WAGE STOP RULE

HC Deb 20 December 1974 vol 883 cc2078-87

2.30 p.m.

Mr. Stanley Newens (Harlow)

I greatly appreciate the opportunity of raising the subject of the wage stop rule on this occasion, particularly as it has been a matter of controversy since its origin in the 1966 supplementary benefits legislation.

According to the rule, unless there are exceptional circumstances the amount of supplementary benefit payable to a claimant shall not exceed what would be his net weekly earnings if he were engaged in full-time work in his normal occupation. In other words, it means that if a man's earnings are less than the minimum established for benefit scales as laid down by the Supplementary Benefits Commission, the claimaint is liable to lose part of his entitlement to benefit. In other words, he is asked to exist—with his dependants, of course— at below the minimum acceptable standards. That is surely an appalling state of affairs.

We have a position in which the State is insisting on a certain category of claimants receiving less than the minimum income necessary, in the eyes of the Supplementary Benefits Commission, to maintain a reasonable standard of life. It means that there is considerable hardship for the small number of people affected. I think that only a small number of people are involved, normally not more than 10,000. Because of the rule, people have to go without certain essentials which are provided for other people in our community.

Families which are subjected to the effect of the wage stop are sometimes socially inadequate and therefore they are not expert planners. As a result, the burden is frequently not evenly shared within the family as a whole. Therefore, the full brunt of the sacrifice may be borne by the mother in the family or by the children.

The problem may be associated with other social problems. As a result, the wage stop rule makes circumstances in some families, which are already very bad, much worse. The wage stop rule, with associated circumstances, may result in children going to school regularly without breakfast or the mother going without main meals. I know that the Under-Secretary of State for Health and Social Security has experience of teaching in the part of London where I gained my experience. He knows that it is not unknown for children to come to school without have had breakfast.

It may again mean that children will return in the evening to unsatisfactory homes where there may be no space heating or electric light. The family may be incurring debts all the time without the possibility of clearing them.

A few years ago I came across a family in which there were five children. When, as a result of a misdemeanour, I investigated the circumstances, I found that those children had to go from school in the evening to a home in which the electricity had been cut off for the previous six weeks, which meant that they were completely without any form of heat or lighting at home. How is it possible for us to expect that children from such families will do well at school?

Consider, for example, some of the other difficulties which they may encounter. Schools will naturally provide that during the course of the week children will have to do physical education and play games in the normal course of events. In most cases the local education authorities and the Supplementary Benefits Commission will not supply children with games kit or physical education kit. The result is that when a child comes to school he finds that he is unable to participate in games. He is often pressed as to why he is not able to provide himself with the kit, and in many cases he plays truant and consequently begins on a course which will considerably undermine his education and his general reliability in the community at large. In such a family the lack of food, the debts, the worry and the pressure from debt collectors can bring mental breakdown as well as unhappiness in many other respects.

I am aware that there are possibilities for wage stop families to claim extra allowances, but I wish to point out that there are difficulties in this. In the first place, as I understand it, the commission's confidential instructions in the A code advise officers normally to reject the use of the discretionary power. Secondly, even if allowances are provided they do not necessarily bring families up to the minimum standards laid down by the Supplementary Benefits Commission.

Thirdly, there are frequently delays while all the ramifications of the possible situation are investigated, and during the period of the delay the family situation continues to deteriorate. In many cases where the allowances are not claimed families do not understand whether they have any entitlement or not. That fact is not difficult to grasp because even the most intelligent and knowledgeable people often find it extremely difficult to grasp whether the allowances are to be paid when the regulations are so complicated, as in this case.

Working out the allowances to which a wage stop family is entitled means, therefore, a disproportionate burden on the staff. Far more calculations are involved, there is considerable need to consult other departments and there is also the need to make home visits, which I understand are supposed to be carried out at intervals of not less than 13 weeks, but frequently the period between visits is much longer. Many offices are under considerable pressure to find people with the expertise to make the necessary calculations and carry out the visits. There is quite an amount of evidence now available that the staff in the offices will not be able to keep pace with the necessities of providing for these families.

I understand from the answer to a Question I asked on 26th November that the total savings involved as a result of the wage stop rule amount to less than £1 million per annum but that the costs of administration could not be calculated. I suggest that if the costs were calculated we should find that they amounted to a considerable proportion of the savings made. In fact, if the savings were compared with the costs, in terms of officials' time, and subsequent payments made by local government and national Government departments were deducted, we might find that the savings were negligible.

If there is a saving, is it justified? I realise that the commission's aim in this case is not to force idlers to work. I realise that that is not the basis of the argument for the retention of the rule. It is extremely important that people who are able to work should be found jobs so that they may go to work and help to support themselves. That is important from many different points of view. But we are often dealing with people who unfortunately are unable to find jobs and who may never be able to go to work again.

