HC Deb 07 July 1975 vol 895 cc209-52
Sir George Young (Ealing, Acton)

I beg to move Amendment No. 4, in page 3, line 33, at end insert: except that that rate shall not be lower than the combined net value to a standard rate taxpayer of any family allowance and child tax allowance that it replaces'. I find it somewhat paradoxical that the House should be dealing with the Child Benefit Bill at a time when any self-respecting child, or indeed parent, is fast asleep, as are, I suspect—looking at the Government benches—many self-respecting Members of Parliament.

The Opposition make no apology for pressing again on the Government Amendment No. 4, which seeks to ensure that the Bill will actually benefit the children and the families. The amendment is more necessary now than was the similar amendment we moved in Committee because the Chancellor of the Exchequer at this very moment may be contemplating economies in the Secretary of State's budget. If the figure which the amendment aims at is not written into the Bill the consequence could be that children will actually be disbenefited and be worse off as a result of its passage.

It is important to consider the clause and the amendment in the context of the policy for families and children. The greatest asset which the country has is its children, and we must invest in children for the sake of their future and ours. Most of the investment in children is made by parents within the families, and it depends on the resources available to parents for meeting the needs of their children.

The family is the major influence determining the quality of the next generation and the family environment is dependent on the income of the parents. It is being increasingly recognised that the mammoth investment that society makes in the education of children may be frustrated by the inadequate home environment of those very same children. The quality of the next generation is dependent not only on the schools but on the homes. It is well known that a child does not do well at school if it comes from a difficult family situation. It is very difficult to separate education policy from family policy.

12 midnight.

So the family environment is determined partly by family income, and this is where child benefits come in. Rearing children is a job that requires time, trouble and patience, as I am sure many hon. Members will testify, but also fairly large sums of money, and expenditure by parents has an investment content for society as a whole. The quality of the next generation is a responsibility of families with dependent children in this generation.

These family responsibilities are at any one time very unevenly spread over the number of households. Three-quarters of all dependent children are in nearly 22 per cent. of United Kingdom households and nearly half are in fewer than 13 per cent. and more than 40 per cent. of the next generation come from a mere 9 per cent. of households. It is these families whom the Bill is trying to help, and the responsibility for bringing up the next generation is borne by a relatively few shoulders.

What is very worrying is that family units that contain dependent children generally enjoy a much lower standard of living than families without dependent children. As a country we have failed to compensate families for the drop in their incomes which follows the arrival of children. The danger if the amend. ment or something like it is not carried is that there will be a further deterioration in the incomes of families with dependent children.

The Opposition say that the Bill is an opportunity not only to tackle poverty in families but to ensure that families can achieve a standard of living comparable with that of non-parents with similar incomes. No attempt was made to refute the proposition that I put in Committee, namely, that families have had a raw deal with taxation over the past 15 years and that there is no case for singling out families with children for extra taxation, as is implied in the Bill might happen were the amendment not to be carried.

Taking 1960–61 as a base year and equating tax allowances in that year with 100; in 1975–76, the single person's tax allowances had risen from 100 to 482 and the married person's allowance to 398. The child tax allowance, by contrast, had risen by roughly half as much, For the over-16s it had risen to 203 for the 11–16s it had risen to 220; and for the 0–11s it had risen to 240. For the past 15 years there has been a redistribution of income away from families with children to the rest of the community. If the Government are proposing to load on to the shoulders of families with children the whole cost of the attack on poverty contained in the Bill, the Opposition must resist.

Not only has the relative position of these families changed, but they are entering the tax bracket much earlier than they did a few years ago. In reply to a Parliamentary Question on 17th June, I was told that a married man with three children under 11 would not commence paying tax at the standard rate in 1960–61 until his earnings reached 154.7 per cent. of average earnings. The percentage for the current year is 55.9. So the full burdens of tax are now being felt at much lower average earnings.

This is the context in which we approach Clause 5 and the amendment, which seeks to ensure that the introduction of the Bill is not an occasion that results in the further deterioration of the position of families relative to other taxpayers. After the debate in Committee, the claims which the Government had made about the beneficial effect of the Bill were looking very tatty indeed. If the Government are unable to accept the amendment, our worst fears about their intentions will be confirmed.

