HC Deb 26 January 1972 vol 829 cc1533-55

9.59 p.m.

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

I beg to move, That the Family Income Supplements (Computation) Regulations, 1972, a draft of which was laid before this House on 18th January, be approved. These regulations mark a further stage in the development of the family income supplement. They show our determination that the scheme shall not be static but be flexible and able to respond to changing circumstances. This is important in a scheme designed to help low-earning families and to relieve family poverty.

I remind the House of what the scheme has achieved so far, though it is still early days yet, the scheme having started only last August. In spite of some efforts to strangle it at birth, and some criticism that it did not mature completely overnight, it has made rapid progress in the first six months. We can fairly claim that it is a new and effective attack on family poverty. Because it is new, there is still a great deal to learn from experience, and we intend to learn.

The scheme is effective because all the money goes to those with children who badly need a boost in their income. It is working smoothly, there have been few complaints about it from those who are benefiting from it, and I am sure that the whole House will agree that this reflects great credit on the staff who have been operating the scheme and on all those throughout the country, in both local authorities and voluntary organisations, who have helped to bring F.I.S. to people, and families to F.I.S.

About 100,000 families are benefiting from F.I.S.., and they include over 250,000 children. This is a good start, on which we are about to build. Take-up is improving all the time, and there are over 3,000 new claims still coming in weekly. Our estimate is that over three-quarters of those eligible to £2 a week F.I.S. or more are, in fact, receiving it. In other words, we are reaching the bulk of the poorest of those who are eligible. True, take-up falls as the amount to which people are entitled falls, but, as I say, for those on £2 a week or more the proportion is three-quarters; and it is rising all the time.

It is important to bear in mind that these beneficiaries are not only receiving F.I.S. or benefit through a higher rate of supplementary benefit than they would otherwise be receiving; they have, in addition, the passport to the other benefits attached to F.I.S., namely, exemption from prescription charges—the certificate is in the F.I.S. order book—and availability of free welfare milk and foods and free school meals.

It is impossible to give precise figures for the future. Inevitably, under a scheme of this kind, there are people coming in and going out. Moreover, the numbers will depend on variable factors which no one can precisely foresee. The most important variable factor is the level of earnings, but others are the prescribed amounts—which the present Regulations will increase—and the level of supplementary benefit; and the level of unemployment also is relevant because only those who are in full-time work are eligible for this benefit.

However, within the general context of the 100,000 families to whom I referred. some firm figures can be given. The average F.I.S. award is £1.73. One-third of the awards go to single-parent families, nearly all the parents in this group being women. The average payment to these single-parent families is £2.17. I think the House will agree that that is a highly satisfactory figure to a group of people who, when the scheme was introduced, we were all anxious should benefit from it. Another one-third of the awards go to one-child families, in other words, to the families who do not, and cannot benefit from the family allowances. That, too, is a welcome feature of the arrangements. In this case the average award is £1.93.

The best estimate that can be made is that the amount of money paid out in F.I.S. awards in the first year of the scheme will be more than £8 million. That compares with the original estimate of about £7 million, and I think that it adds point to the encouraging take-up figures which I have mentioned, particularly in the higher ranges, and it shows clearly, too, that the amount of money going to these families looks like being considerably greater than the original estimate which was put before the House when the Bill came forward.

Mr. Brian O'Malley (Rotherham)

Is the hon. Gentleman saying that the estimated effect of this Statutory Instrument in the first year is an extra £1 million—from £7 million to £8 million?

Mr. Dean

I am not quite saying that. I am saying that a combination of the take-up figures and this Statutory Instrument will give rise to that additional expenditure.

Having mentioned those figures, may I go on to describe the Statutory Instrument in a little more detail. It up-rates the entitlement by £1 per family, and puts up the maximum payment from the existing £4 to £5. The regulations increase the prescribed amounts of £2 for each family size. Thus, the new prescribed amount for one-child families will be £20 a week, for two-child families £22, and so on. That is achieved by regulation 2.

Regulation 3 increases the maximum weekly payment to £5. Regulation 4 revokes the 1971 Computation Regulations with effect from 4th April, 1972, which is the date on which the new regulations will take effect if the House approves them.

Since F.I.S. is half the difference between gross family income and the appropriate prescribed amount, the effect of the regulations will be to increase F.I.S. entitlement by £1 a week for all families entitled to F.I.S. when the regulations take effect, or to bring into entitlement a number of other families who are at present excluded because their income is over existing limits, or who will be excluded when the current awards expire.

