PENSIONS AND ALLOWANCES

HC Deb 21 July 1970 vol 804 cc484-91

4.16 a.m.

Mr. Michael Meacher (Oldham, West)

Despite the unearthliness of the hour I am grateful to have this opportunity to examine the proposed £30 million increase in non-contributory benefits. We welcome any increase in benefit which will substantially improve the standard of living of that growing section of our community which finds itself, for reasons largely beyond its control, depending on fixed incomes, basically State-financed. There are two clear yardsticks by which we must judge this or any other measure of this kind.

The first criterion is this: is the increase sufficient relative to other indices marking the improved standard of living of other sections of the community? In other words, is this merely a ritual increase, a symbolic genuflection to what has become established as an annual convention and one that makes little or no impact, taking into account price and wage rises, on the relative standing of the poor or does it make a significant contribution towards reversing or at least towards assisting the chronic deprivation and secular inequality of the major groups in poverty in Britain today?

The second criterion which must be applied is this: what ramifications will this increase have on other benefits, bearing in mind the constraints which our economic system inevitably imposes on any framework of welfare benefits and, therefore, the necessity to maintain certain balances? My immediate concern is with the adequacy of this increase, and the appropriate comparison is surely with the index of average weekly earnings of adult manual workers in industry covered by the Department of Employment and Productivity six-monthly inquiries. I readily admit that this is not an ideal basis for comparison since the index omits the entire salaried sector female workers, who now constitute a third of the work force, and, above all, it excludes any assessment of the growth of capital and fringe benefits, the recent development of which has been phenomenal.

For these reasons, comparison with the D.E.P. wage scale will tend to understate the financial deprivation of the poor in relation to the wider community. Beggars cannot be choosers, and until the Government produce an index of the growth of personal incomes with more accurately and more universally assesses net accretions in individual economic power, we shall have to rest content with existing inadequate measures.

On this basis the statistics plot the rise in National Assistance or supplementary benefits in the past by revealing that in the 13 Tory years they increased by 110 per cent., rather less than the 118 per cent. increase in average weekly earnings in that period. In Labour's five years, however, wages rose by 38 per cent. while supplementary benefits rose by 48 per cent., a real gain for those dependent on State benefits of 10 per cent. in Labour's five years, as opposed to a real loss of 8 per cent. in the 13 Tory years—

Mr. Speaker

Order. With respect, we are discussing single increases. We are not discussing the whole history of the supplementary benefits. We are discussing some £30 million of increase which come into force on 2nd November, 1970. The debate must not go too wide.

Mr. Meacher

I was trying to set the background in order to see the significance of the present rise. In the light of these figures, and since the present Administration is starting from scratch, I would ask the Under-Secretary of State whether he feels that the present proposed increase is sufficient. The question is particularly relevant when one recalls the ardour, even the virulence, with which hon. Gentlemen opposite drew attention to price and wage inflation before the election.

Before the hon. Gentleman replies, I should like him to bear closely in mind his own strictures when this matter was previously debated on 15th May. On that occasion he claimed: … if prices go on rising at the present rate a married couple will be 12s. worse off by the coming November. Is he asking the House to accept that position is satisfactory?"—[OFFICIAL REPORT, 15th May, 1970; Vol. 801, c. 1668.] Now that the hon. Gentleman has power to upgrade the benefit rates, and since, clearly, no major diminution in the price spiral will be achieved before November, is he asking the House to accept that position as satisfactory?

The hon. Gentleman also made one other comment which is worth recalling now when he asked what would be the effect of the supplementary benefit increase on the wage-stopped, particularly the disabled. After all, there would be no use in raising benefits if disability severely inhibits earning power and the wage stop then prohibits enjoyment of the increase in benefit. Therefore, what changes in the regulations does the Minister now propose to ensure that the disabled are not excluded from the current rise?

It is possible that the Minister, rather than drawing his conclusion for the last six-year period from the figures already quoted, which were deduced from the October, 1964, base-line would prefer to justify his action now in relation to the last increase in benefits by a Tory Government. If May, 1963, is adopted as the base-line instead, it will be seen that by October 1969, the latest date for which the D.E.P. has the figures, wages had increased by 54 per cent., while National Insurance benefits had been increased by only 48 per cent. and supplementary benefits by 50–51 per cent.