Perhaps I may remind the Under-Secretary of those claims. In her Press release dated 28th April the right hon. Lady said: The Government's aim in the Child Benefit Bill is to improve and simplify the system of family benefits… In Second Reading the right hon. Lady said: The scheme is, of course, potentially expensive, and the rate and thus the extent of the improvement—I emphasise 'improvement'—will have to be settled in the light of the economic prospect at the time."—[Official Report, 13th May 1975; Vol. 892, c. 335.] The House is entitled to know what the right hon. Lady meant by "improve- ment". If one consequence could be that families with children paying the standard rate of tax will be worse off, it seems to be a modest target. Of course, the Bill is described as an improvement. It is claimed that the result of the Bill will be that families will be better oil than they would have been without it.

I join forces with the right hon. Lady and say that as the Bill extends support to half a million families who have insufficient income to benefit from the tax allowances and 220,000 families who have insufficient income to make full use of the allowance, it is for them an improvement. My right hon. and hon. Friends go wholeheartedly along with that step. We were committed through the tax credit scheme to extending support to those families and to other groups of the population who would have benefited from the tax credit scheme. However, channelling these extra resources to these families involves public expenditure. This is where the right hon. Lady's problems begin.

Where is the money to come from to help the families I have just mentioned? At the moment the right hon. Lady has no money with which to bring in the Bill. I have quoted to her on many occasions the section from the White Paper which makes it clear that there is no provision in the five-year estimates for the Bill. In page 112 of Command 5879 it is said: The figures in Table 2.12 and elsewhere in this White Paper do not allow for the cost of a child benefit scheme for all children, including the first in each family, to which the Government is committed…. Additional expenditure on this scheme would be a charge on the contingency reserve. Since the White Paper was published the Chancellor has announced that there are to be cuts of £1,000 million in public expenditure. Since the Budget there have been further changes in the economic climate. The prospects of the right hon. Lady obtaining additional funds to implement the scheme are virtually nil.

I propose to assume for the purpose of argument that no additional funds are available to the right hon. Lady to bring in her Bill. If that is the case, where does the money come from to help poorer families? Where is the money coming from to help families with one child who at the moment do not receive family allowance? The answer is clear. 'The money is to come from other families, and in particular families with three and more children. The rate at which child benefit is fixed if the scheme is neutral will mean that many families will be worse off. The families worst off will be those with larger families. That is why we are entitled to ask what the right hon. Lady meant by using the word "improvement" when she described the Bill on Second Reading. If the Bill makes families with three children paying tax at the standard rate worse off, the claim made on behalf of the Bill will be rightly rejected by those families.

The amendment that we tabled in Committee was criticised because it might have been unduly favourable to those who pay tax at the higher rates. The hon. Member for Stockport, North (Mr. Bennett) and even the right hon. Lady drew attention to that. The amendment that we table on Report overcomes that objection by making it clear that we seek to safeguard the position of the standard rate taxpayer. In the course of our debate in Committee it appeared that the cost of the new benefits being introduced at the illustrative figure was about £170 million. That was the figure which the Under-Secretary of State supplied.

If no other provision is made, the extra taxation will fall on the shoulders of taxpayers with families and no one else. This goes against a fundamental principle which I quoted in Committee and which I think the Under-Secretary of State accepted. It was set out in the evidence of the Tax Credit Study Group to the Select Committee on Tax Credits. It said: If it is desired to achieve a given amount o; vertical redistribution by giving help to families with lower incomes, the cost of this should be shared equitably among those who have higher incomes. There could be no justification for placing the burden of helping poorer families with children wholly on those more well-to-do families who have children … Later the Committee said: In other words, it would be wrong to make a redistribution in favour of poorer families the occasion for a relative worsening of the position of better-off families with children as against equally well-off single people or married couples without children In the debate the Under-Secretary of State seemed to accept the logic of the argument. He conceded that it would be inequitable to restrict the cost of the measures—measures which we all welcome—to one section of the tax-paying population. He put forward two arguments for resisting our amendment in Committee. One was that if one undertook to leave the higher income tax payer no worse off, the level of benefit would have to be very high. We concede that point, and our amendment seeks only to safeguard the position of the standard rate taxpayer. It is worth remembering that a married man with three children pays tax at standard rate when he earns over half the average earnings. That is the wage earner whose position we seek to protect.