That is the main effect of the regulations, but in addition there are the important arrangements for bringing F.I.S. to families, and for bringing families to F.I.S. Perhaps I might first remind the House of what are now the regular procedures for this. Information about the scheme is given to people in full time work claiming free welfare milk or exemption from prescription charges, persons returning to work after receiving supplementary benefit, new and addi tional family allowance beneficiaries, claimants for maternity benefit, and immigrants registering for national insurance. Leaflets are continually displayed at post offices, local offices of the Department, and elsewhere. Large employers in many areas, and all large Civil Service Departments, have been asked to display posters.

In addition to those new regular procedures there are three new features which I should like to describe briefly to the House. The first concerns families who apply for free school meals. We are working with the Department of Education and Science on arrangements which we hope will lead to information about F.I.S. going automatically to parents who apply for free school meals.

Some of these people are getting F.I.S. now, but not all of them and we believe that if we can work out suitable arrangements, this will prove an effective way of ensuring that all these families have direct and automatic knowledge about F.I.S. so that if they are eligible to receive it, they can apply.

Mr. Ted Leadbitter (The Hartlepools)

I take it that the Minister is anxious to go a step beyond what has been the practice hitherto, which has been to rely purely on the process of application. In other words, in the past we have had to rely on those who are eligible for F.I.S. or other benefits applying before they could be considered for such payments.

If such a step forward can be made in respect of school dinners, does not the hon. Gentleman feel that it could be made in other spheres, such as free welfare milk? If an improved take-up can be achieved in respect of school meals, the Government should consider extending the new arrangements to other benefits.

Mr. Dean

In a number of the spheres which the hon. Gentleman has in mind we already operate an automatic passport system. It certainly operates in respect of school meals for families who are already on F.I.S. In that case there is an automatic entitlement. No further action is required on the part of the F.I.S. beneficiary to receive free school meals. Equally, it follows automatically that such beneficiaries get free welfare milk and welfare food. There is built into the F.I.S. order book a certificate exempting them from prescription charges.

The hon. Gentleman will appreciate, therefore, that this will be a development in respect of those families who have applied for free school meals but who are not already eligible for F.I.S. That is the first new step which we hope will prove practicable in the near future.

The second is that in each of the English regions of the Department, as well as in Scotland and Wales, an officer of the Department will shortly be appointed with the specific task of reviewing the operation of the publicity arrangements, co-operating with the appropriate departments of local authorities and generally seeing that everything possible is done to ensure that people know about their F.I.S. entitlements. In other words, this will be a review of the arrangements with the object of seeing where they can most readily be improved and the way in which we can tighten up on any weak areas which now exist.

The third aspect which I hope hon. Members agree will strengthen the arrangements is that as from April of this year a slip containing a prominent reminder about F.I.S. will appear in all the 4 million family allowance order books. These are all developments aimed at improving take-up and are designed to make it as easy as possible to bring those who are entitled to F.I.S. within the range of it and to apply for it.

An aspect which I know concerns the House and which the Government are studying closely is the possible disincentive problem. This is a complex problem and there is no easy solution to it. However, it would be unthinkable to seek to solve it by withholding any of the benefits that we now provide for poor families, many of whom are not in a position to increase their earnings.

But the problem should not be exaggerated. It has been suggested, for example, that thousands of families would be worse off if they got a pay rise. Frankly, this is nonsense. Such suggestions are based on hypothetical cases which, if they arise at all, are highly exceptional. To the extent that the difficulty arises from a particularly sharp reduction in the rent rebate, it will be considerably eased by the Government's national rent rebate scheme, under which the rebate will normally be reduced by only 17 per cent. of the increase in income, and never by more than 25 per cent. Moreover, the loss of F.I.S. will be taken into account, so that the earnings rise will not be counted twice over.

It is important to remember too, that any disincentive effect will be considerably mitigated by the fact that income is tested over different periods for the various benefits, and there can be a considerable time lag before an increase in income affects each benefit. Thus F.I.S. is based on the income over the five weeks preceding the claim, and, once awarded, it continues for six months regardless of any subsequent rise in income. This important fact is sometimes overlooked by those who predict a serious disincentive effect. There is no evidence that such an effect arises in practice, although this is one of the areas in which we accept the need for further research and which we shall watch carefully.

