additional burdens being placed on employers is almost endless.

It may well be right in a reconstruction of social security that short-term sickness should increasingly be provided for by industry. But the way to achieve that is to give warning to industry and to relieve it of some of the heavy burdens which fall on its shoulders, particularly S.E.T. There are certain arguments for short-term sickness being the responsibility of employers as an outcome of wage negotiations. That is what happens in the United States where union negotiations are usually devoted to wage levels for two years and to fringe benefits for the next two years. But in this instance the Government are simply cutting off a State benefit at a time when they have piled burdens on employers, and at a time of statutory wage freeze. It will be very difficult to negotiate these fringe benefits. They are doing it, so far as I know, without any preparatory consultation with unions or employers.

We are waiting for the comprehensive social security review due to be published in the autumn. I have been abroad for several days and so I may have missed an important item of news, but I should like to ask who is in charge of that review. Is any Minister in charge or has it been decided that the review is progressing rather more rapidly without any Ministers taking part in it? Is it not rather astonishing that at a time when the poorest sections of the community, the most vulnerable, are being hard hit by the impact of devaluation and a Budget which places the emphasis on indirect taxation, and when a statutory wage freeze is about to be introduced, there is no Cabinet Minister responsible for overall strategy on social security? There is no overall co-ordinated plan, and that is what is desperately lacking in the Government's legislation.

If the Government are to cut the State's insurance for sickness, injury and unemployment, they should not do so in isolation, haphazardly, plucking it out of the air as a new and bizarre system of financing family allowances. If they are to do it, it should be part of their sociological rethinking. It is astonishing that in this Second Reading debate we have not heard one word on the sociological thinking which has led the Government to cut the availability of sickness, injury and unemployment benefit at this time.

To me, the Bill gives very marginal help to some families. Because it gives help, we shall, of course, support it. But it is a very poor Bill indeed, based on extremely shaky principles. The last increases of the Family Allowances and National Insurance Act, 1967, will be almost immediately swept away by the rise in the cost of living. I predict that the increases in this Bill will also be swamped by rising prices.—[Interruption.] An hon. Member says "Really!" but it coincides with devaluation and the rising costs which followed from that. It coincides with a Budget two and a half times greater than any single Budget introduced in this country, one which places the main burden overwhelmingly on indirect taxation. It coincides with a wage freeze specifically designed to lower the standards of life in this country, the first time since 1951 there has been a Budget and wage freeze designed to lower the standards of life. It coincides with an increase in contributions, unmatched by an increase in benefits.

If hon. Members opposite do not agree with me, they might read the words of Professor Peter Townsend in the Yorkshire Post last month. He said according to the report: The outstanding fact about poverty in Britain in 1968 is that the poorest families in the country are being made still poorer by the deliberate actions of the Government. What a condemnation of three and a half years of office by a Party which claimed when in opposition to be dedicated to social reform.

Mr. Kenneth Marks (Manchester, Gorton)

Before the hon. Gentleman sits down, will he make it clear that he is proposing a much higher family allowance to certain groups of people in the country?

Lord Balniel

If the hon. Gentleman will do me the honour of reading my preface to the pamphlet, "Must the Children Suffer?" he will see that I propose to develop a scheme for an income-related family benefit which most certainly will give greater concentrated help to the families in need and will not give help to the families not in need. I suggest that he does me the courtesy of reading what I believe was an interesting scheme.

5.2 p.m.

Mr. James Griffiths (Llanelly)

I do not propose to discuss in great detail the problems to which the hon. Member for Hertford (Lord Balniel) devoted so much of his speech—the problems of the provisions in the Bill for family allowances. As a pre-Second World War Member of Parliament, I was a keen supporter of the real propagandist for family allowances, Miss Eleanour Rathbone. At that time officials and members of trade unions—I was one myself—were deeply divided about family allowances, and for understandable reasons. I think that then the major provision—indeed, probably the only provision—on the continent of Europe for family allowances was not by the State but by employers.

There was a good deal of fear in this country, therefore, lest a similar scheme be introduced here, for the view was held by our trade union colleagues in Europe that family allowances operated by the employers—under which there was a basic rate and then an additional payment for the number of children in the family—had the net effect of depressing wage standards and of holding them down.

Thus, when the Family Allowance Act, 1945, first came before the House, it was clearly understood that, in order to meet the genuine fears in the trade union movement and in industry generally, it was essential to keep the scheme completely distinct from the wages system. It was, therefore, agreed that the family allowances would be paid by the Exchequer from national funds and not by contributions of any kind. It was agreed also that there would be no conditions except those relating to the number of children in the family.

Eventually, the Measure took the form and the figures proposed by Sir William Beveridge, as he then was, in his Report. It is important for us to realise that Beveridge recommended that family allowances should be paid in cash and kind to a total amount of 8s. per week—5s. in cash and 3s. to be rendered in service to the family in order that we should make a contribution to the rearing of families.

Like others of my generation, I supported the Measure wholeheartedly. I wished, indeed, that it could have been made retrospective to my own father and mother. I was the youngest of 10 children. I know what it was like in their day. It simply meant that the family went into debt while the children grew up, and when the eldest started work the family began to pay back its debts. If I could have made the family allowances retrospective to their generation, it would certainly have lightened the burden which my father and mother carried.

I support what is proposed in this Bill, but I want to say something to my right hon. Friends. Family allowance increases are based at present on a payment for the second child and thereafter for every succeeding child. This leaves the problem of the worker without children and of the worker with only one child. I do not believe that we shall solve this problem of low incomes by family allowances, although they can be a splendid supplement. In the Budget debate, I mentioned the problem of lower paid men and what makes it so intractable in a modern setting. I made several suggestions and would like to repeat some now.

I look at industry as one who spent the first part of his life working in it. Now industry is being modernised, mechanised, rationalised. It is feeling the full impact of the technological revolution, with enormous increases in production. But as this all gathers pace I can see an ever-widening disparity within industry between the higher paid and the lower paid workers. I see it in my own industry, coal mining.

My hon. Friend the Member for Mansfield (Mr. Concannon) came here comparatively recently as a skilled miner. I came here before the war from the old hand-cutting and hand-filling coal mines. He is a miner with machine power behind him. The disparity between what the skilled hewer can earn at the coal-face, with all the modern machinery at his disposal, and what the unskilled man can earn is probably higher than it has ever been before in the history of coal mining in this country, and it is a great problem.

One of the problems of the trade unions is to find ways and means by which lower paid men can be given an increased interest and stake in their industries. My right hon. Friends are fighting for an incomes policy. If their policy is to succeed, it must be a real endeavour to secure stability of incomes, prices and dividends. Unless they can achieve this in all three, they will not get it in any single one.

In pursuing that policy, I hope they will encourage productivity deals. I am glad to see that this is the way in which the Government are moving. I hope that, with my trade union colleagues, the Government will make every effort to interest, and give a stake in the output of his industry to, the lower-paid worker who is earning perhaps £9 or £10 a week while more skilled workers are earning perhaps £25 a week.

The family allowance system is a method of assisting those who are in the lower income groups, but it cannot abolish the poverty of the family of the workman who works five or six days a week for very low wages. We thus come back to the wages problem. We are told that we have two years of hard slog before us, but it may be that this Parliament, in the setting of the new age, with its disparities in the wages structure, may have to do what Parliament had to do in the early part of this century.

Then, in order to prevent, under the free-for-all capitalist system, large numbers of workers from being in utter destitution at the end of six days of work a week, Parliament had to pass legislation. There is on the Statute Book a minimum wage for miners. Parliament had to do it. We ourselves may have to return at an appropriate time—I accept that it could not be in present circumstances—to this problem, and I am glad to see that some of my trade union colleagues are thinking about the idea of a minimum wage.

The sum of £15 has been mentioned. Family allowances have a valuable contribution to make towards solving part of the problem of poverty among lower paid workers, but we may have to make very important changes in our wage structure. I was glad to hear that my right hon. Friend intends to look very fully into the provisions of Clause 2. I welcome that, and as a result of this I hope that it will disappear from the Bill altogether. The Explanatory and Financial Memorandum to the Bill says: Clause 2 abolishes entitlement in any circumstances to unemployment benefit and sickness benefit under the National Insurance Acts and to injury benefit under the National Insurance (Industrial Injuries) Acts for the first three days of a period of interruption of employment. The provision which is to be repealed is that which I inserted at the Report stage of the Industrial Injuries Act—and later accepted for the National Insurance Act. If this Bill was to appear in its present form it would take us back more than half a century. The provision under the old Workmen's Compensation Act was that compensation was not payable for an incapacity arising out of an acci dent received at work, unless and until the incapacity had lasted for 24 days. I incorporated that provision into the National Insurance (Industrial Injuries) Bill of 1946, which I introduced in October of that year. When we went into Committee I met the full blast of the opposition of my colleagues. They, and I confess, myself too, had over the years campaigned for the complete abolition of the waiting days.

When I had a look at the administrative problems I was convinced that the complete abolition would create insurmountable problems. If we abolished the waiting days entirely every single day of incapacity would count for benefit and we would have a multiplicity of single days being paid. I was convinced by my advisers that the administration would break down. On the other hand, I was very anxious to do something very much better than the provisions of the old Workmen's Compensation Act. We were the first country to do this. This was the first Bill in which the old Workmen's Compensation Act was not improved, but abolished and replaced by an entirely new social insurance scheme. For the first time that the workman paid contributions towards the benefit he received when he was injured by accident or disabled by disease.

I felt it very important that I should make a change. Eventually I did, and the change I made is that at which I am glad my right hon. Friend is to look again. Under the Acts as they are now, benefit is not payable for the first three waiting days unless the disability, the sickness or unemployment, last for 12 days. In such a case the three waiting days are paid retrospectively. Another change was that I made the day of the accident the first of the waiting days, so that there were only two days for those entitled to industrial benefit under the National Insurance (Industrial Injuries) Acts. Another provision was that if the disability lasted for 12 days the three waiting days were recovered by the workman.

Another important provision was that if within the next 13 weeks there was another injury, another sickness, another period of unemployment, there was no need to have another three waiting days because the first three would count. That provision was introduced first into the National Insurance (Industrial Injuries) Act and the National Insurance Act, both of 1946. On the whole this has worked well and has been accepted. It was a compromise. My colleagues who first began by demanding the abolition of the waiting days accepted this. It has been there since, and as far as I know has proved acceptable to industry. So far as I am aware employers have never asked for its abolition and the T.U.C. has not repeated vociferous demands for the abolition of the waiting days.

If the Bill goes through in its present form it would prove an irritant which would redound to the disadvantage of the Government in every possible way. I put this to my colleagues very seriously. During the summer months the Government will be making appeals to the trade unions, to which I hope they will respond, because it is in this response that success in the battle for solvency lies. Do not throw this into the arena. Do not put this on the agenda. I have spent my life among the Trades Union Congress and the Labour Party conference, and if the Bill went through as it is we would once more renew the determination of the men for the complete abolition of the waiting days. This has worked well and I hope that it will be kept.

I am glad to know that my right hon. Friend will look at this during the Recess. I hope that she will consult the Trades Union Congress and the Industrial Injuries Advisory Committee. The men and women on the Committee give a good deal of time to this, and their views ought to be heard. I am sure that my right hon. Friend will listen to those of us with experience in this. I do not know how much money will be saved, but I am glad to see that the Industrial Injuries Fund has now more than £300 million in the kitty. It will be very difficult to go to the workers in our constituencies and tell them that we are to abolish the three waiting days at a time when the Fund has this amount. Every report on it is financially sound.

For all those reasons, I express the confident hope that my right hon. Friend will look at this again and that we shall find that after the Recess, that Clause 2 has disappeared from the Bill. Then I shall be delighted to support it in the Lobby.

5.20 p.m.

Mr. Philip Goodhart (Beckenham)

The right hon. Gentleman the Member for Llanelly (Mr. James Griffiths) has spoken bluntly and powerfully from a vast reservoir of knowledge about this subject. There is only one sphere in social services in which I can claim possibly more contact that he. That is in family allowances, because I am the father of seven children. I have received rather more in the way of family allowances than the right hon. Member for Llanelly. Of course, I do not hope to derive any direct benefit from the increase in family allowances enshrined in the Bill. Indeed, I hope that I do not, because it might strike financial disaster in other spheres. I do not derive any benefit from this increase. I hardly expected that I would get any benefit from any scheme introduced by this Government.

Over the weekend I visited the house of a family which also has seven children. That house is very different from my own. There are three rooms which are extremely neat and well kept, but there are three other rooms which are about as bad in smell and cleanliness and general state of repair as any that I have seen in my constituency or, indeed, in Greater London. They are appalling. This household's finances in many ways reflect the house in which it lives. The father's earnings fluctuate violently because he is a long-distance lorry driver. Most weeks his earnings are very high, and no doubt they will remain high most weeks until the Transport Bill becomes law. However, there are weeks in which his earnings are very low, so presumably he will benefit at times from the provisions in the Bill.

I regret that this debate has taken place before the publication of the Finance Bill because, having listened to the remarks of the Chancellor of the Exchequer and those of the Minister of Social Security, I am not by any means clear how this clawing back of income will work in cases where one has a sharply fluctuating income.

The right hon. Gentleman the Member for Sowerby (Mr. Houghton) referred to this point as one of the handicaps to introducing any P.A.Y.E.-related benefit scheme. He said that it was difficult to operate when one had these sharply fluctuating weekly earnings. I take the point, but I did not accept the criticism of the scheme which has been put forward by Mr. Hayhoe or the criticism levelled at the scheme by the right hon. Lady over administrative complexity. I notice that in her speech there was no word about the additional administrative burdens of the new proposals in the Bill or to the extra staff that would be needed to carry it through. When one increases the number of people who fall into the tax net by 300,000, the number of civil servants needed to cope with this extra number of taxpayers will be very considerable. Some weeks ago The Times suggested that every Bill introduced into this House should have attached to it a small note saying how many extra civil servants would be needed to administer the proposals contained in the scheme. I have no doubt that the number of extra civil servants needed to cope with the increased number of taxpayers in this instance would be very considerable.

I am not surprised that the right hon. Lady did not say more than one sentence ob Clause 2. But I wish that she had spent rather more time explaining the strategy that lay behind the Bill. I wonder what alternatives were considered by the Government. I wonder why, when faced with the necessity of making some savings in this sphere, they did not automatically alight on the proposals put forward in Clause 2. I wonder what alternatives were discussed within the Ministry and what it was that made the Ministry at the end of the day come down in favour of putting increased burdens on those who are sick or unemployed for a considerable period. I should like to know more about the thinking that has gone on behind it.

I believe that the Ministry hit on these proposals because it had been asked to put forward suggestions to the Treasury for saving some amount and it thought that the Treasury would not accept them. I suggest that the Ministry thought that if it put up proposals that no Labour Chancellor of the Exchequer could possibly swallow, it would get clean away with it. To its surprise and consternation the proposals appear to have been accepted by the Treasury. There is no sign in any of the Clauses of a more widely thought out strategy on the approach to the social services. My noble Friend the Member for Hertford (Lord Balniel) asked what had happened about the review of social services, when it was likely to appear and who would be in charge of it. It is plain from the Bill that this review, wherever it is at the moment, has not developed very far.

5.30 p.m.

Mr. Douglas Houghton (Sowerby)

I wish that my right hon. Friend had said rather more about Clause 2. I came in ready to defend it, but the difficulty with the Government from time to time is that when we are ready to support them they change their minds. I strongly suspect that this afternoon my right hon. Friend was paving the way for a change of mind. That leaves me in an embarrassing position, but I should like to say one or two things about these proposals.

I believe that sickness benefit for very short periods is unduly expensive and, under present conditions, largely unnecessary. This view is probably not shared by many of my hon. Friends, but I believe that it is necessary now to look at some of the social benefits provided in 1948 in terms of 1968, and in the conditions of 1968. I also believe that there is something better to do with £17 million a year in the social services than pay benefit for short periods of sickness.

Having said that, I add that I would not have proposed this change now. I think that it belongs to a review of the social security scheme generally, and should be considered in connection with a redistribution and a reshaping of our social provisions. What I think is now becoming of pressing interest in the social security scheme is the relationship between social benefits and taxation. Sickness benefit used to be taxable, but it was a small amount, it could not be dealt with under P.A.Y.E., it required an end of year tax adjustment, and it was an awful nuisance. Sickness benefit was therefore exempted from tax, and a corresponding adjustment was made of the tax relief on National Insurance contributions.

There are two factors which have completely changed the situation. First, there is the earnings related sickness benefit. Secondly, there is the large increase in the number of workers who are covered by employers' sick pay schemes. I do not want to mention the names of some considerable undertakings which make no deduction from full pay when their employees are away sick, but that does not disqualify those workers from drawing sickness benefit under the National Insurance Scheme. There are many other employers who make only a notional deduction from pay, related possibly to the sickness benefit of years ago, and when their workers are on sick leave they are entitled to claim benefits provided by the National Insurance Scheme, in addition to pay adjusted only nominally by a small deduction.

It means that there are many people who are getting full pay, or nearly full pay, and if they are away for more than 12 days they receive, in addition, tax-free earnings-related sickness benefit. I know a man who is getting £24 a week sick pay from his firm, and drawing £11 10s. a week sickness benefit tax-free. This requires a reconsideration of sickness benefit in relation to taxation, otherwise a lot of people will get a fiscal benefit as well as a social security benefit which will put their total resources when sick far above their earnings when at work.

Mr. James Griffiths

As my right hon. Friend knows, those people form a minority of the total workers in this country. The number of people not covered by any industrial or employers' schemes represent more than half the total working population.

Mr. Houghton

I understand that, and it poses the now continuing problem of how to give adequate benefits to those in need without squandering resources widely over an area not in need. They may be only a minority, but I see no reason why they should profit unduly from a combination of tax exemption and a relatively high level of sickness benefit. The earnings-related sickness benefit was not invented for people already getting full pay from their employment when on sick leave. It was invented for people who suffered loss of earnings while sick. I think that that is the difference between the two.

I believe that the vehicle of taxation can now be used in a sophisticated manner to recover social benefits paid to some people, which are not needed by them, and which could be better used elsewhere.