Secondly, he said that it was impossible to give the assurances we sought because questions of public expenditure were involved, delicate negotiations had to be conducted and, as a result, no commitment could be given about the level of benefit.

If that is the case, that argument flatly contradicts what the Secretary of Stae said on Second Reading when she described the Bill as an improvement, and in Committee when she said that the Government were producing the Bill against a background of systematic advance over the whole field of provision for children…"—[Official Report, Standing Committee A, 24th June 1975, c. 159.] How can the Government make these extravagant claims about their Bill if, in their next breath, they say that they are very sorry but one consequence of the Bill could be that a man earning about £35, with three children, could find himself worse off after the legislation is brought in? If we are to safeguard the position of that man, they must accept our amendment or something like it.

I appreciate that the Minister is in a difficult position. He says that the whole of the structure plan will lead to a more rationalised system by which the Government will find a better way of channelling resources to those who need them. But a consequence of the new structure is that additional funds go to one sector of the population—those with insufficient income to claim child tax allowances.

In the absence of additional public expenditure, those funds can come only from other sectors of the tax force who happen to have children. Those taxpayers have already had a raw deal over the past 15 years. Their tax allowances have not been reviewed as generously as have the allowances of single people or of married people without children. It is a gross inequity to load the cost of the scheme on to those people.

Surely the Government should have thought out the implications of this structure, or at least when introducing such a scheme should have ensured that they had adequate funds. The object of the amendment is to try to protect the situation of such a person and to bring home the consequences of the Government's shortsightedness in trying to introduce a structure after they have run out of funds in their Department.

12.15 a.m.

Mr. Ian Stewart (Hitchin)

I wish to speak in support of my hon. Friend the Member for Ealing, Acton (Sir G. Young) who moved the amendment with great cogency. There were others in Committee who endeavoured to obtain some more specific comments from the Government about the financial implications of the commitment. I wish to thank the Minister for the letters which he sent me on a number of points.

With any structure plan there is inevitably a difficulty in that we have to consider abstract principles of a system which will be assessed properly only when the rates and details are eventually declared. I accept that situation. Nevertheless we need to know a little more about the specific comments which have already been made by the Secretary of State and other Ministers in Committee.

It is a little unfair, I agree, to ask the Under-Secretary of State, who was carrying the Industry Bill single-handed on his shoulders—if he will excuse the mixed metaphor—at the time when this Bill had its Second Reading, but since he has shown himself to be assiduous in answering some of my questions, perhaps I may elaborate and add some precision to one or two of those on which I am still not satisfied.

The point goes back to this remark of the Secretary of State on 13th May when she said: The scheme is, of course, potentially expensive, and the rate and thus the extent of the improvement—I emphasise 'improvement' —will have to be settled in the light of the economic prospects at the time"—[Official Report, 13th May 1975; Vol. 892, c. 335.] The use of the word "improvement" was not an accidental insertion into those remarks. It was a deliberate, carefully thought-out remark, because she said "I emphasise 'improvement'", and she related improvement to her discussion of the rate at which the scheme would be brought in. Therefore, we are in some difficulty.

I tried to obtain from the Under-Secretary earlier some indication of what this improvement would be and to whom it would apply. I received a rather curious answer. I must hasten to say that the Under-Secretary delivered it in the most civil manner, but when one reads it in print it strikes one as a little odd. He said: I cannot give the hon. Gentleman the precise assurance as to the impact on any particular standard rate taxpayer. In no way do I think that is a statement he ought to be concerned about."—[Official Report, Standing Committee A, 26th June 1975, c. 266.] It seems to me to go to the heart of the question that we are discussing. If we are to have an improvement, it must be an improvement for someone or for some body of people. If it is an improvement on rate, the improvement cannot relate to the fact that this is being extended to a different group of people by adding in a benefit for the first child. Therefore, if this improvement is on the matter of rate, which group of people will receive some benefit because of this improvement?