I have pleasure in commending these regulations to the House. They represent the first uprating of the scheme since it began. They certainly will not be the last uprating. I hope that the House will feel that the arrangements I have announced will lead to an improvement in the running of the scheme. My right hon. Friend is committed to a full review of the scheme after it has been running for 12 months—that is, later this year. Whatever detailed points there may be, I hope that the House will welcome these regulations as an advance in the battle against family poverty and as a practical step to improve the lot of hard pressed families.

10.17 p.m.

Mr. Charles Morris (Manchester, Openshaw)

It is not my wish to detain the House long. I was impressed with the point made by the Minister when he referred to entitlement to family income supplement. He quite rightly suggested that one should not exaggerate the difficulties of entitlement. He said that it was nonsense to suggest that thousands would be worse off if they got a pay increase. In this regard may I draw his attention to the dilemma which now faces a number of employees of the Post Office Corporation arising from the introduction of the corporation's new contributory superannuation scheme?

As hon. Members will recall, that scheme was introduced on 1st December last year. One of the qualifications for entering the contributory scheme was that existing employees of the corporation would receive a salary or wage enhancement of 6.383 per cent., in order that they could pay that element of their salary or wages as a contribution to the scheme. In other words, they received a salary and wage increase that wasn't.

As a consequence, a number of those employees in the lower salary and wage groups of the Post Office Corporation now find that their entitlements to F.I.S., to rate and rent rebates and, in Ipswich, their entitlement to be considered for the tenancy of a council house, are now in jeopardy. I am mindful that these difficulties may not as yet have received the Secretary of State's attention, but I ask him to consider the difficulties which have arisen for the lower salaried and wage groups of the Post Office Corporation and communicate with his ministerial colleague the Minister of Posts and Telecommunications about this matter.

10.20 p.m.

Mr. Martin McLaren (Bristol, North-West)

When the family income supplement was introduced it was criticised, but the progress report just given by my hon. Friend the Under-Secretary shows that that criticism was premature and ill-conceived. I know from experience in my constituency—I am sure that this is true of many families in other constituencies—that families have already benefited from this scheme and have good cause to thank the Government for recognising their needs and seeking to meet them in this novel way. I am sure that all hon. Members present will greatly welcome the uplift and the improvement brought about by these regulations.

10.21 p.m.

Mr. Hugh D. Brown (Glasgow, Provan)

That sounded like a vote of thanks, and the first part of it was unnecessarily provocative. All of us should regret it if any Government, whether Conservative or Labour, had to introduce such a scheme. However, we are not discussing the principles of the scheme and I shall confine myself, in a non-controversial manner, to asking questions.

The Under-Secretary said that use would be made of the information obtained through the school meals service. This is an important departure. At last one Department is willing to give information to another. I am in favour of this, although if some of the supporters of individual liberty hear about it there will doubtless be trouble. I hope that this includes the Scottish Office.

Mr. Dean

indicated assent.

Mr. Brown

I welcome the increases. I presume that the books will not just contain a reminder to those who already receive F.I.S. but that there will be a leaflet explaining the availability of this benefit to all.

What does the Department do with the information obtained? Obviously the fact that one-third of the awards go to single-parent families highlights a social problem, and the reasons for such families receiving F.I.S. are not necessarily connected.

The Government could do themselves a good turn in their obvious efforts to discuss an incomes policy with the T.U.C. I have always personally been in favour of such a policy. I should lik to think that there were ways and means of using the information obtained. Who are the low-paid wage-earners? If this matter is not handled properly it could arouse many suspicions. Surely it should be possible in the Department to define areas of workers who are lowpaid—local authority employees, people who work in cemeteries, and so on. There must be areas which are becoming identified, but everybody is getting bogged down in administrative detail with unnecessary problems if people are receiving reasonable wages. I am not taking about miners or anything controversial.

Sooner or later someone must initiate a pilot scheme to improve the administration. I have raised the question of the number of income-tested benefits before, and the reply has been, "They are not all our responsibility. The bulk of them are local authority income-tested benefits." That is true, but we are reaching the stage where it may be worth carrying out an experiment. Something like the social works department in Scotland might be an ideal set-up for liaison between Government Departments and local authorities with a view to providing trained clerical people, not necessarily social workers or civil servants but people with enough knowledge of all the benefits and the general income limits to be able to tell people, "You are near enough to apply for this or that benefit." A central point would be worth experimenting with, not just for F.I.S. but for all the other assistance available.

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

Order. The hon. Gentleman is going a little wide of the regulations. It would be better if he confined himself to the amounts in the regulations.

Mr. Brown

One of the purposes of what I have suggested is to draw to the attention of more and more people the increased amount within the regulations. With that obvious attempt to keep within the rules of order, I conclude, and await with interest the Minister's reply.

