§ 4.10 p.m.
§ Mr. Robin F. Cook (Edinburgh, Central)
I am grateful for this opportunity to raise an issue which affects the daily lives of over 8,000 claimants of supplementary benefit. I appreciate that this number is much smaller than the number which was affected five years ago. Nevertheless, for those who suffer hardship as a result of the wage stop it is small consolation to know that there are fewer who share their fate.
The second schedule of the Ministry of Social Security Act 1966 provides that, where the entitlement to supplementary benefit of a claimant registered as unemployed exceeds the wage he might expect to get in work, then the benefit paid to him shall be reduced by the difference. What this in effect means is that a number of low-wage earners when they go unemployed receive supplementary benefit payments which are less than the figure which Parliament has decided is essential to meet the subsistence of their famiiles. Thus society ensures that the poverty in which the family lives while the father has a job is fully maintained when he loses it.
It is widely believed that the function of this wage stop is to prevent supplementary benefit providing any incentive to low wage earners to going unemployed voluntarily, in the hope of rescuing their family from a below subsistence income. If that is one of the functions of the wage stop, then neither the Supplementary Benefits Commission nor any Secretary of State for Social Services has been prepared to defend it publicly. Both have always maintained that the sole function of the wage stop is to ensure that there is equity in the treatment of the unemployed compared with his mates who are still at work.
I am very doubtful as to the moral basis of this defence. Why is it considered more important to preserve equity between the wage-stopped claimant and other groups in poverty than it is to redress the inequality between him and those who do not live in poverty? Can we ever claim that we are achieving justice in the abstract when what we are doing is creating hardship in practice?
1852 But in any event, there is now mounting evidence that in fact the wage stop, far from achieving some sort of equity, actually intensifies the inequalities of our society. I have been fortunate in that I have been able to discuss with the Child Poverty Action Group the cases of over 60 wage-stopped claimants who have come for advice to their local branches in Edinburgh, London, Liverpool and Bradford, and I am bound to say that, if the public at large knew the kind of families who have their benefit reduced by the wage stop, there would be such a widespread revulsion against the practice that it would be swept out of existence.
Who are the people who suffer from this rule? First of all, they are the long-term unemployed. Precious few workers who fall unemployed are immediately placed on the wage stop. Nearly every worker can produce evidence of recent earnings, and since supplementary benefit levels are so low, they are generally exceeded by his latest wage packet. If, however, he remains unemployed for six months, he is liable to be informed by the Commission that there is no recent evidence of his normal earnings and it has, therefore, assessed them on the basis of the National Joint Council rates for local authority manual workers.
The A Code is quite explicit on this point:After a labourer has been continuously away from work for six months the relevant NJC rate should be applied.Workers other than labourers are transferred to the NJC rate after 12 months. This would not itself be so disastrous if it were not that the A Code also contains the instruction—Never add overtime to an NJC rate"—in flat contradiction to the Report on the Administration of the Wage Stop, presented by the Commission, when it then said:The estimate of future earnings must take account not only of the basic wages payable to men in their usual occupations, but also the possibility of overtime, bonus payments, etc.Thus there are literally thousands of claimants throughout the country who are wage stopped because in their sixth or 12th month of unemployment their estimated income was reduced to the NJC minimum earnings guarantee, despite the fact that they have never been employed 1853 by a local authority and despite the fact that no local authority expects any of its employees to earn only the minimum guarantee—at any rate, for several weeks at a stretch. As an example, Mr. A. of Liverpool, a worker on a car assembly line, earned £40 a week before losing his job as the result of a nervous breakdown. After six months he was wage stopped at the NJC rate of £23 per week.
What this practice means is that the great bulge of wage-stopped cases are wage stopped because they are among the long-term unemployed. A study produced by the Child Poverty Action Group in 1971 showed that of 18 wage-stopped families, no fewer than 15 had been unemployed for over six months. Of the 52 families surveyed for the 1967 Report, the majority had been out of work for at least one year, and some for several years.
It may be helpful to remind the House that in other cases the Commission recognises that a household which has been on supplementary benefit for a prolonged period is entitled to a long-term addition to compensate for the effects of surviving for any length of time on a subsistence income; yet the long-term unemployed, after a period are liable to be placed on the wage stop and have their income reduced.