That brings me to the family allowance proposal, which does precisely that. The only complaint that I have about the proposals in the Bill is that they were not introduced 12 months ago. This scheme was ready more than a year ago, and when I was in the Government we considered almost every conceivable alternative that we could think of for dealing with this situation. We introduced a family allowance Bill last year to provide a 7s. increase across the board, and I regret that we did not at the same time make it clear that this new system of recovering extra social security provisions could be undertaken through the machinery of personal Income Tax. Now we are doing it, and I am glad that we are.

I am surprised that the noble Lord the Member for Hertford (Lord Balniel), and the hon. Member for Beckenham (Mr. Goodhart) seem unable to grasp the simplicity of the operation of these proposals.

Lord Balniel

The right hon. Gentleman is satisfied with the present proposals which pay out a universal benefit and claw back by taxation from those who do not need it. This is widely understood and accepted. But the Government are paying out a universal benefit at a level which is inadequate to give real help to those in need. How does the right hon. Gentleman propose to deal with that problem?

Mr. Houghton

It is possible under a scheme of this kind to fix benefits at whatever level one likes, and to make a corresponding deduction or adjustment in the Income Tax personal allowances to recover the extra provision in a large number of cases. For example—and I think that I have said this before in the House—it would be possible, by abolishing Income Tax child relief altogether, to pay out for the same total amount of money a family allowance of 30s. a week for every child, including the first. This is an extreme example of what can be done if we manipulate the personal reliefs from taxation and relate them to a higher scale of social benefit. This modest proposal provides for an increase in family allowances of 10s. a week and makes a corresponding adjustment in the child relief so that the tax exempt family will get the full benefit of the family allowance. Those coming into the tax bracket will have only a tapering-off benefit from the increased family allowance until the benefit of the increase is eliminated altogether.

When the Chancellor says that he hopes next year to introduce a scheme to implement this give-and-take operation over family allowances as a whole, instead of merely as on this occasion an increase in the family allowances, I assume he means that changes will be made in the personal tax reliefs to recover not merely the increase in the family allowance, as this does, but the whole of the family allowance in cases where there is no need. It can be done, there is no doubt about that, and it can be done in that way.

One of the criticisms that can be made against this proposal is that it does not give enough increase in benefit to the poorer families. This could be achieved by a higher level of across-the-board increases in family allowances and a greater adjustment of or subtraction from the Income Tax child reliefs. It is a matter of relating the two. There is almost unlimited scope for variation of a mutual relationship between benefits and taxation it this way.

One thing we have to recognise about the very poor families is that social benefits cannot do anything that the wage structure should do. We have to look very carefully indeed at supplementary benefits for men in full-time work. One of the problems about the scheme which the noble Lord advocates is that it would entail cash benefits to people in full-time work related, either from week to week or from month to month, to their actual earnings. It would be an adjustment specifically related to the family income from time to time. This introduces a new principle in social provision and in earnings which may have some extremely undesirable consequences. It would perhaps mean that a man in full-time work would, when asked to do overtime, say, "I am not interested in overtime because what I earn extra I will not get in supplementary benefit." If he is asked to go on to a better paid job, probably a more difficult job, he will say, "I am not interested in earning more money because it will be taken off my supplemen tary benefit." These are the dangers, and there are also others.

The skilled man on a higher level of wages may say, "The only skill you need to have to get the income is the skill to have a family, or the higher skill of a bigger family, but skill at work is no longer relevant to your take-home pay; it is the size of your family which is going to govern how much you take home."

These matters are bound to raise serious problems of industrial relations, of incentives and what is appropriate in social provision. That is why I am in favour of across-the-board increases, without means test, if you can use the taxation machine to recover the excess provision for those families not fully in need of the extra benefits provided, especially when these are uncovenanted benefits. I am not talking now of benefits by right of contributions; the family allowances are not benefits by right of contributions; they are a provision paid for out of general taxation, and general taxation can be used to recover a provision which in many cases it is unnecessary to make.

I approve this scheme and I am surprised the noble Lord made such heavy weather of his appraisal of it. I would have thought it would have appealed to him as being a form of civilised selectivity for which I would have thought the Conservative Party stood. I have long admired the speeches of the noble Lord on social benefits, but I wish he would not take himself so seriously. I once called him in a very affectionate way "the Billy Graham of the Conservative Party". It is unbecoming of the noble Lord to lecture my right hon. Friends, my hon. Friends and myself on the problems of poverty and deprivation, when many of us have lived it in our youth and are perhaps closer to it than the noble Lord today. We do understand poverty, we do understand the problems of families with inadequate incomes.

We are trying as hard as the noble Lord and his right hon. and hon. Friends to remedy some of the deficiencies in family life today, and when he leans across the Box and fixes my hon. Friends with a disapproving glare I ask him, when did his party last increase family allowances? When did they last make any additional provision for families? They did it in 1957. Is that not an indication of how they took advantage of the unpopularity of family allowances to do nothing about them for 10 years? A certain humility should come into the noble Lord's strictures on my right hon. Friend's and hon. Friends. We are doing our best.

Lord Balniel

The right hon. Gentleman is being almost patronising in an inverted form. I just ask, if this is so civilised, what is this civilisation which leaves a quarter of a million children below the supplementary benefit levels? He says family allowances ought to be increased. All I can say is that it is not being done. How is he proposing that these children should be brought up to the absolute minimum standards which I regard as compatible with a civilised society?

Mr. Houghton

This is not a simple question. The noble Lord has said nothing about his own proposals except the ones for positive supplementation to particular families which he outlined earlier on. I have dealt with what I would regard as the evils of direct supplementation of the earnings of men in full-time work. That is a principle we must reject, and we must therefore find alternative ways of meeting the problems of the poorer families. One way is the way my right hon. Friend is proposing in this Bill, namely, to increase the family allowances overall. Whether this amount is enough to meet the requirements of the poorest of families is probably a matter for investigation and may, to some extent, be a matter of opinion. The benefit could have been higher if the adjustment of Income Tax to child allowances had been steeper and the balance struck that way, but there are other aspects of family poverty which, as the noble Lord fully understands, have to be approached from the angle of social welfare and other problems of family life.

There are many families who, unfortunately, have little idea how to lay out their family income. There are others beset not by low wages so much as intermittent work due to sickness, injury or disablement. In many cases, these are problems which have to be dealt with from family to family, but not, I repeat, by supplementation of earnings through any form of means test. I am sure that that is not the right way. Let us step up family allowances generally by all means and use the Income Tax system to recover the excess benefit in a large number of cases. In my opinion, this is the beginning of such a scheme. I hope that it will be followed up.

I am sorry if the noble Lord thinks that I am patronising. These days, I listen to more speeches than I make, and I react to the kind of attitude that he adopted this afternoon. This is a problem which we are trying to solve as a House, and both parties have a responsibility. There is not much to be gained by denunciation by the Opposition of what the Government are trying to do in conditions of exceptional difficulty. They should commend us for what we are doing. If we are not doing enough or are not doing it in the right way, he should have the courage to ask his hon. Friends to vote against the Bill. Of course, he will not do that.

Until a short time ago, the noble Lord was almost alone on the benches opposite. Some of his hon. Friends have been whipped in and given copies of the Bill with briefs all complete. They are now busily studying their briefs in case they are able to catch your eye, Mr. Deputy Speaker. That is what all this is about. The noble Lord has not very much virtue on this side. He has conscripted supporters on the benches opposite.

I hope that I have said enough in defence of the scheme introduced by my right hon. Friend. I am sorry that I cannot give her firmer support on Clause 2. I want to know first whether she will shift her ground before I take a firm stand on mine.

5.53 p.m.

Mr. Eldon Griffiths (Bury St. Edmunds)

The right hon. Member for Sowerby (Mr. Houghton) has spoken of conscripts. I assure him that I am a volunteer. There are few matters on which I am more delighted to volunteer than to join with some of his hon. Friends who have been making far more heavy weather of the Bill than my hon. Friend the Member for Hertford (Lord Balniel). If the right hon. Gentleman wishes to address his strictures to the opposition to the Bill, he has only to look behind him.

I recognise his very considerable experience and his strong feeling in the matter, and my namesake, the right hon. Member for Llanelly (Mr. James Griffiths), has equally strong feelings. But the right hon. Member for Sowerby will recognise that what he has been ay in g and what his right hon. Friend has had to say both in private meetings and on the Floor of the House are quite different. So let us not have any strictures about the Front Bench on this side of the House lecturing the Government. The lectures have come from behind the right hon. Gentleman, as most of them do nowadays.

I want to start with a short quotation from one of my favourite authors on the Government benches. Discussing social benefits, this very distinguished biographer and historian wrote: The commitments of the Labour Party's policy, provided that they are not all rushed t trough in the first year"— which no one ever suggested— can be carried out comfortably without any question of an increase in the tax burden. On the contrary, they should leave room for substantial tax reductions. That is by my favourite author, the Chancellor of the Exchequer. That is what the right hon. Gentleman wrote in his elegant and impeccable prose, and, some years later, he has come to the House and told us of the necessity for some £900 million worth of extra taxation while asking his party to support him in cutting sickness, unemployment and injury benefits.

My first objection to these so-called increases in family allowances is that they will still leave 200,000 children below supplementary benefit level. In 1968, under a Labour Administration ho have boasted so much of their care for the unfortunate, I do not know how the Chancellor or the right hon. Lady can possibly be satisfied that 200,000 children are left in this poverty. By any measure, that is uncivilised.

Mr. J. D. Concannon (Mansfield)

Who put them there?

Mr. Griffiths

The hon. Member for Mansfield (Mr. Concannon), from a sitting position, asks who put them there. He should recognise that his Government are responsible. They are responsible for the condition of these children, and it may be that he feels that the Government owe some duty to them.

Mr. Concannon

Of course I do. It was my fault for interjecting. I should have done what I usually do and ignored the remarks from hon. Gentlemen opposite. They are so full of hypocrisy. I have been here for only two years, but listening to right hon. and hon. Gentlemen opposite lecturing me on poverty and what we should do for the lower classes makes me sick at times.

Mr. Griffiths

The hon. Gentleman has not done very well in his reply. He will never hear anyone on this side of the House refer to "the lower classes".

Mr. Concannon

Really!

Mr. Griffiths

That is where I was born.

I object to 200,000 children being left below the poverty line at a time when the Government are asking the people to pay £900 million of additional taxation. If the people could see that additional taxation directed to assisting children in those difficulties, it would be an easier Bill to sell. As it is, it is an extremely difficult one, when taxes go up and the poverty continues.

It is not easy to quantify the number of these children in my constituency, but I have reason to believe that several score of them will be found in the county of West Suffolk, some of whom I have seen myself. Has the Minister considered precisely what it means to families who find it very hard to make ends meet at present? As I understand it, a married man who falls sick or unemployed will find that the actual loss to his weekly income is £3 13s. 0d., or half the weekly rate of £7 6s. 0d. A married man with one child will lose £4 5s. 6d., and obviously the amount lost increases with the size of the families.

In West Suffolk, many of those whom the hon. Gentleman for Mansfield has the audacity to describe as "the lower classes", which I would never call my constituents, will experience a very serious loss. In describing it to the House, the Chancellor of the Exchequer used the expression "small change". Perhaps the Joint Parliamentary Secretary can tell me how I am to explain to the families of farm workers in West Suffolk that reductions of £3 13s. 0d. and £4 5s. 6d. are "small change"?

Mr. Loughlin

The hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) began by talking about the 200,000 children on the poverty level who are being ignored. Then he related them to the three dead waiting days in Clause 2. The two positions are not identical, and I only mention this because I know the hon. Gentleman does not know much about social security provisions, and he was not in when the Minister made the statement in relation to Clause 2 of the Bill.

Mr. Griffiths

Is the Minister suggesting that the families of whom I speak, the 200,000 poor children, are not also going to be affected by the reduction of three days? Of course they are affected, and their condition is made doubly difficult.

My second objection is to the manner in which this is to be done—in other words, to the very great expansion of the Civil Service that will be necessary. We have a Government who have refused to tackle the problem of family poverty in any other way than by the universal increase. The right hon. Gentleman the Member for Sowerby knows a great deal more about this than most of us in the House, but surely he recognises that to be a fair statement. What I find to object to in it is that there is now to be an administrative nightmare of clawing back from what I am advised is 42 out of 43 fathers' earnings some of the money that has been handed over to the mothers. This method of administration is not only wasteful and extremely costly, but does not even solve the problem efficiently.

Mr. Houghton

I am very grateful to the hon. Gentleman. The simple process is that one reduces the Income Tax child relief, alters the code number, and the rest of it is done through the tax tables in the normal way. There is no nightmare; it works like a charm.

Mr. Griffiths

I am delighted to hear on the right hon. Gentleman's say-so that it is going to work like a charm. It seems to me that that is one of the phrases our civil servants may well remember, and I shall certainly remind them of this promise he has made that it will work like a charm. I put this down, along with "small change" and "the lower classes", as one of the three phrases I shall take away from this debate to use in another place.

I objected first to the leaving of so many children below the poverty line, and secondly to the increase in the bureaucracy. Now I should like to ask the Minister—who, I am very glad to see, is in her seat—two specific questions. The first is this. Can she say quite clearly, yes or no, whether Clause 2 is in fact to be proceeded with? The right hon. Gentleman suggested in his speech that he had come here valiantly to champion the right hon. Lady on this particular Clause, which no doubt was put in by the Chancellor to impress foreign bankers, perhaps. I do not know whom he is seeking to impress, but he caused the right hon. Lady to put Clause 2 into the Bill.

I wonder if it is now just possible that the right hon. Lady is about to take Clause 2 out of the Bill. If this is to be the case—and I hope that the Minister will confirm it when she comes to reply—it really will be the social equivalent of Stansted Airport. The party opposite will have been put to great confusion and anxiety in this matter only to find, when they have got themselves all dressed up to support Clause 2 in the Division Lobbies and in their speeches, that the Minister is going to take it away. If this is the case, I want to ask why there has been, if I may use the expression, this deathbed repentance, this reprieve of the Bill.

I have been wondering what could be the reason for this. It may be that the Minister, as the right hon. Gentleman the Member for Llanelly (Mr. James Griffiths) suggested, has had second thoughts. I hope she has, and I wonder if those second thoughts have had anything to do with the events of the past week. Indeed, I cannot help suggesting when I read this Bill and recognise its consequences for the people who supported hon. Gentlemen opposite, that one of the reasons for which this Clause is to be removed, at whatever risk to the opinions of the foreign bankers, is that the party opposite have recognised that there is a revolt in their own ranks and a revolt among the British people. Indeed, I would make so bold as to suggest that we are in a position in which Dudley was able to do very much more than the right hon. Gentleman the Member for Llanelly was able to do upstairs in the Labour Party's Committee rooms. He protested and got nowhere, but Dudley succeeded where he failed. I suggest, too, that many hon. Gentlemen here who put their case sincerely and passionately—and a very good case it is—got absolutely nowhere until the voters of Meriden, Warwick and Acton came to their aid and the people succeeded where hon. Gentlemen opposite failed.

I hope that the Minister is going to confirm that she has dropped this wretched Clause, and, if she does, it will be a demonstration to my satisfaction that by moving as they have done into the ranks of the Conservative Party former Labour voters have succeeded in showing the Government that they did not know what they were doing when they brought in the Bill in the first place.

My second question, very simply, is this. Will the Minister confirm that the second part of Clause 2 An insured person shall not in any event 13,. entitled to injury benefit under section 11 of the National Insurance (Industrial Injuries) Act 1965… also is to be dropped along with the first part of this Clause? I had the impression that it meant only dropping the first half. I hope she will confirm that it means dropping the lot.

I can only conclude on the word that has been bandied about very much in this debate, the word "civilised". The right hon. Gentleman was somewhat scathing about my right hon. Friend's right to comment on what is civilised or otherwise in a modern society. I can only recall the language that was used by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), which was roughly as follows: is it civilised to move 300,000 people for the first time into paying Income Tax? Hon. Gentlemen may feel that is acceptable. They have never thought that higher taxes were uncivilised.

Mr. Houghton

What is the hon. Gentleman grumbling about? If the husband pays a little more in tax and the wife gets still more in extra family allowance, what is there to grumble about?

Mr. Griffiths

Because a great deal of it is going to be clawed back in many cases, and because some 300,000 people are going to have to pay taxes and the civil servants are going to have to collect them, when those people did not have to pay them before and they did not have to be collected before. That is a fact.

Mr. Ted Leadbitter (The Hartlepools)

The hon. Member is annoyed about our intention to claw some of it back. Does he not appreciate the fact that during the years of office of the party he represents there was nothing to claw back? Does he not realise that at the height of the election of 1964 his own hopeful Prime Minister, even in the case of old-age pensioners, could not get beyond the offer of a donation. The hon. Member is being stupid. He ought to sit down.

Mr. Griffiths

The hon. Gentleman knows perfectly well that the people have rumbled him. Let him not talk of 1964. Let him just look at 1968 if he wants to argue this case.

Is it really civilised that in trying to help the poor children, in particular, we should adopt a method that will leave half of the ½ million of them still below the poverty line? Is that civilised? Further, is it civilised that the new advance to be made in the autumn should be paid for, if Clause 2 is enacted, in part by the sick, the injured and the unemployed? Is that Labour civilisation?

It is because I believe better of the party opposite that I think that the Minister will drop the Clause which the right hon. Gentleman the Member for Sowerby came here this afternoon to defend. She cannot drop it soon enough.

6.10 p.m.

Mr. J. B. Symonds (Whitehaven)

First, I want to congratulate the Minister. The hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) disgusts me. I am sure that when he got up this morning he knelt down and said a prayer for those people for whom his heart was bleeding. Members of the Tory Party for years have had their hearts bleeding for the children, for the unemployed and for the sick. Hon. Members opposite have come here today to tell us and the country how their hearts are bleeding for those people.

