HC Deb 21 November 1974 vol 881 cc1547-638

Order for Second Reading read.

4.34 p.m.

The Secretary of State for Social Services (Mrs. Barbara Castle)

I beg to move, That the Bill be now read a Second time.

May I first apologise to the House? I shall not be able to attend as much of the debate as I should like and might even have to miss the winding-up speeches, but it is unavoidable. I hope that the right hon. and learned Member for Surrey, East (Sir G. Howe) will understand.

The Bill embodies the increases in national insurance benefits and family allowances which I announced last week and also two entirely new disablement benefits. This is the second largest up-rating since Beveridge and both these up-ratings have been carried through by a Labour Government. Once again, we have lost no time in fulfilling, and more than fulfilling, our pledge to the pensioners and the others concerned.

Our major aim must be, and remains, to combat inflation with all the means in our power, but in the meantime, in this period of exceptionally high inflation, we are determined that pensioners and other national insurance beneficiaries shall not fall behind. We shall therefore carry out upratings as frequently as is necessary. That is why, on coming into office in February, we rushed through in the record time of 16 weeks a record increase of 29 per cent. only 10 months after the previous Tory uprating. Indeed, so big was that increase in pensions and benefits which we introduced in July that despite the rise in prices since we announced it, last month—when the latest price figures were available—it still represented a gain in real terms of about 10 per cent. on the levels introduced by the Conservative uprating in October 1973.

Now, we are again preparing another substantial increase, of about 15½ per cent., to come into operation on 7th April next year—only 8½ months after the July increase. Once again, we are putting through the increase in the shortest practicable time.

During the election campaign. the right hon. and learned Member for Surrey, East made a big point of declaring that if the Conservatives were returned to power the next uprating could and would have been put through in January of next year—an operational period of about 12 weeks. I fear that some of my hon. Friends may have fallen for this. We could just about uprate national insurance pensions during that 12 weeks, because the work in relation to pensions and long-term benefits is done centrally by our computer at Newcastle. But supplementary benefit increases take much longer, because every recipient has to be clerically and individually reassessed. The minimum time needed to complete a supplementary benefit uprating is 20 weeks, which is exactly the time that we have allowed ourselves in this uprating.

Indeed, the House may remember that when, in my eagerness to rush through last July's uprating, I did so in 16 weeks, we ran into enormous administrative and staffing difficulties and some payments were delayed. I gave an assurance to my staff that the attempt would not be repeated to put through an uprating in less time than that in which it was physically possible for them to complete it, with reasonable working hours.

An uprating by the end of January, an uprating in 12 weeks, would be completely unmanageable unless—no doubt this point will be clarified today—the Conservative Party had intended not to uprate supplementary benefits at the same time but merely the basic pensions and long-term benefits. That is the only uprating that they could have carried through by the end of January, and in his heart of hearts the right hon. and learned Member for Surrey, East knows that I am speaking the simple and sober truth.

However, such an uprating would leave out the poorest section of the community. It is our strongly held view that in this inflationary situation when so many people are so desperately hard pressed, it would be unforgiveable to limit the up-rating to the basic pension and benefits and not to extend it to the poorest in the land, those on supplementary benefits.

Sir Geoffrey Howe (Surrey, East)

It was our declared intention to apply the uprating at six-monthly intervals to all long-term benefits. We sought to make no distinction of the kind which the right hon. Lady is identifying. She misunderstands the mechanics of it. We say that a decision to introduce upratings every six months should enable the procedures to be gone through. It is not a question of the gap between a decision to uprate and its implementation. I follow the difficulty about that. With a pattern of regular six-monthly upratings, it should be possible to do what is done in other countries without any difficulty.

Mrs. Castle

I notice with interest that the right hon. and learned Gentleman said that it was his party's intention to uprate all long-term benefits. That is not the distinction I am drawing. The distinction is between national insurance benefits and supplementary benefits. Is the right hon. and learned Gentleman saying that it is the Conservative Party's policy to introduce six-monthly, parallel and equal increases in pensions and supplementary benefits? If so, he was misleading the country during the General Election campaign when he said, "If we are returned to pick up the machinery of government in November, we shall uprate all those benefits in January". What I am saying is that that could not be done except by excluding people on supplementary benefit.

Sir G. Howe

The right hon. Lady misquotes what we said. We said that we intended to introduce six-monthly benefit increases as quickly as possible, by January or February. That was our declared intention. Clearly we had to work within the limits of what we inherited, but our commitment was beyond doubt.

Mrs. Castle

The right hon. and learned Gentleman hedged a little when I pointed out that it could not be done for supplementary beneficiaries. It could not be done in February either. Taking into account the detailed clerical work involved, the minimum period needed to uprate supplementary benefits is 20 weeks. There is real trouble, as I discovered, if one tries to do it in a shorter time.

As the right hon. and learned Gentleman says, his party has maintained its monthly intervals. This proposition was first mooted in the Conservative Party's manifesto in February 1974. Plainly it was made in response to our pledge to increase pensions to £10 for a single person and £16 for a married couple. It was the Conservative Party's alternative.

The interesting point is that when the Conservative Party made this pledge it had already had 3½ years in power during which it could have prepared, as one has to prepare, the manpower budget for such a switch in policy. Instead, it tried to cut Civil Service staff overall and it precipitated major industrial action in my Department. At the moment that it was making that pledge there was no manpower budget in existence or planned for six-monthly upratings.

Therefore, the House and the country have a right to regard the introduction of the six-month pledge into the Opposition's policy as an election gimmick which was forced on them by the clear, specific and long-standing commitment which we had made for substantial upratings.

However, there is another important facet of the Opposition's policy about six-monthly upratings. It is extremely significant that in February, and again in the election in October, they linked up-ratings merely to the rise in prices and never at any time, in their election manifesto or in their speeches, did they link their pledge about uprating to the rise in average national earnings, which is an integral part of our policy.

Therefore, pensioners would have received less per uprating under the Conservative policy than we have given them. One fact is unchallengeable: after just over 12 months of Labour government, pensions and other long-term benefits will have been increased by virtually 50 per cent., and the Conservatives' policy, linked as it was only to price increases, would not and could not have rivalled that.

Sir Brandon Rhys Williams (Kensington)

Is the 50 per cent. in real terms?

Mrs. Castle

It is 50 per cent. in actual terms.

As I have pointed out, the increase of 29 per cent., despite the increase in prices, has still left pensioners, on the latest price levels available to us, 10 per cent. better off than they were at the October 1973 uprating. With the propo- sals in this Bill there will have been an actual increase of 50 per cent.

In addition, this year, 9 million people will receive another Christmas bonus, 1 million more than received the previous Christmas bonus payments. Moreover, pensioners and other beneficiaries have been given the assurance by the Chancellor of the Exchequer and by me that there will be a second uprating in December next year which will take full account of the relevant movement of earnings between now and then.

Finally, our upratings extend in full to people on supplementary benefit. The supplementary benefit scale rates are not dealt with in this Bill. They will be dealt with separately by regulations. But the increases will be of the same amounts and will take effect at the same time as the increases mentioned in this Bill.

In addition, my right hon. Friend the Secretary of State for the Environment proposes, after consulting his advisory committee, to make corresponding increases in the needs allowances for rent and rate rebates and rent allowances so that, in general, as at the last uprating, housing benefits will not be affected by the increases in social security benefits proposed in this Bill.

Also, my right hon. Friend the Chancellor of the Exchequer proposes, having regard to the pension increases contained in this Bill, to introduce new and improved tax allowances for all elderly people over the age of 65 in 1975–76.

Mrs. Elaine Kellett-Bowman (Lancaster)

Will the right hon. Lady clarify one point? I cannot understand her answer in reply to the intervention of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). The right hon. Lady said that last month there was still a gain of 10 per cent. Beneficiaries are getting another gain of 15 per cent. I make that an overall improvement of 25 per cent. The right hon. Lady appears to make it 50 per cent. Did she use the phrase "real terms" or "money terms"?

Mrs. Castle

Taking cash terms—

Mrs. Kellett-Bowman

My hon. Friend asked about real terms.

Mrs. Castle

I said that I was talking about actual terms. The right hon. and learned Member for Surrey, East cannot have it both ways. He cannot attack us for increasing pensions in line with inflation and then say, "What about the improvement in real terms?". An improvement of 10 per cent. in real terms still remained, on the last available figures, from the July increase. Without waiting for the annual review to which we are statutorily committed, we are hastening to bring forward another review, within the shortest administratively practicable time, which will give another cash addition of 15½ per cent.

I repeat therefore, that, taking into account the fact that supplementary benefit rates will be increased pro rata, that housing benefits will not be affected, and that there are to be new and helpful tax reliefs for the elderly, the Conservative Party has carefully never committed itself to anything as comprehensive and generous as the policy which this Bill embodies and which the Government have introduced.

The House might be interested to know how we have fulfilled our central commitment to link increases to movements in average national earnings. It would have been simple if we could have waited until next April, read off from a convenient ready-reckoner the movement in earnings to that date and pressed a button to give immediate effect to increases of X per cent. But the real situation differs considerably from that ideal state.

We have millions of pensioners and other beneficiaries who are paid weekly at Post Offices on production of order books which contain denominated vouchers to cover a period of several months. Our system affords a feeling of security which would be lost if we were to institute a system such as is used by other European countries. The right hon. Gentleman said "We shall change the system and make it more in line with that of other European countries". He failed to tell the House that, for example, in West Germany—from which I have just returned—very often pensions and other benefits are payable by cheque monthly—in some countries bi-monthly—directly into the account of the beneficiary. That is an entirely different system, and a different tradition from ours, which is to make weekly cash payments at Post Offices on the basis of order books that extend for a considerable period ahead.

The mind boggles at the vagaries which the European system could produce with our large number of beneficiaries, most of whom throughout their lives have been accustomed to budget on a weekly basis. It would be unwise for us to change that system without very careful thought.

Moreover, the rate having been fixed five months ahead—as our predecessors realised in their Social Security Act—we should have had to rely heavily on forecasts for the greater part of the period of eight or eight-and-a-half months between our upratings. Therefore, we decided to proceed as follows.

We have taken the latest period of nine months for which the movement in earnings was known. The Department of Employment's monthly index of average earnings—all employees—was the most up to date, and it provided us with the movement in earnings up to August 1974. Over the nine months since November 1973 the movement was just over 15½ per cent. As prices had moved by just over 12½ per cent. in the same period, we took the movement in earnings as being the more favourable for those concerned and proposed an increase, after rounding, of 16 per cent. in the pension rate for a single person. Married couples will get an increase of 15½ per cent.

More recent figures of earnings are now available, but they have only just become available and were not available when the Bill was published. Next year, when we formulate and announce our proposals for the uprating which will take place in December 1975, we shall take into account the movement in earnings and prices from August 1974 onwards, so that this September's figures will be included then.

The linking of long-term benefits to the movement of average earnings is embodied permanently for the future in Clauses 3 and 4 in a form which is much simpler and easier for everyone to understand than that which is already on the statute book. It is this start, and the principle of the link with the movement in average earnings, that are so important for pensioners and that ensure that their fortunes are now tied for good to those of the working population. Indeed, they do better than do those of working age because we link pensions to movements in gross earnings, and pensioners do not have the deductions for national insurance contributions nor, in most cases, do they have to pay income tax as does the working population. The continuing link is the crucial point, rather than a precise relationship between the pension and earnings at any given point in time.

I do not want to weary the House by giving a complete catalogue of the changes in rates outlined in Clauses 1 and 2 and Schedules 1 and 2, but I should like to quote one or two examples. The widowed mother's allowance, the widow's pension at the standard rate and the invalidity pension all go up from £10 to £11.60, along with the standard rate of retirement pension. The benefit for a widowed mother with two dependent children, for example, will go up from £19.80 to £22.90, including family allowances.

The benefit of an invalidity pensioner whose inacapacity began before the age of 35, and who therefore gets invalidity allowance at the highest rate, will go up, if he has a dependent wife and three children, from £32.75 to £37.85, including family allowances.

Benefits payable at the reduced rates will go up in proportion to the standard rates and increments to pensions, which are payable when retirement is deferred, will—from April—be uprated along with and in proportion to increases in the main pension.

Industrial injuries disablement pensions at the 100 per cent. disablement rate will go up from £16.40 to £19, and the other benefits under the industrial injuries scheme will also be increased.

The increases proposed for short-term benefits—that is, unemployment benefit, sickness benefit, injury benefit and maternity allowance—are £1.20 for a single person and £2 for a marired couple, or 14 per cent. That is higher than the movement in prices to which they are theoretically linked. Here there is a real increase. A man entitled to unemployment benefit with increases in respect of a dependent wife and two children will have his flat-rate benefit increased from £19.30 to £22.10 including family allowance. That is quite apart from any earnings-related supplement to which he may be entitled.

I turn to Clauses 5, 6 and 7 which provide the legislative framework for the two entirely new disablement benefits outlined in the recent report I made to the House. The non-contributory invalidity pension, which we visualise will come into effect during the year 1975–76, is provided for in the Bill, and so is the invalid care allowance which will be introduced in the following financial year. These benefits will provide new, non-means-tested help for those of working age who are deprived of the opportunity to earn their living and who have no rights under existing contributory insurance schemes. The benefits embody an entirely new principle and they must be considered in the context of the comprehensive new provision for the disabled which we discussed in my report to the House called "Social Security Provision for Chronically Sick and Disabled People".

This is quite an historic moment. We have made an important breakthrough here. These are only the first steps towards a new policy for the disabled over a wide field. These first steps bring a new non-means-tested security to nearly 250,000 people whose needs we have neglected for far too long.

These provisions in the Bill will be followed by legislation on two further matters. There is, first, a mobility allowance which will be available to all severely disabled people whether or not they can drive a car; and, secondly, there will be a new benefit for the disabled housewife for whom we are currently studying and working out new criteria. I hope that we shall be able to legislate on these two further measures in this Session of Parliament. We shall be phasing in the mobility allowance by stages, starting next year.

I wish to inform the House what we have decided to do about the difficulty for disabled drivers caused by the increase in VAT on petrol introduced on 18th November. To cover the extra cost of petrol, we are proposing to double the £5 a year petrol allowance now paid to some drivers and to extend that allowance, which was partially withdrawn by the Conservatives, to all drivers of invalid vehicles and cars provided by the Health Departments. This allowance is tax-free and payments of the £10 rate will begin to be made as soon as administratively possible—namely, in January.

There are two further important changes to which I must draw attention. Clause 9 provides for an increase in family allowances—the first since they were last increased by a Labour Government in 1968.

Mr. Kenneth Clarke (Rushcliffe)

Before the right hon. Lady leaves the point about disabled people, I should like to ask her to deal with the question of disabled housewives. Will she accept that there should be no interval of time between her proposals for an invalidity pension in the present legislation and the bringing in of the disabled housewives' allowance? Will she confirm that, as matters now stand, a single woman will receive the new invalidity pension but will lose it as soon as she marries or goes to live with her boy friend? Does she agree that it is disturbing that the pension should be based on chastity?

Mrs. Castle

No, the criterion does not relate to chastity. The criterion is in the dependancy of the disabled married woman, who may have been disabled from childhood: never earned her living, never been a wage earner in her own right. We realise the importance of making provision for the disabled housewife who is incapable of running her own home. This is a new criterion, a new test. It is not as easy to introduce as is a non-contributory invalidity pension where there is a clear assumption that someone of working age would be working if it were not for his or her disability.

We have made clear that our policy embraces four benefits—namely, the noncontributory invalidity pension, the invalid care allowance, the mobility allowance and the disabled housewives' allowance. They will be phased in during the next three years or so.

We start with the non-contributory invalidity pension, tax-free, and with phase I of the mobility allowance, although we are not legislating for it in this Bill. We then move to the invalid care allowance, and as soon as those allowances are in operation we shall introduce our disabled housewives' benefit. We are losing no time in going into discussions to work out the new and rather difficult criteria for assessing incapacity of a woman to do her own housework.

There are demands on medical manpower and there are a whole new number of assessments to be made. The House will be unwise if it neglects the manpower and staff implications of the policy which we all want to see introduced as quickly as possible.

Mr. David Price (Eastleigh)

Does the right hon. Lady agree that there are certain categories of incapacity which can be laid down and that generally those where medical examination is required are borderline cases? Does she agree that there are other categories which do not require medical examination?

Mrs. Castle

We shall be discussing these details with the disabled people and their organisations, such as DIG and other groups. My hon. Friend the Under-Secretary of State, with his responsibilities for the disabled, is losing no time in carrying out discussions. The House must admit that we lost little time in producing our report and in making provision for the chronically sick and disabled. We produced our proposals in advance of the deadline laid down in legislation, which was October. In producing the proposal we did not merely analyse the problem but produced solutions. We have lost no time in legislating for those two benefits, and I hope that we shall be legislating for the other two in this Session of Parliament so that the House will have a full opportunity to consider all the implications.

I was referring to Clause 9 which provides for increased family allowances. I repeat that this is the first increase since family allowances were last raised in 1968, again under a Labour Government. The increase broadly restores the allowance to its value at the time of the last increase. We are committed in our child allowance scheme to extending family allowances to the first child. I shall be making a statement on the timing and other details of our proposals in due course.

Clause 10 substantially improves supplementary benefit disregards. The improvements, which will be brought into effect as soon as operationally possible after the main uprating, will mean that all savings up to the level of £1,200 will be completely ignored in calculating benefits. The disregards of income will be simplified and the amount of earnings to be disregarded will be doubled. This will bring special help to the one-parent family and will meet one of the recommendations in the Finer Report.

The benefit increases contained in the Bill will 20 to about 15 million individuals and families in our community. The total cost of the increases and improvements will be almost £1,150 million in a full year. The Bill provides for over £1,055 million of this sum, of which £810 million will fall on the National Insurance Fund and some £245 million will fall on the Consolidated Fund. Increases in war pensions and supplementary benefit scale rates will cost more than a further £90 million in a full year. The contribution rates and levels set out in the Social Security Amendment Bill, which is now going through the House, will provide sufficient income to pay for the benefits in the year 1975–76.