10.27 p.m.

Mr. Charles Curran (Uxbridge)

I am sure that we all welcome the regulations. In the light of what the hon. Member for Glasgow, Provan (Mr. Hugh D. Brown) said about the need for using the information we obtain, may I ask my hon. Friend the Minister to dwell a little further on the statistics we have already been given? We are told that roughly one-third of the families receiving F.I.S. are one-parent families. How many of them are families where there is a married mother and how many are families where there is a woman with an illegitimate child? My own observation—I do not pretend to have access to the statistics—is that the principal beneficiaries of F.I.S. are women with illegitimate children, who have formed a pocket of poverty and have largely been left out on a limb. Perhaps the most admirable aspect of F.I.S. is that it has reached that section of our society, which has been completely neglected.

In our constituencies we all meet the woman with an illegitimate child, a woman who is perhaps not very bright. It is not her fault; it is the way God made her. She is trying to cope on her own. If she has a job she has hitherto been outside the range of the welfare services. F.I.S. does something at last for such women and their households. I should like my hon. Friend to give us any information he has about the number of women with illegitimate children who are benefiting from F.I.S.

A great deal turns upon the take-up of this scheme. Would it not be possible to simplify the application process? The applicant has either to go to the social security office or to fill up a form and send it in. Is there any reason why an applicant for F.I.S. should not be able to obtain an application form from a post office?

Mr. Deputy Speaker

Order. The regulations are concerned with the raising of the amounts. I wish the hon. Member would try to keep to that.

Mr. Curran

I appreciate that, and I want more people to get the increased amounts by making it easier for them to apply. I hope you will agree, Mr. Deputy Speaker, that I am strictly within the rules of order. I ask that an applicant should be able to walk into the nearest post office for a form, instead of having to go to the social security office.

Many fears were expressed on the introduction of the scheme that it might act in restraint of wage rises. We were told that by subsidising the income of people in full employment we were going back to Speenhamland and holding out an incentive to employers to keep wages down. Has the Minister any evidence of this? Does he see any ghosts marching from Speenhamland? I do not offer an answer, I ask the question, and it would be of public interest if we could have an answer.

10.32 p.m.

Mr. Ted Leadbitter (The Hartlepools)

The hon. Member for Uxbridge (Mr. Curran) may take personal satisfaction in digging deep into the recesses of his mind for the example of Speenhamland, but the answer to his question will not answer the question of the 1970s. There is something wrong with a country which has to introduce an incomes supplement and a means test to go with it. How can the Minister be proud of the increase when it is a measure of the Government's economic failure?

Today two Questions were asked about the purchasing power of money. The one I tabled related to retired people and is therefore not relevant to this argument. The other Question asked about the fall in purchasing power taking the value of the £ as 100, and the answer was that the £ was now worth 88½p, a fall of 11½ per cent. In a year the purchasing power of the £ has fallen by approximately 10p. The increase we are debating tonight only partially restores the purchasing power of the original family income supplement. The Minister is not adding one iota to the well being of the people.

The Minister has given us a progress report, which I have attacked, because it is nothing to shout about. He says we have succeeded in attracting 100,000 families. That is a new use of the word "succeeded". The figures include 250,000 children, and there is obviously some easement for people. If a person on the poverty line gets £1 it will go towards paying the £1 increase on the rent which will come about as a result of the operation of the Housing Finance Bill. The Minister may say these people will be excluded, but in practice any form of rebate scheme catches up with poorer people.

The hon. Gentleman says that one-third of single-parent families have been attracted. The single-parent family is one of the most nauseating, undignified and disgraceful social conditions today. A man or woman, because of lack of enforcement of the maintenance system or the inability of the other spouse to meet the order, has to go to the clerk to the justices, is turfed out of there, and has to go to the local social security offices, maybe at the other side of the town. Then they have to be means-tested to get extra. Out of the thousands of people in this plight we have attracted this small number. Even in this controversial area little progress has been made. The average earnings in manufacturing industry are £28.50. The desperate circumstances of these families are not eased by making them submit themselves to bureaucratic means-testing. I make no comment on the levels of unemployment: the nation has already done that for me.

The Minister says that slips will be put into the family allowance books in April. Before Government or local government start dealing with those in poverty, they should ask themselves how they would like it if every penny had to be justified on forms. We are doing this wrong—

Mr. Deputy Speaker

Order. The hon. Member is not on the point of the regulations. He is now dealing with the general principle.