They have said two or three times in this debate that 200,000 children are at present below the poverty level. How many children were below the poverty line in 1962, 1963, 1964 and 1965? Those figures have not been quoted. What did a Tory Chancellor of the Exchequer do for the poor children in 1961? First, he added to the price that their mothers had to pay for cod liver oil and dried milk at the clinics, and made those mothers pay an additional 15 per cent. for their children's clothing. How kind and generous were the Tories to those people. In the following year, a Tory Government could have helped those children, and so shown their symparty. Instead, they gave £80 million to people paying Surtax. What sympathy that shows for the ordinary working class men and women. Would it not have been better to have given that amount of money—

Mr. Tim Fortescue (Liverpool, Garston)

Would it not be more accurate to say that the Tory Government allowed people paying Surtax to keep £80 million of their own money rather than to say that £80 million was given to them?

Mr. Symonds

I pass that intervention off as something not worthy of reply. It is a typical Tory comment. I understand a lot of these problems a good deal better than the hon. Gentleman thinks.

There is not yet sufficient family allowance given to the ordinary man earning £11 or £12 a week. The average earnings of a large number of people in my division are between £12 and £14 a week. When a mother with two children cannot go out to work because she has to look after their father, it is difficult for her to exist when she has family allowance for only one of the children. The Minister should consider an increase. I plead for those who have one child. There are scores of cases where they are battling hard against the hardships prevailing in their homes. I could give my right hon. Friend the Member for Sowerby (Mr. Houghton) hundreds of cases to add to the one or two that he mentioned, where the husband has been injured in the war or at work, the mother is not able to work because of sickness, and there is one child. Better provision should be made for families like that. The Opposition in their day were appealed to, and they failed, and the Government are appealed to to give family allowance to parents with one child.

I go a stage further. Although this condition must be dealt with at present by family allowances, the answer is on the industrial side. A decent wage must be paid to men to enable them to live in comfort. We have all this technological progress in industry, and an attempt being prepared to send men to the moon. Surely the time has come to provide a decent standard of living for men and women without their having to resort to family allowances.

I agree that those who are better off should be taxed on their family allowances. A lot of people tell me, "You are forgetting that people with plenty of money also get the family allowances", and I must reply that they are now paying tax on that amount as an offset. That is right and proper.

Clause 2 will prove a hardship to many people. No one knows better than I what it means to sign on at the labour exchange. The Clause states that a man will be denied benefit for the first three days "…of interruption of employment…". I remember the time when a man who had had six weeks' benefit went to the labour exchange and was told that there was nothing for him. It was not a question then of three waiting days. Nevertheless, the Clause will mean hardship.

I say to the Government, abolish that Clause. [Interruption.] Never mind what hon. Members on the other side of the House think about it. They can talk about Stansted. At least this Government have had the courage to do the things which it was their intention to do. I give hon. Members opposite the credit for doing the things which they wanted to do—and that was to keep our people in poverty and unemployment. That was their intention and no one knows that better than I do. I can well remember the 90 per cent. unemployed at Jarrow on Tyne before the war. The Labour Government were elected so that our people could be treated better.

Clause 2 will cause hardship. I appeal to the Government, abolish Clause 2. I am pleased to think that the Minister has at least said that she is going to have another look at it. In looking at it she will, I hope, decide to abolish it altogether, and so give to our people more confidence in the Labour Government so that the people may realise that the Labour Government are interested in them. The Government's interest should be to carry out what we said we would carry out, and to look after the interests of the people.

6.22 p.m.

Mr. Marcus Kimball (Gainsborough)

I find it hard to follow the hon. Member for Whitehaven (Mr. Symonds) in his arguments in relation to the Bill. With a lot of what he said many Members will have sympathy, and nobody doubts his sincerity, but, on the other hand, a lot of us on this side of the House cannot accept what he said against the Tory Party.

I think the right hon. Member for Sowerby (Mr. Houghton) was so right when he said that only loyal Members are lining up behind the Government at tae moment. He asked, quite clearly, for a guarantee that, having stood loyally behind the Government, the ground would not be suddenly shot away from under their feet—as was done in the case of Stansted.

The right hon. Member for Sowerby went on to deal with what happens when somebody is sick. I absolutely agree with him that when somebody goes sick the normal practice is to continue paying his wages as if he were going to work, but in most cases the employer then asks that the sickness benefit voucher should be given to him, so that the employee get his normal rate of pay and the employer is credited with the voucher. I think that is the normal practice. It is in the exceptional circumstances that the employee draws his full rate of pay and also retains in his own possession the voucher so that he makes a profit out of being ill. I think the practice as I have described it is the normal one, and that it is an admirable practice.

If we accept that that is the normal practice, that the employer gets the employee's sickness benefit voucher, then Clause 2 is going to put another very serious burden on employers. It is going to put an additional burden on employers just when they have the major additional burden of 50 per cent. increase in Selective Employment Tax, which the present Budget envisages. Most employers will not change the present normal practice when people go sick. The employer will say to the sick employee, "You will continue to get your full rate of pay, and you turn your voucher into the office." All that will happen is that the employer will have the extra burden of not getting the voucher for the three days of sickness benefit, and that will put another very heavy burden on our employers and on our industry. I think the Minister herself has admitted that this provision will add to the costs of employing labour.

I hope that however much the Minister may not want to follow the precedent of Stansted and may not want to follow the precedent of her right hon. Friend the Minister of Transport, she will withdraw that Clause of her Bill, and if she does not want to withdraw it herself I dare say that, like the Minister of Transport, she could get another Minister to do the withdrawing for her. I dare say the Chancellor of the Exchequer would be quite willing to make it known to us when he publishes the Finance Bill.

Mr. Eldon Griffiths

Would my hon. Friend not agree that in the case of the Transport Bill it was the Chancellor of the Exchequer who told the Minister to take Clauses out, and in this case it was the Chancellor of the Exchequer who told the Minister to put a Clause in?

Mr. Kimball

I quite agree. If the right hon. Lady cannot use the Chancellor of the Exchequer, I dare say another Minister would be willing to come forward and make this announcement for her and save her embarrassment.

I can assure her that if she can get rid of Clause 2 that will certainly be welcome to this side of the House, it will be welcomed by nearly all employers, it will certainly be welcomed by everybody who suffers from sickness and unemployment.

It has been suggested that the Government's recent lack of success at by-elections is one of the reasons why they may change their mind about Clause 2. It has come out clearly on television programmes, and we know from our party's workers who have been canvassing and helping in canvassing at the by-elections, that one of the most unpopular things at the moment is the increase in family allowances. I think that, although this is unpopular, it is a very sad fact that it is. I have always myself supported family allowances, quite simply because they can be drawn as of right by the women of the country themselves. I represent a constituency where wages are not very high. Lincolnshire is a very prosperous county in many ways, but because of the very nature of its industries, engineering and agriculture, wage rates are not high. Therefore, I think that family allowances have a very valuable part to play in an area where wages are lower than the national average.

Women have been harder hit than any other section of the population by devaluation. They know perfectly well that the Prime Minister's remarks about the value of the money in their pockets not coming down are absolutely untrue. They are beginning to feel the price of imported foods and the rise in the cost of living, and devaluation is really beginning to hurt now. Therefore, I think it is important that family allowances should be increased, and, like the right hon. Member for Sowerby, I feel that substantial family allowances should be Paid that really will help people. The right hon. Member for Sowerby went so far as to suggest a social benefit of 30s. for every child, including the first child. Let us make it perfectly clear that although many of us would support allowances on that scale they could be contemplated only for families who have very low wages. They certainly cannot be contemplated as across-the-board increases.

I support family allowances for certain families. I realise the need for family allowances in areas of low wages. The difficulty arises from the principle of an across-the-board increase for everybody. I would support substantial family allowances if we could find a practical way of ensuring that the large increases went only to families with low wages.

This is a very niggling sort of little Bill to bring before Parliament at this time. It is doubly niggling when we reflect that it comes just after the largest increase in taxation that has been introduced by any Chancellor. The idea of cutting off unemployment and sickness benefit for the first three days when a man is ill, in order to raise the extra £55 million needed, is an across-the-board, niggling little transaction that has no appeal to anybody, and that does not appear to people outside to be a fair, practicable and sensible method of financing an increase in family allowances.

There are many other sectors of public expenditure which should be considered before cutting out the first three days of sickness, unemployment or industrial injuries benefit. I do not see why other Government expenditure should not be reduced, thus avoiding penalising these people, who are suffering grave misfortune. Sickness is a grave misfortune. Most people do not enjoy being sick, and using sickness as a means of having a few days at home. Some may, but not many. Most people loathe the stigma of having to be away ill for a few days. It is wrong to withdraw these benefits.

Why should the Government not consider the Transport Bill, and other sections of Government expenditure? The Transport Bill seeks to reorganise an industry. All these extravagant Socialist schemes could be examined, with the support of everybody. That would be preferable to this measly, niggling little Bill. I do not see why we should not ask that the Clause be deleted. I hope that the Parliamentary Secretary will be able to assure us that whatever may have been said in the past he has listened to our arguments and has been persuaded to withdraw this Pernicious and unnecessary provision.

6.33 p.m.

Mr. Michael Barnes (Brentford and Chiswick)

I welcome any increase in family allowances, especially one which is based on the give-and-take basis which is now being applied to the 7s. increase that we are now having and the 3s. increase provided in the Bill, but bearing in mind the extent to which it is possible, through this system of give-and-take, to offset the cost of increasing family allowances by getting back a high proportion of the cost of the increase by making adjustments in the tax relief allowed for children, I wish that the Government had gone further and had made a bigger increase than 3s.

Many people may say that it is un realistic to want to do this in present economic circumstances, or that it is un realistic because of the prejudices which exist against family allowances. I was interested to hear what the hon. Member for Gainsborough (Mr. Kimball) said about this. He was right in suggesting that family allowances are not nearly as popular with people as Governments sometimes think. A classic example of this sort of prejudice is to be found, regrettably, in the Daily Mirror last week, when George Gale said: Myself, I am by no means convinced of the virtues of family allowances. Presumably they encourage the birth rate among the poorer sections of the community. The bigger the family, and the lower the parents' earnings, the more the family allowances become attractive, and an inducement to have further children. With the present level of family allowances, Mr. Gale should try telling that to the Child Poverty Action Group.,

This sort of talk really is dangerous nonsense, and I was glad that the Minister corrected the point about the large families and drew our attention to the survey "Circumstances of Families", published last year, which pointed out that two-thirds of all families in which the father is in work but which nevertheless are below the supplementary benefit level have only two or three children. This surely answers the argument about large families. Nevertheless, these prejudices are widespread. I wish that the Government could do more to get across to people the implications of the policy for family allowances which they are now following, and would try to place this policy more in the context of their complete social policy. I am sure that the give-and-take principle which is now being brought in is not understood generally.

[t may be that one reason why the Government have not made a bigger attempt to get this across is the question of increasing the money available to the wife. Perhaps this is a sensitive area. A year ago, when future family allowances were being discussed, it was suggested that the solution which is now being adopted was not adopted then because it would take away money from the husband by cutting his tax relief and giving extra money to his wife—which was unpopular. My hon. Friend made some good points about this. The Government are paying the price for not facing the issue head on. Many of the people who tend to complain about increases in family allowances have no conception of the principles which the Government are trying to apply.

Last week, in reading Press reports, one could turn from the Daily Mirror to The Times for more enlightenment on the subject of family allowances. Last week The Times had a good leading article called "The Budget and the Poor", in which it said: Higher family allowances, on the other hand, are a definite contribution to easing the burdens of many of the lower paid. The problems of many families are caused by a combination of comparatively low pay with a more than averagely large number of children, and the most sensible way of helping them is through the family allowance system. To attempt to do it directly through wages would be prohibitively expensive because everyone's pay would have to go up commensurately. Many of my hon. Friends feel that in the long term that is what must happen—that the prime reason for family poverty is very much a question of low wages, and that it is the wages problem that, in the long-term, must be tackled. Again, many of my hon. Friends would hope that when we get out of our present economic difficulties this is just what the prices and incomes policy will be used for.

The article in The Times concluded by saying: But while this decision is correct it does not go far enough. I very much agree with that. The difficulty is that with two increases in family allowances following each other quite quickly the public have received a certain impression of the situation, whereas if we study the statistics of family poverty we see things in a very different perspective. We have to go back to the big survey which took place last summer, and which was called "Circumstances of Families", which pointed out that the total number of children—even those in one-child families—living below the supplementary benefits level, was 1¼ million. The survey expressed "particular concern" at the fact that 500,000 children in 160,000 families are living in poverty, primarily because of low wages, either because the families are wage-stopped—as to about 20,000 of the 160,000—or simply because of the low wage that the father was earning, as to the other 140,000.

I agree very much with what the noble Lord said about the plight of the 250,000 children who still live below the supplementary benefit level, but I could not understand what he was driving at when he appeared to link what he was saying with the Chancellor's use of the words "civilised and acceptable". When the Chancellor used the words "civilised and acceptable" he was talking about something different, namely, about the system of selectivity based on tax adjustments, which is now being applied for increases in family allowances.

The only alternative to this civilised and acceptable system of selectivity based on tax adjustments is, as my right hon. Friend the Member for Sowerby (Mr. Houghton) pointed out, some sort of crude means test; an extension of supplementary benefits. The noble Lord said that if we had not spread this money so widely we could have paid £1 a week to every child in poor families, but on what basis would it have been paid? It could only have been based on a crude means test. Once that was done, one would immediately become involved in all the problems of low uptake—of people who are not able to go to Ministry of Social Security offices to make their claims or of people who are not prepared to claim because of the indignity involved, as they consider it in some cases. However, the noble Lord was right to draw our attention to the plight of the 250,000 children who are below the supplementary benefit level.

Of the 7s. increase announced last July—which is only just now coming into effect—it was said at that time that it would still leave half the children living below the supplementary benefit level. It was for that reason that many of my hon. Friends thought the 7s. increase disappointing. Since then we have had devaluation, the price increases that have followed it, the increase in the cost of school meals, representing 2s. 6d. per child extra per week, and the proposal to reintroduce prescription charges. The adults in low income families must pay these charges, in addition to the National Insurance contributions increase. This series of actions stemming from devaluation all bear heavily on the poorest members of the community.

The Prime Minister said at the time of devaluation that those who would be hardest hit through devaluation would be protected. The old and the sick will be protected through increased supplementary benefits, but the low income families can only be helped at the moment through increased family allowances. It is important in this connection for the Government not to regard the 7s. increase announced last July as to any great extent fulfilling the Prime Minister's pledge at the time of devaluation, because the increase was announced well before devaluation and because it was primarily designed to deal with the situation which existed then. Seen in that context, one begins to feel that the 3s. increase in this Measure is very little indeed. That is why I wish that it were more.

Like many of my hon. Friends, I applaud the Chancellor's recent Budget He was absolutely right to try to find through indirect taxation so much of the money which is needed. However, immediately my right hon. Friend took that decision—even though he did it so skilfully—he must still safeguard the standard of living of those who will be most hard hit. I accept what my right hon. Friend said at the time about indirect as opposed to direct taxation, but if he is to carry on with this policy, as he suggested he might in future years, I hope that he will quickly apply this give-and-take principle now being introduced to family allowance increases right through the whole of family allowances so that bigger family allowances—getting nearer to the maximum of 30s. a week per child referred to by my right hon. Friend the Member for Sowerby—may be channelled to those who really need them. Naturally, those who do not need them will not get them, because of the tax adjustments which will be made to claw the money back.

If the Government are to do this and if the pattern will be to have successive increases in family allowances—perhaps not large increases on each occasion but frequent rises—it is vital that the Government should try to get people to understand better than they do at present what they are trying to do and how their policy covering family allowances is designed to cater for the total poverty problem. I hope that the Government will now make an attempt to do just that.

6.45 p.m.

Mr. Tim Fortescue (Liverpool, Garston)

I agreed with virtually all of what the hon. Member for Brentford and Chiswick (Mr. Barnes) said on this subject, especially the implication that the Bill does not provide a satisfactory solution to the problem of poverty, particularly in large families and in families of low wage earners.

I wish to confine my remarks to a narrow sector of social security, and that is the sector which is usually known as the negative Income Tax theory. The Minister may recall that in the debate last November I made considerable play with this theory and suggested my version of the negative Income Tax plan. For the purpose of this debate, I will oversimplify the theory by saying that family allowances should be abolished altogether and that those who do not pay Income Tax should be entitled to the same child allowances as those who pay it.

In replying to the debate on that occasion, the Parliamentary Secretary made his now notorious remark that it would take at least nine years to introduce such a scheme. He did not give the reason for that estimate of time, we have not seen any calculation or argument to suggest why he said it and, as far as I know, his remark has never been withdrawn.

I accept that it would be difficult to introduce such a scheme, and, after that debate, I wrote to the Minister saying that perhaps it would be administratively more feasible if such a suggestion of negative Income Tax was confined only to those in employment, since people in employment are easier to deal with than those who are unemployed. I suggested that those who were not in employment or widows or those who did not have employers could have their problems dealt with in another way, perhaps through the supplementary benefits scheme.

The Minister replied just after Christmas. She said, in effect, "That is very interesting. Will you please come and have a talk with me when the House resumes?" I wrote saying that I would do that. Since then I have tried on four occasions to make an appointment with the right hon. Lady, but on each occasion the reply from her office has been the same: "Not just now. We will let you know." I appreciate that the right hon. Lady is busy. I thought at one time that that was the sort of treatment that a humble back bencher on this side of the House could expect from busy Ministers, but in the last week I have twice seen the Minister of Labour, who is also a very busy Minister, and on each occasion he has managed to see me on the same day that I telephoned him. I have come to the conclusion that the right hon. Lady does not want to discuss the matter with me.

Mrs. Hart

I apologise to the hon. Gentleman and I assure him that if we can get together behind Mr. Speaker's Chair later in the evening I will make sure that we see each other quickly in the near future.

Mr. Fortescue

I thank the right hon. Lady.

I will not take this opportunity of expanding what I said in the earlier debate. I recognise that it would be administratively difficult to introduce such a scheme, but I do not believe that it would be nearly as difficult to introduce it in the simplified form in which I put it in my letter to the Department.

In her speech today the right hon. Lady said that in 1968 the theory of negative Income Tax would not be the answer. I assume she said that because of the administrative complications that would be caused. I hope that she did not mean that her Department had decided that the theory was not the answer and that she used the phrase "in 1968" merely to indicate that she did not think that it was a feasible enough answer to meet this problem quickly.