Secretaries of State do not normally make carefully thought-out remarks which they then emphasise by repeating them unless they have specific grounds for doing so. Before the Secretary of State made that remark about the improvement which was related to the rate, she must clearly have considered precisely what she meant by that statement. One does not make such statements if one is in a position of authority, unless one has thought out the consequences and analysed carefully who will be the beneficiaries of that improvement.

It occurred to many of us that these improvements might be related to other aspects of the scheme. It might be something to do with differential benefits or age-related differentials, or it might have same regard to the retention of some residual child tax allowances. But, as the Secretary of State put it, it related to the rate. I accept that in the Second Reading the figure of £1.94 was purely illustrative. We accept that we cannot take that as a commitment. It was purely illustrative of what the rate would be if one did a direct conversion of child tax allowances plus family allowances and allocated the child benefit in a simple arithmetical way. But that does not give the improvement.

The question that we ask the Government again tonight—because repeatedly in Committee we were not given any clear answer to this point—is what does that improvement mean? The Under-Secretary was kind enough to state clearly in his latest letter: I fear it is impossible to give any precise quantifications or assurances at this stage,"— This was in relation to the improvement position referred to by the Secretary of State on Second Reading— since there is no decision yet on the rate of benefit at introduction. But surely in order to make a statement about an improvement, one must first of all decide irrevocably on a minimum rate, otherwise one cannot make a statement like that.

If the position is that in changed circumstances or on reflection the Government have decided not to commit themselves to any improvement, they should be honest and say so. Is this a weaker or an abandoned commitment; or have we repeatedly failed to understand to what the improvement relates? I hope that the Under-Secretary will be able to enlighten us further.

The Under-Secretary of State for Health and Social Security (Mr. Michael Meacher)

I recognise that the purpose of the amendment is simply to ensure that there is a minimum rate of benefit which is precisely quantified to ensure, as the hon. Member for Ealing, Acton (Sir G. Young) said, that there should be no family and no children worse off. I agree with the hon. Gentleman's opening remarks about the importance of protecting family finance, particularly in current economic difficulties, in view of the importance of the quality of the family environment in terms of the bringing up of children.

There can be no question that families are to be singled out for extra taxation as a result of the Bill. I agree with the hon. Gentleman, as I indicated in Committee, that in terms of equity, if there are extra resources to be made available, of course single persons and married couples without children should pay their proper share towards making provision for such extra resources.

Having said that, I should make it clear also that there is a combination of factors in determining the rate of which the hon. Gentleman is fully aware but to the implications of which I should draw attention. First, the child benefit, when it is introduced, is to be a flat-rate benefit and the same amount is payable to every child in the family. Secondly, it is the case at present that family allowances are not paid for the first child in a family, nor are child tax allowances paid below the tax threshold. This means that the flat-rate benefit required to ensure that the standard rate taxpayer is not worse off does not have to be fixed at a level which compensates both for child tax allowance and family allowances for every child.

Perhaps I could make this clear in terms of very simple rounded figures. If the first child were to receive benefit of £1 and the second and third children were to receive a benefit of £2 each, the flat rate per child needed to ensure that the family was no worse off would not be £2, which would be the implication of the amendment, but £1.67.

Perhaps I could make this clear in terms of the actual finances which apply. My right hon. Friend the Secretary of State gave illustrative figures on Second Reading—which have already been quoted in the debate—about the level of child benefit at neutral cost. It would be based on the lowest rate of child tax allowance—namely, that applicable to children under the age of 11, whch is £240 a year, residual child tax allowances also being retained for the older groups. This would fix the level of child benefits, as hon. Members recognise, at £1.94.

If we were to make the same assumptions about a family in the same situation, the amendment would require a level of child benefit of £2.24 per week. That is slightly different from the figure which was given to the hon. Gentleman in answer to a Parliamentary Question on 23rd June and which he quoted, because he there asked that no family should be worse off, whereas the point of the amendment is that no child would be worse off. The figure works out at £2.24 a week.

The net cost of this would again be slightly more than the hon. Gentleman's figure of £170 million, for the same reason. It would in fact be £190 million. The additional cost of this is merely a reflection of, first, paying the net value of family allowances to a standard rate taxpayer for the first child in every family, which is 62½p a week, and, secondly, paying to families below the tax threshold the value to a standard rate taxpayer of the child tax allowance for a child under 11. which is £1.61½ per week.