Mr. Leadbitter

I am sorry, Mr. Deputy Speaker, but I quoted the Minister, and then indicated by disapproval of this system of slips in order books. Is it not time that the Minister stopped making a great mountain out of this molehill of a scheme, which cannot deal with poverty? No one has tried to deal with it in the right way. The party opposite look upon poverty and lack of privilege from the basis—

Mr. Deputy Speaker

Order. The hon. Member is now reverting to precisely the course of conduct that I asked him to stop.

Mr. Leadbitter

I accept your Ruling, Mr. Deputy Speaker. I was then dealing with the problem of the regulations, so I submit that I am in order—

Mr. Deputy Speaker

Is the hon. Gentleman now referring to the increase in the amount or to the general principle of the method?

Mr. Leadbitter

I am dealing with the amount, which is a projection of the scheme. The regulations could not be before the House without the original scheme. The amount and the scheme itself are not the way to deal with this problem, because they conform with the normal Tory Party philosophy of dealing with these social problems.

Mr. J. R. Kinsey (Birmingham, Perry Barr)

What an extraordinary speech we have just heard—a Socialist deprecating a Government who are trying to help the less well-off sectors of our community! I never thought I would hear such a speech from a Socialist. Surely my hon. Friend has moved with great speed in this matter to redress the position and to further his intentions as to when the regulations shall take effect. In comparison with my hon. Friend's speed in this matter, the efforts of the Labour Government during their term of office went at a mere snail's pace.

The hon. Member for Manchester, Openshaw (Mr. Charles R. Morris) put his finger on an important matter in mentioning the marginal area of wages. My hon. Friend the Minister has expressed concern about this and has said that after a period of 12 months there will be a review of the situation to see how the regulations have operated.

I also deplore the low wages that make provisions of this sort necessary. But, as well as deploring this situation, we on this side of the House are tackling it. These factors obtained during the Labour years of office and they did not tackle them. This is why the present Government should be congratulated on their swift action.

These regulations will provide useful help for the deserted wife; in other words, for the one-parent family. I am pleased to see that the Minister has increased the figures to £20 and £5, and I believe that this will redress the balance. It is good news that the one-parent family will form such a large proportion of the people applying for help. I very much welcome these regulations and wish to take this opportunity of congratulating my hon. Friend on his expedition.

10.48 p.m.

Mr. Brian O'Malley (Rotherham)

In introducing the Statutory Instrument the hon. Gentleman the Under-Secretary of State praised the scheme in the fulsome terms of an advertising practitioner in Madison Avenue. He was also supported by two of his back benchers, whose speeches revealed more enthusiasm than detailed knowledge of the operation of the scheme. The Under-Secretary and his back benchers having presented to the House a glossy prospectus which does not give the full facts, I know that the House will be grateful if I, in a completely unbiased way, try to add to the information the hon. Gentleman has given.

Hon. Members on this side of the House continue to believe that the family incomes supplement is an unsatisfactory method of tackling the general problem of family poverty. It extends the jungle of the means test, with all the undesirable side effects inherent in the extensive use of such schemes. However, I will not repeat, nor would it be in order to repeat, the detailed objections to the scheme made during the passage of the substantive legislation in 1970. It is clearly right that before the provisions of this Statutory Instrument come into operation we should examine their implications.

There has been a great deal of criticism during the whole period in which the F.I.S. has been in operation, and indeed earlier, about the disincentive effects of the scheme and the high marginal tax rates involved. So sensitive are the Government on this matter that, even before anybody stood up to criticise the regulations on those grounds, the Under-Secretary sought to come to the House with a pre-emptive strike. I hope to have a little to say later about his comments on this disincentive effect—

Mr. Dean

It is sound tactics.

Mr. O'Malley

It is if one has a weapon with which to make a pre-emptive strike. But the hon. Gentleman has not, and I shall show why.

The Government have stressed the importance of increasing incentives to workers at all levels. The wealthier have been given priority in the provision of such incentives. But there has been no such overall help for the lower-paid and the recipients of the family income supplement, who have been defined by the Secretary of State as being the "poorest of the poor". They suffer extremely high marginal tax rates as a result of the F.I.S. scheme. There are no financial incentives for them to increase their earned income; in fact, the reverse is the case.

I want to examine some of the effects of the family income supplement as it will operate from April, 1972, assuming that these regulations are passed. However, before doing that, it is important to ask one general question on the subject, because it is relevant to the rates which are set in the regulations.