The right hon. Lady went on to say that family poverty could be a real problem for families with only one child and she added that we could not do anything about that, except that we had to have regard to the problem. Later she said that there was no answer, other than by using family allowances, to the problem of low-wage earners. She did not mention the 250,000 children who are living below the poverty line, and this is another problem which is not met by the proposals in the Bill.

I believe that my scheme of negative Income Tax would meet all these problems. There would be no difficulty in meeting the problem of the poor family with only one child. It would specifically meet the problem of the low-wage earner with a large family. This is a problem which negative Income Tax exactly meets. It would also solve the problem of the 250,000 children who are below the poverty line, or as many of them as are in families where the father is working. Therefore, in those three respects the three problems—although the right hon. Lady felt there were only two—would be specifically solved by the theory I am putting forward.

We have heard also this afternoon that the Inland Revenue has said that its staff are having to work one million hours of additional overtime in order to do the recoding necessary to meet the Budget. I suggest that one million hours overtime could go a very long way towards doing the recoding which would be necessary to introduce a system of negative Income Tax for employed people only. If the family allowance system were abolished at the same time this would relieve the hon. Lady's Ministry of a great deal of work which would no longer be necessary, so that there would be more man hours available for introducing the new system.

I hope, therefore, that the Parliamentary Secretary, whom I know to be exceedingly well informed on the whole theory of negative Income Tax—and I was most impressed by his answers last time which even though they did not convince me showed that he was inside his subject in a way I strongly applaud—will this evening answer the specific point: why could not those, in employment only, who at present are not paying Income Tax be put on a negative Income Tax system thus bringing real benefit to those families whom the right hon. Lady admits are at the heart of the problem—families with large numbers of children in low wage earning groups?

6.52 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

I should like first to make a reference to a point made by the hon. Member for Liverpool, Garston (Mr. Fortescue) in relation to the family on low wages with only one child. This is really a very important and difficult problem and, although we cannot solve it in this Bill, I hope that in the future proposals will be brought before the House whereby a family can receive assistance.

I remember very well a family of which the older children had left home and married before the family allowances scheme came into existence. The mother received no family allowance in respect of the last child because he was apparently the only child; and under the circumstances that family had an enormous struggle to help that child forward, particularly as he went on to university. I remember the resentment and bitterness in that family when other families in the same area, indeed in the same street, with two or three children received such assistance, when they themselves were not getting anything at all, although the wages in that family were very low.

I realise that this cannot happen now. That was, of course, a hang-over from a previous time, but I believe that the family with only one child needs assistance, and I hope that sooner or later it will be possible to come forward with proposals to help in that way.

This Measure would almost have qualified to have been called the "Cecil King No. 2 Bill". My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) referred to a previous Bill as being a "Cecil King No. 1 Bill", and, quite honestly, with Clause 2 remaining in this Bill, this one would definitely have qualified to be the "Cecil King No. 2 Bill". Unfortunately, because I was engaged upstairs discussing other matters, I did not hear the contribution made by the Minister; but I understand that this matter is at least to be further investigated and I am very pleased that this is so because I would have found it exceedingly difficult to have supported this Bill with Clause 2 in its present form remaining in it.

Certainly, I would happily support the Government measures for stepping up family allowances. I believe the point made by the hon. Member for Gains-borough (Mr. Kimball) was very true. Throughout the country, in all our constituencies, there are many people who are opposed to the idea of extending family allowances because they have not understood precisely what is involved. That is a very bad thing and it is regrettable that people should take that view. The Government have acted very courageously. It has been said that the Dudley by-election result was one effect of the Government's policy, but if the Government wanted to be entirely popular in all the measures they were to take, the extension of family allowances would not be one of the measures they would have taken because it is not the most popular measure in this country.

I believe people are wrong in not accepting the idea of an extension of family allowances and that in the course of time they will appreciate that the Government were absolutely right in coming forward with these increases. I support the Government on this, and, like my hon. Friend the Member for Brentford and Chiswick (Mr. Barnes), I would have liked to see the figure even hither, but we all realise that we are in a very difficult economic situation.

Clause 2 deals with something which will be known to anybody who has been involved with construction workers, workers who have experience of casual employment. Frankly, if it had been left in the form in which it appeared in the Bill, it would have been an iniquitous piece of work and it is quite right that it should be changed in some way or other, though we do not know how that is to be done. But the provision in respect of three waiting days should, in any case, be abolished, and payment for those days should be made not after two weeks but from the word "go". There should not be this loss of three waiting days if a worker is off sick.

I can remember the resentment felt by by workers on the shop floor who fell sick, when they knew that other people employed in the same firm, perhaps engaged on clerical work, were receiving their full payment from the first day they were off sick while the workers on the floor did not receive that payment. That caused tremendous resentment. It is also true that many workers, because they do not get payment for the first two days, when they go off work, perhaps with influenza, because they do not believe that it is going to last, do not go to the doctor for the first two days. On the third day the man's wife may say, "You are much worse; I am going to send for the doctor", and the doctor on that third day may decide that the worker is sufficiently ill to be put "on the panel", as we used to say. That would mean that that man would miss his pay not for the first three days but for the first five days he is off sick. That causes great resentment among the workers.

I have always believed that if we want to get workers back to work quickly, the answer is to make certain that they are paid right from the word "go", from the start of their illness, rather than having to wait until the end of a fortnight before they can reclaim the first three days' pay. I want this to be looked at in reverse. I want to consider how much would be saved if we did that. I believe the saving could be much greater than the £15 million which is supposedly being saved as a result of this particular provision. I urge the abolition of the three waiting days.

Child poverty has to be looked at in perspective. A great deal of cant is talked about poverty. I remember what it was in pre-war days. In whole sections of the City of Liverpool there were unemployed, and the children walked the streets without shoes. They had condensed milk and very little else on the table. That was real poverty, mass poverty. My right hon. Friend the Member for Llanelly (Mr. James Griffiths), who was the Minister concerned in the Attlee Government, understood the poverty of South Wales. Those of us who have come from such areas understand what poverty meant.

It is true that we have not solved the problem entirely, but it is a very different sort of poverty from that which we had before the war. There are pockets of poverty which need to be cleared, but it is very different from the legacy which was left from pre-war days. Do not let us have talk about the Labour Government not having solved the problems of poverty, for basically those problems were solved between 1945 and 1951. The Tory Governments that followed in the 13 years could never allow the position to return to what it was before the war because the people would never have tolerated it.

There is the problem of the large families. Parents of large families come to me in my "surgery" and tell me about their problems. Let us face it; there are a few layabouts who do not want to work, but there are a very few. Mothers come to see me to tell me of their problems in paying the rent and their concern about bringing up their children and seeing that they get enough to eat. That is a problem we have to solve. I believe that we are helping towards solving it, but we have not entirely solved it.

I say to hon. Members opposite: please do not try to suggest that all these problems of child poverty have developed in the last three years. What were they doing in the 13 years when they were in government? Why did they not solve these problems? These problems are being tackled properly for the first time by a Labour Government. The Child Poverty Action Group is pressing the Labour Government to do even more. That is because they expect us to do something about it and they did not expect the Tories to do very much about it.

The best way to tackle the problem is not only through family allowances but also by ensuring that there is a minimum living wage for every worker in the country. The Transport and General Workers Union is absolutely right to put forward the concept of a £15 minimum wage. It is important that every worker should be able to make quite certain that he receives such a minimum. Of course, the minimum would go up under different circumstances.

This Bill as it stands, without Clause 2, is a very good one. We have just been saved. Whether it was by the workers of Dudley or anyone else, does not matter. I remember that when I was on Merseyside every time a great demonstration of the unemployed came to the House of Commons we got two more factories from the Conservative Government. We marched and got a couple more factories and a few of the unemployed were relieved. If some workers are dissatisfied with the Labour Government and have not voted for them, and that has had an effect on the Government, I am happy. The combination of the workers of Dudley and hon. Members on this side of the House can make a vast difference in the next three years. We shall win the next General Election, make no bones about that.

Mr. Speaker

The hon. Member is getting a little away from the subject of the debate.

Mr. Heffer

I realise, Mr. Speaker, that I am going somewhat wide of the debate, as you rightly pointed out, but an hon. Member opposite, who is not now present, referred to Dudley and I was answering the point he made.

I happily support this Bill. It could have been the "Cecil King No. 2 Bill". I am glad that it is not that Bill but a Bill which can receive the support of every hon. Member on this side of the House.

7.6 p.m.

Mr. Nicholas Scott (Paddington, South)

I do not want to follow the hon. Member for Liverpool, Walton (Mr. Heller) in the rather hectoring party political note with which he concluded his speech. While we all rejoice in the fact that widespread poverty is no longer a feature of life in this country, to the person actually suffering from poverty it is still very real indeed and it is made all the more offensive for him to be part of a pocket of poverty in the midst of affluence. We do not want to underestimate the reality of the impact of poverty on the individual.

My purpose in intervening in this debate is to ask the right hon. Lady not to turn her back completely on the idea of a negative Income Tax or a family benefits scheme. I am sure that while we are all glad that the Government are turning their backs on the high priests of universalism and moving, albeit clumsily, towards selectivity in the social services, we can refine this and make it more responsive to the needs of the people. One of the ways of doing so is through a reverse Income Tax system.

I am sorry that I did not hear the right hon. Lady's opening speech, but I understand that she made a particular point about the self-employed. The self-employed were a great barrier to the introduction of P.A.Y.E. itself, but it was still considered that we could introduce P.A.Y.E. and that the benefits across the board outweighed the disadvantages of having to make special arrangements for the self-employed. If we are determined to introduce a scheme of family benefits I cannot see why we should not be able to make arrangements for the self-employed. From memory, I believe that of the 160,000 families suffering poverty 140,000 were low wage earners, 20,000 were wage-stopped and the self-employed were not a great factor.

Mrs. Hart

Twenty per cent. of those who were employed were self-employed.

Mr. Scott

I take it that that means that 20 per cent. of the 160,000 were self-employed.

I revert to the main point. One can make special arrangements for that number, and a family benefit scheme is the broadest solution that has been suggested. The Government scheme will leave 200,000 to 250,000 children still below the poverty line. A family benefit scheme can be tailored so that it is immediately responsive to a reduction in earnings. It does not involve long delay before benefit is paid. Tying it to the P.A.Y.E. system means that everybody who is paid wages can be brought into the scheme very easily. There is no need for an application for benefit to be made. It can be paid automatically, and so it is possible to avoid the low take-up of benefit which many other schemes—supplementary benefit still—involve.

Therefore, I hope that the right hon, Lady and her Ministerial colleagues will not turn their backs on the idea and take refuge in saying that it will take nine years to introduce such a scheme. I do not believe that. I am convinced that it is a much better bet than any minimum wage, which would put a massive burden of costs on industry and throw a large number of low wage earners out of work. That would be the most immediate effect of a national minimum wage of about £15. A family benefit scheme is a flexible and responsive answer to the problems of family poverty. I hope that before long, if we still have Labour Ministers, the right hon. Lady will tell us that the Government have made some progress towards such a scheme.

7.12 p.m.

Mr. J. D. Concannon (Mansfield)

When I listened to the hon. Member for Hertford (Lord Balniel) I could not help thinking how nice it would be if one could think that he was speaking for the rest of his party. I do not doubt the sincerity of the noble Lord or the hon. Member for Paddington, South (Mr. Scott), but I doubt the sincerity of quite a number of their colleagues in a debate of this character. [An HON. MEMBER: "Why?"] I just do. I am probably born like that, and I am suspicious as well.

A good deal of mention has been made of the 300,000 extra people coming into the taxation bracket and the 250,000 children still living at below the supplementary benefit level. I wonder why there is complaint about the two, why there is complaint first that 300,000 more families are coming into the taxation bracket and then that 250,000 are being left outside. I should have thought that the noble Lord and his colleagues would like to see every family in the country in the taxation bracket at the present level. I have grumbled at paying tax, but if the level remained the same I have always said that I would not care if another £3 or £4 a week was stopped on P.A.Y.E., because that would mean that at the bottom of the pay packet there was a bit more to play with. If wages rise to bring those families into the P.A.Y.E. system that must mean that the social security measures and family allowances are working.

In any case, this happens every week in industry, because when the wage increases come along and the family income reaches a certain point the family is brought into the P.A.Y.E. bracket. Therefore, there should be no discontent at 300,000 extra families being brought into the Income Tax bracket. It is a good sign that some of the benefits are working to increase family income.

I think that everything has been said today on the family allowance that could be said about it. I believe that the family allowance should be only a supplementation to a good wages policy. It cannot, and never will in the long term, take the place of such a policy.

I agree with something the noble Lord said, because I spent yesterday in my local Social Security office and I found that what is causing great concern is the administration of the increases—three in one year. They are causing a good deal of duplication in administration, and I hope for the sake of those who work in the offices that in the future, or even if it is not too late now, we can make one increase, and perhaps put it back a month, to save some of the duplication in administrative work.

I decided to say a few words in the debate because, on looking round the Chamber, I think that it is fair to assume that only a limited number of hon. Members have worked what is termed the 13-week cycle. It is only two years ago that I was still practising the art of collecting the three waiting days, and therefore my comment will be aimed at Clause 2. I am all in favour of the abolition of the three waiting days, but the way it has been done is causing me tremendous worry. Many of my colleagues and hon. Members opposite would like to see Clause 2 deleted. I should not like that. I should just like to see a small amendment to the Explanatory and Financial Memorandum on Clause 2 deleting "abolishes entitlement in any circumstances" and substituting the word "making" so that it would read: Clause 2 makes entitlement to unemployment benefit and sickness benefit under the National Insurance Acts and to injury benefit under the National Insurance (Industrial Injuries) Acts for the first three days of a period of interruption of employment. Like my hon. Friend the Member for Liverpool, Walton (Mr. Heller), I should like to see this incorporated from the very first day of sickness.

I am for the abolition of the waiting days because they are no longer desirable. They restrict production and we can ill afford to do that these days. But we should put something in the place of the waiting days. As my right hon. Friend said, 60 per cent. of those concerned are already covered, but it is the 40 per cent. that are left who should cause us all the concern.

In Nottinghamshire about a quarter of the male working population are in mining. In individual towns and villages 'from 50 per cent. to 75 per cent. of males are employed in mining, and the only cover they have for the three waiting days is the National Insurance Act, 1946. I think that the Minister will understand When I say that all the experts on that Act and on social security are not in her Ministry. It is a well-known fact that the first three days of sickness and injury are not paid for unless one is off work for two weeks. But it is also well known that there are 13 weeks from the start of the three waiting days before one loses the claim to them. That is why one finds in most homes in my area two calendars, one for the husband and his 13-week cycle and one for the wife. It would not do for the two dates to become crossed. A man is considered a fool who lets his three waiting days go by default. If at the end of 12 weeks he has had nine, 10 or 11 days off work he need only have the others to get the three waiting days back. One day off at that stage could mean payment for four.

Those who do this are a minority, but I have also spent a nice day or two at Queen's Park, Chesterfield, and Trent Bridge, Nottingham, watching Yorkshire play Derby or Nottinghamshire, on one of my three waiting days. We considered that this was money owed to us, and the workers are still not well paid enough to let three days' pay go by. It is a matter of practical economics, the art of living, which few in the House understand or need to understand.

If one keeps in benefit, as I have explained, there can be other abuses of the Act. One can be paid for isolated days off work within the 13-week cycle, and there are other examples. One of the classic examples is that of the shift worker, who can claim two days' sickness benefit without missing a day of work finishing work on Friday afternoon and if they are sick over the Saturday or Monday can claim those two days' sickness and start work on the Monday evening. This can and does happen every three weeks and nothing can be done about it. However, it is only in isolated cases that it takes place.

While it is wrong for the minority to abuse the scheme like this—and I have been guilty in certain respects—hon. Members must remember that these people cannot fiddle on their Income Tax returns. I have now sat through three Budgets and in each one the Chancellor of the Exchequer has been trying to close loopholes leading to tax evasion. I have sat through the Ferranti, Bristol-Siddeley and Savundra affairs and it would take many waiting days to catch up on them. So do not let us become too critical. It is becoming harder to explain to constituents who have overdrawn at the Social Security through some oversight, or have committed some slight misdemeanour and who find themselves being pressed by the Social Security—some even finding themselves in court and in prison—why those indulging in these affairs I have mentioned seemingly get away with it.

While the saving in money under this Clause will be £15 million, the saving to the country will be in a reduction in days' work lost, and so an increase in production. While I agree that we should abolish the three waiting days—and I hate being at variance with my right hon. Friend the Member for Llanelly (Mr. J. Griffiths) over this, because my predecessor was his Parliamentary Private Secretary when the National Insurance Act, 1946, went through—I should like my right hon. Friend the Minister of Social Security to consider the way it is being done.

To stop the three waiting days and put nothing in its place is wrong. If there is now only a section of the population not covered, would my right hon. Friend not think about delaying the date of operation? If she announced a date in the future when this was to cease, it would allow those sections not covered to start negotiations for cover. The other alternative, which I would prefer, is to pay the three days as they happen. Even this would, I am sure, make some saving to the nation, if not in monetary terms then in the saving of days' work lost. I suggest that this is the answer and it would at the same time cut out the abuses of the Act by the minority.

7.22 p.m.

Mr. David Winnick (Croydon, South)

I agree with a great deal of what my hon. Friend the Member for Mansfield (Mr. Concannon) has said. The Bill is totally justified but I think that there is no doubt that increases in family allowances are not popular. When I was canvassing in one of the by-elections last week, the point was made to me on a number of occasions. I recognise, therefore, that many people—including many Labour voters or potential Labour voters—do not look with much favour on family allowance increases.

Nevertheless, such increases are justified as long as we have in Britain such a large pocket of poverty. I agree that, to a very large extent, the problem is linked, and will continue to be linked, to the position of low wages. Recently in the House I asked my right hon. Friend the Prime Minister what action was being proposed to increase the wages of people receiving very low wages. I cannot say that I was altogether satisfied with the reply, although I recognise that, in the present economic situation, the Government will not be very keen to encourage large wage movements.