This is the package of compassion which we confidently put to the House. I have no doubt that hon. Members during this debate will ask for more. We would all like to be able to do even more. But what we have proved in the Bill is that at a time of acute economic stringency the Government will not sacrifice the neediest in our society. I suggest that we should not belittle what these improvements will mean to those who receive them.

I have had a flood of "thank you" letters from people all over the country in the last few weeks. I wish to quote to the House one letter which comes from Watford: Dear Mrs. Castle, My wife and I would like to extend to you our sincere gratitude for the measures you have taken to care for the disabled, the under-privileged and the old-age pensioners. This morning's post contained a wonderful surprise, the £10 bonus. I can assure you that it was very much appreciated. The forthcoming increase in my invalidity pay will be a great help. I am 64 years of age, my wife is of pensionable age, but is unable to draw a pension until next year when I am 65, but owing to the fulfilment of your election promises the forthcoming increase in old-age pensions will help us. We are helped in the payment of our rent and rates by our local council, and in spite of the trials that old age can bring to those who are not financially secure, we feel we have much to be grateful for. Reading letters like that makes me realise how much the rest of us have to be grateful for, and it is a pleasure to be able in this Bill to discharge some of our gratitude to these pensioners.

5.10 p.m.

Sir Geoffrey Howe (Surrey, East)

It is inevitable and understandable that a Bill of this kind, designed to bring more cash help to the most hard-pressed members of our community, should receive a general welcome. It is also inevitable that it should happen at a time of acute economic stringency when the poorest are the most hard hit by the blizzard of inflation. Again it is inevitable that a Bill of this kind should provoke a number of detailed and substantial criticisms from those who feel that they have not received enough consideration or that they have been left out altogether. I shall return to some of them in a moment.

Before doing that, I wish to strike a much more sombre note. It would not be right for this House to be carried away in a mood of euphoric benevolence and pride in its own generosity with the passage of legislation of this kind. We do that at the expense of our sense of reality. I have received letters of the kind quoted by the Secretary of State. They are extremely moving, because there are many people in real want in our society who are moved to write in that way to people in the position of the right hon. Lady. But we should not allow letters of that kind to conceal from ourselves that the £10 bonus is now worth far less than it was a year or two ago—I make no party point—and that the money with which we are making it available is running away and losing its value fast.

We should not allow ourselves to speak with pride about this being the second largest increase made in the pension, as though in itself that was automatically a source of pride, when the foundation of the increase is no more than to protect people against the ravages of inflation. Rather than a sense of pride, we should have a sense of failure, because it is a measure of our failure. It is a revealing insight into the right hon. Lady's mind when she says, "Last July we had an increase, and here we are again." Here, indeed, we are again on the inflationary roundabout.

That is not to say that the Opposition do not like the Government's conversion to the proposition that in our present circumstances a more rapid pattern of increases is necessary. We still argue that, if the Government were committed to that, it should be possible to achieve a more regular pattern. But let us not deceive ourselves into thinking that this is a magnificent state of affairs and cast away our sense of reality.

We all wish to help those most in need in our community. But when doing that we must not forget that our ability to provide that help depends on our capacity to produce and to be able to spend the basic wealth on which this benevolence depends. There are strict limits in our capacity to spend resources because of the oil crisis and the deficit facing us. There are severe and growing constraints on our capacity to produce the wealth needed because of the continuance of the inflation against which this legislation is no more than a defence—inflation fired to a significant extent by the collective selfishness of coercive industrial action.

We must not allow these harsh and uncomfortable truths to be concealed from ourselves by the mechanism, acceptable though it may be, of earnings-related contributions to the National Insurance Fund. The total cost of these changes is £1,125 million, of which £810 million will be met from the National Insurance Fund.

In paragraph 3 of the White Paper accompanying the Bill, the Government Actuary says in bland prose characteristic of that distinguished gentleman: With a system of mainly earnings related contributions the income will rise automatically with increases in the general level of earnings and will broadly be sufficient to meet the cost of corresponding increases in the level of benefits. … The right hon. Lady made the same point more simply in announcing these increases on 13th November: …the inherent buoyancy of revenue from fully earnings-related national insurance contributions is expected to be sufficient to cover this additional fund expenditure."—[OFFICIAL REPORT, 13th November 1974; Vol. 881, c. 419.] So be it. In so far as it is designed to keep the fund, and so the beneficiaries, in line with the growth in real wealth, such a system is fine. But we must not overlook that it also keeps benefits no more than in line with the on-going pace of inflation. That may also be acceptable, but it can also serve to conceal from us the reality of inflation, to accustom us to it, even to the point of accepting it. If we leant on that crtuch, it would be disastrous. We must guard against any such feeling.

It was said by someone some years ago that national insurance brought the magic of averages to the help of millions. But we must guard against the comparable but profoundly different danger that the mystique of earnings-related contributions may bring false comfort to tens of millions.

That is why I say with due solemnity that I must utter the earnest warning that all that we try to do in this kind of legislation may turn out to be of no real value unless and until inflation is brought under control. The Government themselves must be more robust in that direction. If that does not happen, the right hon. Lady may find that she has been building castles of compassion on foundations of sand.

For this reason, it is important for the House to examine the assumptions about inflation on which the Bill is founded. I begin with the fact that the Government Actuary's report accompanying the last up-rating Bill which came into effect in July was founded upon Government expectations that the rate of increase in earnings would be 12½ per cent. per annum. In the Government Actuary's report accompanying this Bill it is assumed that between now and March 1976 average earnings will increase at an annual rate of 17½ per cent. There is a large and deeply disturbing increase there.

On 13th November the Secretary of State explained that the present increase in long-term benefits was founded on the fact that earnings, over the last available nine months, had risen by 15½ per cent. That is an annual rate in excess of 20 per cent. Today she said that the latest figures showed that even this latest increase is not high enough, and she promised even further escalation.

We have cause for grave alarm if these figures are right and if average wages have increased at the rate of 12½ per cent., then 17½ per cent., and now more than 20 per cent. The rate of wage inflation underlines the Government's lack of impact on the basic problem besetting all of this, which is the runaway pattern of increase promised us in the future in relation to pay settlements in the public sector.

The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley)

As the right hon. and learned Gentleman is so concerned and seems anxious at this stage to allocate blame, if blame is to allocated, perhaps he will tell the House about two matters. First, in the rate on inflation that he has described, what has been the percentage contribution of the threshold mechanism which was designed and arranged by his Government? Second, in the wage index for the latest available month, what proportion of the movement of the index in that month is the responsibility again of the trigger mechanism set up by his Government?

Sir G. Howe

Part of the pattern of pay increases is due to the threshold, but the Government deceive themselves and the nation if they overlook the extent to which they are responsible for the atmosphere of total irresponsibility prevailing in public sector pay settlements now. That is the real gravity of the charge that I am making.

I do not want hon. Gentlemen opposite to run away with any cosy illusion that they have now won the political argument by this smart intervention. I do not suggest that the Conservative Party has no responsibility for the pattern of inflation that has developed. But we should face the fact that both parties are now trying to grapple with this hideous problem. We should not kid ourselves that, by the simple pattern of linking benefits to whatever may be the going assumption, we are solving the problem. Indeed, we should not cast around ourselves a cloak of generosity at the expense of others. We are seeking only to defend the hardest hit from the consequences of what has happened. That is why I remain concerned at the way in which the Government are failing to face this underlying inflationary problem.

Other aspects deserve to be probed. The right hon. Lady explained that the long-term benefits are going up by either 15½ per cent. or 16 per cent., according to how one rounds them, and that the short-term benefits are going up by only 14 per cent. The right hon. Lady explained that that 14 per cent. was more than the pattern of increases in prices over the nine months period.

How is the distinction drawn between the 14 per cent. and the 16 per cent.? Is the 14 per cent. the Government's estimate of the likely rate of price rises over the nine months or so during which this new award is likely to be effective? How are we to answer that question when the expected increase in nationalised industry prices, to which the Chancellor looked forward as soon as possible, have not been disclosed? What are the expected increases in nationalised industry prices? How can we tell whether these benefits will be enough to meet them? Are those increases to remain a secret until after the Labour Party Conference next week? Why has nothing been proposed, as I understand, about the heating allowances, increased in July, which form an important part of the standard of living of the most elderly in our society?

Why, if it be the right assumption, do the Government expect a gap of 1½ per cent. or 2 per cent. between prices and earnings? Is not the social contract designed to keep the two in line? Is not the fact that the Government, on their own admission, expect earnings to rise at an accelerating rate ahead of prices—17½ per cent. up to April 1976; 20 per cent. on current assumptions—the clearest possible confirmation that the social contract is sadly, or however one may feel about it, turning out to be a busted flush? Does not the Bill and the assumptions on which it is explicitly based demonstrate beyond doubt the falsity of the economic prospectus on which the Government recently presented themselves to the country?

How can we compare, with any kind of credibility, the statement of the Chancellor of the Exchequer during the election campaign, that inflation would be running somewhere near to 10 per cent. by the end of 1975, with the assumption enjoined upon the Government Actuary for the purpose of the Bill that wage inflation will be running at 17½ per cent. until April of the following year? That is the gravity of the situation against which we have to judge the real merit of the Bill. That is the sombre background against which the House should consider the other wider measures contained in this legislation.

I should like now to refer to the improvement in disregards, which we welcome. I asked the Secretary of State a question when she made her statement last week. I confess to trying to relate the provisions of the Bill to the unrecognisable amended provisions of Schedule 2 of the Supplementary Benefit Act 1966, which is not even to be found by that name in the statute book. I asked: does the improvement in disregards go anywhere towards abolishing the whole idea of an earnings rule for children under 16 years of age in families in receipt of supplementary benefit? The right hon. Lady will be familiar with the point. I understand that the teenage child who does a job—even a newspaper round—may not earn more than £1 if he is 15 or £2 if he is 16 without having the whole lot, penny for penny, taken away. The cost of abolishing that constraint, as I last read it, would be no more than £150,000. I cannot tell whether the Bill proposes to elimnate that.

Mr. O'Malley

I can deal with that point straight way. The Bill provides a £4 disregard in such circumstances.

Sir G. Howe

It makes a £4 general disregard. In those circumstances I should have thought that it would cost even less to abolish the restriction altogether for teenage children. It would seem a socially desirable thing to do. To have a child, in whatever circumstances in a family dependent on supplementary benefit, feeling that anything he earned beyond £4 a week could result in a penny-for-penny deduction is an unhappy situation in which to launch him on the business of life and earning his own living. I hope that the Government will give some attention to that matter. I appreciate that the change makes some difference, but for the sake of a small amount it is worth considering more sympathetically.

I turn to what the right hon. Lady said about the provisions for the disabled—the non-contributory invalidity pension and the invalid care allowance. Clearly they go a small part of the way to meeting the income needs of the chronically disabled. It is clear that it will take a long time to bridge that gap. It will be more difficult for a Government pledged to irrelevant policies, such as nationalisation at great public expense, to raise the resources with which to bridge that gap. Indeed, such policies will diminish the chances of doing so.

I was glad to hear what the right hon. Lady said about the forthcoming mobility allowance. We shall look forward to the legislation on that matter.

It is worth reminding the House that all these advances relating to the disabled are founded upon solid advances undertaken by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) when we were in office—

Mrs. Castle

Absolute nonsense.

Sir G. Howe

—to the advantage of 600,000 families.

The right hon. Lady does herself little credit by reacting to that and saying, as she does, "Absolute nonsense". One thing that has failed more than anything else to commend her to the country has been her total lack of generosity to her predecessor, who had a distinguished record in pioneering important changes in social services and introduced the attendance allowance and the long-term special invalidity benefit.

Mrs. Castle

I have done nothing to discredit the standing of the right hon. Gentleman in this House. It was his inability to do justice where justice was due that I regret. The concept of the attendance allowance was pioneered by my predecessor, the late Richard Crossman, in his National Superannuation Bill, which was taken up and followed by the right hon. Member for Leeds, North-East (Sir K. Joseph). The new disablement benefits, which have been worked out during months of hard work by my hon. Friend the Under-Secretary of State who has special responsibility for the disabled, were never put forward by the Conservative Party.

Sir C. Howe

This does the right hon. Lady and the House even less credit than her attitude so far. The country hates this kind of badinage. I make the point only to establish that we all identify here a huge target of need that we want to knock down and conquer. We must recognise that our resources will fall far short of what we want to achieve as quickly as we would like. The cash provisions in the Bill fall far short of the cash needs identified by the Disablement Income Group. I am not saying this by way of criticism. The progress which has been made has been founded upon a joint recognition of the need and a joint movement towards it. Of course, Richard Crossman was at work on the proposals, but—

Mrs. Castle

He legislated on them.

Sir G. Howe

My right hon. Friend put them on the statute book. We placed on the statute book the commitment to produce an annual review of provision for the disabled, to which the right hon. Lady responded in September. The matter comes to a head in this way. On the same day in September of this year the Government, with the White Paper machinery behind them, and our party produced policy documents assessing the problems of the disabled and putting forward proposals that were very comparable. I shall look at this in detail. The Secretary of State must be patient and listen to my analysis of the proposals.

The new non-contributory invalidity pension is an identical concept to that which we set out. It is a solution that commends itself. But we question two aspects of the way in which the Government have set about it. Can it be right, in introducing that benefit, to offset, as the Government propose, supplementary benefit completely against the new benefit? For many people this would turn out to be an improvement that is no improvement at all. Can it be right to subject the non-contributory invalidity pension to what is in effect a 100 per cent. earnings rule?

Clause 6(1), if I understand it correctly, says that the benefit shall be payable only for any day on which a person is incapable of work. That seems to be an unattractive proposition. Only about 4,000 out of 260,000 of the most severely disabled, classes 1 to 4, are at work, according to the 1972 survey. Surely it would be sensible to continue, if we can, to encourage such self-help among the disabled by avoiding a situation which deprives them of benefit on any day on which they are capable of work? I acknowledge that the invalid care allowance—and I hope that I am being fairer than the Secretary of State—is a potentially valuable idea. We shall study it closely.

I turn to the Government's decision to exclude married women from the noncontributory invalidity pension. Because of the consequences of this, I have grave doubts whether it is right to do it in two stages. We proposed to provide for married women. The Government proposed to do so, but separately and later. It is difficult to see why benefit for married women should be deferred in this way when their contributions to the homes and families in which they live is substantial. It is easy to see that by making that separation the Government have landed themselves in a predictable and justifiable mess over the impact of the cohabitation rule. This has already been denounced by many of my hon. Friends and by the hon. Member for Ormskirk (Mr. Kilroy-Silk).

If we introduce a benefit that is not available for married women, as is the case in the present proposal, it seems that the cohabitation rule follows because without it we should be making it available for those who dwelt in sin and not for those who were married. It makes a strong case against severing the two proposals in the way intended. The Government will have much trouble from this proposal.

I wish to know whether the Government propose to avoid some of the trouble by responding to the recommendations of the Finer Committee to the effect that benefit should continue to be payable in a cohabitation rule case at least until the case is proved against the cohabiting woman. This would go some way to meeting anxieties.

It is easy, in the face of inflation, to understand the case for improvement in family allowances. The Opposition were also pledged to move in this direction as resources became available. But we wonder how much the proposed increases will be worth, after payment of tax, for a family paying the standard rate of income tax. Another unheralded feature of the Government's economic policy is the increase in charges for school meals which the Secretary of State for Education promised as long ago as 8th November but which may also be deferred until after the end of next week. What will be the net increase in the value of family allowances after taking account of these matters?

We are glad that the Government intend in due course to extend the family allowance to cover the first child. My hon. Friend the Member for Kensington (Sir B. Rhys Williams) will follow up aspects of this matter if he catches Mr. Speaker's eye. We also note the intention to raise family income supplement and rent and rate rebates. But there is surely a consequence that the overlap between tax brackets and means-tested benefits will again grow substantially. Thus the consequence of the Government's policies will be to transform the poverty trap into a much larger and more gaping, uncamouflaged elephant pit for many people.

Does this not underline the strength of our case that there is no satisfactory answer to all the problems short of a decision to move ahead with the introduction of a tax credit scheme? Similar problems will arise for millions of pensioners who will still be below the supplementary benefit level even on maturity of the second pension scheme in 20 years. Other categories could also be helped by the introduction of a tax credit scheme.

The Government propose to recruit 1,250 more public servants in the first instance to carry out their proposals and a further 600 in the long term. Would it not be better if those public servants were engaged in preparing a coherent framework towards the establishment of a tax credit scheme? We deeply regret the continuing failure of the Government to make progress with implementing a tax credit scheme.

We welcome the modest improvement in provision for the disabled and the provision to protect existing beneficiaries against inflation. But the proposals are little, if anything, more than that. We remain gravely sceptical about the Government's capacity to deliver any benefits in a form that will be substantially worth more than the inflationary paper on which they are printed.

5.36 p.m.

Mr. George Cunningham (Islington, South and Finsbury)

There are many provisions in this Bill and I would have liked to take time to congratulate my right hon. and hon. Friends on the Government Front Bench on the provisions. But I hope that they will forgive me if I do not do that because I want to concentrate on a provision which I must criticise. My right hon. and hon. Friends might more easily forgive me if I say that I criticise not Department of Health and Social Security Ministers but Treasury Ministers whom I regard as having made a first-class boob on a matter related to both the Budget and a provision in the Bill. I apologise in advance that I shall have to leave the House for a previously arranged engagement soon after I have made my speech and so I may miss at least part of the wind-up speeches.

