PRESCRIBED AMOUNT (Hansard, 17 November 1970)

§ Mr. Pardoe

This Amendment seeks to remove the specific reference to the figure of £15 in the Bill and the reference to £2. It seeks not only to increase those figures, which I will show by calculation it does, but also two specific things. First, it would relate the basic amount to be paid under the Bill for the married couple to half the average national wage, in other words, giving a straight definition of what we regard in our society as the poverty line.

We have various poverty lines written into various pieces of social legislation—I suppose that the supplementary benefit scale is in many ways the most convenient—but it seems to me that it would be better if at the outset we settled the amount for the married couple who are to benefit under it. I realise that no married couple without children will do so, but let us start with the basic unit. Let us accept that the poverty line is half the average national wage. I go on then to add, plus 30 per cent. of this amount for each child", that amount being half the average national wage.

9.45 p.m.

The Secretary of State said on Second Reading that the figures were already out of date, and, obviously, we face the problem 1160 of inflation. We shall have constantly to up-date whatever figure is written into the Bill if the Government's version is followed and the figure is set at £15, £16 or whatever it may be. We shall have the same problem such as we have had in public service pensions, national insurance pensions and so on of having to bring in a Bill every two years or having Regulations enabling the Secretary of State to increase the figure, with all the accompanying argument about whether we are Increasing it by the right amount, whether we should increase it merely according to the rise in the most of living or in accordance with the average rise in wages, and so on. In my view, in trying to define a level below which people should not be allowed to sink in our Welfare State, we should do far better to relate it to wage levels than to the cost of living.

My proposal, therefore, which would come in at the start, would incorporate as the basic line in respect of the married couple half the officially determined national average wage, and this would overcome the problem of continuing erosion by inflation. Also, it would give a clear definition of what is meant by the word "poverty" in this context.

I come now to the second point, the factor of 30 per cent. which I seek to apply in respect of each child. This is a more controversial proposal. I developed it at some length on Second Reading, which, perhaps, was not the best time to do so, for one cannot on such an occasion expect a detailed reply from the Minister, but I hope now to engage the right hon. Gentleman in some thinking about the relationship between the cost of a child and the income of a married couple.

It is an extraordinary fact that, over the years, we have never really argued this question in the House. I do not remember any debate on social security legislation in the last four years in which we have tried to define the cost of a child in our social legislation.

For the presentation of my argument, I shall take £25 as the basic unit, the national average wage. I realise that it is slightly less than that at the moment, although any figure of that kind would make most of my constituents green at the gills with envy since we do not have that kind of money down in the far 1161 South-West. However, I take £25 as a round figure—it will soon be there, even if it is not yet—and half of that is £12 10s. The addition of 30 per cent. for the first child adds £3 15s., giving a total for a married couple and one child of £16 5s. instead of the figure of £15 which the Government have written into the Bill.

I do not know what new figure the Secretary of State had in mind when he said that the figure was already out of date. He may be thinking in terms of £15 10s. or, perhaps, even about £16. In any case, I hope that he will not decide the figure until we almost come to the Royal Assent, for it will be bound to be out of date, and the later the figure chosen the better will it be for the poor people who are to benefit.

They will not receive all this amount in any case. Even under the Government's proposal, they will receive only half of the difference between what they earn and £15. For example, a family with one child earning £13 a week would receive £1, that is, half the difference between £13 and £15, making them up to £14 a week. Under my scheme, for such a family with one child the actual target would be £16 5s., so on £13 a week the shortfall would be £3 5s. Half of that would be £1 12s. 6d., so they would end with an income of £14 12s. 6d. That is still, I believe, not far above any level which any right hon. or hon. Member could call a poverty line. It is by no means over-generous, and it will not cost a vast sum of money. Indeed, I greatly doubt that £16 5s. as the limit will be all that different from the level which the Government will eventually have to set.

I come now to the proportion of income for a child, the 30 per cent. which I have chosen. At present, in our supplementary benefit scale, we reckon the additional money given for a child to be £1 16s., which is roughly 21 per cent. of the amount allocated for a married couple, namely, £8 10s. That figure has remained more or less constant over a long period. It depends a little on the age of the child, but, to take the case of a child aged under 11, we find that in our supplementary benefit scales the ratio was 21.5 per cent. in 1968, and it has remained approximately at that level.

Why has it remained at that level? There is nothing to say that 21 per cent. 1162 of the income of a married couple is needed for a child, or that the cost of a child is 21 per cent. more than the income which we regard as required to keep a married couple at a reasonable standard of life. I do not want to deploy again the points I made during the Second Reading. I want to mention one or two figures from my speech on that occasion. I am indebted to Christopher Bagley, of the Institute of Psychiatry in London, for his report, "The Cost Of A Child", which was prepared with the aid of a grant from the Joseph Rowntree Memorial Trust. Taking England alone, he showed that in 1942 Lord Beveridge reckoned that the additional allocation over and above the income of the married couple which should be given for a child in our social security scales was, roughly speaking, 31 per cent. That was for a male aged seven. Hon. Members will be pleased to hear that the figure was the same for a female aged five.