One of the letters I received as a result of that Question came from a school groundsman—not a constituent—who earns about £13 a week and takes home £11 5s. He wrote me a very long letter of seven pages. He had taken great pains in writing to me and telling me of his daily and weekly difficulties with his family in trying to make ends meet on such a low wage. There are so many people all over the country receiving wages of under £15 a week.

My hon. Friend the Member for Liverpool, Walton (Mr. Heller) was right in saying that the poverty we have today is quite different from the poverty of before the war. Those living in poverty today—people taking home £11, £12 or £13 a week—feel some humiliation when they see that other workers are receiving better wages and enjoying a higher standard of living, and rightly so, and that they are falling very much behind. There may well come a time when wages will be so increased that we shall not have to worry about family allowances but at present they should be raised and, if anything, I would like to see more substantial increases than those contained in the Bill.

One of my reasons for supporting the incomes policy in the past is my belief that a fair incomes policy operated by a Labour Government should give favourable advantages to the low paid people. In a free-for-all atmosphere of wage bargaining, it is often those earning low wages who get by-passed and ignored. When I came to this House two years ago, I made my view clear. If an incomes police could be operated by a Labour Government with good advantages to low paid workers, I would be much in favour of it. But I am not altogether happy with how the incomes policy has been operated so far. It seems that, by and large, a number of workers who are poorly paid have not won any advantages from the existing policy.

Mr. Bob Brown (Newcastle-upon-Tyne, West)

Last year, in the period of severe restraint and the six months following, for the first time that I recall in industrial negotiations, a section of the lower-paid workers—local government workers—received a 9 per cent. increase as against the average national increase of 6 per cent.

Mr. Winnick

The point my hon. Friend has made is a fair one and I certainly commend that increase. I am in favour of the nurses' new increase. But, over all, there are still many people—

Mr. Speaker

Order. Hon. Members may make passing reference to the need for an incomes policy but we cannot proceed with a general debate on it during discussion of this Bill.

Mr. Winnick

I appreciate that, Mr. Speaker. Perhaps I may just comment that, over all, there are still many people in the country earning very low wages, which justifies the family allowance increases proposed in the Bill.

Some hon. Members opposite have spoken of family poverty as though prior to 1964 it did not exist, as though we created this problem—that before 1964, it was unknown in the post-war years. It may well be that, in practice, we have not done as much as we should have done—I should like to have seen much more progress—but at least the Government should be congratulated on the steps they have taken in trying to deal with it quite apart from these increases in family allowances.

It is sometimes argued that family allowances encourage parents to have more children. That viewpoint has been expressed to me on the doorstep in canvassing and by some of my constituents. I do not believe that there is any evidence that this is the case. But even if there were evidence to that effect, even if it could be proved that more children arrive on the scene because of family allowances, that would not alter the fact that we have a large number of families living in poverty and that our main concern in this House must be to take care of the children already here and who have to go through a great deal of hardship because their fathers earn such low wages.

How many children there should be in a family must be a very private matter, not to be decided upon by the Government. I hope that we will never reach the 1984 situation when the Government of the day will say that a person earning £20 can have so many children and no more, and between £20 and £40 an extra child or two. This must remain a very private matter in any type of society. A year or so ago the Government provided time for a Bill introduced by my hon. Friend the Member for Bebington (Mr. Brooks) dealing with family planning. It increased the scope for this, and I am not altogether certain how local authorities have responded to this.

Mr. Speaker

Order. We cannot discuss tonight the Family Planning Bill.

Mr. Winnick

It could be argued that it is part and parcel of the matter with which we are now dealing. The Government are reconsidering the whole position of Clause 2, and I am very pleased about this. People may say that the Government have given in to back-bench pressure, but there is no harm in that. It is part of the function of a democratic party, when in power with a large majority to respond to back-bench reactions. We should make our views known. Whatever comments may appear in the Press afterwards will not worry me a great deal.

What has worried me over the years is the gap in industry between the manual worker and the non-manual. There are many places where the non-manual worker is automatically protected when he is away ill. He is paid by his employer, and I am pleased about this. In most places in the private sector this does not apply to the manual worker. Figures supplied to me by the Library show that only one-third of manual workers in both the public and private sectors are protected by their employers when sick. If Clause 2 was to remain in the Bill it would further discriminate against manual workers.

Most firms, when they have a sickness scheme applying to non-manual workers, pay automatically if one is away for one or two days. There is no difficulty about claiming money if one can prove one has been away for good reasons. It has been argued that if we did what is outlined in Clause 2 we would discourage the malingerer, but the person who takes a day off—and I have done so from time to time when working in private industry—is not covered at the moment. As I understand the Regulations, one has to be away 12 days before one can claim the first three days.

The Ministry of Labour Report "Sick Pay Schemes" issued in 1964 deals with the whole question of sick pay and has a bearing on what we are discussing. Paragraph 79 says: However, even if it were the case that sick absence is greater when sick pay is provided it would not necessarily mean that employees were being encouraged to feign sick when they ought properly to be at work. It could mean that without sick pay they would have been compelled for financial reasons to stay on at work when they would have been justified from the medical point of view in going sick. The provision of sick pay enables them to stay away when it is best for them to do so, in the interest of their own health, to avoid the infection of other workers and, perhaps, to prevent a much more prolonged absence at some time in the future. To the extent that this is the true explanation of any increase in absence which may follow the introduction of sick pay, it means the change is to the long term advantage of employers, because it tends to raise the general standard of health of the labour force. None of the organisations in the public or private sector which we have consulted about the provision of sick pay thought there was any widespread abuse of sick pay provision. One or two pointed out that such malingering as might occur could be reduced by a strict control of the arrangements. It cannot be argued that if Clause 2 were to remain it would have some effective answer to malingering. I am sorry that it the Government considered it right to introduce such a Clause in the first place. I hope that I am not giving away secrets when I say that I have expressed my views in places other than the Flood of the House on this matter. If Clause 2 is done away with when we return from the Easter Recess, I hope that the Bill will go through. Without the Clause it is a good Bill and a further recognition of the problems of family poverty. It is a further recognition that the Labour Government care about people and children in families who have to be brought up in very difficult circumstances. It proves, although we have not solved the problems and may not be able to do so for some time, that the Government are taking the right steps, perhaps a step at a time, but none the less steps in the right direction to end the awful situation when so many of our fellow citizens have to live in great poverty.

7.36 p.m.

Mr. Douglas Jay (Battersea, North)

I listened to the noble Lord the Member for Hertford (Lord Balniel) and I could not help thinking that his concern for child poverty would have carried more weight if the previous Government had taken some steps during their 13 years of office. I want to add my voice to those who ask my right hon. Friend to reconsider this question of the three waiting days. I wholly agree with her that there is an overwhelming case for the increase in family allowances. The main part of the Bill is absolutely right and justified.

It is true that for some strange reason family allowances are rather unpopular as a social service. I have always found in my constituency that those who dislike them always seem to look at the matter from the viewpoint of resentment against the parents of the children rather than from any concern about the welfare of those children. Although it may be unpopular, the social case for family allowances is extremely strong. What concerns most people is not the increase but the method by which it is being financed. In his Budget speech, the Chancellor introduced this change about the three waiting days, not as a method of checking abuses, although it may be that some abuses existed, but as a method of financing the increase in the family allowances.

This is what seems so illogical and curious an argument. Why should it be that, if we think it right to make the increase, costing £55 million in all, something like £17,500,000 of this should be paid for by the alteration to the three waiting days rule? This can be looked at from two points of view—the first, social justice, and the second, financial rectitude. On the first point, I can see no reason why the cost of part of the increase in family allowances due to the policy of relieving child poverty should be paid for by people losing sickness, unemployment or injury benefit. No reason has been put forward supporting that doctrine, either from the Chancellor or from my right hon. Friend.

Secondly, concerning financial rectitude, the odd situation is that, whereas family allowances are not financed out of the National Insurance Fund or the National Injury Fund but out of the Budget as a whole, the increase represented to us by the Chancellor has to be financed from what will be an accretion of money to those two funds. From this point of view it is entirely illogical. I cannot see any reason for that. It seems to throw some doubt on the whole principle of the actuarial basis of these funds if they are to be juggled about in this fashion.

I think that if the increase in family allowances were to be made, it would be better to pay for it by a general increase in taxation. When one looks at the amount, it seems extraordinary that it was felt necessary to make this change in insurance benefits to obtain it. The Minister will correct me if I am wrong, but we are concerned with £17½ million. According to the Chancellor's Financial statement, to take one example, the increase of 4d. in the hydrocarbon oil tax, or what most of us call the petrol tax, will yield £76 million. Therefore, even though the amounts may not be proportionate, another Id. on the petrol tax would have paid for this extra £17½ million and no change in benefit would have been needed.

My right hon. Friend said remarkably little about this in her original speech. I understood her to say that the Government propose to reconsider Clause 2 before we get to the Committee stage. I hope that that is so. If so, she will prove what nonsense it is to talk about the Government never listening to Parliament and the Executive ruling everybody, or that we are living under a tyranny by a temporary dictator in the form of the Prime Minister and that Parliament counts for nothing. If she reconsiders Clause 2 she will improve the social service structure, present it with a more satisfactory financial arrangement, and redress an injustice which would otherwise be done in the administration of our social services.

7.42 p.m.

Mr. Robert Howarth (Bolton, East)

I apologise for having had to spend about an hour at another meeting and therefore missing some of the speeches which have been made, but fortunately I was here at the beginning of the debate.

When I have heard the noble Lord the Member for Hertford (Lord Balniel) speak on foreign affairs, I have usually enjoyed listening. I suggest he always takes a humane and liberal point of view. This may explain why he is no longer speaking for the Opposition on foreign affairs. On social security I cannot pay him the same compliment, because I feel that he is terribly out of touch. I think that he needs to do a little more homework. One wondered at times whether he was speaking officially for the Oppo sition or just giving his own ideas. I noted with interest his comments on the problems which we have at the present time. I would observe, without making the acknowedgement that these are not new probems, that he was consideraby less than fair and that his contribution was not much use to the serious debate we have so far had under the heading of social security.

He suggested that the problems of families were multiplying so rapidly because of "raging price increases". We heard all this last year ad nauseam. The Budget statement showed how earnings during 1967 had increased at about twice the rate of price increases. We have yet to hear an acknowledgment from the Opposition that at the end of the year many people were certainly better off than at the beginning of the year. That is not to say that I do not accept that in the post-devaluation period this year and possibly part of next year there will be a worsening of living standards arising from devaluation and the Budget. which followed.

I applaud the courage of my right hon. Friend the Minister in putting forward this Bill which, as has been repeatedly stressed, concerning increased family allowances, is not universally popular. The comments I have heard on the Budget in my constituency lead me to believe that it did not contain the sort of shattering proposals that seemed to most annoy people. Those who were not beneficiaries of family allowances criticised the proposal to raise family allowances once again on top of the increase that is coming forward this month, and equally there was criticism from workers in the industries in my constituency who are likely to be affected if Clause 2 goes through in its present form.

I applaud the courage of my right hon. Friend, because I think she has taken the right course. However, I am not quite as sanguine as she is that husbands will not be unhappy at the thought of paying out more tax knowing that their wives are drawing back a certain amount of it, if not all, in the form of increased family allowances. I wish it were so. However, my experience is that this is not always the case, because there are those who resent the idea of paying this money, or some of it, in the form of taxation even though their wives are getting some of it back. I suspect that the 200,000 who will now for the first time come within the tax range will be especially bitter about this form of change. That is not to say that I do not support it. It is a method to be commended and I give it my support.

I noticed with interest the comments wade about the other ways in which we might try to tackle the problem of the lower paid families and the effect that this hits on children. I have heard a number of debates in this Chamber and at meetings in other rooms in this building. Always the claim is that the administrative difficulties of trying to concentrate the assistance where it is most needed are such that we have to devise methods, which we now see in the Bill, which I think are a second-best arrangement, because it would be difficult to do otherwise.

I can understand the difficulties, but I feel, having seen the work that is being done on computers and having heard suggestions from computer manufacturers about the kind of problems which will be tackled in future by computers, that we should be giving serious thought to linking up our local offices of the Ministry to the computers which already exist at Ministry headquarters so that the recording of information and the ability instantly to record changes and the effect of changes in benefit could be undertaken and produce results which would have the effect of bringing the system where it is most needed. I believe this is possible. I do not under-estimate the cost of doing it, or the difficulties involved, but I look forward to the time when social security and other forms of Government activities—the extraction of tax and whathave-you—can be centralised and recorded by the use of giant computers, with, one trusts, a saving in time and ultimately producing a much better service to the ordinary citizen.

I noted with interest what my right hon. Friend said about Clause 2. I do not share the optimism of some of my hon. Friends, though I hope they are right. I should like to think that Clause 2 will be considerably modified at some later stage, but my experience in the House, short as it is, leads me to think that the Government do not easily change their mind. I shall therefore direct my remarks particularly to the effect of ending the three waiting days' provision during unemployment.

A number of hon. Members have discussed the effect of the new proposal on those who are sick, but I am concerned particularly with its effect on those who are unemployed. By ending the present facility, the Government will save only about £2 million per annum. This is a derisory sum, and I hope that its smallness will assist the Government's rethinking on this subject.

I wish to make the case for continuing this payment during the first three days of unemployment. I have an obvious constituency interest because my constituency is concerned primarily with the textile and engineering industries. The majority of manual workers in these industries are not covered by sickness or unemployment schemes, and therefore depend to a great extent on the benefits available from the social security scheme.

I have received a letter from a prominent official of a textile union, in which she says: The textile industry has a long history of short-time working and is subject to extended holidays whenever a recognised holiday period comes round. To deprive the workers of three days unemployment benefit is a severe penalty upon an industry which is already burdened by more than a fair share of cheap foreign imports, which is the root of the industry's troubles. She goes on to describe the proposal in Clause 2 as a gross injustice, and I agree with her.

Having for many years been an active trade unionist in an engineering union, I can truthfully say that I was always amazed at the anachronism of so many manual employees being outside so-called staff conditions. When a youngster starts work on the staff, or after 12 months at the most, he is covered by quite good unemployment and sickness benefit schemes, but men on the shop floor who have given years of devoted service to their employer receive nothing when they are sick or unemployed or leave their employment.

I put the blame for that on both sides of industry. My experience as a trade unionist is that it is always very easy to go for an immediate cash benefit. This is always at the top of the list. When negotiations are being carried out, a cash increase is always at the top of the list, while fringe benefits are ignored, with the result that in the end the problem of getting them is never tackled. I know the problems which some of my colleagues have had in trying to persuade their members to look ahead and realise that, whereas a cash benefit can be whittled away by inflation, fringe benefits are a permanent gain, and are worth fighting for. The trade union movement has something to answer for in not making fringe benefits a higher priority than has been the case in the past.

I hope that even if it is not possible to change the whole basis of this Clause, special consideration will be given to the minor saving which will be achieved by ending the arrangement at present in operation for the payment of benefit for the first three days of absence from work. I say that because of its importance to the textile industry in particular, in which, since the war, there has been a three-year cycle of activity. This has meant that workers in my constituency have experienced bouts of short-time working at regular intervals, and they will be particularly hard hit if Clause 2 goes through in its present form.

I look forward to the Committee stage of the Bill, and I hope that the more optimistic of my hon. Friends will be proved right.

7.56 p.m.

Mr. Stanley Orme (Salford, West)

I agree with the provisions in the Bill which deal with family allowances. I think that these are extremely important. These allowances are not popular with many sections of the community, mainly because they are not understood, and this is a problem for which we must all take some blame. The only benefit which is never criticised is the old-age pension, and there is a good reason for this. One is either receiving it, or is likely to do so. Other benefits affect people at different times of their lives. As a result, different attitudes are taken by the same people at different times, and it is important that this should be borne in mind.

In my constituency there is a mixture of poverty and affluence, and at the same time we have a large number of bigger families. One important aspect of this increase in family allowances which should not be overlooked is that we are giving women greater facilities and rights, in the sense that they will handle the extra money. In some of the unfortunate families about whom we have heard the mother will have a greater measure of security, and greater purchasing power.

My right hon. Friend the Member for Sowerby (Mr. Houghton) is an expert on these matters, and when he was a member of the Government he was, no doubt, responsible for establishing the method of collecting money to pay for these benefits. He did it by taxing the higher income groups. This is by far the fairest method, and I am surprised at the attitude adopted by the Opposition. It has not come through very clearly just why they oppose this method, or why they think it unfair. I know that many people, because of their financial circumstances, do not need family allowances, but they still like to draw them, even though they may have to pay them back by way of taxation. The benefits provided by family allowances are universal. They are not provided on the basis of a means test, which is obnoxious to everyone.

We know that some of these increases—particularly the increase in family allowances—are unpopular, but we must get people to understand that in a society in which there is more affluence, and more purchasing power, than ever before, there is still a considerable amount of poverty which stands out more starkly than it ever did. By helping the children of today, we are helping to build the country of tomorrow.

I am sorry that I was not present at the beginning of the debate, and I apologise both to my right hon. Friend the Minister and my hon. Friend the Joint Parliamentary Secretary. Some of us were engaged in a very urgent meeting upstairs at that time.

I turn now to Clause 2. My hon. Friends have covered this at some great length, and I welcome the fact that the Minister has said that this will be seriously re-examined. It should be dropped absolutely and completely. If the Minister wants us to sell the higher family allowances, to convince people that they are justifiable, and if he wants us to tackle the selfish people and say to them, "I am afraid your selfish attitude will not do; this is necessary to deal with the poverty of the children concerned", it will make our debate infinitely more difficult if we say that we are going to balance this by taking it from the unemployed, the sick and the disabled. This is absolute nonsense.

I am a trade unionist who was employed in industry but was not covered by any benefits other than the insurance benefits. I represented workers in industry. I come from an area where we have a high level of workers in the older industries, who have not entered into joint schemes with employers. When in these basic industries improvements were made with internal insurance unemployment pay or industrial injuries provisions, these were made after many years of fighting, by consultation, and by long years of arguing with the T.U.C. and the trade union movement. As my right hon. Friend the Member for Llanelly (Mr. James Griffiths) knows—he introduced this originally when these measures came before the House in 1946—that was the culmination of a lifetime's work on his part, to see that these measures were written into the Statute Book.