The feature of the Bill I want to deal with is contained in Clause 1(3). I welcome the fact that the Bill will raise the earnings rule limit from £9.50 to £13. But I say, as many hon. Members have said in the past, that the time has come when the earnings rule must be abolished at the earliest opportunity. This is the opportunity, when my right hon. Friend the Chancellor has apparently persuaded himself that he is prepared to do without £280 million of revenue relating to people over retirement age. The announcement by my right hon. Friend the Chancellor in his Budget Speech of the coming into force of the new age allowance for people over 65 has persuaded me that the normal defence of the earnings rule—that we simply cannot afford to abolish it at the moment—is no longer valid.

The case against the earnings rule has often been rehearsed in the House, most recently by the hon. Member for Kensington (Sir B. Rhys Williams) last April or July. I do not intend to go into it in detail but I wish to refer to what I see as the heads of the argument against it. We can perhaps go into it in greater detail during the Committee stage.

First, there is the notorious disadvantage that it applies to earnings and not to other forms of income. If a person over retirement age has an investment income, no matter what size that income is, his retirement pension is not diminished by one penny as a consequence of that income. If a person has retired from a large company on, say, £10,000 a year, his State retirement pension is not diminished by one penny as a conse- quence of his company pension, although for tax purposes that pension will be treated as earned income. The earnings rule applies only to the person who, not having enough income from other sources, decides to continue working after retirement age partly so that he, or she, will not be a burden on the community and will not have to go to the Supplementary Benefits Commission for assistance. That person is the one we pick out and upon whom we confer a disadvantage by means of the earnings rule. There is a severe disincentive on a person over retirement age to provide for himself or herself.

Secondly, the earnings rule applies for those years when it will operate most severely as a disincentive. It does not apply for all the years after retirement age but only for five years after that age. If the retired person can stand the fact that he or she will be losing a large part, or all, of the retirement pension for five years, after that we say to him, "You can go on earning as much as you like and we shall not now abate your pension by any amount". Of course, by this time the person has been so discouraged from earning that he has stopped going out to work.

Another disadvantage is that since the earnings rule permits earnings up to a certain level—in future £13—what often happens is that the person gives up a job he was doing and instead takes on a menial job so that he does not have his statutory pension diminished by earnings over £13. Many retired people rightly regard this as humiliating. They also have the experience, when everyone else in the factory or office is being given a rise, of having the boss come to them and say, "You do not want the extra £2 or £3 do you? You will not get it, so there is no point in paying it to you." That is, fairly, resented.

If we abolished the earnings rule, we should also abolish what I suppose would be called the retirement rule at the same time because, strictly speaking, at the moment if a person does not retire from a job at all, if he is never off the books even for a notional instant, he does not have the £13 disregarded, He has to go through the sham of retiring and then being re-employed before that situation arises.

Mr. Robert Boscawen (Wells)

Will the hon. Gentleman also agree that because of the earnings rule there is a great disincentive for the employer who employs a lot of women to move over to equal pay.

Mr. Cunningham

I certainly do. There is a disincentive on any employer to pay more money to someone subject to the earnings rule, whether it be to take account of inflation, because that person has been promoted, or is fit to do a better job, or for equal pay purposes. The scale of the effect of the earnings rule is well appreciated by the victims of it, although not always, I think, by those hon. Members who are not among those who attend our social security debates.

Between the levels of income per week of £13 and £17 it means a reduction in pension to the tune of 50 per cent. of the money earned. The other 50 per cent. is often subject to tax, so that there is an effective deduction of 67p for every pound earned per week between £13 and £17. That is enough to put anyone off. Above the level of £17 the employee does not keep a single penny. Every extra pound that he earns is taken away until he gets to the point of earning £25. Then he can keep the whole of the rest. I presume that that £25 limit will be increased to £27, given the new rates.

There are also disadvantages between the sexes. With men the earnings rule applies up to the age of 70, which is very close to the expectation of life for a man. If he tries to earn a living instead of depending upon other people, we take away a large part of his earnings. With women, although the disadvantage is different, it is equally serious. We are saying to women between the ages of 60 and 65—and many of them feel perfectly able to go on working and want to do so—"We regard you as retired and are not prepared to let you keep all the money you choose to earn." The rule is obviously made from the point of view of the economy of the country in that we are discouraging people from contributing to the economy by working for it. Instead they are drawing benefit from it without contributing.

The reason why I make this speech now rather than last summer, as did the hon. Member for Kensington (Sir B. Rhys Williams), is that then I was prepared to accept the Government's defence that while the earnings rule is indefensible the Government simply could not afford the cost of abolishing it. Representatives on both Front Benches have made that kind of statement. They gave up all defence of the earnings rule except for on point of the cost.

But along comes the Chancellor with an austerity Budget and introduces a new age allowance to take the place of the old age relief for people over the age of 65. He proposes to spend on this—that is, to forgo tax on this—no less than £280 million in a full year. The people to benefit from this new relief are roughly the same people who are victimised by the earnings rule.

If the Government feel that they have £280 million to dispense with in that category, there is no doubt that they ought to give priority to abolishing the earnings rule, which would cost only £175 million at the maximum. They would still have £100 million left over to combat the tax incidence on people over retirement age, although to a lesser extent than the Chancellor proposes. The Chancellor's proposal for the new age allowance is a good idea in itself, although I am surprised that he feels that the present state of the economy justifies him in introducing it now.

I cannot believe that Ministers, presented with a choice between abolishing the earnings rule or introducing this new age allowance, would seriously say that it is better to go for the age allowance and to leave the earnings rule in existence. The cost of abolishing the earnings rule and the retirement rule, according to an Answer from the Under-Secretary of State the other day, would be £175 million at current rates of benefit. Moreover, there would be an abatement of that cost, because there would be tax revenue to be derived from the extra income that people would have. It is not possible to be very accurate on that possible tax revenue but it would probably bring the net cost to public funds down to about £130 million.

I accept that there are two funds involved. The earnings rule, if abolished, would place an additional burden upon the National Insurance Fund, whereas the forgoing of tax does not touch that fund but affects the Government's general revenue. However, especially when we are altering contributions to the National Insurance Fund, we ought to be capable of seeing these two problems as one. Although these two options that the Government have are directed roughly at the same group of people—those over the age of retirement—the differences are of interest and they show that it would have been more sensible to abolish the earnings rule.

First, there is the fact that women who are subject to the rule will get nothing out of the Chancellor's proposal because women are subject to the earnings rule between the ages of 60 and 65 while the Chancellor's largesse begins only at the age of 65. Women are geting no quid quo pro out of this at all. They will continue to be subject to the full ferocity of the earnings rule without any abatement through the Chancellor's present decisions.

Secondly, the money will go mainly to the better off in retirement. Let me say at once that it will not go to anyone with an income of over £3,000 a year. There is to be a cut-off at £3,000 a year. But the present age relief goes to people with incomes roughly up to £1,000 a year for a single person or about £1,500 a year for a couple. The Chancellor's largesse will be distributed, therefore, to people who have incomes between those levels and the new cut-off level of £3,000 a year. A married couple who in retirement have an income of £3,000 a year are very well off indeed compared with the vast majority of people in retirement. If one thinks of them having a national insurance pension of about £900 a year, one appreciates that this means that they must have a private pension or a private income of over £2,000 a year. By normal standards, therefore, they must have had a final salary of about £4,000 or £5,000 a year. These are the people upon whom most of the Chancellors' largesse is being distributed.

I do not believe that Ministers of the Department of Health and Social Security—this explains my irritation in this matter—in fact decided that it was sensible to choose the tax relief option rather than the earlings rule option, because the secrecy with which the Budget is so unnecessarily shrouded would ensure—it is my uninformed belief—that the Chancel- lor and his fellow Treasury Ministers decided to do this without full consultation with the other relevant Departments in Whitehall. I have not inquired of my colleagues in the Department of Health and Social Security whether this is the case. It might be embarrassing if I were to do so. I simply assert this on the basis of 10 years' experience in Whitehall, and I am absolutely confident that it is the case.

I direct these criticisms at Treasury Ministers, who are not present to hear them but who will hear of them in one way or another. I say to them that just as the Treasury has the job of coordinating other Departments in Whitehall, the Treasury might do a bit of co-ordinating itself. This first-class boob has occurred because Treasury Ministers did not have the common sense to look at the obvious option as an alternative to that which they chose. What they should have done, in consultation with my right hon. and hon. Friends in the Department of Health and Social Security, was to abolish the earnings rule—as the Chancellor apparently has £150 million which he does not need—and to use the remainder to modify the tax incidence for people over the age of 65 by introducing, for example, the tax allowance but having the cut-off at a level of £2,000 instead of £3,000. I guess that the sums would have worked out to roughly the same cost as those which the present arrangement involves.

I am not prepared in future to vote for the retention of the earnings rule. I shall never again vote for the retention of that rule. Given any opportunity, I shall always vote against it. I am not prepared at this stage to vote for the Chancellor's proposal to introduce this age relief unless the earnings rule is abolished. I would put a limit of April 1976—because I am a very reasonble person, I say April 1976—as the date by which this earnings rule must be not just further modified along the path on which it has been modified over the years but totally eradicated from the system. The Treasury may not like this situation, but it has brought it upon itself. It may be no bad thing that it has done so, because by this boob we may finally get rid of the earnings rule—an object for which we have all been striving for many years.

5.55 p.m.

Sir Brandon Rhys Williams (Kensington)

It is always a pleasure to speak after the hon. Member for Islington, South and Finsbury (Mr. Cunningham). His heart is in the right place. He knows his stuff and masters his facts. He produces unanswerable cases. This is not the only occasion on which he has done that. We on the Opposition benches feel just as he does about the earnings rule. It is only a question of strategy and tactics to get the Departments concerned to see that public opinion will not tolerate the continuation of the earnings rule. I hope that we have the opportunity to go into this matter in greater detail in Committee. Perhaps we may even score some victories. Who knows?

The Bill gives away over £1,000 million. No right hon. or hon. Member will quarrel too vigorously with that. But I am glad that on this occasion we have the opportunity of a proper parliamentary discussion, unlike the last occasion when the stages in the House of Commons were unnecessarily curtailed, because there is so much in the Bill which needs examination. Some of the points which I want to make about the Bill are truly Second Reading points, but there are also many other things which will have to be dealt with more fully in Committee. I hope that I shall have the honour of being selected to serve on the Committee.

The questions which we have to look at in relation to this £1,000 million are whether the money is being wisely spent and what it shows us of the Government's philosophy. It does not show us very much. There are so many questions which remain unanswered, even if one has studied the Bill and the explanatory documents.

When there are upratings of retirement and unemployment benefits, and so on, I make a practice of examining the relationships which are introduced between the single person's benefit and the benefit for a couple. Once again, one finds here some seeming anomalies. Perhaps they are inexplicable, and perhaps there may be answers. But the House does not have these answers, and it should have them.

The retirement benefit was £10 for a single person, to be raised to £11.60, and £16 for a couple, to be raised to £18.50.

Obviously the benefit for two people living together is not equal to twice the benefit of a single person. I have mentioned this matter previously, and I do not want to labour the point. It must be deemed, however, that there is some common element for a household when there are two people in it instead of only one. That does not have to be repeated and I do not quarrel with that philosophy. But we must examine the figures to see what is being done.

Under the benefits which were introduced earlier by the Government, the £10 and £16 benefits, one could deduce that the common element was £4 for a retirement pensioner. If my arithmetic is corect, it now becomes £4.70. What was the single person's benefit of £6 becomes £6.90.

With unemployment and sickness benefits one finds that the common element is still much less. It is only £3.30. Why was the common element for a retired couple deemed to be £4 but that for unemployed and sick couples £3.30 and now £3.70? It is still £1 a week less. The House is entitled to an answer on that matter not just because it is important to the people concerned but because so much public money is involved. It is not just a matter involving these increases. We find that these anomalies persist as though there is some policy at the back of them, but we cannot deduce what it is.

Industrial injuries benefits are on a different scale altogether. The common element—which is £4 for retirement pensioners and £3.30 for the unemployed—is £6.05 for people drawing benefits through industrial injury, and that is now being raised to £6.45—much the highest common household element of the three I am not saying whether I think these are right or wrong, because I do not understand the philosophy. I wish that I did, and I hope that the Under-Secretary will tell us what the thinking is that has gone into these important figures which matter so much to so many people.

I have said before and I say again now, because it must be said, that what we are working towards is a system of housing allowances. These figures which are hidden in the tables in the Bill are all about housing allowances, but they are not adapted to the actual housing need. This is where the Government ought to be going forward. There is no sign of a philosophy emerging. I do not think that the right hon. Lady said anything about this.

The need to introduce housing allowances is obvious, not only because the actual cost of rent varies so much that to deal with it by a blanket allowance is wasteful in some cases and under-providing in others, but also because it is a way of escape from the cohabitation rule. Once a housing allowance is linked to a household and is made a separate element for the household, it is not necessary to ask embarrassing questions about the status of a couple and their relations with each other. It is simply necessary to discover who is the householder and to give him the benefit. It is so obviously fraudulent to claim two household benefits for one household that the majority of the public would be on the side of the Department instead of being against it as they are at the moment.

There is also the very important question of reducing the numbers of people on supplementary benefit. The differences between the rents which people must pay bring umpteen hundreds of thousands of people into supplementary benefit. If there were a housing allowance which took account of the actual amount of the rent, all that case work could be got rid of.

I entirely share the sentiments of the hon. Member for Islington, South and Finsbury about the desirability of abolishing the earnings rule. I am not certain whether we shall succeed in getting the earnings rule abolished as early as 1976, although we should be glad if we could. If we cannot abolish it by then, why not announce now that the rule will be phased out over a period of, say, four or five years so that people know in advance what is to happen?

The earnings rule affects not only those who are now in retirement and who are starting to think about whether they should take up some sort of employment. It affects also people who are approaching retirement and who are considering whether to take up some part-time employment in retirement, and it also affects the attitude that their employers will adopt.

If everybody knew that the rule would be phased out in five years' time, or in three years' time—I am not attached to a period of five years, but in present circumstances such a period might be realistic—those whom it would affect would be able to adapt themselves to a scheme which would be comprehensible and they would not just have to blunder along from year to year wondering whether there would be a change in the rules.

The public are entitled to know what the Government's plan is. Here again, there is no statement of philosophy and no clear pattern emerging. There is a problem at present with rising unemployment if the Government commit themselves to a policy of encouraging people to remain in work after the normal age of retirement, particularly if they have another source of income, namely, their retirement benefit. Possibly this has particular reference to skilled workers and people with experience which industry does not want to lose rather than to, say, manual workers who may ordinarily be less disposed to go on working after the age of 65 in the case of men and the age of 60 in the case of women. It may be that one is not facing a head-on collision between the interests of family men looking for work and the interests of people already in retirement and who are in two minds whether they want to work or not.

Whilst on the question of entitlement to benefit in retirement, I come to the next big question for the Government. What is their philosophy in regard to the basis of entitlement to pension? Are basic pensions paid for citizenship or in return for contributions? Now that we are moving increasingly over to earnings-related contributions and we are still maintaining flat-rate benefits, what is the Government's philosophy on this? Will they make a clear statement? Do they wish ultimately to move towards wholly earnings-related pensions or earnings-related contributions, or will they retain an element of basic pension paid for by earnings-related contributions? It matters, and we should know what the Government's thinking is on this.

I come next to the question of indexation, which is introduced in Clauses 3 and 4. Indexed increases are to be related either to earnings or to prices for the majority of benefits, whichever system is more favourable to the beneficiaries. This will lead to some extremely delicate calculations as time passes. What is the index of earnings which is to be used? It may be my fault that I have not found that from the Bill, and perhaps it is there. Equally, what is the index of prices which is to be used?

I have often made the case once again, I must go on like a barrrel organ in the hope of changing the ideas of officialdom—that the Index of Retail Prices takes no note of family size. When the change in the Index of Retail Prices arises from a rise in the price of an item such as sugar which is repeated for each member of the family, it matters that the actual index should be calculated for the family of a different size. Obviously a single person is less affected by an increase in the price of sugar than a mother who has a husband and perhaps an aged relative in the household as well as three or four children. Obviously in that case the Index of Retail Prices is such a rough instrument that it does not provide an accurate guide. Prices may mean more than the earnings index in some cases but not in others. Once again we have no guidance from the Secretary of State as to her philosophy.

The cost of living of a family changes in ways which relate not only to the family size but to the composition of the family. If there is a sharp rise in the price of coffee that may not matter too much to a mother with four children under the age of 7 who may not drink coffee at all, but for a pensioner couple it might make much more difference.

These are matters which must be studied. I see no trace of an indication that serious study is proceeding.

Let us consider manpower and methods. We have an interesting insight here when we see that the new invalidity benefits—I am amongst those who welcome these, because we are delighted to see this improvement—will require 1,250 staff for the take-on period and 600 permanently after that. I do not know where these staff are to work or how they are to be recruited or when, but I am very interested in the subject of manpower and methods in the Department of Health and Social Security because this seems to be the stumbling block which is preventing the House and public opinion generally from getting done the things that we want done in relation to social security.

What is to be learned about the progress on automation in the Department? We hear much about the enormous and insuperable difficulties of getting things done according to the will of the Secretary of State. She cannot get pension increases introduced in fewer than so many weeks. Incidentally, Continental countries can introduce such increases quite quickly.

The Secretary of State may have a point when she says that we are used to weekly payments whereas on the Continent the payments may be monthly or even two-monthly. However, a machine can do a job several times over without adding to the number of people involved.

Cases have to be studied here, too, because it may be that some people would prefer to draw their allowances through the Giro and it would not matter whether they had a weekly credit or a monthly credit. This might be a matter of simplification or it might be a complication to be avoided. We have no guidance.

We learn nothing about the programme of automation in the Department. What is the strategy about case work? We know how overburdened the officers of the Department are. We know that the dedicated staff in the Department are driven almost distracted by the routine work they have to do. What is being done about it? Year after year after year we hear that upratings cannot be brought in quickly and that there are obstacles in dealing with case work because of administrative difficulties. We are asking people to tackle these things not with nineteenth century methods but with eighteenth century methods. We are not making progress.