As well as the long-term unemployed, the disabled suffer most severely from the wage stop. This is what we might expect. The disabled are more likely to be eligible for the wage stop because they normally earn a low wage and because they are liable to periods of prolonged unemployment. All the wage stop does is to reinforce the way society normally penalises disability. Mr. B. from Glasgow was sacked from a job with the railways as a result of partial paralysis, and is registered disabled: he has been unemployed in the seven years since, and for each of those seven years he has been wage stopped. The family of Mr. C. of Birmingham had their benefit wage stopped while he was in hospital receiving treatment for tuberculosis. Mr. D. of Edinburgh was wage stopped while attending an out-patient clinic daily in the early stages of terminal cancer. Mr. E. of Edinburgh is registered as partially sighted, and has been unable to find work for 11 years, for all of which time he has 1854 been wage stopped. Of the 52 families covered by the 1967 report, only a third enjoyed good health, and no fewer than 19 were registered disabled. It is, therefore, the long-term unemployed and the disabled who suffer most from the wage stop.
The third group of households who are socially vulnerable, who require extra generous assistance, but in fact get less because of the wage stop, are large families. Again we can expect such households to be affected by the wage stop because it is precisely the large number of children in the family who give it entitlement to a high supplementary benefit. Not since 1970 has there been published an analysis of family size of households on the wage stop, but it seems more than probable, following the reduction in the overall number of wage stopped cases, that families containing five or more children make up a clear majority of them.
Survey after survey has shown us that it is exactly the children of such households who are most at risk in our community, who ought to be given positive discrimination to save them from becoming the social casualties of their generation; yet it is they who are penalised most of their furniture has been sold.
Mrs. H. of Edinburgh keeps her children indoors in pyjamas every evening and all weekend to save their one set of clothes for school. The 11-year-old daughter of Mr. J. of Liverpool shares a bed with her teenage brother because most of their furniture has been sold. Mr. K. of Bradford has 10 children; eight have to attend a special school and three are retarded in their physical development. The entire welfare resources of our community should be directed towards helping such a household. In fact, we have wage stopped it by £8 per week.
The poverty induced by the wage stop is felt most keenly by both children and parents in the way that it cuts the children off from school companions by preventing them from going along to the football match or the swimming baths. In nine out of the 52 families reviewed for the Commission's own report, the children had refused to take free school dinners because of the stigma they brought at school. In 36 of the families, 1855 totalling 137 children, not a single child had had a holiday in the last five years. I am reluctant to believe that there is a single member of this House who is prepared to justify a practice which condemns so many children to such a stultifying start in life.
But perhaps we can best see how the wage stop reinforces the inequalities of our society in the way it is applied to coloured immigrants. Two years ago there was a major influx of Ugandan Asians, many of whom had to go on supplementary benefit, and some still are. The majority of these immigrants had held skilled or responsible jobs in Ugandan industry and commerce, with a high income. However, the whole function of the wage stop rule is not to bring a claimant's supplementary benefit into line with his past income but to make it reflect what he might earn if he were now to get a job.
The supplementary benefit officers knew that our society treats the coloured immigrant in such a way that few of the Ugandan Asians would ever achieve the same position in British industry or commerce, and therefore, by and large, they placed these skilled, qualified workers on the NJC rates for labourers and wage stopped them. For example, Mr. Shah taught mathematics at a secondary school in Uganda and held two degrees but was not qualified to teach in Britain. He was classified as a light labourer and wage stopped at the NJC rate.
At first sight, such treatment seems ludicrously unjust. But if we accept the principle of the wage stop we have to admit that the action of the supplementary benefit officers was logical. The purpose of the wage stop is to ensure that the inequalities between the wages of men at work are reflected by differences in the benefit they receive while unemployed. The wage stop simply ensures that the coloured immigrant, like the disabled, is discriminated against when he is unemployed equally with the way he is discriminated against when at work.
Of course, there will be those who say that such cases are genuinely distressing, and what we need is a proper system of safeguards to fillet them out from the general ruck. I expect that 1856 my hon. Friend will give a variant of that response in his reply by offering to look into any particular case on my behalf.
But I put it to the House that if this rule is so evil in its effect, can any amount of safeguards or individual reviews really improve it? After all, the whole point of the 1967 report was to establish a proper system of safeguards, and we now have ample evidence that these have proved inadequate. It was that report which recommended the use of NJC rates in order to provide consistency, and that particular safeguard has now notoriously backfired because of the six-month and twelve-month rule.
The 1967 report also promiseda review of all wage stooped cases where there is an element of disability.Yet although the review identified over 8,000 such cases, less than 500 had their wage stop removed. Lastly, the 1967 report recommended that in all wage stop cases where there were signs of special difficulty the claimant should be visited at homenot less often than every thirteen weeksand that in the course of such visits the officer should assess the need of the family for lump-sum payments to purchase bedding or clothing.