The following appeared in the Economist of 22nd January, 1972, on page 22: F.I.S. has attracted a good deal of criticism for creating high marginal tax rates. That is precisely what it was meant to do, and perhaps we shall be told whether that is the case. Certainly that view was not expressed from the Treasury Bench when the substantive legislation was going through Parliament.

In attempting to deal with the disincentive effect, obviously the Under-Secretary regarded the problem as almost incapable of solution. He said that the argument that the scheme produced disincentives was nonsense. He said that the argument was based on hypothetical cases. Then he admitted that there was a need for further research on the matter.

One does not need research to see that these disincentives for higher wage earnings amongst recipients of F.I.S. will be markedly increased when the new benefit rates come into operation in April. If we ask ourselves whether this scheme provides serious disincentives for working overtime or obtaining higher overall earnings, we have only to remember one fact, and that is that any recipient loses 50 per cent. of every £1 increase in his wages in reduction of F.I.S. alone. Having moved over the tax threshold, he will lose another 35p income tax. He will suffer a lower rent rebate. He will probably lose other means-tested benefits. He will be faced with increased national insurance contributions.

We are all perfectly capable of taking a family of any given size, with the head of the family with any given wage up to £24. The figures speak for themselves. There is a very high marginal rate of taxation. So large is it that the recipient of F.I.S. can find himself no better off and even worse off with a wage increase. He will need a massive wage increase in order to be any better off.

There has been substantial comment in the Press on this matter which the Under-Secretary tried to shrug away by saying that it was nonsense. If he is to sustain this argument, he must take the figures as they will be in operation after 4th April, in accordance with these regulations, and say that all the examples which we can work out are not true. I suggest that he certainly cannot do that. In addition, family income supplement payments are included in the total income when calculating rate rebates under the Housing Finance Bill which is under consideration in this House. Families receiving family income supplement will, therefore, suffer reduced rent rebates.

It remains the case that after 4th April, when these increases come into effect, the payments made to poorer families where the head of the family is still in full-time work will still be below the supplementary benefit level. Therefore, after 4th April the criticism which was made on Second Reading, that a second lower poverty line was being created by the Bill, will continue to operate.

It is also the case that under the existing tax benefits structure of family allowance, child tax allowance and claw-back, standard rate taxpayers in some circumstances receive more, as much, or almost as much financial consideration from the State in respect of their dependent children as the recipients of the family income supplement who are, as the Secretary of State said, the poorest of the poor.

In view of the notable defects of the scheme as revised by these regulations, will the Under-Secretary give us an indication of the Government's longer-term thinking on the existing tax benefits structure?

The hon. Gentleman has already said that by August next year the Secretary of State will be reviewing the family income supplement scheme. By that time, I assume, the report on the problems of one-parent families will have been received. I hope that if a solution can be found for the financial problems of such families it will not depend on means testing.

We are bound to ask the Under-Secretary, seeing how the family income supplement rates have moved and are moving as a result of these regulations, whether the Government see the F.I.S. scheme as a permanent feature, whether they are examining other ways, through family allowances, which we have been told for 18 months are still under review, or whether variants of the existing tax benefits structure are being examined as a substitute for the type of F.I.S. scheme which is amended by these regulations.

The House is grateful to the Under-Secretary for the information that he has given on take-up. He mentioned that 100,000 families were now receiving family income supplement and thought that that was a good start. The hon. Gentleman then presented us with some figures, which put the best possible face on the Government's case, indicating that 75 per cent. or more of the poorest people entitled to F.I.S. are receiving it. Nevertheless, it remains the case, does it not, that probably one-third of the total number of families who are entitled to F.I.S. are receiving it and two-thirds, as yet, are not?

Perhaps the hon. Gentleman will comment on the article which appeared in The Times of Wednesday of last week—

The Financial Secretary to the Treasury (Mr. Patrick Jenkin)

Not Meacher again?

Mr. O'Malley

No, it was not by my hon. Friend the Member for Oldham, West (Mr. Meacher). If the hon. Gentleman showed half as much detailed knowledge of the problems of poverty as my hon. Friend, he would be a far more effective Financial Secretary to the Treasury. But I am not criticising the hon. Gentleman tonight. It is merely that he put his nose into what was virtually a private quarrel between the Under-Secretary and myself.

In The Times of last Wednesday there was a report of some comments by the Child Poverty Action Group on the operation of F.I.S. [Interruption.] If the Financial Secretary wishes to pour scorn on this group, perhaps he will do it publicly and not sotto voce. If he has a low opinion of the group, I will give way to him to enable him to say so publicly. Apparently he does not wish to avail himself of my offer. The article said: In fact, looking at the benefit showing the largest increase, free welfare food, the Government has reached less than a third of the families eligible. I hope that the Under-Secretary will comment on that.