I understand that the aim of the commission basically is to avoid the iniquity of a man at work earning less than his unemployed counterpart is drawing in national assistance. But the existence of what I call starvation wages is no justification for starvation allowances. Something has to be done about wages, and it is no use reducing the allowances until it is done. I believe that we ought to do something to see that the situation is brought to an end at an early stage. The effect is to penalise those who frequently are less able to defend themselves.

One problem is in determining what is a claimant's normal occupation. There are many cases of disabled or sick men who previously had skilled jobs in which they earned considerable incomes but who, as a result of disablement or sickness, are classed as labourers. Frequently there is no allowance for overtime which they might be able to work. The result is that the normal earnings for which they are assessed fall to a low level at which they become eligible for the application of the wage stop rule.

Frequently many of those affected have children. Some figures which I have seen show that 60 per cent. of wage-stopped families have five or more children. It means that the real burden frequently is imposed upon the children, who are unable to stand up for themselves. It seems to me totally unsatisfactory that we should allow this state of affairs to continue.

The Child Poverty Action Group has campaigned against this rule from its inception. Tony Lynes did this in the past and more recently Frank Field and Laurie Elks, who is the author of a pamphlet showing what are the disadvantages of the system in detail. I am indebted to Mr. Elks for opening my eyes even more to the results of this iniquitous rule.

The Child Poverty Action Group has assessed a great volume of material and experience. Many of the cases which it has investigated are heart-rending. All are cases in which the people concerned were not able to help themselves.

I do not believe that a Labour Government should perpetuate poverty, which is what is happening in these cases. In any event, I believe that poverty has its own cost in terms of the creation of apathetic, alienated and inadequate citizens whose cost to the community in the long run may be very much greater than would be the cost of paying the families in which they are brought up a reasonable minimum allowance.

I am deeply aware of the problems of the present economic crisis. I am very well aware of the pressures from the Treasury which my hon. Friend will have to face. I am also aware of the attitude of some commentators in the Press who are prepared to write off as idlers these unfortunate people who are subject to this rule. That is totally unacceptable to those of us who are involved in the Labour movement.

I do not regard the Supplementary Benefits Commission as the main enemy. In many cases it has tried to do its best to alleviate the rule. As long as the rule exists, however, there will continue to be a number of people in our midst who are very badly treated.

I believe that the wage stop rule should be abolished forthwith, and I hope that my hon. Friend will be able to make some announcement on this issue today. I can assure him that many of us who feel deeply for those afflicted by it will continue our campaign until the rule is wiped out and these people get reasonable consideration from the State, which at present they are not receiving.

2.45 p.m.

The Under-Secretary of State for Health and Social Security (Mr. Alec Jones)

I am very grateful to my hon. Friend the Member for Harlow (Mr. Newens) for giving this House the opportunity to discuss this important subject of the wage stop.

It is a convention of this House on these occasions for Ministers to pay tribute to the hon. Member who raises such a subject. On this occasion it is more than a convention. The concern that my hon. Friend has expressed today and on many previous occasions is one that is shared by me. Both of us are deeply concerned to abolish poverty wherever it is to be found, and, therefore, it is a personal pleasure to me to reply to this debate.

My right hon. Friend the Secretary of State is always anxious that all aspects of social security shall be subjected to the closest scrutiny and criticism of this House, especially those sensitive areas of which we know the wage stop to be one. There can be very few hon. Members who are unaware of the problems and the effect of the wage stop on families. I represent a constituency which has a too long history of high and long lasting unemployment, which inevitably leads to the exercise of the wage stop rule.

For that reason, I say at the outset of my remarks that we are aware of the major problems. If we were not aware of them from our own experience, we would soon become aware of them from our reading of the publications of the Child Poverty Action Group. We are indebted to the people whom my hon. Friend mentioned. Even my Department has provided itself with the book on the wage stop written by Laurie Elks.

As my hon. Friend knows only too well, the wage stop results from the fact that the take-home pay of some people when they are at work is less than the amount of their requirements by supplementary benefits standards. It is inevitable that decisions which limit the supplementary benefit payable to amounts below the levels approved by Parliament are not only unpopular but at times controversial. These decisions which have to be taken by the officers of the Supplementary Benefits Commission stem from the duty laid on the commission by statute. Since the commission is the object of much criticism for keeping people to a standard of living below the minimum that Parliament has prescribed, it is only right and fair to emphasise that in applying the wage stop the commission is applying the law for which we in this House are responsible. I know that my hon. Friend is aware of that, but sometimes it is too easy to criticise other bodies when the responsibility is our own.

My hon. Friend realises also that there is no easy answer to the problem. To pay a man who is not working more than he receives when he is working seems mani- festly unfair to large numbers of our people. I think that we would be unwise to ignore the resentment which that causes particularly to those who are working on particularly low wages irrespective of the rights or wrongs. We would be unwise to pretend that those at work on very low wages would not see it as unfair if we did otherwise

The answer to the problem, as most of us have come increasingly to realise, lies ultimately not in reducing the benefit of the family which is living on supplementary benefit, but in increasing the income of men at work.