When workers have seen these measures established, it is unthinkable that they should be removed. These are advances that do not go up and down like a seesaw; these are advances that might be improved on, but it would be unthinkable for them to be abolished or withdrawn. Therefore, when my right hon. Friend is taking this Clause back—and it will obviously have to go back to the Chancellor and to the Cabinet—she ought to take the view of those of us who have been fighting for the abolition of the three days provision.

As my hon. Friend said earlier, there are many reasons why we may not pay benefit on the three days and have sickness benefit paid fully on the first five days. How many workers try to get the three days added on to the fortnight, when they might go back to work after the five days if the benefits were paid? Nobody could tell until we experimented and this was brought into operation, but this is the way in which I am sure my hon. Friends on this side of the House want to see the measure operate.

If it is right that 60 per cent. of the working population are covered com pletely for sickness, then it is absolutely outrageous that the 40 per cent. who are not covered completely are going to be penalised further, as it were backwards, and not have an improvement in their current conditions. I am sure my hon. Friend the Parliamentary Secretary, who, as an ex-trade union official, has probably spent a great deal of time discussing issues of this sort, understands that it is more in sorrow than in anger that we raise this matter.

That this should even have been put before us is absolutely silly. If the effects were felt and it became known fully in industry what these measures are and how they will affect industrial injuries and unemployment and sickness pay, then the reaction against the Government Would be very strong and forthright.

I hope the Government will yield to pressure on this matter. I have opposed certain Government measures not because they have been unpopular but because I thought they were wrong. I am prepared to support the family allowance measure; I know it is unpopular in some quarters, but I believe it is right. I believe I have to go along with my hon. Friends and justify this in the face of ignorance and obstruction, and any other objection that is put in our way. I believe we can convince people that these increases are right, and I think that people and organisations like the Child Poverty Action Group have done a good job in bringing this matter forward and spotlighting where poverty in our society resides at present.

I would say to my hon. Friend the Member for Bolton, East (Mr. Robert Howarth) that I feel confident the Government will drop Clause 2. I sincerely hope so. If they do, we can go ahead with this Bill without any problems and we can see it implemented. This is, in my opinion, a step forward in relation to family allowances; Clause 2 is a retrograde step. Drop Clause 2 and let us go ahead with the rest of the Bill.

8.6 p.m.

Mr. John Ryan (Uxbridge)

May I begin by apologising to those of my right hon. and hon. Friends whose contributions I did not hear. I had an engagement which prevented me from hearing the first back-bench speeches from this side of the House.

It is sometimes said that those on the Government benches who criticise some aspects of policy do so because they cannot stand unpopularity. I have always taken the view that I do not mind how unpopular I am provided I am doing the right thing. This Bill has the kind of unpopularity some of us would like to see more of. In that sense we welcome it because it deals with a very important problem in our community.

It is true that family allowances are not recognised for what they are or for the spirit behind them, and they are criticised in an ill-informed way which I believe that, as my right hon. Friend the Member for Sowerby (Mr. Houghton) said, it is the duty of those of us on this side of the House to overcome this prejudice and to say clearly what the nature of the family allowance is.

Like other Members, I am often told by people that the family allowance is a misconception, that the money goes on bingo and does not go to the children. How can we be sure that it goes to the children? It is said that the money goes to the mother who buys cigarettes and plays bingo. This is to misunderstand the situation. I cannot believe that this applies to more than a tiny fraction of those people who benefit most from the payment of family allowances. Also, the theory behind the family allowance is that it is a benefit for the family paid to the mother, and it is sometimes suggested that the payment should be made in kind in the form of milk, clothes, food, to make certain that it benefits the children. That I believe, takes us back to the nineteenth century Dickensian system of payment in kind, which is a step away from the type of society towards which we should be aiming.

As my hon. Friend the Member for Salford, West (Mr. Orme) said, it is mainly older people who are critical of the payment of family allowances. In the course of my professional work, I have done research and looked at many social services to try to understand social motivations. It is as true of our social services as it is of charities. People are always prepared to pay more towards a charity catering for an eventuality which may arise to them and tend to neglect other charities dealing with problems which are behind them. It seems that once people have crossed a particular hurdle in their lives, they do not care if it is maintained for others, Sometimes they even seem to have a vested interest in maintaining it, pointing out that they have come over it and they do not see why other people should not have to. That is totally wrong, and I hope that my right hon. Friend will give consideration to ways of breaking down these prejudices.

I welcome the Bill because, in a major respect, the method of financing it departs from the traditional system of social security. It is a strong criticism of the Child Poverty Action Group that family allowance payments and Income Tax relief for family allowances have caused a serious distortion of the position in Britain. It is ludicrous that one should have tax allowances for children which are determined entirely by the marginal rate of tax that one pays. In a sense, the person who is best off gets the most benefit. It is a regressive system. The abolition of it has been suggested by the Child Poverty Action Group, with a movement towards flat rate benefits. My right hon. Friend the Member for Sowerby suggested 30s. We are moving away from a regressive system to one which has a degree of equality.

In a society where there is a wide disparity of incomes, another regressive situation is created if 30s. is available to a man earning £50 a week as it is to a man earning £15. We are concerned to bring about a system of negative Income Tax, bringing people up to a basic level which will maintain them.

I represent a constituency where there is relatively little unemployment and wages are high. Nevertheless, it contains groups of people who are tied to low wages which have been negotiated across the country, mainly in the service industries. Thanks largely to my right hon. Friend the Member for Llanelly (Mr. James Griffiths), who was Minister of Pensions and National Insurance in the Attlee Government, the problem of poverty has changed from the mass poverty experienced in the 'thirties. One of the achievements of the 1945–51 Government was that they eradicated mass poverty. When they came to power, right hon. and hon. Gentleman opposite could not allow the situation to slip back to what it had been before. Society had been raised on to a different plateau. Nevertheless, in that plateau there are still serious chinks, and it is to one of the crevices that we turn our attention tonight.

Poverty is now concentrated in pockets, hut it is no less serious and, in an area like my own, it may be more serious. Poverty is essentially relative. It is not an absolute concept. The deciding factor is whether one can provide for one's children in a way which compares with people round about.

In the period which remains to this Government, I hope that we can tackle seriously, as we must, the problem of the situation of flat-rate taxation allowances and create a system of negative Income Tax. It has been said that 3s., coming on top of the recent 7s. increase, will cause some problems of administration i a social security. That is something which we must overcome, because it is essential that the 3s. should be paid because of devaluation. On 19th November, the Prime Minister said on television that the worst off people in the community would be shielded from the effects of devaluation. Those are the people who have to bear the greatest burdens arising from increases in the charge for school meals, increases in the National Insurance stamp and the abolition of school milk.

I welcome the fact that the Minister feels able to look again at Clause 2. I will not go over all the arguments which have been advanced. I found this clause most obnoxious and extremely difficult to support in Committee.

It may be true that the Measure hits at a minority of people, but they are the worst off people, and it hits them in periods of sickness and unemployment, at the most unfortunate times in their lives. For the sake of the money, this is an unacceptable Measure to be introduced by a Labour Government, in view of other ways in which the money could be raised.

I hope that it will not be interpreted that there is any great climb-down involved in my right hon. Friend's undertaking. It must be remembered that the Bill was presented as part of the Budget, and the proper consultations could not take place before the Budget Statement. It is only now that we can probe the Bill it detail. By showing her sensitivity to the feelings of hon. Members on this side of the House and our Movement in the country, my right hon. Friend has done a good turn for our party and one which I hope will be the turning point in our resurgence back to political popularity.

8.17 p.m.

Mr. J. T. Price (Westhoughton)

At this late hour, I will not enter into polemical arguments with hon. Members whose speeches I have listened to so far. Like others whom I have had the pleasure of hearing in the last half hour, I have a good alibi for not being present earlier. I was serving on a Select Committee upstairs on other matters which required my attendance.

I want to emphasise what has been said already about Clause 2. Even if there are sound technical arguments for withholding the three waiting days from benefit it would be completely unacceptable to those whom I represent. The arguments may be tenable, but only in Whitehall circles. They are not tenable to ordinary people outside.

I do not labour the point too much, because I have been extremely critical on a previous Bill dealing with these matters, and I will not air my criticisms again. However, I assure my right hon. Friend that the almost recondite or metaphysical arguments to which she has listened from her civil servants and the National Advisory Committee are completely incomprehensible to people outside this House.

Like my hon. Friend the Member for Bolton, East (Mr. Robert Howarth), sometimes I have the embarrassing duty of trying to explain to people engaged in the textile industry in my part of the world, who have been taking the hammer for years as a result of excessive imports of cheap foreign materials, why it is necessary for the Government to have powers to withdraw the three waiting days unless the total period of unemployment or sickness extends over the longer period. However, I might remind hon. Members that there has never been a period under the National Insurance Act when there were not waiting days with some reservations. The matter has been backwards and forwards like a yo-yo or shuttlecock to the National Advisory Committee every year since it happened.

The only information that I can obtain is that the National Advisory Committee always advises against the complete removal of the three days unless the period of sickness extends over a longer time. I hope my right hon. Friend will recant at some stage in this debate. To say to Members on the Labour benches, who have always condemned in principle the three waiting days—I am not so much concerned about hon. and right hon. Gentlemen opposite, for they will have their own statements to make—that a Labour Government will insist on this as part of the new legislation, a new package deal, is quite unacceptable. I would not wish to be embarrassed further by having to try to put this over even to people in my constituency, who accept that I am an honest chap as politicians go and would not try to pull the wool over their eyes, which I never have done and do not intend to start doing at my time of life.

I feel fortified in a hunch that I have. It is a bad thing for a politician to act on hunches, but sometimes these are more productive than all the logical arguments in the world. Hitler thought that, but he came unstuck, and I am not going too far in that direction. Nevertheless, I think that there is a strong body of opinion on this side of the House which feels that this Clause must go. I say that with great respect to those who, for reasons of their own, put it in.

So far as our social services are concerned, it is true that there has been a constant increase in the liability of contributors and of employers, but as regards the total impact of National Insurance liabilities on our community and our employers, I find that in other advanced countries, on the Continent in particular, a far heavier share of national insurance liability is placed on employers in industry than is the case in this country. The Minister knows this and is aware of the figures. Therefore, I think that if at any time the Government feel it right to revive this proposal for the three waiting days so far as insurance is concerned, they should see that it is coupled with a statutory provision that the employer has a duty to pay the first three days of unemployment or sickness benefit, because that is general in some neighbouring countries.

I want to refer to something that may not have been mentioned in this debate, some of which, for reasons that I have already explained, I did not hear. With the further increase in family allowance of 3s. per second child, and so on, there is linked a provision that where a contributor claims benefit in respect of his family under the family allowance Clauses, and the children for whom the claim is made are not living with the parents—that is often the case because of divided families—he shall be under an obligation to pay 18s. instead of 15s., or whatever the sum may be.

I would remind my right hon. Friend that a body called the Paul Committee has been sitting for the best part of two years. It is a Committee under an eminent judge appointed to consider the position of women who have parted from their husbands under judicial separation orders or other instruments properly executed by the court. I can testify from personal experience that there are many thousands of cases of women who, for one reason or another—and one does not want to discuss the ethics of this unfortunate aspect of the human relationships—have had orders awarded to them by the court in respect of themselves or their children but whose husbands never make the payments because they cannot be found. The terms of reference of the Paul Committee are to report on the reform of the law necessary to tighten up the position.

Some years ago, during the period throughout which I have been in this House, we had a Measure relating to the attachment of earnings, which was designed to ensure that a man with an order against him could have a lien put on his wages in respect of his liability to his wife and family. This failed to achieve its purpose because men in difficulties with their families sometimes disappear and change their jobs and frequently cannot be traced. I am saying to the Minister, because it is germane to this Bill, that it is no use making a notional increase in the benefit if the family is not going to get it. There are dozens of people at this moment drawing National Insurance, including family and children's allowances and all the subordinate benefits, who never pay it to their children or families, and a committee has been asked to Report on this rather unpalatable aspect of human relationships.

I do not want to detain the House. I know that hon. Gentlemen opposite have things to say, and my right hon. Friend will probably want to wind up this debate. I shall listen with great interest. Like other Members of this House, I hear a great deal of criticism of family allowances. I crossed swords with the Minister some months ago when she introduced the last increase in family allowances, and I mentioned—as I have on many occasions and will continue to do—that the idea of dispensing ever-increasing social benefits right across the board for whatever ethical reasons—some of which were advanced very temperately by the hon. Member for Uxbridge (Mr. Ryan) just now—is not practical politics. Some people who do not need these increased allowances get them, and others who really need them do not get as much as they should. Therefore, I was very interested shortly after the debate in which I had critical words to say to the Minister, when Her Majesty's Government changed their policy on this question. I understand that now it is accepted as a matter of high policy that we must have selectivity.

Mrs. Hart

I think my right hon. Friend will agree that the point at issue between us in the last debate on family allowances concerned whether or not means testing was the correct method of achieving selectivity. We have now found that the method of taxation adjustment is, as the Chancellor put it, a highly civilised way of achieving selectivity, on which I think that both my hon. Friend and I can agree.

Mr. Price

I accept that and do not quibble about it. I am not concerned with mechanism but with a sound principle which will stand the test of time and answer all the tests of common sense. But by whatever means it is achieved, it is quite impossible to justify the constant pouring out of hundreds of millions of pounds of public money to people who do not require it, and then to hope that some other mechanism will drag it back, because there are always ways of dodging that sort of thing. Nevertheless, I think that we may be making progress with this Bill.

The Government have been criticised for being too open-handed in dispensing public money. I have said, and I say again, that in some respects they have been too generous and have leaned over backwards where I would have been a bit more circumspect, if not mean. Nevertheless, I welcome this. It will bring comfort to those in greatest need and criticism from those who do not receive it.

We are not always on an easy wicket in the constituencies when it comes to explaining things to many of those who support us and who are good radicals and take our point in politics, because they think that when the standard of living has been increased, under the Welfare State and with the advance of science, which is one of the major factors in an increased standard of living, we ought to be more careful, if not parsimonious, in the way we apply social benefits across the board. After all, the only means test that has any validity in common sense and reason—and it is the greatest means test of all—is the test represented by income and Income Tax. Tax applies to us all, and it is a sort of means test, except that it is based on one's ability to pay rather than vice versa.

8.30 p.m.

Mr. Edwin Wainwright (Dearne Valley)

I apologise for not being present during the earlier part of the debate. I had to attend an important meeting, but I am glad of this opportunity of commenting on the Bill.

I am particularly concerned with Clause 2. When my right hon. Friend the Chancellor made his Budget Statement I was surprised to hear him refer to this provision. I strove hard for years in industry on behalf of men who did not receive what were known as make-up wages when they fell sick or were injured. It is all very well for the Chancellor to say that a great amount of money is being paid out in wages benefits to various sections of the community, but he must remember that a number of workers do not receive any benefits in make-up wages whatever.

For those who earn low wages and who do not receive pay in lieu of time off for, say, sickness, this three days' provision will be a great hardship. I was shocked when I heard my right hon. Friend announce this decision. While I have tried to make excuses for the Chancellor in this matter, there has been a furore over this proposition in my constituency and I have been made to realise that I will have to fight on so that those on low wages are not hurt unduly when they are unable to work.

In the old days, when wages were far lower than they are now, we argued that a man who was injured in the mines and who received a permanent injury which prevented him from working regularly, should be catered for. Perhaps such a man is able to work for a month but must then take a week off. Why should he lose these three days? He may have drawn his compensation, and if he is off work within a period of 13 weeks he will, after a number of days, receive the money for these three days in which case they will not be classed as waiting days.

Is my right hon. Friend aware that these three days are of great importance to a man who cannot work regularly? I refer to the man who is conscientious and wants to work. Perhaps he is not gifted with good health or has suffered a serious accident which does not permit him to work regularly. Perhaps he suffers from osteoarthritis, which makes it difficult for him to work regularly. What will happen to him? He will work for a month, but must then be off for a fortnight. Who are we penalising by this provision?

I urge the Minister to stand up to the Cabinet and, if she does, so I assure her that there is a strong body of opinion on this side of the House who will support her if she attempts to get Clause 2 deleted. We are by this provision hurting people who cannot afford to be hurt—those on lower incomes, the unfortunate, the sick and lame—and I therefore hope that my right hon. Friend will strive to remedy this situation. She must succeed because, if she fails, my hon. Friends and I will have some strong words to say to her.

The proposed family allowance increases are not popular. When I was in my constituency last Saturday many conscientious and thoughtful people told me that the Government were making a mistake in increasing family allowances. Of course, they came up with the usual comment that there are people who spend the money indiscriminately, who go to bingo, smoke cigarettes and do not spend the money on the children as they should Wherever any benefits are paid out by any Government there will always be a few people who do not spend the money as it should be spent, rather selfish people who spend it on themselves. People who do that are really a disgrace to society. But they are a very small percentage.

As my hon. Friend the Member for Salford, West (Mr. Orme) stated, children are future members of society. It is the children we have to think about and particularly the children in the large poor families where money is needed so that they can be brought up to be healthy, strong and physically sound, able to take full advantage of their opportunities and to take greater benefit of education than they could if they were physically weak. That is why I have always agreed with the provision of family allowances; because the future of this or any nation depends on the way the children are looked after, allowed to develop and to be educated, on whether they have sufficient food and sufficient clothing and are able to stand comparison with other children. This is very important because some children can be very sensitive while other children can be very cruel and will often make comparisons.

Individual members of a poor family start life at a great disadvantage and we have to do as much as we possibly can to ensure that they get as good an upbringing as possible. If the Government wanted to retain popularity there would have been no need for them to introduce that part of the Bill. But, being a conscientious Government and one which cares, they obviously thought it only right that we should try to protect the children of the poorer families in this country by giving that increase. Whether or not it is across the board, I do not agree on the selectivity that has always been talked of, because there is great danger of introducing demarcation lines. In the long run, who is to decide which families shall have the increase and which shall not? I saw the results of that kind of thing in the 1930's and I hope it will never come back again; because often the people who are in charge will have different ideas about who is in need and who is not, and different thoughts on how benefit should be paid out. I am hoping that the kind of system we now have will be further improved. I believe that the Government should be praised for extending these family allowances.