It remains the case that the take-up is nowhere near the percentage which the Secretary of State thought would be satisfactory. Second, only a tiny proportion of families are receiving any help—100,000. The scheme is very small, indeed.

The hon. Gentleman should give us some information about the average sums paid. I should be grateful if he would tell the House what he expects the aver age figure of £1.73 to be as a result of the up-rating contained in these regulations. Perhaps he could tell us, too, what is the extra estimated annual cost of these changes, what is the estimate for the additional numbers involved, and how many families who would not have been entitled to F.I.S. will be brought into eligibility as a result of the proposals in this Statutory Instrument.

Is it the case that family income supplements that are being paid on 4th April, 1972, having been granted before that date, will automatically go up to the new rate?

Mr. Dean


Mr. O'Malley

I am grateful to the hon. Gentleman for saying that they will, because the regulations do not make that clear.

Why it is that the figure of £2 has not been altered? Since the passing of the 1970 Act that prescribed sum has been increased from £15 to £18, and now to £20. The maximum F.I.S. payable has been increased from £3 through to £4, and now to £5, but the £2 in respect of additional children after the first child in estimating the prescribed sum has remained stationary at a time when general wage levels have been rising. Perhaps the hon. Gentleman will explain why that figure of £2 has been left unchanged.

I hope that the Under-Secretary will feel able not only to answer the specific and detailed questions which I have asked, but to say something further about the general comments which I have made on the incentive, or disincentive, policies of the Government, and about longer-term Government thinking and policy in this difficult matter of family poverty.

I hope that the hon. Gentleman will be able to tell the House that the Government are engaged in a full-scale policy review which will obviate the need for a scheme which is riddled with anomalies and which suffers from major defects in trying to deal with family poverty.

11.3 p.m.

Mr. Dean

With the leave of the House, perhaps I may deal briefly with some of the points raised during the debate. I am grateful to the House for the general welcome which, I think, has been given to these regulations, particularly by my hon. Friends the Members for Bristol, North-West (Mr. McLaren), Uxbridge (Mr. Curran) and Birmingham, Perry Bar (Mr. Kinsey). I am grateful, too, for the kind comments made by a number of hon. Gentlemen opposite.

The hon. Member for Glasgow, Provan (Mr. Hugh D. Brown) expressed regret that we needed this scheme. As my hon. Friend the Member for Perry Barr said, while we have the problem of low wages which are below the supplementary benefit level this is a practical way of dealing with the problem. That is really the main reason for a scheme of this kind.

The hon. Member for Manchester, Openshaw (Mr. Charles R. Morris), asked me about the Post Office superannuation scheme increased contributions. I was not aware of any particular difficulty which is arising for this group of people, but I will gladly look at the point he raised, because it may well be that there is experience here which will guide us as to the future of the scheme.

The hon. Member for Provan asked me a number of questions but first welcomed the co-operation which is growing up now between the various Departments not only so much for exchange of information but in ensuring that a group of people who get one benefit and are automaticaly entitled to another, or should get another, know about it.

I mention this not only in respect of the Department of Education and Science, but also because it applies equally in Scotland and Wales. We expect to—and have undertaken to—provide the House with as much information as we can as soon as we have it available and it has been assessed as to whom the low earners are and what working groups they fall into.

The hon. Gentleman mentioned also the multiplicity of means tests and asked what we were hoping to achieve, particularly with the test administered by local authorities. It is broadly the case that most means tests administered at the centre are within the automatic passport arrangements and are therefore linked to F.I.S. in this way, or will be fairly shortly. We are discussing with the local authority associations the possibility of extending the passport arrangement into other fields, but it is too early to say what the outcome of discussions will be.

My hon. Friend the Member for Uxbridge welcomed particularly the help to the one-parent family, the vast majority of which parents are women, and he asked me whether I could say how many of these women who are benefiting have illegitimate children. I cannot give him a precise figure for them, because we do not ask questions about the status of the mother. We are anxious not to cause embarrassment, and that is why I cannot give the information.

My hon. Friend also asked about the forms available in Post Offices and other places and asked whether it would not be a good idea for the leaflet explaining the scheme and the form of application to be available together. We pride ourselves in the Department that we are fast workers, and I can tell him that the new leaflet incorporating the form is now ready and if the House passes the regulations tonight it will be available tomorrow. It will take a little time to get it to his post office but I hope he will agree that we have responded with admirable promptitude to his suggestion.