Mr. Newens

Hear, hear.

Mr. Jones

I know that my hon. Friend has played, and continues to play, a large part in that campaign. The best solution to the problem surely lies in improved earnings for the lower paid and better measures of family support.

Criticism is often directed at the commission and its officers. I suppose that, in view of the number of cases which the commission and its officers have to deal with, some criticism is inevitable. With the sheer size of the task because of the duties this House puts upon them, it is inevitable that mistakes will occur from time to time. Judgments requiring the wisdom of Solomon may have to be taken, and I do not suppose that any member of the staff can guarantee to have such widsom every time he makes a judgment.

Here, as in so many aspects of their administration, the commission and its officers are open to attack on both sides —on the one side, for being too generous, which has been suggested on numerous occasions by the Opposition, and on the other side, including by my hon. Friends, for being too niggardly. The commission is in no way complacent about the wage stop and the difficulties it produces, both for the claimant whose income is cut by the operation of the rule and that the difficulties that it throws on the hard-worked staff itself.

This is instanced by the fact that the commission chose the wage stop as the subject of its first special report as far back as 1967. The commission has been, and remains, only too aware of public concern about the effect of the rule on poor families. One of the advantages of having people like my hon. Friend campaigning and of having booklets published of the sort that he mentioned is that they constantly draw these facts to our attention. But the commission has been concerned about the situation for some time. In its special report it described the wage stop as a harsh reflection of the fact that there are many men in work living on incomes below the supplementary benefit standard. Given this fact, there can be no easy or painless way of administering the wage stop.

In some respects, we accept that we should be doing more to help. My hon. Friend referred to the need for visiting wage stop families regularly. He suggested, rightly, that we are unable to fulfil what he regards as our reasonable obligations in this matter. Of course, we are unable to do it, because we had to concentrate so much effort on uprating benefits and other urgent tasks, which have taken up so much of the time of those who would carry out such visits. In the last 12 months we have placed an intolerable burden on the staffs of local offices, which is having the effect of making it much more difficult to carry out such visits. Many of the criticisms arise also because of the intrinsic difficulty of judgments to be made by local officers.

My hon. Friend referred to the possibility of a person who might be considered handicapped, and the difficulties there. This is a considerable problem. One of the judgments which have to be made is deciding whether a man is so handicapped in one way or another that he is virtually unemployable. To remove the wage stop from him may be seen as a signal by him that he is now on the scrap heap. By doing that, in such circumstances whilst we should be relieving him of the wage stop on his actual benefit, at the same time, we should be depriving him of his hope of re-establishing himself as a working member of the community.

Yet another difficult area of decision and judgment for the commission and its officers is determining the potential earnings of a claimant. Again, all the difficulties raised by my hon. Friend are well known. Where there is clear evidence of a man's recent earnings, this figure can be taken. Such evidence, however, is frequently not available, and, as my hon. Friend knows, the commission bases its estimate on likely earnings for about three-quarters of all wage-stopped claims on the rates of pay negotiated for labourers by the National Joint Council for Local Authority Services.

I am glad to be able to tell the House that the agreement recently concluded provides for an increase of about £3 in the basic rate, which will result in an appreciable drop in the number of claimants whose supplementary benefit is wage-stopped. This fall in numbers is the continuation of a welcome trend. The numbers have been falling considerably over the past years. In November 1970 there were as many as 34,000 wage stop cases. In November 1974 the number was below 8,000. This reduction has been brought about by the use of the national joint council rates, which now amount to over £30 at basic rates, and more in London, by general increases in wages and by improved family support.

The rent and rate rebate systems and the increases which we made through the family income supplement rates in July have all helped, and so, too, will the increases in family allowances to be introduced in April. As a result of these developments, we expect that even when supplementary benefit rates are increased next April the numbers wage-stopped will decline to perhaps as few as half the present number.

My hon. Friend suggested that exceptional needs payments were not payable in these cases. I am not suggesting that everything is perfect there, but I am assured that such payments can be made, and are made. I am speaking generally, but I would not like it to go on record that no exceptional needs payments are made for these people.

The real attack on the wage stop is to render it unnecessary by increasing the earnings of the lower paid and improving the measures of family support. The Government's proposals to help the low paid and other families in poverty by introducing a new system of child cash allowance for every child, including the first, should reduce the numbers of the wage-stopped to vanishing point.

The Government will continue to keep the matter under review, and if, as a result of the other measures we are taking, the numbers fall to a very low level, we certainly do not rule out the possibility of abolishing the wage stop. In the meantime, the commission will continue its unremitting efforts to administer this difficult provision of the law as fairly and as sympathetically as possible.

The Government and the Department are fully aware of the difficulties which the wage stop creates. We are concerned about it, as is my hon. Friend. When I use the words "keep under review", I assure my hon. Friend that I mean them absolutely literally.