I was one of those who thought that the Department of Health and Social Security should have been merged with the Inland Revenue, not with the Ministry of Health, which was quite another matter. Perhaps the health service would not be in the state it is now in if the Ministry of Health had remained a separate Ministry. If the Department of Social Security does not want to merge with the Inland Revenue, let us hear about liaison committees and work going on between the two Departments.

Is it still the policy to buy a British computer even it it does not exist, to do a job which is established in other countries, or is it the intention to postpone modernisation, or are the Government thinking again about this question? We need to know.

I want to come to the question of family allowances for the first child. We heard from the right hon. Lady that she is to make a statement in due course. When does "in due course" mean and when will she commit herself to this desirable—indeed, inevitable—reform? All the parties committed themselves in the elections this year to introducing family allowances for the first child. There is no controversy between the Government and the Opposition on this question.

In her correspondence with me the right hon. Lady has suggested that the difficulty of introducing legislation and getting it through the House is one of the major obstacles. Let us examine some of the other obstacles. There are, first, printing difficulties. The right hon. Lady said that it is difficult to get the printing done. I suggested that the family allowances for the first child should be introduced next April. I see that April is the date being adopted for the increase in the family allowances for the second and subsequent children. I cannot believe that printing difficulties can be a serious obstacle to the introduction of the family allowance for the first child. That is a contemptible reason which should never have been given.

We then hear about the difficulties of recruiting staff. One thousand more additional staff will be needed to give the family allowance to the first child. At a time of rising unemployment, perhaps 1,000 people might not be available to do the work. God knows, but I would not have thought that it was impossible to find these people.

We are told that they need an office the size of Centre Point and that the Government cannot find one. That is a contemptible excuse which should never have been uttered. I am not suggesting that the Department should locate these people in miserable and inadequate conditions, but surely there is somewhere in Newcastle or the new town of Washington, which is not too far from the existing office, where accommodation for 1,000 could be found. Of course, it might have been said that the computer could not cope because it was not large enough, but in a parliamentary Answer I was told that it was large enough to handle the extra burden and that the extension was already in the programme.

There is also the difficulty of finding the children. I believe that the work has already been half done, but even if the DHSS does not know where the children are, the Inland Revenue must because the children are taken into account through PAYE. There is another way of finding where they are. It could be done through an advertisement, through FIS or through other methods which the Government have. Since family allowance is a benefit with virtually a 100 per cent. take-up, why should it be assumed that mothers would be unwilling to come forward and claim the benefit if it were made known that it was available without any test of means?

I and a group of others who are deeply committed to the idea of paying the family allowance on the first child went to see the Secretary of State. She explained that one of the major difficulties was the additional work that the recalculation of supplementary benefit would impose on staff all over the country working in the offices that handle supplementary benefit. I tabled a Question about that and I was told that if the increase in family allowances were made a disregard, which is the inevitable object of the whole manoeuvre, the extra word would be negligible. That excuse therefore falls to the ground. If the increase in family allowances were coupled with the elimination of child tax allowances, which is the nucleus of the tax credit scheme, there would be an enormous saving to the Inland Revenue and to employers in handling PAYE.

Maybe it is therefore a question of finding the money to give to the mothers. I do not believe even that. There appears to be plenty of money to give in wage increases to those who are in unions, and that is because the unions control the Labour Party and the Labour Party exists to serve them. Mothers are not in a union and therefore their pressure counts for nothing.

We therefore come to the whole question of what happens after the threshold in the Government's policy on wages and prices. There have been a series of threshold increases this year geared to a retail price index which does not reflect family need. Whatever comes after the threshold should take note of household needs. Where these needs arise because of the presence of children, they should be catered for by increases in family allowances rather than by increases in wages across the board which would give the same benefit to single people who did not need it and to families with children who did need it.

The Government should look much more seriously at the problem of the retail price index and its relationship to families of different sizes, and not assume that they can bungle their way along making use of the average in order to save themselves administrative work and accurate thought. Family allowances are a selective method of meeting needs and protecting the people who are most exposed to inflation.

What is happening about family endowment? All the Secretary of State said today was that she will make a statement in due course. It would still be possible to introduce family allowances for the first child next April. If there were a will there would be a way.

Mr. O'Malley

I am sorry to interrupt the hon. Member the moment I enter the Chamber, but he has made that statement on a number of occasions before. He has been told that it would not be possible to bring in family endowment or even family allowances for first children next April, and the hon. Member knows the reasons. I wish the hon. Member would stop repeating a statement which he knows to be manifestly untrue.

Sir B. Rhys Williams

I do not agree. I do not believe that it cannot be done. In Germany the reform is being carried through in five months and the British Civil Service would rise to the demand if it had the leadership from the Secretary of State and the Government. We have not been given an inkling of what the Government's policy is on family endowment, but we know that it will be something bigger and better than tax credit, although we are never allowed to get down to brass tacks.

The real reason that family allowance for the first child is of increasing relevance is that more and more young wives are remaining at work after marriage. The shock of losing all their earnings when the first child arrives, just when the family faces considerable extra expense, is making a large number of families think very carefully before starting a family. We have seen news today of a fall in the birth rate not only among the classes most conscious of family planning but in classes 4 and 5 as well. I hope that the Secretary of State will draw the necessary lessons from the fall in the birth rate.

The Secretary of State must think, too, about one-parent families. The raising of the disregard will be of some small help, but thousands of children in Britain are growing up in conditions of deprivation and every year that goes by matters to those children. It may not matter to the Government, but family poverty is a scandal and it is leaving a lasting blemish on coming generations. We must end it. I do not accept the Minister of State's suggestion that there are insuperable objections. We must ask the Secretary of State when she will act.

The House must see her as purely partisan in this matter because of her opposition to tax credits. She believes that because it is a Conservative idea it should therefore be opposed. I wonder whether she ever understood the tax credit scheme. I know that she was a member of the Select Committee which examined it, but the things she says about it do not seem to indicate that she has understood the principle at all.

We must also see her as heartless when it comes to mothers and children. Perhaps that is her blind spot. We have to indict her as incompetent in dealing with the reform of the organisation and methods of her Department. I am sorry that she has not been here to hear my speech, but she will be hearing from me again, at least in correspondence, on this matter.

6.18 p.m.

Mr. Guy Barnett (Greenwich)

In speaking in the debate I do not do so with the authority of the hon. Member for Kensington (Sir B. Rhys Williams) or my lion. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), who have both concentrated on social security matters in a way that I have not. My purpose in speaking is to raise four points which I should like the Department to think about. Two of the points have been raised before.

I should like first to congratulate the Government, particularly my right hon. Friend the Secretary of State and my hon. Friend the Minister of State, on the considerable advance represented by the Bill and on the announcement by my right hon. Friend last week. I do this for the main reason that the Bill reflects so clearly the commitment that the Labour Party made in both elections this year. The programme that the Labour Party put before the country was first-class, and for that reason alone I am glad to see it being carried into legislation.

A second reason why it is an important step is that it was a commitment by the Labour Party in two General Elections. We knew a good deal about the serious economic situation when we made that commitment and, if anything, the situation has become more serious since. In spite of that, we have stuck to our commitment. I am grateful for that, because a good deal of the reason for cynicism about politics and politicians over the past year or more is the failure of Governments to do what they said they would do. The fact that on both occasions after returning to power the Labour Government have done what they said they would do has restored many people's faith in politics and politicians, certainly in my constituency. That is a good reason for congratulating my hon. Friends on the Bill.

Much has already been said about the earnings rule, and I do not want to waste time by repeating the arguments of my hon. Friend the Member for Islington, South and Finsbury. He put them much more ably than I could. I support his arguments, which are very sound, and I was glad to hear that the hon. Member for Kensington also supports them.

I want to produce yet another reason for believing that the earnings rule should go as a matter of urgency. About three years ago Peter Townsend wrote a book called "The Family Life of Old People", in which he came to the inescapable conclusion…that after retirement most men in Bethnal Green could not occupy their time satisfactorily. Their life became a rather desperate search for pastimes or a gloomy contemplation of their own help- lessness, which, at its worst, was little better than waiting to die. They found no substitute for the companionship, absorption and fulfilment of work. The House should carefully consider that conclusion. It is often amongst those who have held skilled, semi-skilled or unskilled jobs that physical and sometimes mental deterioration take place when the element of work in their lives disappears. For that reason, the earnings rule does considerable damage.

Evidence has accumulated over the years that those who reach retiring age cease to work altogether. I am certain that a contributory factor is the earnings rule. Our social policies should encourage people to continue to work if they are healthy and well, because the consequence of not doing so may be a mental and physical deterioration in old age that might otherwise not take place. Research indicates that that may be true. I hope that for this additional reason the House will continue to press the Department and the Treasury on the matter.

The third point I want to raise is one about which I have written to my hon. Friend the Minister. It concerns old people living in their own homes who, because they possess savings, are unable to draw supplementary benefit or heating allowance. They do not have very great savings, but they have kept money on one side to insure against the need to repair their house. I am glad that there is provision in the Bill for an increase in the savings disregard to £1,200. That goes some way towards destroying the sort of problem about which I am speaking. Many of my elderly constituents have told me that, because they had £800 or £900 in a building society as insurance against, for example, a chimney falling off or a leaking roof, they were not entitled to any form of supplementary benefit or extra help.

This is not merely an important matter for old people who have money on one side for an understandable reason. It may also affect the standard and quality of our housing stock. Many houses coming on to the market have been occupied by elderly people who were unable to maintain them in a reasonable condition because of the size of their income. As a result, the houses may have to be pulled down or may have to have considerable repairs. I hope that the Government will consider, in addition to the provision they have rightly made to raise the savings disregard, the possibility of making allowance for those in retirement who own their own homes and who may need the disregard of a further sum—perhaps only a few hundred pounds—against the possibility of repair bills and so on.

My last point follows the arguments of the hon. Member for Kensington. I do not want to take up all his criticisms of the Department. I cannot believe that all he said was in accordance with the facts. I hope that my hon. Friend will be able to tell us more about the matter when he sums up the debate. Speaking, however, as the consultant to the Society of Civil Servants, I am aware of considerable dissatisfaction in the society about the pressure under which its members have had to work. That pressure was caused by a need to rush through pension increases which were desperately urgent and for which no preparation had been made by the previous Conservative Government. Considerable burdens were placed on civil servants working in the Department.

Those burdens continue, for a variety of reasons. One is that we in the House legislate in this area in more and more complicated ways. No hon. Member—least of all I—would question the desirability of the new benefits, but the fact is that the more we rightly provide for specific needs, the greater the burden we place upon those whose job is to administer the benefits on which we have agreed. It is a difficult problem. The House needs to ensure that when it provides for a variety of benefits it also provides the manpower to administer them. I have heard in my own social security office about dissatisfaction over the load of work, and I am sure that other hon. Members can echo that dissatisfaction. Because the pressure of work is so great, officers are unfortunately often unable to give the personal attention that applicants require.

I hope that the manpower provision in the introduction to the Bill is sufficient. I have no means of judging whether it is, but the hon. Member for Kensington has raised doubts. I hope that we shall learn more about the position from my hon. Friend. I also wish that we could ensure better provision for voting the necessary funds to provide staff to administer the benefits.

Despite whatever criticisms I have made, I am certain that this measure will be widely welcomed throughout the country for the degree to which it sticks to the commitment made by the Labour Party during the election campaign. It is an indication that despite our economic problems my right hon. and hon. Friends believe that we should be able to care for those who are less able to care for themselves.

6.30 p.m.

Mr. David Penhaligon (Truro)

Liberals recognise that the Government have done something for many people who are at the bottom end of the income bracket. It is worth remembering today that we are discussing the position of people who could be most affected if inflation went absolutely wild as opposed to the partially wild state in which we now live.

I ask the Government to consider with some care the various indexes that are used when calculating the benefits of various groups. When prices are changing at the present rate, it is possible that the broad context approach that we now use is not satisfactory. There is little doubt that many of the people at the lower end of the income bracket have little room to fall before they reach genuine hardship.

During the debate I have been struck by the inclination to heap too much praise upon ourselves. As I understand it, in 1948 we paid a pension for a married couple of 30.5 per cent. of male manual earnings. In October 1973, after 25 years of progress, we had only maintained that percentage. It is true that at present the figure is somewhat better. During the last election many pensioners asked me "How can we get a reasonable rise?" I replied "What we really need for you pensioners is an election every six months". Of course, we have had two elections this year. I suspect that that in part is the reason for the better position of pensioners today.

According to my calculations—obviously they include some extrapolation—the percentage figure to which I was referring could drop to 31.5 per cent. by October 1975. These basic comments could be extended to many other benefits. We must ask ourselves how much progress we have made in real terms over a lengthy period.

One of the promises made by the Government which was of the most value was that they would ensure—I believe they will—that pensions and other benefits would keep up with wages or prices. They went further and said that they would keep up with whatever was most beneficial. Who in this House could criticise them for that? But why will they set no target for their pension? It is easy to make a promise of a cash payment and the day will come when the promise is kept. The way we are going, someone will promise a married couple a pension of £50 a week. Let us make no mistake about that. That day is probably not so very far away. Why have the Government not set themselves a target percentage figure?

Liberals welcome the increased family allowances. I do not think that there is enough admission of guilt from Conservative Members. It is a staggering fact that not since 1968 has there been an increase in these benefits. The point has been made with some strength that there should be an allowance for the first child. Liberals are desperately keen to see family allowances extended to the first child.

It was decided this week to subsidise yet another food item—namely, tea. According to my calculations, one-third of the money that we now spend on food subsidies could provide some sort of allowance for the first child. The rest of the money could be spent on pensions. I suggest that that would be a great improvement on the present system. That would include the real poor. I cannot understand the delay in introducing an allowance for the first child. I am sure that there are many millions of women who would help to identify the children. I suspect that the problem is finding the money. I think that the Government have a chance to solve the problem that they have created for themselves with subsidies. If the Government decided to spend that money immediately on family allowances for the first child and on increasing pensions, the money would go where it was most needed.

I was impressed by the mention of petrol for the disabled. I genuinely believe that the Government are con- cerned. It would not involve a large amount of money, and it is without a doubt a great problem for disabled people as we gradually approach the price of £1 a gallon. I now make a plea on behalf of my constituency. The Government have criticised local authorities—Tory-controlled authorities were stipulated, and with substantial justification—which will not give any relief to pensioners who use public services. I go along with that. I have spent some effort in my county in trying to get the authorities to do something to assist the pensioner in this direction, but there is a large category of pensioners who live in rural areas where there is no public transport to subsidise. Benefits are of no use to them.

The Secretary of State made passing reference to the Finer Report. It concerns about 1,500,000 people. We shall double the disregard and we are told that that should be hailed as a start to the implementation of the Finer proposals. I believe that that falls a long way short of the spirit of the report. Liberals will become increasingly critical if no further progress is made.

Local authorities have been told that they must not increase their expenditure by more than 2¾ per cent. in real terms. They have also been told with justification that they should do a far better job than they do now in implementing the Chronically Sick and Disabled Persons Act 1970 What disturbs me is that until the Bill is given totally separate finance which can be identified, the cuts which I believe will come in local social services, will result in action such as that which was taken in December 1973. I believe that they will be ad hoc cuts with no relationships from one area to another. There are some areas that have done precious little about implementing the Chronically Sick and Disabled Persons Act to date, and cuts that are made in such areas will be positively suicidal.

Liberals have always wanted a rationalised scheme. The idea of a tax credit system originated not from the Conservative Party but from the Liberal benches. According to the remarks of the hon. Member for Kensington (Sir B. Rhys Williams), it seems that we have converted one party. Liberals now look forward to the day when they have converted the rest of the House and when such a system will be implemented.

Sir B. Rhys Williams

In 1942 I collaborated in the production of a pamphlet in which the concept of a tax credit system was advocated. I do not think that that was the first occasion, but I can remember that very well.

Mr. Penhaligon

That is possible. It is one of the great things in party politics that it is possible to find a pamphlet to prove anything. The day that the tax credit system became Conservative Party policy was nowhere near 1942. In fact, it was many years after it became the Liberals' official policy.

It seems that the present system in the social services sphere is that a person will receive benefit if he collects the correct form, completes it at the correct time and in the correct manner and sends it to the correct department. The only hope that now exists of reducing bureaucracy and making many of the benefits automatic to the people to whom we all wish to see them go is to use the tax credit system. I recommend it to the Government for further thought.

6.40 p.m.

Mr. Lewis Carter-Jones (Eccles)

I shall not follow the hon. Member for Truro (Mr. Penhaligon) in his deliberations.

It was Confucius who said that when one takes one's first step on a journey of 1,000 miles, one is on the way. That is the spirit in which I accept the Bill. We have taken the first step, but my right hon. and hon. Friends will not expect me, as Vice-Chairman of the Disablement Income Group, to say "Yes" to everything they are doing. I shall make some complaints.

I am glad to see in his place my hon. Friend the Under-Secretary of State who is responsible for the disabled, because he and I agree that there are two ways in which we can help the disabled. In a strange way the hon. Member for Truro touched upon them. We can either do it by direct financial support, which is what the Bill is about, or we can provide the disabled with services. I believe that perhaps in some ways services can be as helpful as cash, because it has been proved conclusively, in a report produced by Action for the Crippled Child—"Care with Dignity"—that domiciliary help is the most important.

Although I seem to be going a long way round my argument, I want to say that my greatest worry this winter will be the non-implementation of the "Alf Morris" Act—the Chronically Sick and Disabled Persons Act 1970—because of rate demands.

A survey, published in The Times and commissioned by Action for the Crippled Child, shows that 80 per cent. of the British people are prepared to accept an increase in the rates, provided that it is for disabled people. The other problem that we face, however, is that local authorities are already talking in terms of cutting their social service staff and facilities. Indeed, it is true to say that many of them would turn to my hon. Friend and say "Why do you want us to implement Sections 1 and 2 of the Act to identify the people and the needs when we do not have the wherewithall to support and sustain them?"