I repeat my original question. In the light of the leeway to be made up by supplementary beneficiaries, and in view of the acclaimed acceleration of price inflation, which continues unabated, does the hon. Gentleman regard the proposed increase as sufficient even to restore the relative position of supplementary beneficiaries as at seven years ago, let alone significantly to improve it? After November, of course, the position will deteriorate more and the benefit gap will grow still wider.

Moreover, this supplementary benefit deficit will be exacerbated still more if the firm commitment, first established under the previous Government, to make regular annual increases in benefit is relaxed and convention reverts to the policy previously followed under the previous Tory Administration whereby there was often a gap of 20 to 25 months between successive increases in supplementary benefits.

I turn now to the other criterion to be applied in assessing this proposed increase. I refer to its impact on other areas of the welfare network. One can say at once that, because no corresponding increase in National Insurance benefit is included in the Estimates, this group of beneficiaries is bound to suffer a relative decline in living standards. More significantly, any increase in supplementary benefits must tend to diminish the incentive to return to work of any lower-paid man with several children who is ill or unemployed.

If the total allowances paid for the children of an unemployed or sick man are increased until they are higher than the family allowances paid when he is in work, there is an obvious danger that he will get more from his total benefit when ill or unemployed than he can earn on full wages, so that a wage stop which penalises his wife and dependants has to be imposed.

It is because family allowances have not been raised parallel to each successive increase in supplementary benefits that recourse has been had to the unsavoury alternative of an increased establishment of special investigators. Yet there is every justification, in terms of the advance made by other types of benefit, for a substantial increase in family allowances to be made, as has been explicitly promised by the Government in their Election Manifesto.

In 1946 the allowances for a family with three children represented about 8 per cent. of average industrial earnings—

Mr. Speaker

Order. The hon. Gentleman can mention these matters when we are considering the impact of the increase that we are discussing tonight. But he can only mention them. He cannot debate them.

Mr. Meacher

I am grateful for your ruling, Mr. Speaker.

Merely in terms of keeping step with other rising standards, especially with family allowances, in order to preserve intact the delicate balance in the pattern of incentive, this increase in supplementary benefits should not be made without a definite commitment to raise family allowances in tandem.

While the last Government increased family allowances by 10s. per child—and this has a definite bearing on the present increase—they also increased supplementary benefits by more than this for all children over 10 years of age and by 16s. for children aged between 13 and 15. On top of that, it is now proposed to raise supplementary benefits for children by amounts ranging up to a further 6s. for a dependent child of 21 or more. The net result of all these changes is to tilt the balance decisively for the sick or unemployed man in the direction of financial discouragement to return to work, and this general trend is only accentuated by the failure to pay family allowances for the first child. Extension of these allowances to the first child—

Mr. Speaker

Order. The hon. Gentleman is doing what I asked him not to do. We are discussing a—30 million increase in this Supplementary Estimate for supplementary pensions and allowances. There is no provision for family allowances for the first child. I said that the hon. Gentleman might refer to these matters. He cannot debate them.

Mr. Meacher

I am sorry, Mr. Speaker. I wanted to make it clear that any significant increase in supplementary benefits—

Mr. Speaker

Order. With respect, I know the keenness of the hon. Gentleman on the whole topic. But we must find some other opportunity for discussing so many of the matters that he has at heart.

Mr. Meacher

I submit that for the sheer purpose of retaining and strengthening incentives for the lower-paid worker, of which so much is rightly made, as well as for other compelling reasons, this increase in supplementary benefits should not and must not be made without a clear parallel pledge to raise family allowances in line.

The combination of the two criteria adopted here implies a commitment to the poor far outstripping the very modest proposals presented in the Bill. If supplementary beneficiaries are not relatively to fall further behind the rising living standards of the average industrial worker, let alone in relation to more ambitious indices of growing wealth, supplementary benefit rates will need much larger uplifts than are offered here. If these were granted, the necessary accompanying increase in the family allowances must be all the larger. The first is simply and straightforwardly a matter of real commitment to the poor. The second follows by virtue of the inexorable logic of the welfare system. Yet I submit that it will be these early decisions of this new Administration which will constitute the litmus paper of their resolve in this crucial central sphere of social policy.