The hon. Member for the Hartlepools (Mr. Leadbitter) spoke about the one-parent family, and mentioned the Finer Committee, which will give us valuable guidance on what additional help can be given to the one-parent family, as soon as it reports.

The hon. Member for Rotherham (Mr. O'Malley) made some points about the scheme, mentioning in particular the disincentive effect, and quoted the Economist. But he stopped in the middle of a sentence, and, in fairness to this excellent and balanced report, I should complete the sentence. It goes on, after a semi-colon: the corollary to its ' disincentive' effect is that those who suffer a decline in earnings are cushioned from the blow, since F.I.S. is designed to make up half the difference between actual income and some prescribed figure". It goes on to deal with the disincentive point which the hon. Member raised. It adds: But a man who earns more but does not only lose F.I.S., but other benefits as well, so that theoretically he may even be worse off than he was before. In practice, this is avoided because the different benefits are altered at different moments through the year and F.I.S., for example, is awarded for six months". This is a particularly effective way of putting the point, though it is not to say that we minimise the problem. There is a problem, and we are looking at it. We are simply saying that the wrong way to deal with it is to say, "We will not give these families any help at all." That would be a counsel of despair.

Mr. Kinsey

Is it not a fact that as F.I.S. does the job it is intended to do—namely, to bring the total sum up to the desired level—there is less need for the cushion, as it were?

Mr. Dean

Yes, and the scheme is not intended to carry people for ever, so to speak. It is designed to give them a lift while their earnings are low, and when their earnings rise the need for F.I.S. naturally diminishes. However, we must be careful not to get a sudden disincentive effect, and the spreading of the benefits and, above all, the award of F.I.S. over six months, irrespective of earnings, helps to deal with this problem. We must work to make these arrangements better than they are, but it is fair to say that we are aware of this problem and are dealing with it.

The hon. Member for Rotherham went on to mention the tax structure. Considering the record of the Chancellor of the Exchequer in the Government of which he was a member, I was surprised at his comments. His right hon. Friend was responsible for seeing that in a tax structure in which one has a very small margin between the area where tax is paid and where supplementary benefit is available, the problem was greatly accentuated. My right hon. Friend has at least begun to tackle this problem, and the improvement in the child allowances has been a big step in that direction.

Mr. O'Malley

I referred not to the tax structure but to the tax benefit structure, and it is the case that the poorest families who are not paying tax receive less financial consideration from the State through the child tax allowances and clawback system than the standard rate taxpayer, who gets the full advantages of the child tax allowance, in addition to family allowance.

Mr. Dean

I am sure that the hon. Gentleman will not seek to deny that we have through F.I.S., whatever the effect of the tax arrangements, given substantial additional net help to these groups of people, who are some of the poorest in the land.

The hon. Member for Rotherham then asked about take-up and mentioned the figure of one-third. I do not think he was speaking of the family income supplement. Be that as it may, I repeat that the take-up figures are improving all the time. Overall, they are about 50 per cent., but the important point is that for those families who are most in need of F.I.S. and who are getting £2 or more, the take-up figure is at least three-quarters and may be even higher.

I gave the cost figures. The estimate of £8 million for the first full year takes into account the increase in the prescribed amounts in this Instrument. The hon. Gentleman asked whether those who are getting a payment now will automatically get the increase of £1 when the uprating comes into operation on 4th April. The answer to that is that they will. This will be automatically in their order books. We shall ensure that they get the increase.

The hon. Gentleman also asked why we had not changed the £2. One could argue that the £2 could have been changed, but equally we felt that it was most appropriate on this occasion to improve the amount for the families and to improve the upper limit from the existing figure £4 to £5. That seemed to be the right order of priorities.

I repeat that we are committed to review the whole scheme after 12 months. There is no doubt that we are learning from experience. In introducing a new scheme of this kind, one learns far more from the practical operation of the scheme about needy groups and where the scheme can be improved. With great respect to surveys, one learns far more from practical operations. When we review the scheme after 12 months' operation we shall be able to introduce improvements to it, both in its working and in its effectiveness in covering those groups of people that we all wish to see covered.

I am grateful to the House for the remarks which have been made. I hope that this Statutory Instrument will be approved.

Question put and agreed to.

Resolved, That the Family Income Supplements (Computation) Regulations 1972, a draft of which was laid before this House on 18th January, be approved.