Therefore, if the Department of Health and Social Security cannot impress upon the Treasury and the Department of the Environment the necessity for a greater rate support grant, my right hon. Friends should look again at this Bill. If the rate support grant cannot be increased in such a way as to specify "This increase is directed towards you, as local authorities, provided you implement the Act, because these are the people in greatest overwhelming need", for a substantial number of people this will be a grim and grave winter because of the cutting back of social services.

What point am I getting at? It is that the disabled housewife and mother, for example, will find herself in very severe financial difficulties because of omissions from the Act. My hon. Friend has promised that at a later stage it will be brought up to date. But that may be too late. We are facing a severe winter. If we agree, as I think we do, that domiciliary help is the most vital and most important help, either we give more money deliberately to local authorities to implement the Act in full and give maximum help, support and sustenance to the disabled housewife and mother, or we put into this Bill a means whereby the disabled mother looking after her child shall be given help in financial terms.

It is hypocritical if we do not admit that for these people it has either got to be services or it has got to be cash. I do not care which way it is done, whether through the rate support grant or by the other method. But I want to see the Department of Health and Social Security insisting to the Treasury and the Department of the Environment that it wants more rate support grant specifically for the disabled or, in this Bill, enabling the disabled housewife and mother to get more money.

I know that this is a difficult proposition, but I am talking about those who are in greatest need. We have to give them maximum support. Yesterday my hon. Friend and I attended the premiere of a film, "The Employment of the Disabled", produced by the Spastics Society. It was made abundantly clear that whether or not these people can get gainful employment, whether they can, as it were, earn a living and hold their heads high with dignity, depends on the amount of support the employer or others are giving. We either have to change our attitude towards employment of the disabled—which could come within this Bill—and say that we will make up to the employer the money needed to keep disabled people in open employment, or we must augment the income of the disabled who are in work.

Part of the film illustrated the problem of a person staggering around a home with a cane and walking device, causing obvious damage to his house, his clothing, his carpet and his furniture. When such a person goes out to work, he not only needs a supplement to his earnings but, because of the extra cost of disability he also needs a tax-free allowance to allow him to make and keep his life as normal as possible.

I repeat that we have taken the first step forward. I urge my hon. Friend to turn this first step into a gigantic stride, because many people are waiting on us to make that great step forward.

6.48 p.m.

Mrs. Lynda Chalker (Wallasey)

It would be presumptuous to try to emulate that speech by the hon. Member for Eccles (Mr. Carter-Jones), with every word of which I agree. I shall not seek to repeat it, but I want to make a few other comments about the disabled.

I welcome the general upgrading of benefits in the Bill, particularly because there is in it a small start towards the disablement income for which many of us are fighting. I have an interest to declare. I, too, am a member of the Disablement Income Group. All of us want to ensure that we give the maximum possible benefit to those people who are really in need. I am not saying that by the Bill the Government are not doing that, but we must view the Bill in the context of the total Government programme. If we are to devote what money we have to those in need, it means absolutely scrupulous housekeeping, and I think that we could improve the Government's housekeeping in a number of different ways.

First, I see the need for the administration of the social security system to be even more diligent in reviewing the existing very small proportion of fraudulent claims. They are a small proportion, but they exist. They bring disrespect to the whole system and cause a lot of worry and unnecessary trouble across the counter, because frequently we hear "Mr. X has got so much. He should not get it, and I should have it." The consequent long rigmarole takes up hours of the time of Members and officials. We must find some way of being more diligent in social security offices and in the administration as a whole.

This matter points to the fact that there has never been as great a need as there is now for a simplification of the system. Since I became interested in this subject—not in 1942, I regret to say, because I was just the subject of a maternity allowance then; I think we had those allowances then—I have been horrified by the number of alternative courses of action which it seems possible to take, because there are so many different benefits. If we are really determined to instil that feeling of security of which the Secretary of State spoke, we should also get rid of the feeling of mystery about the benefits and simplify the system.

It may be that a human mind cannot cope with this, but computers have taken on board many more difficult things than even the United Kingdom social security system. In their desire to achieve this feeling of security, the Government should try to do away with the mystery and many of the inefficiencies which we all know to exist. They should have the courage to change the system, possibly to a tax credit system, if we can eventually persuade the Government that that is best.

The subject which is of most importance to me is that of the disabled. I am very pleased to see the courage and determination that disabled people have shown in their continuing fight for an income—and not just for an income, but for the ability to do things for themselves and earn their own living.

Although I welcome the £6.90 non-contributory pension, I wonder why it is only 60 per cent. Will it always be 60 per cent., or will the Government progress to a higher percentage? We should not regard disabled people as less worthy of a full pension than able-bodied people who can go on working longer or until they are widowed or something like that. Will this be increased?

I have further questions about the invalidity care allowance. The £6.90 is quoted as being the amount available for caring for a disabled relative who is in receipt of an attendance allowance. What happens if the person caring is not a relative of the person cared for? Without even consulting my records in my constituency, I can think of four such people who would not get that payment because they are not related to the disabled people whom they look after.

Another group of disabled who will not benefit from this payment are the disabled teenagers. Very often, although not working, they are of working age, or as they come up to the age at which they would normally pass out of secondary school, which they probably have not been attending, they are trying to study. They have a number of additional hurdles to cross in the way of special equipment or facilities. If these people are under 16 and at home and face additional education costs, have they any hope of getting some benefit from the Government to help with their studies?

The group of the disabled to whom I naturally feel the nearest are the disabled housewives. I am glad to hear that their benefits are coming, but in many ways their need is more urgent than that of pensioners themselves. In a household with a disabled wife, particularly if the husband is also partially disabled—I have come across so many such families—that woman carries, often from a wheelchair which she is unable to get in and out of unaided, a far greater load than the Government currently seem to recognise. She faces a desperate plight in trying to care for often robust young children with whom she cannot adopt the normal motherly tactics.

If that woman employs a daily help, she has to pay 40p, 50p or 60p an hour, and in some areas she has to pay for the transport of that help on a daily basis. For her, it is not a temporary part-time help but a full-time job that she has to get someone else to help her to carry out. That could mean a cost of up to £20 a week if she tried to do it fully. Therefore, I wonder whether, in Committee, the Government will see just how desperate is the plight of the disabled housewife in carrying out normal duties.

The mobility allowance is also to come. I am a little concerned that two of the benefits that we are discussing are in the future. We know that they cannot possibly come next April, because the Secretary of State has told us so, but will they come the April after, or in April 1977? It is all a bit misty and I should be grateful for some clarification to clear away the blurred vision that I presently have about these benefits.

The mobility allowance is to be paid regardless of the individual's ability to drive. I hope that it will also disregard any question of whether a disabled person is without arms or legs. I know of several cases, which I shall shortly bring to the attention of the Minister, of drivers of adapted vehicles who can drive with their legs but who will not get the allowance because they have no arms. This seems extremely unfair.

We should also consider the cost of petrol in this respect. VAT at 12½ per cent. will hit the disabled driver harder than ever before. This is not the first time this year that I have mentioned this matter. Fuel costs for disabled drivers have quadrupled and the elderly disabled person who cannot use any of the bus passes or other public transport facilities is especially affected. We are told that the allowance is to be doubled from £5 to £10, which will go a small way to make up for the present petrol costs faced by disabled people who cannot afford them. But will even that doubling be applicable to adapted cars as well as to invalid cars? That, too, is not clear.

Will the Ministers also look at the car allowances? They have stuck at their present rate, admittedly with the free road fund licence, at a time when repair costs have more than doubled and breakdowns seem to be more and more common for those who drive their own cars.

Whatever examples of need we consider—whether one-parent families or any others—we must get our priorities right. I hope that all concerned will stop patting themselves on the back for what they have done in the past. Despite what the hon. Member for Eccles said, I am not sure whether we have even taken one step. Rather, have we just started to lift one foot from the ground—and we are the lucky ones with feet to move.

In that respect, whether we do something for the mother who is on her own and trying to cope with children—because I, too, hope that family allowances will soon come for the first child—whether we do something for the first time ever for widows under 40, or whether we persuade the Chancellor of the Exchequer to give greater tax relief for widows, all of these are only small measures. It makes those in need feel really aggrieved when they read of the likelihood of able-bodied people getting£30 a week, not in wages but in increased wages.

Cannot we wake up to the fact that there are people who, hard as they try for years on end, will never be able to achieve a wage of £30 a week in general employment? Those are the people for whom our caring society should be reorganising its Ministries and not everlastingly giving to the big and strong.

7.0 p.m.

Mr. Bruce George (Walsall, South)

The Bill may not be epoch making, some might even call it modest, but without doubt it will be greeted wiht a great deal of enthusiasm by many of the less fortunate sections of our population.

At a time of economic crisis and budgets, we seem to be preoccupied with the state of business, which is a principal concern of government. But the Govern- ment have other major concerns. The remedy of economic ills is not an end in itself. I wish to address myself to the problems of those people who, to my mind, have the foremost claim on the public treasury, namely, people at the bottom end of the income scale.

The Bill shows the Government's deep concern, even in the present economic situation, for the plight of people in what is known by some as classes 4 and 5. The hon. Member for Kensington (Sir B. Rhys Williams) called the Secretary of State heartless. My right hon. Friend does not need me to defend her from the hon. Gentleman. Perhaps she is considered heartless by some people in his constituency, but if he were to wander around my constituency or similar constituencies he would find that people view her in a different light.

The Government's measures are commendable. The hon. Member for Kensington said that he could not discern any philosophy in this Bill or in other similar Government measures. I can discern a philosophy, and it is different from the philosophy of the Tory Party and Liberal Party when it comes to looking after the worst-off sections of our community.

Mrs. Jill Knight (Birmingham, Edgbaston)


Mr. George

In the past, Governments have failed to recognise and devise a long-term strategy for eradicating poverty. Some Governments have introduced specific measures which have deliberately widened the gulf between the better-off and the less-well-off. In the Budgets of the late unlamented Conservative Chancellor of the Exchequer, Mr. Anthony Barber, the bonanza days for the wealthy were created on the backs of other sections of the community.

Some Governments make decisions which temporarily improve the lot of the poor, but the impetus appears to be destroyed. They start by taking favourable measures and become complacent, and then the people who have benefited ultimately lose. It is encouraging to see a new approach being adopted. The present Government have increased old-age pensions, introduced food subsidies, increased benefits and made a number of tax changes. I wholeheartedly support their proposal for a new pensions plan. It must be galling for Tory hon. Members to have to talk of what should be done. The present Government are taking the action, and in that respect I fully support them.

Sir B. Rhys Williams

Was the hon. Gentleman in the House when his party voted against pensions as of right for the over-80s?

Mr. George

I became a Member in March. However, I remember many other measures introduced by the Conservative Government with which the hon. Gentleman was generally sympathetic but which were looked upon by others with considerable disfavour, particularly the increase in means-testing. If stones are to be thrown, they can be thrown in other directions.

The Labour Party said in Labour's Programme 1973: We want to bring about a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families". The Bill is but a small measure towards the achievement of that goal.

The causes of many sections of the community such as the elderly and the disabled have been championed today. One must add to them the causes of the long-term unemployed and the low paid. I add my support to those hon. Members who have championed the cause of one-parent families. Here I declare an interest. I am secretary of an all-party parliamentary group working on behalf of widows and one-parent families, and I am adviser—unpaid, I hasten to add—for the National Association of Widows. There is a great deal of interest among back benchers in the situation of widows and one-parent families.

The Finer Report showed that there were two-thirds of a million one-parent families with over 1 million dependent children. It also confirmed what we already knew—that the plight of one-parent families is generally significantly worse than that of two-parent families. We must concern ourselves with the problem of the children of such families. Some children are born into disadvantage, others are plunged into disadvantage by death or marriage breakdown. One of the first disadvantages can be traced back to birth. Few would deny that infant mortality rates among various social groups differ remarkably. This is one cause of concern.

The education of children in these groups is often significantly worse than that of children in other sections of society. They may also come from areas in which housing is inadequate. These factors combine to produce considerable disadvantage for children. The Government are setting about remedying this situation.

One way of breaking the cycle of deprivation is for the Government speedily to implement many of the 230 recommendations of the Finer Report on one-parent families. Hon. Members on both sides of the House have been eagerly waiting for the Finer Report. One writer said, with some disdain, "Finer will be reporting any year now". We had waited since 1969 for the report to be published. Now that it has been published, we do not want to wait a long time for its implementation.

The Finer Report is a superb report, not only for future historians and sociologists but because it gives to the Government and Members of Parliament a programme for action. It reveals that one family in 10 with dependent children has only one parent. It paints a depressing picture of the widespread financial hardship and intense difficulty experienced by one-parent families.

The social policy for one-parent families must surely aim at providing a standard of living above the accepted minimum. But it involves much more. It involves more than increasing income and benefits. The Government must consider the Finer Report's recommendations which deal, amongst other things, with education, housing, the law, day care facilities and social work help. The report involves not simply the activities of the Department of Health and Social Security or even of other Government Departments such as the Department of Education and Science. A combined effort is required, and I hope that the Government are organising their action for implementing the Finer Report.

Modest signs can already be seen of a recognition of this major report. However, the Secretary of State has rejected, rightly in my view, the guaranteed maintenance allowance because it would perpetuate the means-testing system, which I regard with some abhorrence.

Many of the Finer recommendations involve increased expenditure. In present circumstances it may not be feasible to implement the major financial recommendations. But many of the Finer recommendations involve little or no increase in expenditure. There is no excuse for not ticking off these recommendations one by one or a group at a time.

The Secretary of State rejects a guaranteed maintenance allowance and says that the Labour Party is looking more to the extension of the principle of family allowances. Family allowances were first paid in 1946. If one wished to be academic, one could go back to the Speenhamland system, a long time before then, to find the origin of allowances for children, and even for the first child. At the end of 1946 family allowances were paid to 4 million children. I was disappointed to hear from the Secretary of State that, although the Labour Party is committed to extending family allowances to the first child, she will be making a statement on its timing and other details of the scheme in due course. Although I recognise the difficulties, I hope that the commitment in previous Labour Party manifestos will soon be translated into reality. I realise that in extending family allowances to the first child there are problems of accommodation for printing and staff, but the Government could consult the relevant organisations outside Parliament, which I am sure would work hard to induce printers to speed up and help in finding accommodation and the requisite staff.

Family allowances are a direct means of help. More than 7 million children do not receive family allowances. The time of greatest financial strain is when the first child is born. A husband and wife may have two incomes and two mouths to feed. When the first child is born, the husband is providing the only income and there are three mouths to feed. The Government recognise the case for the payment of a family allowance for the first child, and we must recognise their financial difficulties. The Beveridge Report suggested that wages should be adequate to sustain the first child, but recent events have proved this to be manifestly untrue.

I support almost everything said by the hon. Member for Wallasey (Mrs. Chalker). I go some way in supporting her remarks on vigilance in detecting abuse in social security, but vigilance should not be confined to the Department of Health and Social Security but should include the Inland Revenue, where there are more examples of abuse—

Mr. O'Malley

I should like to clear up a minor issue. My hon. Friend and the hon. Member for Wallasey (Mrs. Chalker) have both referred to abuse. The Fisher Committee, set up by the previous Government, came to the conclusion that the Department was using its resources sensibly and efficiently and was tackling the problem of abuse in a very effective manner. However, the Fisher Committee made recommendations, a substantial number of which were implemented by the previous administration, and those are still in operation. It is important that within the available manpower and financial resources the Department should keep tight control over abuse, which the hon. Lady recognised was confined to a small number of people. Action has already been taken to deal with this problem. It was begun under the Conservative Government and is continuing.

Mr. George

I concur with what my hon. Friend says. The Fisher Report gave little comfort to people who expected to find wide-scale abuse in the social security system. One can draw a contrast between abuse of the tax system and abuse of the social security system. It can be said of some people who abuse the social security system that they are struggling with great economic difficulties. It is hard for some of us here to realise how hard it is to live on an income which is a fraction of that earned by hon. Members.

I congratulate the Government on the upratings and the innovations in the Bill, and also on the measures they have taken in the last eight or nine months. These are early days yet. I hope that the impetus we have created will not be lost. We must remember that the poor do not have a strong lobby. The sections of the community of whom we are speaking cannot mount large battalions and it is, therefore. important for us to represent here to the best of our ability the people who are unable to fight adequately for themselves.

We have all been told to pull together to fight the menace of inflation. To combat inflation may be the major task facing the Government, but let us not forget that we have other objectives to achieve as well, and one of the supreme objectives is the eradication of poverty. This Bill and other measures taken by the Government are a step in that direction.

7.17 p.m.

Mr. Robert Boscawen (Wells)

I assure the hon. Member for Walsall, South (Mr. George) that the poor have a strong lobby on both sides of the House. I take a humble view of what all parties have done in the past 25 years towards helping them, but we have tried and we shall continue to try. People outside are led to take a more cynical view of the House of Commans when one party, one hon. Member or a group of hon. Members, claims to do more for this group of people than do others. During the time I have been in the House of Commons, admittedly not too many years, I have taken part in almost every debate on this subject and I have found that hon. Members on both sides of the House care deeply about these matters.

Intervening on the question of abuse the Minister of State wanted to nail that assertion straight away, and I am sure that his answer was correct. It was the answer that was given by his predecessor, my hon. Friend the Member for Somerset, North (Mr. Dean). It is widely believed that there is abuse, and a great deal more publicity and more statements on the lines of the Minister's statement are needed to persuade people that there is not. We all had experience in the election campaign of people telling us that something must be done about such and such a person who was abusing the social security services. One sometimes has to try until one is blue in the face to persuade people that that is not so. We all have a job to do in our own constituencies to persuade people that there is no wide-scale abuse, as is sometimes thought.