4.30 a.m.

The Under-Secretary of State for the Department of Health and Social Security (Mr. Paul Dean)

I congratulate the hon. Member for Oldham, West (Mr. Meacher) on being able to get a good deal of substance into this comparatively narrow debate. I shall try to follow your ruling, Mr. Speaker, and keep within order in trying to reply to the interesting points raised by the hon. Gentleman.

It may be helpful if I deal, first, with the Supplementary Estimate of £30 million which is involved. The whole of this sum is needed to meet the cost in 1969–70 of the uprating in supplementary benefit which was approved by the last Parliament, with all-party support, and is due to take effect in November.

In a full year the cost will be £70 million. All expenditure on supplementary benefit is met from money voted by Parliament, and the full cost of any increase not announced at the time of the Annual Estimate is presented to Parliament and has to be covered in a Supplementary Estimate.

About four-fifths of the extra cost will be absorbed by the increase in the principal scale rates. In a full year the 8s. increase for the single householder will cost over £37 million, whilst the 13s. increase for married couples will cost over £21 million. The remaining sum covers the extra provision for non-householders and for dependent children of claimants.

The Estimate for supplementary benefit this year was £485 million, so that, with the Supplementary Estimate, expenditure is now expected to total £515 million.

The increase in benefit will help nearly all those now receiving supplementary benefit, and also some people who, because of the increased scale rates, will become entitled to a supplementary pension or supplementary allowance.

The hon. Gentleman raised two main questions. The first concerned whether the increase is sufficient in the light of price increases and likely price increases. He was kind enough to quote remarks that I made from the Opposition Front Bench in the last Parliament when the regulations were debated.

The 8s. increase in the single householder rate to £5 4s. gives an increase of about 8.3 per cent. and the rises in other rates are of broadly similar proportions.

The scale rates were last increased in November, 1969, so that there will be a full 12 months before they are increased again. Up to mid-June the Index of Retail Prices, excluding housing, had gone up by 4.6 per cent. It was the estimate up to that time on which I based my figures in the debate to which the hon. Gentleman referred. This would require an increase of 4s. 5d. to restore the value of the November, 1969, scale rates. If this trend were to continue until November, an increase of 8s. 6d. to £5 4s. 6d. would be needed to restore the 1969 value.

However, it is not possible to forecast exactly in this way what movements will take place in the Index of Retail Prices, because this depends in part on such factors as seasonal and climatic fluctuations as well as the effects of rising prices here and overseas. In practice, prices have risen more rapidly in recent years over the period November—April than over the year as a whole. If the average trend for the previous two years, November to November, were applied, an increase of only 5s. 7d. to £5 1s. 7d. would be needed to restore the 1969 position. The rise in prices this year has not followed exactly the 1969 pattern, in that the increases in mid-May and mid-June taken together were greater than in the comparable months in 1969. Nonetheless, it is reasonable to assume that the rise in prices from November 1969 to November 1970 will be less than a simple projection of the trend so far would indicate, and that the increase of 8s. will at least cover price increases.

I turn now to the point made by the hon. Gentleman about the incentive or disincentive effect, and, in particular, to the points that he made about the wage-stop. The wage stop depends, of course, on earning capacity, and, therefore, as earnings rise, so the earning capacity of the wage-stop families tend to rise, too. The disabled cases have been reviewed carefully to see whether the wage-stop could be removed, and in a number of cases—nearly 500 of them—this has been done. It has been possible to help with some of the problems with which the hon. Gentleman is clearly familiar concerning the wage-stop cases.

I do not think that it would be in order for me to develop the point about general measures to relieve poverty, but I conclude by saying that the Government are very conscious that there are areas of poverty which cannot be dealt with fully through the supplementary benefit increases which are due to come into operation in November. We feel, however, that this will be of substantial help to many of the poorer families. They should at least restore the value of the benefits and, one hopes, also give a real increase in them. We fully recognise that there are other aspects of family poverty; for example, the one-parent families, which a committee is considering at the present time. That is one obvious example, and it was mentioned by the hon. Gentleman, and we shall in due course be bringing forward proposals when our studies of these matters have been completed.