In conclusion, Mr. Deputy Speaker, I hope my right hon. Friend will take back to the Cabinet the strong opinions that have been expressed on this side of the House on Clause 2, because I am sure that with the deletion of that part of the Bill the whole of this Measure will have our full support.

8.40 p.m.

Mr. Marcus Worsley (Chelsea)

Trying to follow the social policy of this Government is never dull. It is a little like watching a conjuror at a party. Rabbits appear out of all sorts of pockets, never out of the same pocket more than once, and one never knows what the rabbit is to be.

Only a week or two ago there was an increase, the first since 1948, in the insurance stamp without any corresponding increase in benefit. That came suddenly out of the blue. It had not been announced as part of the January measures; it had not been put forward as part of party policy. Apparently the Government Actuary had been doing his sums and found that he got them wrong in the previous year. So the Minister put forward this remarkable piece of legislation as part of a rag-bag Bill.

I suppose the matter got to the top of the in-tray and the Minister saw that there was one of those Bills which refer to a great many matters, which is typical of the Government's legislative chaos at the moment, and she slotted it in. Hardly had we recovered from amazement at this curious bit of legislation, this little bit of sleight of hand, when, through the Budget, the Government suddenly decided to cut the first three days' unemployment and sickness benefit, the first cut in such benefit since 1931. This was perhaps a little unexpected and the hon. Member for Salford, West (Mr. Orme) called it "just silly". What bit of forward thinking was this? The hon. Member for Uxbridge (Mr. Ryan) said that he hoped the Government would do more unpopular things. I should have thought that after today's procession of new Members up the Floor of the House he might have been a little less forthcoming.

We should like to know more about the background of the remarkable proposition before us today. Who was con sulted? Who had recommended such a thing? The Minister has an advisory committee. What on earth is it for if it is not to discuss matters of this character? The Minister consulted that Committee on a much minor, though important, matter to those concerned, dealing with occupational pensions. This is a much bigger question. Government policy in these matters appears to be to put the burden on industry. The more one looks at Government policy the more one finds that that is the general Government panacea—when in doubt put the burden on industry. What consultations have there been with industry on this matter? Part of the case—not made today by the Minister for she made no case—for Clause 2 is that the employer often makes up the first three days.

Mr. Edwin Wainwright

The hon. Member should bear in mind that many in the lower income groups do not have the payments made up. Mostly it is salaried people who get them made up.

Mr. Worsley

I agree with the hon. Member and I shall return to that point. The Government's case is that more and more industry is paying for sickness for the first three days. Since that is their case, surely it would have made sense to have consulted industry before bringing in such a Measure. They are asking industry to add another burden. Those firms which make up the first three days, if they go on doing so, will be adding to their burden.

Has there been any consultation since this decision was made? May be it was made in the secrecy of the Budget, but that is now some time ago. There has been time for consultation with industry and I should like to know if there has been any, but I doubt it. The real point that the debate has illustrated is that the Government have dropped any pretence of a coherent social policy. My hon. Friend the Member for Beckenham (Mr. Goodhart) made this point. It is a sad comment. When the right hon. Lady's predecessor, the right hon. Member for Lanarkshire, North (Miss Herbison), was Minister she used to come to the House in her eloquent way and tell us how this great review was gradually working its way out. All the measures which seemed slight and inadequate at the time were part of a higher wisdom, and as the years rolled by we would see a coherent social policy emerge, she used to say.

Who can seriously say now that this is the case? These recent measures could not be part of a coherent plan. One could not envisage a coherent plan that would contain measures so rag-bag and random.

The Joint Parliamentary Secretary to the Ministry of Social Security (Mr. Norman Pentland)

Is the hon. Gentleman really saying that the Ministry of Social Security proposals, such as the earnings-related sickness and unemployment benefit scheme, are a rag-bag scheme? This is a consequence of the major review now taking place.

Mr. Worsley

If the hon. Gentleman had listened, he would have noticed that I referred to the earlier period when the right hon. Member for Sowerby (Mr. Houghton) was in charge of social affairs. Then there seemed to be some social policy. I am now saying that any pretence that there is such a coherent plan has had to be dropped, and we hear no more of it from the right hon. Lady.

Mrs. Hart

It has been made quite clear that we expect a White Paper dealing with the very large earnings-related scheme to be ready by the end of the year. The hon. Gentleman will be aware that what is consistently emerging in this Bill, and what emerged in its predecessor of November last, is the strategy of protecting poor families. He will be equally aware of the number of other aspects of our social policy linked with working out the new wage-related scheme. How he can say that there is no strategy in view of his own party's experience, I cannot understand.

Mr. Worsley

The right hon. Lady's intervention was rather longer than her entire explanation of Clause 2. Naturally she is trying to argue that there is a coherent social policy, but my general case is made more plausible by the fact that since the right hon. Member for Sowerby left the job of co-ordinating social affairs we have had constant change, and for some weeks have had no one in that position.

I cannot imagine anything which puts greater doubt upon the intentions of the Government in social matters and upon the priority they give to them than the absence of any co-ordinated lead. Everything that I see underlines the wisdom of the policy that we have been advocating for some time, that there should be a single senior Minister in the Cabinet, in charge of a major department of social affairs, who will really speak out in the Cabinet when these matters are discussed.

If this was the case a lot of the disarray of the Government's social policy would have been avoided. With all respect to the right hon. Member for Sowerby, it is not the same thing to have someone in general charge. Ever since he has left, Ministers taking up that job have increasingly been given other work too. They have become a sort of permanent twelfth man in the Government XI. When any other job needs doing they are brought in.

I want to deal now with Clause 1. The Government are proposing the third increase in family allowances in 12 months. I do not know whether they suggest that three increases in 12 months is part of a master plan. I cannot believe that any Government really thinking these things out in advance could have legislated in this way. We have heard from both sides about the appalling strain these constant changes put on the Inland Revenue and surely this is a matter of the greatest importance. It is absolutely vital that we introduce these changes carefully. When changes are made, they should be considerable simply because of the immense administrative cost involved.

It is also true of Clause 1 that the Government are still operating on the old universalist basis. They are still trying to give to everyone what anyone needs. They are trying to pretend—and this is the crux of the debate between the two sides—that a selective increase in Income Tax for the family man is a substitute for a truly selective system of family allowances. We say that it is not.

We have a certain difficulty in this respect in that we have not yet seen the Finance Bill. I have read and re-read the Chancellor's words referring to this matter and I do not think that it is a criticism of him to say that they are hard to follow. Obviously it is a complicated matter. So we are all to some extent arguing without all the facts before us. It would have been much better if we could have had this debate after publication of the Finance Bill. We ought to be able to discuss as a House not only the payments side but, with all the facts before us, the receipts side as well.

We say that the scheme as we understand it combines the maximum of expense with the maximum of disincentive. I am sorry to refer so often to the right hon. Member for Sowerby, but he made one of his stimulating speeches and one of the points in it was that it would be possible under the present scheme to have something like a 30s. family allowance and put up Income Tax to compensate. Perhaps the right hon. Gentleman will have difficulty in catching your eye once more, Mr. Speaker, so I ask the Minister how it is that the Government have not done this.

The reason is that the disincentive element built in to the scheme will become infinitely more obvious the more the Government put up the family allowance. This is not a scheme capable of the expansion which the right hon. Gentleman suggested it was capable of, because the more one carries out the scheme, the more the disincentive effect of the taxation element begins to apply. It is this which we criticise.

We criticise the system which means chat, the more the family man earns—I am looking at the taxation element—the greater the proportion of his earnings which will be taken away in tax. What we want to see is a system whereby additional incentives, additional risk-taking and additional work at every level of society are rewarded and not penalised. WI-at this Bill, taken with the Finance Bill recommendations, would give is a built-in disincentive the more people earn, the more risks they take, the harder they work. This is true and must be true in any case which relies on Income Tax.

Mr. J. T. Price

This is a very subtle argument and can be debated at great length, although I am not in a position to do it. Will the hon. Gentleman say categorically the position of the Opposition on the question of family allowances? Are the Opposition in favour of indiscriminate family allowances, or of discriminating against those people with large incomes so that they do not receive benefits which we say they do not require?

Mr. Worsley

One of the difficulties of giving way in debate is that so often the question is asked on a matter which would be dealt with in the next passage in one's speech.

The present system has disadvantages which are apparently not understood by the Government. It is vitally important that the disincentive effect should be understood. We need a society where there is incentive. There is less excuse for taking the course the Government are taking now that many other propositions have been put foward. The hon. Member for Brentford and Chiswick (Mr. Barnes) had some suggestions to make on the matter.

I should like an explanation of the extraordinary passage in the Chancellor's speech on 17th January. I shall quote it again, because he is supposed to be the great white hope of the Labour Party and presumably we are therefore supposed to pay some attention to what he says. He stated: Next year, however, I hope to introduce full selectivity for family allowances and to do it in such a way that people who are not in real need of them do not draw them at all".—[OFFICIAL REPORT, 17th January, 1968; Vol. 756, c. 1800.] The right hon. Member for Sowerby seemed to think that the scheme the Government propose could fit that description, but, of course, it cannot.—[Interruption.] What the Chancellor said has been quoted before, but I repeat: …people who are not in real need of them do not draw them at all. Surely the hon. Member for Bolton, East (Mr. Robert Howarth) must understand that every mother in the country will draw family allowances for her children and subsequently, when the Income Tax bill is worked out, some or all of that money will be clawed back. The Chancellor of the Exchequer is suggesting something different—that they do not draw the money at all. If words have any meaning they cannot have the meaning that the hon. Gentleman is suggesting. At any rate, if the Chancellor has just not made his meaning clear, if all he is suggesting is a continuationn and extension of the present scheme, it is important to know that, because the obvious superficial judgments on those words would be different.

There have been other suggestions in the past. In our last debate on the subject there was considerable discussion of an option scheme suggested by Mr. Aydon. This was not mentioned in today's debate, but to my mind it has many attractions. We have had very widely discussed and advocated on both sides of the House, particularly from my hon. Friends, some form of family benefit scheme similar to that outlined by Mr. Barney Hayhoe in the pamphlet which has been mentioned. The right hon. Lady was very firm in her condemnation of that scheme, but I should like to think that the Government have not made up their mind about it. It is not new, and is not peculiar to our side of the House or to Mr. Hayhoe. Many people in the country feel that it is an absolute absurdity to hand out large sums of money and then claw back the greater part of it. It is expensive to handle money. If one has a bank account the bank does not handle the money in it for nothing. We need a system which on the one hand rewards those who need reward and produces incentive in the economy and on the other hand at the same time provides a system of help where help is needed.

This is still a universal scheme, and any universal scheme has two related characteristics. The first is that it is overwhelmingly and increasingly expensive. Once one starts paying out these enormous allowances, it is very difficult to stop.

The hon. Member for Croydon, South (Mr. Winnick) made an interesting point. He said that he hoped at some future date the rise in wages might make family allowances unnecessary. With this sort of scheme, whereby one has granted them, any Government will find it difficult at a future date to withdraw them when they might become unnecessary. Therefore, it is much better to pay them only to those who really need them in the first place. This is what we should like to try to do.

Secondly, because of the tremendous expense, there would always be left an unsolved element of the problem.

Mr. Winnick

Would the hon. Gentleman agree that at the moment, how ever much he might dislike the way of tax adjustment, the increases net are going only to the people in need? Others will be paying them back in tax. The way in which matters are arranged at the moment ensures that the people most in need are the only ones receiving the overall family allowances increases. Would he agree with this?

Mr. Worsley

I do not want to repeat my argument, because the House no doubt wishes to conclude its deliberations. However, this system has an almost universal disadvantage through the disincentive that it produces. This is my criticism.

The hon. Member for Brentford and Chiswick made an interesting speech. Genuinely puzzled, he asked why we said that this was not a civilised system. The answer is that it leaves a very large number of people still below the poverty line.

Mr. Barnes

The system does?

Mr. Worsley

Yes, the system does.

Mr. Barnes

No. Surely the scheme is flexible in the way indicated by my right hon. Friend the Member for Sowerby (Mr. Houghton). The system does not leave these 250,000 children below the supplementary benefit level. It is the level of benefit in the system as it is being operated at the moment. This can be increased and we want to see it increased.

Mr. Worsley

I have been arguing that it would not be possible to so increase it, because the disincentive effect of the increase in taxation on the family man would be so great that one could not do it. That is my point. It is because of the system that these 250,000 children are being left out. I hope that the Minister will give some indication of what estimate the Government have made of the number of children who will be below the poverty line at the end of the year. In another place the figure of 200,000 was quoted, but that is a figure on the existing level of supplementary benefit.

We have been told that as a result of the bad financial administration of this Government an increase in supplementary benefit will be needed this autumn. So the 3s. extra benefit will come in presumably at about the same time as the rise in supplementary benefits. Can we be given any idea whether there will be more or fewer children below the new poverty tine than there will be after 9th April? I shall be very surprised if we find that there are fewer children below the poverty line when Clause 1 comes into operation than there are now. If that is the case, it is a serious condemnation of the system and of the Bill.

Mr. Houghton

Is the hon. Gentleman's remedy, therefore, to subsidise low wages?

Mr. Worsley

No, my remedy is not to subsidise low wages. The right hon. Gentleman will know the history of the Speenhamland system and the difficulties into which it got. If the right hon. Gentleman will study the paper produced by Mr. Hayhoe—I do not know whether he has already—he will see that this point is carefully argued out. One can gear a system of this kind to avoid the Speenhamland difficulty which the right h3n. Gentleman wants to avoid.

I turn now to Clause 2. I think that we all came to the House expecting a full explanation of this Clause, because Clause 1, although it is important, only extends some of the provisions of an Act which we discussed recently. I think that everyone, except a few who seem to be in on some secret—the hon. Member for Liverpool, Walton (Mr. Heller) seemed to be one of these—was astonished when the right hon. Lady introduced this new proposition and gave an almost cavalier explanation for it. She gave no serious explanation for this radical change.

Mr. Winnick

My right hon. Friend was honest. She said that it would be reconsidered.

Mr. Worsley

She said that there would be no Committee until after Easter. That was not all that impressive, seeing that Easter is at the end of next week. Secondly, she said that it would be amended in Committee. The right hon. Lady said that substantial alterations would be made in Committee. We were told to wait, and when my noble Friend the Member for Hertford (Lord Balniel), as was his duty speaking for the Opposition, started speaking about this great reform which this great reforming Government were bringing in, he was told by the right hon. Lady that in his own interests he would be wiser not to pursue that. That is the most remarkable piece of advice that I have ever heard given across the Floor of the House.

Here we have a Bill with the right hon. Lady's name on it, and supported by a number of distinguished Members. The right hon. Lady has presented it to the House. She has not withdrawn it. Clause 1 is an extension of an existing principle, but Clause 2 proposes to introduce a radical new proposition into our insurance system. What is the position? In a few moments the House will be required to make a decision on the Bill. It is not good enough for the right hon. Lady not to explain this provision in full. With respect, and quite seriously—and this is not a party point—this is contempt of the House. This Measure has been introduced, and we have been told that the Government will make some major alterations, or perhaps even withdraw it. The hon. Member for Walton thought that it would be withdrawn. The right hon. Member for Sowerby thought that the right hon. Lady was paving the way for a change of mind. I thought that that was a nice phrase.

I think that we are entitled to know what is happening. I think that it will be an abuse of the House if Mr. Speaker rises in a few moments with the Bill in his hand and asks us to make a decision without the right hon. Lady explaining what is to happen about this major change. Unless she gives us a full explanation, we shall be uncertain about whether she intends to remove a major element of the Bill. The right hon. Lady intervened at considerable length earlier in the debate. I invite her to intervene now to tell us what she intends to do.

Mrs. Hart

I shall endeavour to assist the hon. Gentleman, as I sought to assist the noble Lord. I made it quite clear that when we get to Committee the Government will have had an opportunity to consider the provisions of the Clause in the light of the factors which I mentioned this afternoon. I am sure that, experienced as the hon. Gentleman is, he will see that that being so, the principle embodied in Clause 2, and its implications, can be considered again in Committee in the light of further views which the Government may have on the matter.

Mr. Worsley

Would not the right hon. Lady agree that it would be better if, before bringing a Bill to the House, the Government were to consider all these matters? Is not that the ultimate duty of the Government? We are being invited to discuss the Bill as it stands. The right hon. Lady entered the House at the same time as I did. I know of no precedent for the Government coming to the House with a major Measure and saying, "We are uncertain about the major principle in it". It is the main novelty in this Bill, the main new principle we are being invited to consider. I hoped that the right hon. Lady would have been able to intervene and spare the House from me. Speaking on behalf of the Opposition on a matter of this sort, I must deal with the Bill as it is and not with promises that have been made in the privacy of party committees on that side of the House. I must pursue, as hon. Gentlemen behind her have pursued, the Bill as it stands.

We should like to hear a little more about the history of this proposition. It seems to be selectivity in reverse. It seems to hit at those who have to face a fortnight or more of sickness or unemployment. The figures have been given. They are worth repeating. For a married couple without children there is a loss of £3 13s.; for a married couple with one child only, £4 5s. 6d.—and so on. These are very high figures. One would have thought just such people as these would have been high on the list of those who need the full benefit of insurance, particularly since this category—the under 14 days—do not get the benefit of the wage-related scheme, as the right hon. Lady indicated in the few things she did say.

Such people confronted with 14 days' sickness or unemployment have to make sudden and drastic alterations to their living standard. It is true, as the right hon. Lady said, that some have their pay made up, but speaker after speaker has pointed out that in his constituency or in many industries throughout the country this is often not the case. The hon. Member for Dearne Valley (Mr. Edwin Wainwright) made this point a few moments ago, and so did the hon. Member for Walton and the hon. Member for Bolton, East.