The Bill brings in important changes which I welcome. I regret the short period between publication of the Bill and Second Reading. There has not been sufficient time to allow much comment from outside on the merits of the proposals. I wish that there had been more time, but I recognise that the Government are in a tight spot in trying to get the benefits through by next year.

I agree with my hon. Friend the Member for Kensington (Sir B. Rhys Williams) that the Bill provides for the expenditure of a large sum of money on retirement benefits and short-term benefits and that the proportionate increases as between the two have not been fully explained. The Secretary of State for Social Services said that the proposals would involve a 16 per cent. increase in long-term benefits and a 14 per cent. increase in short-term benefits, but a slight variation in those percentages involves a very large sum of money.

We should look more carefully at the difference between the two benefits. I should like to see the Government save some of the money and spend it on some of the more needy groups. We are rather browning the target and not picking out specific groups for help, and I mainly refer to groups in greatest need.

I turn to the question of the new proposals as they affect old people and the idea of helping those who have not been able to establish a sufficient contribution record. I have in mind the category of people who are so severely disabled, mentally and physically, that they can do little or no work. Further thought should be given to this aspect of the matter.

I regard the Bill as a modest measure, but I agree that at least it is a start. We Conservatives introduced proposals in similar words, but I still regard the present measure as too modest. It is certainly a long way from our target of a disability income and leaves out categories of deserving people. Those categories comprise children under 16, at the other end of the scale people over 65 who already receive some invalidity pension, and also people who receive industrial injury benefit—but, in my view, not enough benefit—and other disablement groups. Those people are left totally outside any comprehensive disability plan.

One category which to a great extent is obviously missed from the proposals is that of the disabled married woman who is too badly disabled to look after her home and family. I am sure the House will agree that it is in those homes that the need is greatest. When one visits such homes one soon realises that they involve categories of people whom the Government should have at the forefront of their minds. I am disappointed that those groups of people will have to wait, although I am glad to hear that they will be covered later in the present Session rather than in the next parliamentary Session. I am glad that the Government intend to do something for that group of people, but I am sorry they will have to wait even through the winter.

As I understand the situation, those who receive non-contributory invalidity pension will nearly all be on long-term means-tested supplemenary benefit. Many are long-stay cases in mental hospitals. The latest figure I have been able to obtain shows that there are 306,000 people in this category.

I was a little shaken to read on page iv, paragraph 15, of the Explanatory and Financial Memorandum the following comment: The gross cost of the proposed noncontributory invalidity pension and invalid care allowance will be about £70 million and £6 million respectively in the first full year. In effect, what this means is that the net cost to the Exchequer will be only £11 million. I hope that I have underestimated that figure, but are the Government seeking by the Bill to help those people who are mentally handicapped to the tune of only £11 million? If that is so, it is most disappointing. When one remembers how quickly and rightly the Government leapt to the aid of the thalidomide families one surely must regard a sum of £11 million for 300,000 people as a small sum indeed. This is another area to which I should like to see money diverted.

I should like the Minister to deal with one matter in reply. Is the whole of the non-contributory invalidity pension to be discounted for special benefit? I believe that the whole amount should be disregarded. This suggestion was contained in the Conservative proposals made earlier in the year and would cost a great deal more. Our proposals, which included married women, would have cost about £94 million, less a sum of £10 million to £20 million—we were not able to estimate the exact amount—in relation to the reduction in hospital costs and so on. Perhaps we could be told whether this is to be disregarded in the supplementary benefit.

A large number of the 300,000 people in the category to which I have referred will be receiving attendance allowance. Is that allowance to be reduced to the extent of a non-contributory invalidity pension? I hope not, because the two schemes are widely different and have a different purpose. I hope that we shall be given a ministerial answer on this point because the allowance should be allowed to continue. Only a small number of people are involved, and the new non-contributory invalidity pension will still leave the vast majority of individuals on long-term supplementary benefit.

I should like to put in a plea for the young persons who can never work and who have no chance of ever being able to work when they reach the adult age of 16. What is to happen to them? Are they to wait the full six months before they receive the new invalidity pension, or will they have to go on supplementary benefit, or will there be some means of establishing the fact that they are severely handicapped, mentally or physically, so that they may draw the new benefits straight away when they become of age? I think that any help to that group of people would add to their dignity.

Mr. Kenneth Lomas (Huddersfield, West)

I am sure that the hon. Gentleman is aware of the number of children who have suffered vaccine damage in the United Kingdom, and of the fact that Governments of whatever party have not been able to estimate the exact numbers of these children. Does he not agree that those children and their families are just as deserving of compensation as are the thalidomide children? Is not this a subject that should be considered on an all-party basis, and should we not try to do something about the important group of people to which I refer?

Mr. Boscawen

I accept that. I have such a case in my constituency. I hope that the individual concerned will fall into one of these categories.

However, it appears that a child under the age of 16 in this situation will not get anything under the Bill. In some future legislation, I hope that he will. If he is just over the age of 16 he will be in the position that I was discussing just now. I hope that there will not be any hiatus when a child reaches the age of 16 and is obviously incapable ever of working. He should get this benefit immediately, as of right. There should be no undignified delay resulting in his having to go on short-term supplementary benefit till he qualifies for long-term benefit or for this benefit.

What about the tests of eligibility for this new benefit? Obviously, there has to be more than an adequate contributions record. Clause 6(6) is very brief and points only to the fact that regulations will be drawn up subsequently. The regulations will be exceptionally important. Upon them will depend whether this measure is a humane one or one likely to lead to an immense amount of dissatisfaction and disappointment. I hope that in Committee we shall be able to discuss regulations concerning eligibility for this new long-term benefit.

In the same breath I ask whether there is to be any dividing line between those who qualify for full benefit and those who get nothing. As the Bill is drafted it seems to me that a person gets either full benefit or nothing at all. I feel that there should be some half-way house. Possibly those with an over 85 per cent. assessment should get a higher rate and those below that a lower rate. This is a matter that we shall want to examine at some later stage.

What is the position about the earnings rule in relation to this new non-contributory invalidity pension? In my view, once given, there should be no earnings rule at all. The pensioner should be able to earn. It is vitally important that disabled people who are able to get back to work of some kind are allowed and encouraged to do so. This is a very important consideration, and I am opposed strongly to the introduction of an earnings rule on the new non-contributory invalidity pension. In any event, it would not cost very much to have no earnings rule. There cannot be many disabled people in this position. The Amelia Harris survey shows that about 4,000 very severely disabled people went back to work. I think that it would be far better to leave out the earnings rule, especially for these cate- gories of people. I might add that I am as anxious as anyone else to see the earning rule for the general retirement pension phased out as quickly as possible as well.

There is one gap in the non-contributory invalidity pension to which attention should be given. No special consideration is given to the clothing requirements of recipients of the pension. We all know that severely disabled people experience considerable wear and tear on their clothing and would find of great assistance a provision for it similar to that already given to war pensioners. Very often clothing is a very expensive item in the budget of a severely handicapped individual, and it would be a good idea to include some element in this new pension to cover a special clothing allowance.

Having said all that, and having been rather critical of the Bill, I feel that it is a milestone along the road to doing something for people who have for so long been neglected. I am disappointed that we have not gone further and faster. I am certain that the Under-Secretary of State with special responsibility for disabled people is equally disappointed that present-day economic conditions are such that we cannot move further and faster. However, the Bill is a step in the right direction. It is a painful inch, but we are going somewhere. I hope to see this sort of progress continue throughout this Parliament, in order to give a better life and more stable and satisfactory home surroundings to this group of hitherto much neglected people.

7.36 p.m.

Mr. George Rodgers (Chorley)

The hon. Member for Wells (Mr. Boscawen) has spoken a great deal of common sense. The debate has established that this is an area of common ground and that there is concern on both sides of the House. There is deep appreciation in this House, which extends throughout the country, for the accomplishments in the proposals put forward in this Bill. I suspect that they have not been easy to achieve in the present economic climate and that there has been many a fierce battle to secure the resources which have come the way of the Department. Many of us are grateful that here at least we have Ministers who are not placid by nature and who are prepared to do battle. They have demonstrated that even in hard times it is possible to make provision for those in great and often desperate need.

I welcome the two additional benefits provided in Clauses 6 and 7. The noncontributory invalidity pension will assist many people who have slipped through the net of welfare provision.

I have in mind a constituent of mine. He is a married man with two young children who for several years has been completely disabled after losing both his legs. He receives no social security benefit at all. His wife is a nurse. She has to work continual night shifts to maintain the family. During daylight hours, she has to attend to her husband, deal with decorating and gardening and look after her two young children. When I first entered this House, it seemed to me incredible that such a situation could exist. I can recognise the enormous difference that this new benefit will make to that family. It will add to the quality of their lives and remind them that they are not entirely forgotten. The impact of this payment will have a heartening effect and will lighten what must be an almost unbearable load. That burden is brought about not through villainy and indolence but by chance and circumstance. It is incredible that such families should exist today.

Similar points can be made about the invalid care allowance. Many lasses and the occasional lads have sacrificed career and prospects of marriage to demonstrate their devotion to handicapped relatives. The invalid care allowance will bring a gleam of light to what must be the very drab lives particularly of those who have chosen, because of their own inherent decency, to become trapped into an existence of unpaid nurse and companion and have so long appeared to be neglected and forgotten. The allowance will be warmly welcomed by those people who lead lives of continual quiet despair and misery.

The broad provision for improved State pensions is a further indication that the welfare of the elderly is in very good hands. There was a time when it was claimed that pensioners had no big battalions, no industrial power, and no allies in the City to plead their cause. Times have changed. Our pensioners now have a strong lobby in the Government. The trade unions—particularly the Transport and General Workers' Union with Jack Jones as its leader—have taken up the cudgels on behalf of pensioners with great effect. The Pensioners' Federation is very powerful.

I think that we all have a vested interest in reaching old age. I look to the time when pensioners' organisations are prepared to lend their weight in other directions, because there are many minority groups worse off now than the ordinary pensioner. I am thinking of the large number of low-income families, the mentally handicapped, and one-parent families.

Much remains to be done. I accept that it is political cowardice to will the ends without the means, but many hon. Members, particularly on this side of the House, insist that there is still a great superfluity of wealth in this country which can be utilised for better purposes.

I accept that this is not a matter for debate today. Therefore, I will conclude my brief contribution by thanking and congratulating my right hon. Friend and inevitably by reminding her that there is still a long grinding battle ahead before we can say that the victory over poverty is finally won.

7.43 p.m.

Mrs. Jill Knight. (Birmingham, Edgbaston)

This evening hon. Members have heaped pearls of wisdom and diamonds of advice on the Secretary of State on how she may best improve the Bill. It is to be hoped that her gratitude will excel her attendance record in this debate. I earnestly hope that the right hon. Lady will read the suggestions which are made in the debate. Of course, she has a stalwart standby in the person of the Minister of State, who I hope will listen carefully to what is said and perhaps give us some hope that our suggestions may be adopted.

I agree with the sympathy expressed by the hon. Member for Chorley (Mr. Rodgers) to the specific cases he outlined. They underline again how often the Inland Revenue could be brought in to improve the lot of people who have been disadvantaged. I am thinking particularly of the woman whose husband has been struck down with a disabling disease and who is unable to get assistance from the Inland Revenue for help in the house which she must have if she is to go out to work to support her family. If a man whose wife is disabled still goes out to work to support the family, he is entitled to tax relief towards a home help.

Would it not be a good idea for payment of the new family allowances to be dependent on a child's undergoing regular medical examination? Such a law was passed in France in 1970. I am assured that already the French authorities know that this move will drastically reduce the amount of childhood illness and disability in the next generation.

Mr. O'Malley

I am listening to the hon. Lady with interest. My first reaction—of course, I will consider anything that she suggests—is that whatever we consider must be consistent with the qualified medical manpower that is available. I should have thought that the general practitioners and the hospital system, superimposed on which is the school medical system, would, if properly administered and fully manned, meet the hon. Lady's demands.

Mrs. Knight

I may have allowed the Minister to intervene prematurely. Of course, he is right. Standard school medical examinations are undergone by all children at school. Yet the most formative years of a child's life are from birth to five years of age. I find that the majority of mothers—even good mothers—do not present their children for regular medical checks after the age of two. Had there not been that experiment in France and such a successful outcome to it, I should not be commending it to the Minister. However, I beg him to consider what we now know about the French experiment.

Research in France shows that parents often do not recognise when infants are in need of medical attention. Yet early diagnosis is absolutely vital to the treatment and prevention of many congenital childhood handicaps. I am thinking of deafness and mental subnormality which, surprisingly enough, cannot always be detected.

Mr. Kenneth Lomas (Huddersfield, West)


Mrs. Knight

Vaccine as well. I am talking of damage to children up to the age of five and of the need to locate the trouble early so that it can be treated and checked. Locomotor handicap and faulty growth of any kind, if it can be detected and treated early enough, has a much better chance of being curbed.

The French law is based on the concept of the legal rights of the child. I sometimes think that we in this country do not take enough notice of the legal rights of children. I realise that the whole question of the legal rights of children and fostering in particular, is being considered in other legislation, but until now we have not given sufficient attention to it. This is another instance where the child has a right which we could recognise more by saying to parents "We will pay you these increased benefits, but only on the basis that you can show that you have taken your child to the clinic for regular checks".

Hon. Members will quickly appreciate that there is a point here on the battered baby syndrome. I am sure that those who know the details of the numbers of children who today come into the category of battered babies recognise that it might be a good idea to have regular checks.

Mr. Lomas

I am charmed by the hon. Lady's charisma. No doubt it helps her to win at elections. But what does she mean when she refers to the age of a child? What age is she talking about?

Mrs. Knight

I am sorry if I have not made it clear; I thought I had. I am talking about the age group from birth until five years of age. After five years of age a child is regularly examined at school. In the group from birth until the age of five there is a great deal of medical evidence which could be detected if the child had regular medical checks. I shall not labour the point about battered babies even though it is extremely important.

If a mother knew that receipt of child allowance was dependent, as is now the case in France, on having submitted her child for regular medical checks, I do not think that the outcome would be any different from the French experience. It would be a good idea to do that.

I turn now to social security benefits. The Bill would be much better if it clearly laid down—I know that the Government are unlikely to agree to this—that strikers would not receive social security benefits but that their needs must be taken care of instead by the strike fund of the union which had called the strike. It would be a good thing if hon. Members understood and appreciated the depth of feeling outside the House at the fact that persons acting against society can draw funds from society for so doing.

I wish to say a further word about the abuses of the social security system—

Mr. Lomas

What did the hon. Lady's party do about that?

Mrs. Knight

I am not making a party point on this. I am saying what I think ought to be done in the Bill and what I think would improve the Bill. I would have thought that that is what parliamentary debates are all about.

When we were dealing with the question of abuses, the Minister rose to point out that it had been accepted by his predecessor as well as himself that the resources of his Department were being used sensibly and efficiently and that there was tight control over them. He said that action had already been taken to deal with social security abuses.

My hon. Friend the Member for Wells (Mr. Boscawen) said that it is widely believed that such abuses exist. The Minister feels that a great deal has already been done to tighten up control of abuses and my hon. Friend feels that, whatever is done, it is widely believed—though possibly wrongly—that the abuses exist. He said that we should help the truth to emerge.

Let us therefore examine the case of John James Barrow, of 41 Hornsey Road, Kingstanding, Birmingham. I assure the Minister that John James Barrow is no unfortunate piece of flotsam on the tide of life and that no tears need be shed for him in any quarter of the House. His occupation is that of a crane driver and his national insurance number is YA 96 31 61 B. The point about John James Barrow is that he is a modern equivalent of the old wartime man who never was.

John James Barrow, like Venus, sprang into existence fully formed, but unlike Venus he appeared five minutes before a Birmingham Evening Mail reporter entered an employment exchange in Birmingham. John James Barrow did not appear a long time ago. It is not an old story. It was reported in the newspaper in September.

I am talking about John James Barrow to indicate that whatever the Minister feels about how efficient and how tight the controls are and whatever my hon. Friend feels, John James Barrow has been reported on in the Press and he has made many people very annoyed. Having invented this identity, it took the reporter concerned 90 minutes to get the necessary papers to establish himself as John James Barrow, and for a few additional lies he found that he was to get£80 in benefits. I know the Minister will agree that this is the sort of case that greatly annoys the public.

Mr. Lomas

Very few.

Mrs. Knight

Whether there are many John James Barrows or whether he is alone I do not pretend to say, but even one John James Barrow is one too many, and he ought to be curbed. It is not only a question of the money he can get through social security benefits. Every penny which goes to a scrounger is one penny less for a deserving case.

Mr. Lomas

I appreciate the hon. Lady's point. There are between 2 and 3 per cent. of the population who are taking us for a ride. I accept that—

Mrs. Knight


Mr. Lomas

Will the hon. Lady tell me how many civil servants would be required in order to try to curb, the 1, 2 or 2½per cent. who abuse the system?

Mr. Deputy Speaker (Mr. George Thomas)

Order. When the hon. Lady rose again, it meant that she wished to resume her speech and that she was not prepared to let the hon. Gentleman continue with his intervention.

Mrs. Knight

Indeed, the hon. Lady has given the hon. Gentleman as much time as he is going to get.

If we say that we need not trouble about John James Barrow and his like and that to curb them would mean employing more workers, detectives and the rest, that would be self-defeating. Does not the hon. Gentleman see that every time we say such a thing we give encouragement for more and more John James Barrows? We have to be as certain as we can that John James Barrow is squeezed out of existence as quickly as he came into existence.

I appreciate completely the point that staffs in social security offices are extremely overworked and that it is impossible in present circumstances to send them to check on all addresses. Nevertheless, that is not my problem. My duty as a Member of Parliament is to come to this place and say what outrages my constituents and residents in my city—and that is what John James Barrow does.

Mr. Lomas

But 99.9 per cent. do not.