That is the position the amendment would create. The hon. Gentleman was wise enough to make clear that he recognised—though this has been said somewhat sarcastically in Committee—that this is a structure Bill. It is too early for us to be certain what the rate will be when it is introduced. I can say that the Government will not be satisfied with anything less than the maximum amount consistent with the overall public expenditure position at the time. In the current rather unusual position, we cannot make predictions of the public sector borrowing requirement or the level of public expenditure nearly two years ahead. As far as is consistent with the public expenditure position, we intend to achieve an improvement in the neutral cost position. I cannot say at what level the benefit will be introduced.

To the extent that we manage to bring about an improvement for each child over and above the neutral cost level, we shall be moving towards the amendment. The benefit will include children who are not covered by family allowances or child tax allowances. Accepting the amendment would necessitate a substantial increase in public expenditure. I cannot accept the amendment, but I hope that we shall be able to move some way towards it in future.

Mr. Kenneth Clarke

The debate has drawn attention to the difficulties of discussing a structure Bill—and I do not use that phrase sarcastically—in the absence of any idea of what the rate of benefit will be when it is finally introduced in 1977. The debate has also revealed the terrible position Ministers are in, and the Under-Secretary has had to use the most tortuous phrases to encourage us to have hope while making it clear that he was not committing the Government to anything.

We welcome the way he accepted from the start our case that it would not be right for this new help for poorer families to be financed by taking away solely from the better-off who also have families. This is a fear we have had throughout the Bill's proceedings, but the Under-Secretary has now said that, if one is to improve the position of families as proposed, single people must pay their share.

Is he accepting, by that that, although neutral cost is important for illustrative purposes, it is scarcely conceivable that the Government will in fact introduce at neutral cost if it is to be of help in any way for those people below the taxpaying level? It would follow from this situation that tax rates for everyone would be raised to produce the finance to produce a somewhat higher figure than the £1.94 used in Second Reading.

12.30 a.m.

If it is proposed to finance any help for families in need, the expression that single people must pay their share must imply a raising of tax rates for everyone if there are public expenditure difficulties. That leads to the main point of concern of what was meant by the Secretary of State when she used the careful phrase which referred to "improvement" being embodied in the Bill. It was in explaining what that might involve that the Under-Secretary got into most difficulties. If the right hon. Lady is to use such phrases, she must follow them un in the House. When she gave a Press conference upon publication of the Bill she said something which has deepened the mystery. in The Times on Tuesday 29th April under the byline of Pat Healy, the respected social services correspondent of that paper, was a story which, referring to the level of rates, read: Mrs. Castle, Secretary of State for Social Services, declined yesterday to say how much mothers will get, but said families would be left no worse off than under the present system of family allowances for second and subsequent children and child tax allowances for all children. That implies that the benefits will be at least £2 a child. At present, a family with three children under 11 receives a net benefit of just over £6 a week. I read the second paragraph as being a comment by the correspondent, but there seems to be a direct quotation from the Secretary of State that families would be left no worse off than they are with family allowances in respect of second and subsequent children and child tax allowances for all children.

The implication from the Secretary of State's statement is that £2.03 will be the operative rate, and I can only assume that the Secretary of State said that at the Press conference and that this is her understanding of what the benefit for each child will be. It is therefore curious that no provision was made for that in the Government's published estimates on public expenditure. If the Under-Secretary can intervene again we should like him to explain what the Secretary of State has in mind. Is what she said at the Press conference still operable?

We might be in some difficulty in working out the future position of standard rate tax payers in view of the complication of child tax allowances. The Minister said that it was explained on Second Reading that the situation was based on the assumption that child tax allowances would be retained in the case of children over the age of 11. It would simplify matters if he would spell out that this is the Government's intention. As a first step, will the child tax allowances be paid in respect of children below 11, and is it expected that there will be a residual tax allowance for children over 11? That would have some bearing on the position of some families because for the standard rate taxpayer child allowances are more valuable in the case of older children.