There is not a DHSS office in the country which could claim to have fulfilled that ambitious follow-up programme. In general, the highest frequency with which wage stop cases appear to have been visited is every eight months. It is hard to blame the commission for failing to match its promise by its performance. As we all know, it is permanently understaffed by about 20 per cent. and yet has to cope with an annual increase of something like 250,000 claimants in receipt of supplementary benefit. At the moment, other supplementary benefit claimants are being visited routinely about every fifth year.
These very acute work load problems must make us suspicious of any further promise continually to review wage stopped claimants, since the commission patently does not have the manpower to do it.
In her foreword to the 1967 report, my right hon. Friend the Member for Lanark 1857 (Mrs. Hart) who was then Minister of Social Security, said:It is a clear indication of the Commission's intention to administer the law on this subject as sympathetically as possible.Yet the fact of the matter is that all the safeguards in the 1967 report and all the good intentions of the commission have failed to prevent the wage stop rule from causing real hardship to some of the most vulnerable members of the community, That being the case, we arc, surely, impelled to consider the abolition of the rule itself. I believe that there are three powerful arguments for so doing.
First, it is a rule which by its very nature discriminates against the weakest and most vulnerable members of the community. No administrative safeguard can remove this fundamental problem, since inevitably it is the low wage earner and the large family who are drawn within the scope of the rule, yet these are precisely the people we should be trying to help most.
Secondly, rules such as this distort the whole bias of our social security provision, so that instead of creating the machinery whereby we can actively seek out those in need and extend help to them, we instead devise a system which is designed to make it difficult for those in need to get help.
Finally, the total number of those on the wage stop is now derisory, less than 5 per cent. of all registered unemployed. I find it impossible to believe that an easing of the hardship experienced by this tiny minority would have the least effect on the incentive to work for the rest of the population.
Whatever arguments there have been in the mid-sixties for retaining the wage stop, there are now powerful arguments for abolishing it. I hope that my hon. Friend will give the fullest consideration to this.
§ 4.25 p.m.
§ The Under-Secretary of State for Health and Social Security (Mr. Robert C. Brown)
I congratulate my hon. Friend on raising this matter this afternoon so that the question of the wage stop rule can be discussed.
All of us who take an interest in the administration of the supplementary benefit scheme must have reflected at 1858 some time upon the substantial responsibility which Parliament has given to the Supplementary Benefits Commission in the Supplementary Benefits Act 1966 to limit the amount of benefit which would otherwise be paid to an unemployed claimant, so that it does not exceed their estimate of what his take-home pay would be in his normal employment. Inevitably, decisions that the amount of supplementary benefit is to be limited are never popular and the exercise of the wage stop rule is therefore bound to be unwelcome to those affected by it and controversial on occasions. As a result, the commission has been criticised, sometimes unfairly, for deliberately forcing people "to live below the poverty line" which Parliament has prescribed as the minimum below which nobody should fall. It is a little unfair that the commission should carry the can for the decisions of this House.
I therefore want to begin my remarks by recognising fully what is in the statute, namely, that the commission has no alternative but to apply the wage stop to an unemployed claimant when it is appropriate in its judgment, and to pay a tribute to it—which, unfortunately, is not often paid—for its consistent attempts since 1966 to apply this difficult provision fairly and to explain publicly, for example in its published report on the administration of the wage stop in 1967 and in its advice in the Supplementary Benefits Handbook, the very considerable practical problems of administration with which it is faced in trying to carry out the will of Parliament.
I also want to pay tribute to the local officers of the commission, on whom the burden of operating what, in recent years, has become an increasingly complex provision of our social security system inevitably falls. In doing that, I do not want to be taken as implying that mistakes never occur. Certainly they do, and the commission is the first to admit this. But, equally, the commission is always ready to put matters right, if that is what is needed, and I know that my hon. Friend will get a sympathetic response from Lord Collison, the commission's chairman, if he is concerned about any of his constituents who are subject to wage stop.
1859 There is no doubt that Lord Collison is the kindest, most sympathetic and understanding man I have ever known. I know that my hon. Friend will not let his general dislike of the system prevent him from seeking the help which he would get from Lord Collison.
As my hon. Friend recognises, the wage stop results from the fact that some people's take-home pay is less than the amount of their requirements by supplementary benefit standards. This may happen either because the family is a relatively large one or their housing costs are substantial even after obtaining any rebate to which they are entitled in some cases, both of these factors may be present. We also need to bear in mind that those who are wage stopped while on supplementary benefit are, as it were, only the tip of the iceberg. There are far more people who are working for these low wages.