Surely it is true—and the Minister might care to comment—that such people tend to be in the low wage earning industries; they tend to be in industries where fringe benefits are least, so that in this Measure that the Government are asking the House to approve the Government seem to be singling out for punishment those least able to bear the burden. The hon. Gentleman the Member for Uxbridge (Mr. Ryan) echoed that view.

So much for the Prime Minister's pledge about the most vulnerable. The people affected by this, when told that the Chancellor regards this as a small change, will think it a very large change indeed.

Several hon. Members have discussed the question whether there should be transfers of responsibility for some of these matters from the State to the employer. The right hon. Gentleman the Member for Sowerby did so and so did the hon. Member for Westhoughton (Mr. J. T. Price) who said that on the Continent this was very often the case. I do not deny that there may well be a case for some change of this sort, but in order to have such a change there must be two pre-conditions. First, it must be accompanied by a reduction of other burdens upon industry, and the Government, particularly in this Budget, have increased the burdens upon industry. Secondly, it must be part of a comprehensive scheme, argued out, a rational scheme.

As the Bill stands, there is nothing to transfer responsibility to industry. It is merely taken off the State and left in limbo. There is nothing to ensure that a single extra family has its sick pay made up. There is nothing even to protect existing payments which sometimes rely on the practice of an employer and sometimes on a trade union agreement. If the Bill goes through, an individual employer who wishes to make up pay in the event of an employee's sickness will find that he has to contribute even more at a time when his dividends are controlled and when Selective Employment Tax has been applied. There is no guarantee that present practices will be continued.

We on this side of the House reject Clause 2. We regard it as a half-baked unthought out Clause, and certainly we shall vote against it if it is still in the Bill in Committee.

Finally, I must ask a question of the Minister about the financial relationship between Clauses I and 2. The only knowledge that we have comes in the Budget Statement, and perhaps I might quote one sentence from it where the Chancellor said, about the increase in family allowances: We propose to meet the net cost of this further increase by a small change in National Insurance benefits, the saving resulting from which will accrue to the National Insurance Funds rather than the Consolidated Fund."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 266.] The two halves of that sentence do not add up, and it was a little hard of the right hon. Lady to accuse my noble Friend the Member for Hertford of not understanding what he was talking about when he pointed this out to hon. Members. He was merely repeating what the Chancellor stated, that the increase in family allowances would be paid for by this reduction in benefit to the sick and unemployed. That is what the Chancellor said.

If again the Chancellor has made a muddle and that is not what he meant, perhaps the Minister will explain that when the Chancellor says something, he does not necessarily mean what he says. His statement can only mean that money is taken from the funds or less money is put into the funds, about which there is nothing in the Bill, or that some family allowances will be paid out of the funds, and there is nothing in the Bill about that, either.

Apparently, the Government do not intend to carry out what the Chancellor said. If we discover that on a matter of finance and on another matter of actual proposals the Chancellor did not mean what he said and that the Government intend to withdraw what was contained in the Budget Statement, we shall have a funny time when we come to consider the Finance Bill.

This is about the most ham-fisted bit of legislation that I have experienced. Certainly I have never heard a Minister produce a new legislative proposal and then say that she is not sure that she wants to have it. The Government are treating the House with contempt. I much regret that the Bill has not been withdrawn. It should have been, and it could still be. It should be redrawn and brought to the House on Second Reading in a form which the House can understand and approve.

9.20 p.m.

The Joint Parliamentary Secretary to the Ministry of Social Security (Mr. Charles Loughlin)

I wish to begin by making clear exactly what my right hon. Friend said earlier about Clause 2. A lot of heavy weather has been made of this issue by hon. Gentlemen opposite. My right hon. Friend said that the Government had always recognised that State provision for the first three waiting days must be seen in the wider context of the factors she had mentioned. She said that we thought that, given all the consideration of public expenditure involved, it would be sensible to look fully at this aspect of our structure of short-term benefits and, therefore, at the provisions in the Clause. My right hon. Friend added that we would have an opportunity to do this because there would be a good deal of time before the Committee stage, which would certainly not be taken before the Recess. [Interruption.] If the noble Lord the Member for Hertford (Lord Balniel) wants to giggle like a little girl, he should leave the Chamber.

It has been suggested that this is the principal novelty of the Bill. I cannot understand how the hon. Member for Chelsea (Mr. Worsley) could take such a view. It is the first time I have ever heard a part of a Bill described as a "principal novelty". It is a part of the Measure and I cannot understand why hon. Gentlemen opposite should have made such great play with the idea of the Government wishing to re-examine the matter. If it was implicit in my right hon. Friend's remarks that we are prepared to re-examine Clause 2, then that is surely to the credit of not only the Government but of the whole House, since it is the function of Parliament to see that important matters are re-examined.

My hon. Friends made representations to us, as did hon. Gentlemen opposite, on this issue. There cannot be complaints of an alleged tendency towards dictatorship on the part of the Government—the current theme of many hon. Gentlemen opposite and of some national newspaper editorials, with statements about the Government seeking to steamroller their propositions through—if, when a change is mooted by the Government and representations are made by hon. Members, the Government reply, "We are prepared to reconsider the position."

Hon. Gentlemen opposite cannot criticise us for running away from the problem or for creating another Stansted, as was suggested, when we say that we are willing to have another look at the matter; remembering, of course, that we will have ample opportunity to consider it further in Committee.

The noble Lord made what I can only describe as a tragic speech. He called this a sad little Bill and made belittling references to the 3s. by which family allowances are to be increased. He had fun when talking about rocketing prices and the marginal degree of help that he said was being given to the more vulnerable sections of the community. It is amazing that the noble Lord should be so disparaging of the Government's measures to help certain sections of the community. It is not possible to look at the present proposal on the basis of a 3s. increase in family allowances. The purpose of this additional 3s. is, as was clearly indicated by both my right hon. Friends the Minister and the Prime Minister, to protect the most vulnerable members of society against any additional cost that could accrue as the result of devaluation.

But when we are talking about family poverty, as we have been today—and I make no apology to the House for dealing with the issue on the basis of family poverty because that is precisely the approach that has been taken by almost every hon. Member on the other side of the House—we have to think in terms of the increase that we are giving not only under the 3s. heading but under the 7s. heading as well.

I think it is right that I should make quite clear what the difference between the two sides is, because whilst all sorts of sob stories have been advanced from the other side of the House today, it is still valid for us to say that if hon. Members opposite are so concerned about family poverty and about the enormous number of children who are or were living at standards lower than the supplementary benefits needs scales, it is remarkable that the conversion has taken place in the last three years.

When hon. Members opposite left office, the two-child family was receiving 8s. in family allowances; the three-child family 18s., the four-child family 28s. and the five-child family 38s. If we take the two increases together, under our proposal the two-child family will be receiving, instead of 8s., 18s.; the three-child family will be receiving, instead of 18s., 38s.; the four-child family will be receiving, instead of 28s., 58s.; and the five-child family will be receiving, instead of 38s., 78s. I suggest that this is a very substantial improvement on the position which the hon. Gentlemen's Government left when they went out of office.

If this is the type of thing about which hon. Gentlemen opposite are going to sneer, it is not much good their sneering about the considerable improvement we are making and at the same time talking about those elements in society who are not receiving improvements under the Labour Government. They talked about the increase in the cost of living. It is true that in 1967 prices rose. We heard a lot about that. They talked constantly in this House about the spiral of prices, and at the end of 1967 the retail price index rose by 2 per cent. and wages rose by 6 per cent.

It may well be that in consequence of devaluation and other measures that the Government are having to take, prices will rise this year. That is the reason why we are making provision for the most vulnerable in society. But the last time a Tory Government increased family allowances was eight years prior to their completion of office. Between 1956 and 1964 they never increased family allowances by one single penny; and it ill behoves them today to talk about spiralling prices and the failure of the Government to give succour to the more vulnerable members of society—[An HON. MEMBER:"Hypocrisy"]—because they never gave a single penny in a period of eight years, when the cost of living in this country rose by 24 per cent.

During the time the Tories were in office they increased child tax allowances. They did not increase family allowances, so they did not give aid to the more vulnerable members of society. They increased the child tax allowances no less than four times, so that those who were better off during that whole period of time were better off after the increases as a result of the actions of Tory Governments.

Mr. Edwin Wainwright

That is what they want to do again; that is the incentive.

The Speaker

Order. Some involuntary debating is going on.

Mr. Loughlin

In addition to family allowances, we cannot possibly begin to think in terms of the protection that we have given to the more vulnerable within our society without thinking also in terms of the schemes we have introduced for rate relief, for protection from rent increases, and prices and incomes policy in relation to those on low wages.

The hon. Gentleman, with many of his hon. Friends, made great play about the 200,000 children who, according to them, will still be outside the provision that we are making. I believe my right hon. Friend the Minister of Social Security dealt with a similar type of argument in previous debates. Indeed, one of the features of this debate today has been that almost every single argument that has been advanced from that side of the House has been a mere repetition of the arguments which those hon. Gentlemen have advanced in debate after debate; and they do not seem to learn.

I do not know—and it would be a very brave man who could argue that he could say—how many children will not be caught in this net that we are putting out. But the figure of 200,000 children does not appear to us to be anything like the figure of the total that are not caught, and what my right hon. Friend said on a previous occasion applies equally at the present time. Hon. Gentlemen will remember that she was then talking about a similar figure during the debate on the last Family Allowances Bill. At that time the figure was 250,000 and she was asked how many would still be below the supplementary benefit level. She said: Increases in wages reduce the figure. Increases in rents increase it. Increases in the number of families receiving rate rebate will reduce it. A higher level of unemployment may increase it. For example, it may become more difficult for the wife to earn. And the level of supplementary benefit itself is crucial. Paradoxically, any increase in benefit which Is designed to relieve the distress caused by too low an income automatically enlarges the number of people whose incomes are judged to be too low. So the introduction of higher rates of supplementary benefit when the National Assistance scheme was superseded in November, 1966, at once apparently increased the number of families whose incomes were below their needs, even though nothing had occurred at that particular point of time to reduce their actual standard of living and even though the incomes of virtually all those receiving allowances were increased."—[OFFICIAL REPORT, 8th November, 1967; Vol. 753, c. 1040–41.] The hon. Member for Chelsea and his hon. Friends in trying to suggest that there are 200,000 not necessarily given assistance by the measures that we are putting into effect, may well be drawing an exaggerated picture.

I turn to the alternative method of "selectivity," if I may use the word "selectivity" in inverted commas, that the hon. Member and his hon. Friends have advocated. I do not know how often we have to try to make clear to hon. Members opposite the difficulties which are inherent in the various schemes advanced for selectivity against the one we are introducing, the give-and-take of tax allowances. The hon. Member for Liverpool, Garston (Mr. Fortescue) asked about the system of reverse Income Tax. We have had this debate before. The same arguments apply to reverse Income Tax even where, as he suggested, only those who are employed should be put on to negative Income Tax—those who are employed and not paying Income Tax.

We had the celebrated scheme to which the hon. Member for Hertford wrote a postscript. My right hon. Friend dealt adequately with the difficulties in that scheme. Then we have had the question of the use of P.A.Y.E. in some method by which selectivity could be introduced into the schemes. I have tried time and time again to clear up what I consider to be misunderstandings of the way in which tax scales could be used for the purpose of introducing selectivity into benefits. I take the point made by my right hon. Friend the Member for Sowerby (Mr. Houghton). It is relatively easy to have some method of selectivity in those cases where there is virtually a static income, but in the various schemes which have been advanced the cases do not have a static income. Although on a number of occasions the hon. Gentleman has referred to the method by which the Danish Government operate a system of selectivity through P.A.Y.E., I do not know what he means, because there is no such thing as P.A.Y.E. under the Danish tax system. I should be very grateful if he would let me know precisely what he means.

Let us be quite clear that the P.A.Y.E. scales relate to a period which is 12 or 15 months out of date. What we have to do is to try to meet a problem of need at a given time, and it is no good trying to have a system of selectivity whereby one channels the greatest amount of assistance to people who need it unless it enables us to give that help when it is needed. It must be given at the precise point in time when it is required.

I do not want to go through all the factors that can change a person's financial circumstances at any given time. But if people's tax figures are 12 months out of date it must be categorically said that if we want to introduce a system that provides assistance at the time when help is required, we shall have to dispense with the existing P.A.Y.E. tax system. Then we must try to devise a system whereby we can relate help to the tax scale, but at the same time can use current information to meet the need of the person concerned.

One can think of an enormous number of factors, either singly or in combination, that can alter the financial circumstances of a person working at any time. But the tax information we have at present relates only to the man and does not give information on his wife or other members of the household, nor on capital and other income he might have. Therefore, anyone who begins to consider the difficulty of applying the present tax information must realise that we must dispense with the idea.

If we have any form of taxation-related selectivity we must clearly accept a situation in which a man must disclose an enormous amount of private information to his employer, because short of the operation of the scheme by the employer it is virtually impossible to operate it at all. If the employer does not operate it—and, I would think, even if he does—there will have to be a constant interchange of information about all his employees between the employer and either my right hon. Friend the Minister of Social Security or the Inland Revenue Department.

Mr. Fortescue

Would not the Minister agree that in present circumstances exactly that position obtains in respect of Income Tax payers? The amount deducted from their salaries on P.A.Y.E. is determined on the basis of the disclosure of an enormous amount of private information. Why should not that be applied to everybody instead of just to one section of the community?

Mr. Loughlin

The information is not supplied to the employer. It goes to the Inland Revenue and then the employer deducts on the basis of a code number supplied to him by the Inland Revenue.

Mr. Fortescue

Why not all the others?

Mr. Loughlin

The present P.A.Y.E. payer only supplies to the Inland Revenue information in respect to his taxation position related to himself and his family. He does not, for instance, supply any information in respect of his wife. The point is that there would be great difficulty in getting the precise information that would be required for family ascertainment. Assuming that the person gave the information the hon. Gentleman suggests—at what intervals would he give it? In a system of this kind, we could not have a coding which allowed for 50 weeks in the year because the circumstances of the man himself can change considerably within short periods.

But the Government have not ruled out the possibility of devising some method by which there can be a higher degree of selectivity—as long as the selectivity is not based on a direct means test. As I have said before, as long as there is recognition of the difficulties inherent in all these schemes, the Government are not prepared to reject out of hand any idea of examining in detail any scheme which would produce the right result.

Mr. Fortescue

Does this mean that the famous "nine years" remark has now been withdrawn?

Mr. Loughlin

I must be careful about this. I am prepared to withdraw "nine years" but there will be a considerable period of time before it will be possible to introduce a scheme of Income Tax in reverse. Indeed, I think that the original author said that it was difficult enough in all conscience.

I want to turn now to the "give and take" scheme. We think that this is a method by which we could get some selectivity. But family allowances have always been in a degree selective because they are taxable. The value of the 8s. rate for the second child is only 5s. 5d. to the person on the standard rate of Income Tax. The Government propose to extend this degree of selectivity by recovering through the tax machinery the full amount of the April 7s. increase from the person paying tax at the standard rate, with lesser amounts from those paying tax at reduced rates only.

This was announced by my right hon. Friend the Prime Minister in his statement on public expenditure on 16th January and the technique was announced by my right hon. Friend the Chancellor of the Exchequer in his Budget Statement on 19th March. He also announced that the 3s. increase in October would be subject to the same technique of take-back.

In her opening statement, my right hon. Friend gave some examples of how this would be selective, and it would not he wrong for me to repeat them. It is essential that not only should the House know how the system is to work, but that the country should know too. There is an enormous degree of criticism levelled against the Government on the grounds that family allowances are being paid irrespective of whether people need them. It has to be made absolutely clear that while family allowances have always been taxable, while it has always been true that the standard taxpayer received less benefit than those who did not pay tax, under this scheme those who pay tax, those who can afford to do without the allowances, will do without them.

A married man with two children under 11, earning £12 a week—£624 a year—would pay no tax in 1968–69, and will get an extra £22 family allowance, that is about 8s. 6d. a week averaged over the year. If he earns £15 a week—£780 a year—the extra tax he will pay will be about £11 a year. In other words, he will pay back about half the extra allowance in tax on the take-back system. The family will end up with about 4s. 3d. a week more. At £20 a week he will pay something like £17 extra tax on the additional allowance, and the take-back, leaving the family about 2s. a week better off. At £22 a week—£1,144 a year—the family will derive no benefit from the extra allowance. I restrict myself to the two-child family, although this applies equally to larger families. My point is that this scheme will now ensure that those families who can do without the allowances will not receive them. Although they may be paid to the mother, additional tax will be borne by the father.

I am conscious that family allowances are unpopular. One or two hon. Members opposite talked of the need to introduce and extend them, even though they are unpopular with most people. I welcome the Opposition putting this point of view, because I am glad that we have it clearly stated that it is in favour of family allowances. My regret has been that whilst hon. Members opposite made a lot of noises when they were on the Government benches, and while they were prepared to say that they welcome the increases, even though they are unpopular, they do not say so on the doorstep when canvassing in by-elections. A good many of them did not, and I can give chapter and verse.

One is bound to get people who are prejudiced against family allowances. A number of hon. Members on both sides have talked about the apparent eagerness with which people who are likely to accept benefits are prepared to have them but will reject benefits with which they are not likely to be favoured. It is easy for those not in need of family allowances, not likely to have family allowances, to talk about them being spent on beer and bingo. Family allowances are not intended as direct payment for a child. They are what the name implies; family allowances intended to augment the income of the family when the father is working. It always amazes me when I hear people talking about spending family allowances on beer and bingo, because it is a lot of nonsense. It may be true that a father and mother will have a drink of beer and may even play bingo. But is it suggested that the father and mother of a family in receipt of family allowances should not be entitled to have a drink of beer or play bingo? It really is a nonsense. We want to see family allowances augmenting the family income. Of course, we want parents to do the right thing by their children and see that they have the best chance in life.

The criticisms which have been levelled at us by the Opposition today have been compounded on ignorance and hypocrisy. It is disgraceful that a Government, through ignorance and incompetence, should have ignored this problem for so long and yet, when they go into Opposition, are suddenly enthusiastic and say "Let us all be family allowance givers". They should have thought of it a long time ago.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Armstrong.]

Committee Tomorrow.