Mrs. Knight

It is not only a question of money. In the sort of case I have been describing, the false papers would, for instance, help a crook to get through most police checks. It would also give an identity to go with a stolen cheque book. The social security cheat can get not only supplementary benefit but money for rent arrears, possibly unemployment pay, and free travel on British Railways if he is in another town and wants to travel back home. If he is lucky he might also get a full set of national insurance cards. It might be possible to catch up with him, but by that time he will have gone off and started cheating another department.

It is simply no use saying that it is too bad and we must let it go on. We cannot let it go on. We must recognise the dangers. Every time we increase the rates of social security benefit, we make it more of a bait to those who cheat.

I am concerned not only about the question of the money but also about the identification provided by the papers that are supplied.

Mr. O'Malley

I do not recall having any knowledge of the case to which the hon. Lady has referred. Has she raised this case in correspondence with the Secretary of State, myself or the Under-Secretaries?

Mrs. Knight

I have raised it in the Chamber but not in so much detail. I hardly think that that has a very great deal to do with it. I am describing how we ought to seek to improve the Bill. Nothing is so good that it cannot be im- proved. I have no wish to prolong my speech—

Mr. Arthur Lewis (Newham, North-West)


Mrs. Knight

I will not give way. I have already given way too often. The cheats exist, and they not only get money but they get identification papers too.

I support most strongly what has been said about the need to do something for the disabled housewife. The hon. Member for Eccles (Mr. Carter-Jones) and my hon. Friend the Member for Wallasey (Mrs. Chalker) have raised this point. We listened carefully to what the Secretary of State said in opening the debate. She hinted at some point that there was to be help for the disabled housewife. I would have thought that this debate has shown that there is strong support for the cause of the disabled housewife in every part of the House.

Mr. Lomas

Write a letter.

Mrs. Knight

I rose to make a speech, not to write a letter, and I have every intention of making that speech. The plight of the disabled housewife is particularly sad. If she has children at school, has started work and is then struck down by a disabling disease, words cannot sufficiently convey what that means to that woman. Not only is she unable to help her husband and family with the work in the house but she cannot help to bring in any money. Further, the family must pay out more money for her. She is in an appalling position. I know of no worse case than the disabled housewife, and I hope that the right hon. Lady will be as good as her word and do something soon for that sad lady.

8.3 p.m.

Mr. Arthur Lewis (Newham, North-West)

I wanted to ask the hon. Member for Birmingham, Edgbaston (Mrs. Knight) a question but she refused to give way to me. I want to get this on the record. I agreee with her that any abuse of the social services is wrong. I was glad that my hon. Friend the Minister of State rose to ask whether the hon. Lady had raised this matter at ministerial level with any of the relevant Ministers. She replied that she had not written to any Ministers but had raised it in the House.

I am a diligent attender in this House. I cannot recall hearing this case and I cannot recollect having read of it. I do not doubt that the hon. Lady raised it but no doubt she raised it before last February. I have studied HANSARD since last February and I cannot recall the hon. Lady raising the subject during the period of office of the present Government.

Mrs. Knight


Mr. Lewis

I thought the hon. Lady would want me to give way. She would not give way to me. I suggest, when my hon. Friend looks it up, that he will find that this was due to maladministration on the part of the previous Tory Government.

Mrs. Knight


Mr. Lewis

I am sorry. The hon. Lady would not give way. I will not give way. She can perhaps raise it again—

Mr. Geoffrey Finsberg (Hampstead)

On a point of order, Mr. Deputy Speaker. Is it not a normal courtesy of the House that, if a personal attack is made on an hon. Member, that hon. Member should have an opportunity to reply?

Mr. Lewis

Further to that point of order—

Mr. Deputy Speaker (Sir Meyer Galpern)

Order. Let me deal with one point of order at a time. Whether the hon. Member gives way is entirely a matter for him. I would say to the hon. Member, that so far, from what I have heard of his speech, I doubt whether it is related to the Bill. That is my problem.

Mr. Lewis

You were not in the Chair at the time when the hon. Lady made a speech which was relevant to the Bill. It must have been relevant—

Mr. Deputy Speaker

Order. I observed the point at which the hon. Member came into the Chamber, which was when the hon. Lady was speaking.

Mr. Lewis

I heard the hon. Lady's references to this and I heard my hon. Friend ask her whether she had written to him or to any other Minister. The hon. Lady was allowed to raise this matter by the previous occupant of the Chair so it must have been in order. The hon. Lady said that she had not raised it with any of the Ministers but had raised the matter on the Floor of the House. I wanted to ask her a simple question, namely, whether she did so during the period of office of this Government or during the period of office of the Tory Government. But the hon. Lady would not give way and she must realise that I am doing exactly the same as she has done. She must remain seated and must not keep interrupting. Had she given way to me, I would have given way to her. She has made her speech and now must wait and see. No doubt it will be in HANSARD and I can read it there.

8.6 p.m.

Mr. Kenneth Clarke (Rushcliffe)

I hesitate to begin my speech at the point at which my hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) has ended. She has raised an important matter about fraud and the misuse of the system, to which I will return later.

Nothing ought to remind the House more of the desperate position of pensioners and others living on benefits in these highly inflationary times than the fact that this type of Bill is coming before the House with ever-increasing frequency. We are engaged in a process—and this affects a number of areas of policy—of learning to live with inflation.

My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) was quite right, when opening the debate, to remind us, and particularly Labour Members, that we ought not to get too complacent about the fact that we are adjusting to inflationary times and learning to live with inflation.

The overwhelming purpose of the Bill—it takes up by far the bulk of the expenditure—is to keep up with the ever-soaring increase in wages and prices. The large increase in benefits, in which we all take pleasure because of the need for them in these circumstances, and which the Secretary of State took pride in announcing, is entirely due to the huge rises in wages and prices which have taken place since our last uprating Bill not many months ago. While we all regard these increases as timely because of the hard-pressed position of pensioners and others, the Government and particularly the Secretary of State, are in some way taking credit indirectly for the rate of inflation.

It was not good enough for the right hon. Lady to emphasise that this is the second largest increase ever introduced into the House and to talk about raising benefits 50 per cent. in cash terms. That is largely determined by the fact that the Government are presiding over an accelerating rate of inflation. We could reach the absurdity, Heaven forbid, if this country goes over the brink and we are having to weigh out benefits to pensioners and others because it takes too long to count out the money, of the Secretary of State coming to the House talking about ever bigger percentages and ever more frequent uprating Bills showing how distinguished is the effort she is making in this area. Let us get back to the real gravity of the situation. This was underlined first in the Secretary of State's statement to the House, when she indicated that over the nine-month period which she was using for the purpose of comparison between her two upratings there had been a 15½ per cent. increase in earnings in the country and a 12½per cent increase in prices. One of our difficulties in discussing the Bill, and in trying to work out just how far we have gone in helping, is that all of us have no idea what those rates might have accelerated to by December 1975, which is the date by which the next review can possibly come into force. In fact, it is rather indicative that the Government, in revising short-term benefits in the Bill, have put them up by rather more than the increase in prices which they were using and to which they had statutorily bound themselves—14 per cent. It is our belief that they are expecting a more rapid rate of inflation still in the months ahead.

Mr. O'Malley

The hon. Gentleman, as did his right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), is making too much of the margin which is at the top of the movement in the price index. If he looks at the practice of the Conservative Party when it was in Government, he will see that similar margins were put into these up-ratings. Therefore, we are following a pattern for which there is a precedent.

Mr. Clarke

I accept that, and certainly we on the Opposition side of the House are not criticising the prudence of the Government for leaving in such a margin in these circumstances. As my right hon. and learned Friend made clear, all the later indications are that it is only too right to anticipate an acceleration in the rate of price increases during the period for which this review will be payable. But this review will be payable up until December 1975. In debating it, hon. Members ought to bear in mind that what that means is that we have no idea what the real value, in constant terms, of these benefits will be through the time when pensioners and other beneficiaries will have to live on them. Pensioners will be particularly dependent in the autumn of next year on the rates of benefit which we are now declaring. The Government have a heavy responsibility to ensure that by then the rate of inflation has not made the achievements of which they are so proud in this Bill look rather puny and very ineffective in protecting the poorest in our society.

It is because we all fear the worst in these inflationary times that the Conservative Party believes that the Government should commit themselves to six-monthly reviews, to which we committed ourselves in two General Election campaigns this year. The Government and the Secretary of State keep asserting that they will stick to the 12-monthly review period as soon as it is practicable, but they are slowly being driven by circumstances to speed up the rate of uprating Bills in practice.

The Secretary of State made a great deal of the administrative problems and the practical problems. She said that we were overlooking them in committing ourselves to a six-monthly review. But no one is overlooking them. We all know that the present Secretary of State has rather specialised so far—certainly during her early months in office—in underrating them herself, and this has caused great difficulties in the Department. I shall return later to the administrative expertise and the ability of Ministers to organise the resources of the Department.

The Secretary of State's explanation was based entirely on a difficulty that she had had in trying to shorten the period between reviews being carried out and the benefits coming into payment. We well remember how her attempts to shorten that period, in the aftermath of one election and the preparation for the next in July, led to near chaos at one stage in the administration of the national insurance system.

But that is not what we are talking about. A regular system of six-monthly reviews allows the time necessary to get supplementary benefits into payment. They take about 20 weeks to effect. A regular system of six-monthly reviews is believed necessary by the Conservative Party. This certainly could have been achieved. It is unfortunate that the Government are being driven towards it in practice while professing all the time that it was only an electoral gimmick proposed by the Conservatives.

I turn to the Bill with that sombre background of fears of inflation damaging the level of benefits and the question how adequately the Government are speeding up the machinery to cope with that.

Certainly the Bill contains some very welcome features. We have no intention of overlooking them. At this stage and in Committee we shall give praise where it is due.

First, the Government are to be congratulated on increasing family allowances. I accept that we on the Opposition side of the House were not able to do so when in Government, though we introduced family income supplement, and that was a very substantial advance. My hon. Friend the Member for Kensington (Sir B. Rhys Williams) has always urged an increase in family allowances. He congratulated the Government. It is clearly an acceptable change at present. We should all like to know—when in office we were working towards it—when the system will be extended to cover the first child with the child credits that have been promised by the present Government. At least that is one feature of our tax credit scheme which the Government have committed themselves to continue.

But I echo the words of an hon. Member opposite who said that during the passage of the Bill, perhaps even during the Minister's reply, we need some more precision about when the new allowance for the first child will come into payment. Perhaps that will give the Minister of State the opportunity of telling us more of the administrative problems which are slowing up some of the progress in his Department, but he may like to give an indication of when the new allowance is to be made payable.

Another welcome feature is the fact that what are known as the disregards for supplementary benefit are, at long last, being raised. Successive Governments must accept joint responsibility for the fact that in the pressing need to try to revise other benefits, the disregards have been left unchanged since October 1966. The hon. Member for Greenwich (Mr. Barnett) dealt with the important effect of raising the disregards of capital on elderly people living in owner-occupier houses. He chose a very pertinent case. These are being raised. So also is the disregard of income, which has stayed at £2 since November 1966. The raising of that sum to £4 is probably bringing it only to the equivalent purchasing value in 1966. The last figure that I could find was given in a reply to a Question of mine on 29th July. Apparently the equivalent figure would have been £3½51 in mid-June 1974, but I suspect that it is pretty well back to its former purchasing power.

I suspect, however, that in the neglect of the disregard over the last eight years, while it may now be going back to a position of being roughly the same as it was in 1966, the ratio of the level of disregards to the average weekly earnings of male industrial workers is still somewhat less than it was in 1966. In November 1966, when the £2 level which has operated since then was first fixed, £2 represented 9.9 per cent. of an average male industrial worker's earnings. It was very much less than that mid-way through this year. I very much suspect that a sum of £4 is nowhere near back to that very pertinent level.

These disregards are exceedingly important. It is time, whichever party is in power, that the Government got on with the job of revising them. As the Finer Committee pointed out, this matter is extremely important for one-parent families. It has an important bearing on the problem of the poverty trap. The hon. Member for Truro (Mr. Penhaligon) and other hon. Members raised both of those matters in connection with disregards. Disregards are still not back to where they ought to be in comparison with the average weekly earnings of male industrial workers.

Another matter which we should examine in Committee is the fact that since 1966 we have altered our programme in a number of ways. All that the Government have done is to double the cash value to the right flat-rate level of income. That still has a sharp effect on anyone qualifying for supplementary benefit. It has a quite disincentive effect on someone with a small income coming in if he begins to lose supplementary benefit drastically thereafter. The Minister should seriously consider whether that particular style of disregard is out of date.

The Government should look at a sliding scale for these disregards, in the way in which a sliding scale is now the practice for the earnings rule for retirement pensioners. This important matter of the poverty trap, or the poverty surtax, has a great effect and it should be seriously re-examined.

The other substantial new feature of the Bill which will take up much of our time in Committee and which rightly took up a great deal of time in this debate is the beginning of what the Disability Income Group would wish to call disability income, namely, the non-contributory invalidity pension, which we are all glad the Government are able to bring forward in the Bill. The Government have taken on our statutory obligation to bring proposals forward. Now they are putting the first steps into legislative form.

This matter was referred to in particular by the hon. Member for Eccles (Mr. Carter-Jones) and by my hon. Friends the Members for Wallasey (Mrs. Chalker) and for Wells (Mr. Boscawen), who raised important points about the disability income scheme. Obviously all those hon. Members started from the common basis of having a genuine concern for this neglected sector of our society. We trust that we shall be able to carry on the substantial work which has been done by the all-party group in the House which is interested in the welfare of the disabled and begin to introduce a proper, workable disability income scheme which will make a significant difference to the plight of the disabled.

We are anxious that the Government, having taken over our statutory obligation to introduce such a provision, will not make a botched job of it and will not create for themselves difficulties in the next two years. There are substantial criticisms to be made, and my hon. Friends have already made them. We have doubts whether in practice the Government's administrative competence will match the good intentions which were stated by the Secretary of State.

I suspect that one of the things that can be said of our social security debates is that practically every participant is a paid-up and probably a practising member of DIG, which is one of the leading pressure groups for the disabled. Most people who have been involved in the campaign for the disabled, certainly those on this side, rather expected that the beginning would be made with the disabled housewife, because her position and that of the married woman at home is particularly severe. She is totally neglected at present. The problems of this section of disabled, as the hon. Member for Eccles pointed out in a strong speech, are particluarly acute at present, and disabled housewives seemed a suitable group to start with.

I am very concerned that one of the extraordinary features of the Government's scheme and the way in which they seem to be phasing it in at present is that in their beginnings they are excluding the disabled housewife. The invalidity pension proposals in the Bill exclude married women and therefore, as it inevtably must, women cohabiting outside marriage.

This has some rather extraordinary effects which I am sure that the Government did not intend and which I fear reflect upon their administration competence to implement their intentions. It would seem from the right hon. Lady's earlier remarks that there is to be an interval between bringing in this invalidity pension on these terms and bringing in whatever the Government have in mind for disabled housewives when they are able to publish their proposals. I have gained the impression from Answers to Questions given by the hon. Member for Manchester, Wythenshawe (Mr. Morris) that the interval between these proposals for single women coming into effect and the coming into effect of any proposals for disabled housewives may be as long as two years.

If that is so, quite apart from the disappointment which will be felt throughout the House at the realisation that disabled housewives have somehow gone towards the back of the queue of the disabled rather than being at the forefront, the Government have produced a rather absurd position and one which the Standing Committee will be reluctant to allow to go forward. The absurd position that occurs to me is that a single woman, under the terms of the Bill, will receive the benefit as of right, but that benefit will cease should she decide to marry or to start cohabiting with her boy friend. For a new benefit of this kind this is obviously an absurdity which the Government should never have intended. I trust it is one which they will not press the House and the Committee to accept in that unaltered form.

As I said in a somewhat tongue-in-cheek fashion to the right hon. Lady, it sounds as though chastity is to be made the criterion for ladies receiving this benefit. It is rather like the criterion applied by Victorian husbands in the injunction they placed upon their widows when making their wills, that their widows should enjoy the benefits of the estate only as long as they did not remarry and till as long as they remained chaste.

I understand how the Government have got themselves into this position. They have decided to make this benefit payable to those who might have been in a position to work but for their disability. They appreciate that it is difficult to work out which married women and housewives would be in that position. By adopting this approach, the Government are in danger of making a nonsense which the hon. Member for Ormskirk recently attacked in the Press and one which it will be extremely difficult for the Government to defend.

Another problem—my hon. Friend the Member for Wells touched on this in his interesting contribution—is the qualification the Government have chosen for the invalidity pension—I use the language of the Bill. The criterion is that the recipient should be "incapable of work". As my hon. Friend pointed out, that has the effect of sounding like an absolute earnings rule.

As the hon. Member for Eccles pointed out, one of the great needs of the severely disabled and the handicapped is to be encouraged to get themselves into some modest work, and a pension or benefit should be designed to meet the special needs and expenses of the disabled or to compensate for their reduced earnings level.

The terms of the Bill are that this new invalidity pension is to be payable only to those "incapable of work". It would seem that anybody who is contemplating taking on some low-paid employment will disqualify himself. I hope that the Minister of State will help us on this aspect. We are trying to be constructive and to steer this provision on to more commonsense and useful lines for the disabled.

Clause 6(6) contains a regulation-making power to define exactly what "incapable of work" means. Will the Minister use that regulation-making power so to define "incapable of work" that modest earnings up to a pretty high level will not be caught? I would prefer the Government to get away from the whole idea of an earnings rule—other hon. Members, particularly my hon. Friend the Member for Wells, have urged this, too—and to try to find a much better definition of those qualifying for the benefit.

If the Government insist on having an earnings rule, it will be necessary to examine how the Minister will use this regulation-making power. As we intend to take this matter up in Committee, I hope that the Minister will place draft regulations before the Committee showing how the Government intend to use the regulation-making power, if that is the way they intend to get themselves out of the difficulty.