By way of illustration of this point, I want to refer to the respective numbers in December 1972, because that is the latest date for which this particular information is available. There were then some 20,000 unemployed people receiving wage stopped supplementary benefit; but at the same time there were also another 40,000 people in two-parent families who were estimated as being in work with take-home pay of less than their supplementary benefit requirements. In other words, we had a scandalous situation in which it would have paid about 40,000 people in employment, whose families would have been better off, if they had given up work and relied instead on supplementary benefit.
If I may say so, I thought my hon. Friend was a little less than fair in his remarks about the application of the wage stop to Uganda Asian immigrants. The commission was faced with a very difficult problem and it dealt with it, as it normally does, by taking advice from the Department of Employment about the immigrants' employment potential. It is surely not for the commission to determine that it is simply not true that all Uganda Asians were wage-stopped on the NJC basis; a good many undoubtedly were, unfortunately, but this only happened after adequate consideration had established that there was no reasonable alternative.
1860 The rest of the trouble is therefore not in the supplementary benefit scheme but in low wages and the neglect by previous Governments of family allowances. This was indeed one of the reasons we included in our election manifesto a number of steps we intended to take towards achieving greater social justice in our society, and I want to mention one which will particularly help to resolve the wage stop problem. This is our commitment to help the low paid and other families in poverty by introducing a new system of child cash allowances for every child, including the first, and payable to the mother. I shall refer to that again later.
I want to turn now to the effect of this month's increases in social security benefits on the wage stop. The House has approved substantial increases in the supplementary benefit scale rates and, taken on their own, these increases would have the effect of increasing the numbers of people with benefit subject to a wage stop. The number of unemployed people whose benefit was wage stopped had been reduced to as few as 8,000 by April of this year; this was a considerable improvement on earlier years and none of us would want to see the kind of increases which could occur if the improvement in the supplementary benefit scale rates for unemployed people took effect by itself. I am therefore happy to be able to tell my hon. Friend that what we in fact expect to see is a quite substantial reduction below that figure of 8,000 by the time the whole complex of operations of which the benefit up-rating now consists is completed.
There are two main factors at work to produce this result. The first is the increases in the prescribed amounts governing entitlement to FIS, which my right hon. Friend proposed and the House approved to take effect on 23rd July. These have the effect of increasing the amount with which a family's supplementary benefit requirements have to be compared to decide whether a wage stop is appropriate. As the House knows, we think that the FIS scheme is completely unsatisfactory. In the meantime, however, we have made use of the FIS scheme to help the poorest families and, in the way I have just described, to bring some consequential relief to the wage stop situation. The second factor is a decision 1861 which the Supplementary Benefits Commission has recently taken about the application of the threshold increases provided under stage 3 to the wage stop. As my hon. Friend knows, the commission bases its estimate of likely earnings for as many as three-quarters of all wage-stopped claimants on the rates of pay negotiated for labourers by the National Joint Council for Local Authorities' Services.
The current agreement includes a cost-of-living safeguard provision and the commission therefore decided that the threshold increases must also apply for the purpose of calculating a wage stop when this would be appropriate. However, the commission has also gone a step further and decided that, because the threshold increases covered such substantial numbers of employees, they must apply in all cases for wage stop purposes. This will help greatly to reduce the numbers whose benefit might otherwise have been wage-stopped as a result of the up-rating. I am afraid I cannot give my hon. Friend a reliable estimate of the number who will eventually still have their benefit wage stopped after all these operations have taken place, but they will certainly be much fewer than the numbers involved as recently as April.
I should like finally to come back to what I have already mentioned as being the fundamental difficulty with which we are faced in regard to wage stop. This is that some people who may never have had the opportunity to acquire sufficient 1862 skill, or have had their earning power reduced in some way, have take-home pay which is relatively low in relation to their family commitments. What these people need is an appropriate form of additional family support.
I have referred to the proposals in our manifesto for dealing with this situation and my right hon. Friend has again reminded the House, as recently as Monday of this week, of our intention to introduce as quickly as possible a scheme of family endowment which would provide a cash allowance for all children, first included. We are pressing ahead with this as fast as we can, and, in the light of that commitment, I can assure my hon. Friend that we shall consider carefully whether there is any continuing justification for having the wage stop provision in the supplementary benefit scheme.
My right hon. Friend and I dislike the wage stop as intensely as do my hon. Friend and other colleagues inside and outside the House. I am sorry that I cannot at present give any undertaking that the wage stop is to be abolished, but I can say that my right hon. Friend will be re-examining it thoroughly as part of her overall planning for improvements in this area of social security benefits generally.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-three minutes to Five o'clock.