This figure has changed over the years and various people have arrived at different ratios. But it is extraordinary that back in 1942 Lord Beveridge—I think he must have been Sir William then—was saying that one needed to think in terms of the cost of a child as being 31 per cent. of that of the mother and father.

If one looks abroad one finds even more extraordinary comparisons. For instance, in New York in 1966 the figure was 41 per cent. In Pennsylvania in 1955 the figure was 31 per cent. These are figures for children under 11. They rise substantially for children over 11. In Japan at present the figure is 40 per cent., as it is in West Germany.

What I am trying to do in the Bill is to get back to Beveridge. Naturally, I go back to a great historic Liberal, but that is not the only reason why the figure is right. It is a reasonable figure to take in view of the foreign experience. After all, what has made the great Japanese civilisation come to the view that it costs 40 per cent. of one's income to bring up a child?

We are in the business of income maintenance, after all. That is what social security is all about today, dealing not with primary poverty but secondary poverty. That is the philosophy behind it. We have to ensure that there is some relationship which is satisfactory in our 1163 society between the cost of bringing up a child and the income of the married couple. I hope that the Minister will either seek to justify the figure of 21 per cent. or at least say that the Government have some sympathy with the advocates of an increase in the percentage. It is high time that we debated this strange gap in our social security legislation.

To sum up, £15 may or may not be the correct level. I do not think it will be by the time the Bill becomes law next August, and the following year it undoubtedly will not be. It will then have to be changed perhaps every two years, involving the business of parliamentary legislation, and so on, which will waste parliamentary time. It would be very much better on this score if we tied it to the national average wage and made it clear that we had a definite ratio for each child. I have said 30 per cent. for each child, but I shall not nail myself to any mast about the figure of 30 per cent. for every child. It may well be that one would either start with a lower figure and go up or, more likely, start with 30 per cent. and perhaps come down as the size of the family increases. If one takes the large family of, say, six children, my figure would produce an amount of money which was appreciably greater than the Government's calculation.

It is in a family of six children that the Government want to put the money, because in the family income surveys it is in these families that we find a great deal of poverty—I know that there are families with one child that are living in poverty—but as we go up the scale, with more and more children, the Government's scheme will not provide anything like as much money for the family as would my scheme. I accept that the cost to the Exchequer will be greater, but it will be focused on the problems of the large family.

I think that the ratio of 30 per cent. is intellectually, politically and socially justified. I do not think that the Government can justify an additional £2 for each child in political, social or economic terms.

§ Mr. Michael Meacher (Oldham, West)

I support the argument so ably put forward by the hon. Member for Cornwall, 1164 North (Mr. Pardoe). I rise to confirm his arguments and to put forward some of my own in support of a very slightly different Amendment.

The central aim behind both Amendments is to ensure that the value of the supplement is fully maintained in relation to the constant rise in earnings. Even in a normal year—and I submit that at this juncture in economic policy to gaze back at a slightly normal year is a slightly heady experience—the rise in the value of gross weekly earnings may well be in the region of 5 per cent. to 7 per cent. a year, and it would be an ironic quirk if the device used to supplement the earnings of the lowest-paid were geared to a system which would virtually guarantee that the rise in the value supplementation was constantly trailing behind the upward thrust of market forces acting on the level of ordinary earnings.

My chief witness in support of the need for the Admendment is the Secretary of State himself. In introducing the Bill on Second Reading, he replied to my question about whether the Government would commit themselves at this stage to increasing the supplement in line with average earnings. The right hon Gentleman said: Already the earnings on which we have based our figures in the Bill are sharply out of date. The answer to his question is that I think it highly likely that the make-up level will have to be looked at again before the Bill comes into effect."—[OFFICIAL REPORT, 13th November. 1970; Vol. 806, c. 229.] The right hon. Gentleman therefore presumably accepts the need for a constant upward revision of the amount of supplementation, and the question, therefore, is whether the technique in the Bill is necessarily the most appropriate method to achieve this end. For the reasons which I shall give, I doubt whether that is so.

First, historical experience does not lend much credence to any verbal commitment of the Conservative Party to maintain the value of an important noncontributory benefit since, when hon. Gentlemen opposite were last in power, the value of an even more important noncontributory benefit aimed at the remedying of family poverty—and I refer to family allowances—was allowed to lapse drastically. The value of the benefit for 1165 a family with three children at its inception in 1946 represented about 8 per cent. of average industrial earnings. After 1956 its value was not increased throughout the whole of the next eight years, and by 1964 its value had declined to about 5 per cent. of average national earnings.

In view of that wretched fate for family allowances, and despite the absence in increasing family allowances and of any of the distorting disincentives which will inevitably accompany any major development of F.I.S., what really copper-bottomed guarantee can the Government offer that F.I.S. will not go the same way? What definite assurance will the Government give about the regularity of reviews and about the time intervals between them? Even if the Government were to engage in regular two-yearly reviews, which is the normal habit for most insurance benefits, there remains the delicate question of the amount by which F.I.S. would be raised taking into account, presumably, such moving indices as the rise in prices, the advance in average wages—