I am sorry to take a little time in dealing with the question of disability income, but this is a crucial part of the Bill and it occupied the time of many of those who have spoken. My hon. Friend the Member for Wallasey dealt at some length with the rate at which the new benefit is to be paid and highlighted the difficulties inherent in the way in which the rate is set out in the Bill. She shared the disappointment expressed by my hon. Friend the Member for Wells at the comparatively disappointing level of these first steps.

My hon. Friend the Member for Wallasey expressed worry, first, about the fact that the rate of the pension is only about 60 per cent. of the contributory pension. I accept that the case could be made for that, and it follows the precedent of our non-contributory pension for the over-80s. However, we are seriously concerned at the prospect that supplementary benefit rights will be lost completely by recipients of the invalidity pension, and we would very much wish that it could be disregarded for supplementary benefit purposes. If it is not, as a number of hon. Members have pointed out, it will not amount to very much in practice for many of the most severely disabled.

I share the surprise of my hon. Friend the Member for Wells that only £11 million is being devoted to this provision. I would be ruled out of order if I went on to compare that with the amount spent on tea and cheese subsidies and the cost of the proposals for nationalising various key industries. However, we have a ground for saying that £11 million represents only a modest step.

I have dealt with most of the innovations and the point of view we shall try to take in Committee to strengthen them. The remainder of the Bill is living with inflation and it is quite clear from the size of it that the system is under great strain. We must begin to wonder whether the national insurance system will match up to the test of looking after those in great difficulties at times of inflation such as this.

Another matter which will have to be raised on another occasion because I do not have time to deal with it now concerns fraud and abuse. That is causing great concern to many people. We welcome what the Minister said in reply to the hon. Member for Walsall, South (Mr. George) that the safeguards we introduced are still being applied, but it is not only my hon. Friends the Members for Birmingham, Edgbaston and Wells who are anxious to press him further on that. Perhaps as Members of Parliament we need an election to remind us how aware the public are of abuse of a system that they would otherwise like to respect. The Government need to be urged to make sure that, given all the practical difficulties, everything possible is being done to reduce the level of fraud and abuse.

We must make sure that although the system is under great strain and large sums have been put into it, inconsistencies and anomalies are not being created by the Secretary of State's uncertain hand in dealing with administration and in choosing priorities. We shall want to follow closely what was said by the hon. Members for Islington, South and Finsbury (Mr. Cunningham) and Greenwich (Mr. Barnett) and my hon. Friend the Member for Kensington about the earnings rule. As the hon. Member for Islington, South and Finsbury said, the position among the Conservatives is that we make no attempt to defend the rule. We agree with everything he said in putting strictures upon it and we wish to see it abolished. We pledged ourselves to phase it out as quickly as circumstances allowed. In case the Minister of State accuses us of becoming irresponsible in Opposition, I accept that Conservative Ministers, in his position, put forward just the argument that he no doubt will be putting forward to his hon. Friend, that no one defends the rule but that resources have to be found before it can be abolished in the way that we should all like.

In Committee we shall look closely at the four-to five-year phasing-out period suggested by my hon. Friend the Member for Kensington. I wish to follow once more the argument of the hon. Member for Islington, South and Finsbury about the choice of priorities that the Government seem to have made somewhat inadvertently between the large age allowances for tax and the abolition of the earnings rule. We for our part will not be irresponsibly pressing the Government to spend large amounts of money that we know are not available, but we shall listen with interest to the arguments put forward about the earnings rule.

I wish now to deal with the question of anomalies and inconsistencies and how we should avoid unintentionally getting the system into a muddle as it comes under great strain from inflation. I am very concerned about the question of the poverty trap, as it is coming to be called in the jargon of those journals which follow these matters. As the Minister knows, this means the serious problem where a combination of so many means-tested benefits and the incidence of taxation leave the lower paid no better off although their earnings may rise. They find themselves in the situation where for every pound they earn, they lose a great deal in tax allowances or means-tested benefit, so that they risk losing most of their additional earnings. This poverty surtax can be the equivalent of confiscatory taxation for the very poor in our society. I do not apologise for raising the matter, because it is one of those that the Government have been getting wrong from the moment they came into office.

Earlier this year the Department of Health and Social Security and the Treasury got completely at cross-purposes by raising the FIS eligibility limits without raising personal tax allowances and the tax threshold in line. They made the poverty surtax much worse. The situation was also made worse earlier this year when the Secretary of State for Education and Science raised the means-test limits for free school meals without the tax threshold being raised.

The Government are improving. This time the disregards will improve the position and give slightly more incentive to the lower paid. They have resisted the idea of clawback on family allowances. If they had not, they would have made the poverty trap much worse. But they have committed themselves to raising the FIS eligibility limits again.

The Secretary of State has announced increases in the needs allowance for rent and rates rebates. If they are carried out without proper consultation with the Treasury on personal tax allowances and tax thresholds, the Government will find that they are making people no better off and are putting a huge disincentive in the way of the very low paid increasing their earnings.

I notice that this new package comes into effect at the start of the new financial year in 1975. From that I assume that the Chancellor of the Exchequer will include in his next Budget a massive increase in personal allowances and will raise tax thresholds. It is not good enough for the Secretary of State to say that that has already been announced for the over-65s, because for the most part they are not affected by the problem of losing any increase in earnings. The Minister of State cannot say what his right hon. Friend will do in his next Budget, but I trust that he can reassure us that this time his Department is in close consultation with the Chancellor, and that the Government will get it right this time. I trust that they will not find that, because one hand does not know what the other is doing, they have unintentionally made the poverty surtax so much more serious. We hope that they will get better at that kind of thing as time goes on, and that the Minister can reassure us about some of the worrying features of the Bill.

Although there are many matters we shall raise in Committee, as we have in today's debate, we accept that in inflationary times the whole system is groaning under the strain. We realise the desperate problems of all those in receipt of pensions and benefits, who are waiting for the Bill and the increased benefits to relieve the burden of inflation. Therefore, we shall not oppose Second Reading, but we look for considerable improvements in structure, because the Secretary of State's professed good intentions are once again outstripping her competence to carry them into effect in the details of her legislation.

8.38 p.m.

The Minister of State, Department of Health and Social Security (Mr. Brian O'Malley)

I should not expect the Opposition to oppose the Bill. They could hardly do so. What I find astonishing is their impudence, particularly that of the hon. Member for Rushcliffe (Mr. Clarke), who made a speech which was long but not notable in content. It boiled down to a pile of Committee points plus a great deal of carping. I am not prepared to take criticism of my right hon. Friend the Secretary of State or of the Government's record on pensions and social security matters from any Conservative Member. The pensions record of the Conservative Government between 1970 and the beginning of this year was deplorable. When they left office the retirement pension was at a lower percentage of national average earnings than at any time since the inception of the National Insurance Scheme.

The hon. Member for Kensington (Sir B. Rhys Williams) knows something about some of these matters. He complained that the Government were not introducing family allowances for the first child in April 1975. The hon. Gentleman should not criticise this Government. He should examine the appalling record of his own Government in that respect. The late Iain Macleod made a firm promise to the Child Poverty Action Group that family allowances would be increased. That promise, made before the 1970 General Election, was not kept during the whole period of the Conservative administration.

Mrs. Kellett-Bowman


Mr. O'Malley

I will not give way. I want to make progress. The debate has gone on for a long time, and hon. Members are waiting for another debate.

The third thing that I do not have to take—from the right hon. and learned Member for Surrey, East (Sir G. Howe)—is criticism of the present Government about inflation. If any Government created the conditions in which inflation began in this country in recent years, it was a Conservative Government. We have only to consider the latest wage increase movement over the last month for which figures are available to see that a substantial part of the increase recorded is as a result of the operation of the trigger mechanism which the previous Prime Minister and his administration introduced. We do not have to take anything from the Opposition about how to deal with inflation. Their way of dealing with inflation produced the miners' strike, a three-day working week and the placing of this country on the verge of chaos. They are not in a position to start criticising either my right hon. Friend or the Government on their pensions record or on any other aspect of policy.

The right hon. and learned Member for Surrey, East, like many of my hon. Friends who made constructive speeches, found little to criticise in the Bill. He chose to talk about something else. The general attitude of the right hon. and learned Gentleman, as of so many of his hon. Friends, was that while the Bill might in itself be praiseworthy it is in some sense rendered less so because of its Labour parentage. That was an interesting aspect of the debate.

There were some exchanges about the Conservative manifesto which referred to six-monthly upratings. I am surprised that the hon. Member for Rushcliffe, who works hard on becoming knowledgeable in these matters, should have fallen into the same trap as his right hon. and learned Friend. The position is that six-monthly upratings would require no extra staff if there were almost permanent use of intolerable hours of overtime and if casual staff were accepted on a continuing basis. I do not believe that anyone in the House would be prepared to accept that situation. If, however, that approach were not adopted, there would be a need for some 2,000 extra staff within the Department of Health and Social Security.

The next point concerned uprating within 12 weeks. The Conservative manifesto suggested that there would be an uprating in January. The right hon. and learned Gentleman suggested later that it might have been early in February. To uprate in 12 or 13 weeks between announcement and implementation would require about 3,000 extra staff after they had been trained.

Mr. Kenneth Clarke


Mr. O'Malley

If the hon. Gentleman will not believe me, I do not know what kind of situation we are in. I am giving him the hard administrative facts. I am saying that this Government have made considerable progress. We came into office and brought in an uprating not 12 months after the Conservative uprating but within nine and a half months. We are prepared to make another uprating in April and another one in December next year. I do not think we have to take criticism from the Opposition about that.

Mr. Kenneth Clarke

I am disappointed that the Miinster should try to suggest that we are talking about shortening the gap between the review date and the payment of benefits. His right hon. Friend used that argument, but it is a different point. It is something that the Secretary of State tried to do and in doing so she got into a mess. We suggested six-monthly reviews. If the Minister suggests that 2,000 extra staff need to be recruited for six-monthly reviews, how many extra staff has he taken on to cope with the eight-monthly reviews that his Government have guaranteed? Why is it administratively impossible to make the slight change of two months? Is it because the idea has Conservative parentage?

Mr. O'Malley

The hon. Gentleman should not start crowding the argument. The point was whether it would be possible to bring into operation an uprating in January or February 1975. I have demonstrated, even to the hon. Gentleman's satisfaction—I am glad if I have provoked him on this matter—that it was not possible. Discussions have proceeded with the staff to avoid the difficulties which arose last July, when we took a decision which resulted in an enormous amount of overtime. On that occasion the staff, after initial problems, paid out the greater percentage of increased pensions on time.

There is common ground between the Government and my hon. Friends the Members for Islington, South and Finsbury (Mr. Cunningham) and Greenwich (Mr. Barnett). The objection to the abolition of the earnings rule is the cost. At the new level of benefit, it is estimated that the cost would be £175 million in a full year. Some hon. Members, in a hypothetical question, asked whether, if the Chancellor of the Exchequer had acted differently, money might not have been available to abolish the earnings rule.

The benefit of abolition of the earnings rule would be restricted to the 300,000 pensioners whose pensions are now being affected by the operation of the rule. If we in the Department found ourselves with an extra £170 million, we would not think it right, at a time of competing claims on scarce resources, that the whole of that amount should go to the abolition of the earnings rule. For example, the hon. Member for Wells (Mr. Boscawen) and my hon. Friend the Member for Eccles (Mr. Carter-Jones) made a strong case for further improvement in the disability benefits.

But whereas the abolition of the earnings rule would be restricted to the 300,000 pensioners currently having their pensions affected by the rule, the proposals announced by my right hon. Friend the Chancellor of the Exchequer will give relief to over 2 million people who either pay tax now or would have been brought into tax had it not been for the new arrangements.

Sir G. Howe

Perhaps I may raise a point of a non-contentious nature, because I want to be clear about the Government's position. As I recall it, the White Paper "Better Pensions" envisaged, without apparent modification, that the earnings rule should continue to apply to State pensions. I do not recall any reference in it to abolition of the earnings rule. Yet the hon. Gentleman appears to be implying that he accepts abolition as his objective. Is there any inconsistency there?

Mr. O'Malley

There is no inconsistency. The abolition of the earnings rule is a very expensive proposition. There is a large number of competing priorities. One looks forward to relaxation of the earnings rule as more resources become available. I said that the argument about the abolition of the rule is confined to the cost and no other ground.

The hon. Member for Birmingham, Edgbaston (Mrs. Knight) charmingly hid what to us were completely unacceptable and, I would say, vicious principles. I describe them as that having thought before saying it. We have said over the years that we have no intention of withdrawing supplementary benefits from the wives and children of strikers, because we are not prepared to use the starvation of wives and children as a weapon against men taking industrial action. The hon. Lady must remember that her own Secretary of State was not prepared to do it either. If she takes an easy populist line like that, she has to be attacked by those of us who take a strong contrary view and regard her views as completely unacceptable.

Mrs. Knight

The Minister should read my speech tomorrow. I did not mention the wives and children of strikers. I directed my remarks specifically to strikers and said that strikers could get benefits from their union funds once they were out on strike. There is no question of anyone starving because they are on strike. If a union calls a man out on strike, it is not vicious for society to suppose that the union should support him while he is on strike.

Mr. O'Malley

What is the hon. Lady talking about? If that is her case, she should take the trouble to find out the facts before she comes into the House. Under the supplementary benefits system and the National Assistance Board, even going back over 100 years to the poor law guardians and the overseers of the poor, men on strike have never received benefits on their own behalf. They have received benefits in respect of their wives and dependants. Neither at this time nor at any time during the twentieth century have such men on strike received benefits from public funds.

Mr. Arthur Lewis

My hon. Friend is wrong, I am sure unintentionally. As he knows, Members of Parliament can strike for days, weeks and months on end, yet they get full pay and no one says one word against them.

Mr. O'Malley

My hon. Friend is not like that; he is always here.

The hon. Lady talked about abuse. It does not help a hard-pressed system and hard-pressed officers, who are doing their best to stop abuse of the system, to speak as she speaks. I would say to her what I would say to any constituent, any Member of Parliament or any member of the public—that any of them who knows of an invidual case with individual details should send those details to the local supplementary benefits office, to the local manager, or Members of Parliament should send the details to a Minister.

I take it amiss when the hon. Lady quotes an individual case to me on which she has never approached the Secretary of State, the Under-Secretary or myself. If there are individual complaints, they should be raised on an individual basis. Witch-hunting of the kind that I saw in 1968–69 about abuse caused a great deal of unhappiness to a number of genuine claimants.

This Government are keeping not only to the letter but to the spirit of the manifestos on which we fought the February and October elections. We introduced on 22nd July the largest pensions increase since the national insurance system began. Only four months later, we are announcing another set of substantial increases, which will mean a 50 per cent. increase in pensions in just over 12 months of a Labour Government.

The Chancellor has announced substantial improvements in tax allowances and the Christmas bonus is once again being paid to all pensioners. Within nine months we have done something substantial about the level of family allowances, on which the Conservative Government did nothing in three and a half years. We have introduced two new benefits for the disabled. I agree with those who have said that we are making a beginning in a difficult field.

Of course I recognise the views of those who think that more progress should be made. My hon. Friend the Member for Walsall, South (Mr. George) spoke about one-parent families. I think he will have recognised that the Bill gives effect to the Finer recommendations on disregards, and that in addition the Supplementary Benefits Commission has implemented a number of recommendations on supplementary benefit—for example, the payment of the adult scale rate to all lone parents under 18 who are non-householders. I could quote a number of examples, and if my hon. Friend would put down specific Questions, I should be only too pleased to answer them.

The House knows of the significant contribution which my hon. Friend the Member for Walsall, South makes on these matters, and particularly on the subject of widows and one-parent families. I hope that he will feel reassured by the Bill.

Mr. Kenneth Clarke

The Minister is sailing through his speech and I know that he referred to Committee points earlier, but, on the question of disability income, does he propose to say no more than that he has listened to what has been said? I trust that he will give some guidance on the question of the timetable for the allowances, which is not just a Committee point, and on whether there will be an earnings rule, which is not just a Committee point, and on its relationship to supplementary benefit. The hon. Gentleman should assist the House with regard to what is proposed and not glide over the subject in the way that he has done.

Mr. O'Malley

I am trying to make a Second Reading speech, not a Committee speech. I have tried to deal with the major arguments which have been adduced. If there are any questions to which hon. Members want answers before the Committee stage—

Mrs. Knight


Mr. O'Malley

The hon. Lady must not shout like that. If there are any matters of detail on which it is clearly impossible for me to comment in winding up a Second Reading debate, I will consider them before the Committee stage and, if necessary, write to hon. Members and hon. Ladies about them.

Sir G. Howe

I do not want to press the Minister unreasonably and I know that there is other business that we want to get on to, but there are two points which were not made clear in the White Paper and which have not been made clear but appear to have been deliberately steered round in this debate.

First, will the new invalidity pension be offset entirely against supplementary benefits so that there will be no net increase for people on supplementary benefit? That appears to be implicit in the Explanatory Memorandum, but we are entitled to a clear answer on it. If not, how else is the cost reduced from £70 million gross to £11 million net? Secondly, does it follow from the definition of the qualifying condition that on any day that a person who prima facie qualifies for the benefit is at work, whatever he earns on that day, he will not qualify for the benefit? In other words, it looks like a 100 per cent. earnings rule. Is that correct?

We are entitled to answers to those two questions. They go to the fundamentals of public understanding of what the hon. Gentleman is saying. The fact that the point has been raised twice underlines its importance.

Mr. O'Malley

The answer to the first question is "Yes". The answer to the second question is that there are the same earnings limits as with the invalidity pension.

The Bill has been generally welcomed in the House. In view of the substantial improvement in pensions which once again is being introduced, the improvements in family allowances and the be- ginnings of a system of disability income as laid down in the White Paper, I think that it will be felt that the Government are keeping faith with the country and with the labour movement in implementing their manifestos of the February and October elections.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).