Sir George Young

By leave of the House may I say that the Under-Secretary is in a terrible difficulty? In the face of all the arguments we put forward he must have felt that he was back in the Standing Committee examining the Industry Bill because he was left alone totally abandoned by his hon. and right hon. Friends on the Treasury Bench. He made one significant comment. He said that it is not his intention to single out families for taxation in connection with this Bill. If that is the case, if the burden is to be borne by other sections of the community, the Bill cannot be neutral. There must be some injection of public expenditure from somewhere else. This means that the estimates in the White Paper have apparently been thrown overboard.

The Minister was unable to give any undertaking that any section of the community at any income level would be better off as a result of the Bill. In introducing the amendment I mentioned the case of the married man on £35 a week with three children and I said that he could be worse off as a result of the Bill if it were neutral, and the Minister is not able to hold out much hope for people in that position when the Bill becomes law.

We do not question the motives of the Government in introducing the Bill, but they have committed themselves to a structure the consequences of which they have not foreseen. They have not learned the lesson of the Select Committee on tax credits which found it was essential to pitch the level of the cash benefit at a fairly high level to ensure that no one was worse off. The Government are going ahead with the structure without having made sure that the necessary funds, which appear to be £190 million, are available.

The Minister asked the House to believe that funds which were not available in February, because they were not included in the five-year forecast, and which will not be available when the Chancellor of the Exchequer has finished with his announcements in the next few days, will somehow be available between now and 1977. The hon. Gentleman is asking the House to believe a lot if he expects us to think that funds which had no priority in the Government's latest statement on finance will be found within the next 18 months. The Minister's speech was hedged around with conditional clauses and qualifications, and families who are following the debate will be disappointed that he was unable to give an assurance that they will be better off as a result of the Bill.

We leave the Minister in his embarrassment. We do not propose to press the matter to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Sir George Young

I beg to move Amendment No. 5, in page 3, line 33, at end insert 'and different rates shall be prescribed from 5th April 1979 for—

  1. (a) a child aged under 5 years;
  2. (b) a child aged under 16 years and over six years;
  3. (c) a child aged more than 15 years'.

Mr. Deputy Speaker (Mr. Oscar Murton)

With this we are to take the following amendments:

No. 6, in page 3, line 34, leave out 'may' and insert 'shall'.

No. 7, in page 3, line 36, at end insert 'as from a day to be appointed by the Secretary of State'.

Sir George Young

It is a matter of some surprise to my hon. Friends and myself that we find it necessary to press the question of age-related benefits again on Report. In the evidence to the Select Committee on tax credits and on Second Reading there was unanimity that child benefit should be related to the age of the child.

My hon. Friends and I were dismayed at the negative performance of the Government Front Bench in Committee and at the agile somersaults performed by Government back benchers. The hon. Member for Stockport, North (Mr. Bennett) said: … it is essential to build into the Bill at this stage the principle of age-related benefit. A few minutes later the hon. Gentleman cast his vote in such a way as to ensure that no such thing ever happened.

The hon. Member for Walsall, South (Mr. George) said: …we believe that some element of reality and certainty should be injected into the clause."—[Official Report, Standing Committee A; 19th June 1975, cc. 81–87.] The hon. Gentleman developed his case which he described as unanswerable, and likewise when it came to a Division he voted fearlessly with the Government against age-related benefits. The performance of the Government Front Bench, while it at least had the merit of consistency, was equally discouraging, and I shall return to that in a moment.

The case for relating the amount of benefit to the age of the child is overwhelming and I do not propose to spend long on it as the Government have made clear that in principle they accept it. Clause 5(2) gives the Government specific powers to bring in age-related benefit and it is unlikely that they would seek such powers if they did not intend to use them.

Supplementary benefits have six different levels for children, rising according to age, and this is logical as the cost of bringing up a child is closely correlated with its age.

The tax allowances also reflect this, through the three rates of child tax allowances, again rising with age. Evidence to the Select Committee which dealt with tax credits also supported age-related benefits and no voice I know of has been raised to say that we should not have them. The need for Amendment No. 5 arises from the Government's reluctance to build age-related benefits into the scheme at its inception and from our own fears that if they are not built in at an early date they may never be introduced.

We were also dismayed that in Committee the Government gave no indication of their thinking on the details of the scheme. Members on the Committee did a certain amount of research into the subject and we were assisted by "Equivalent Scales for Children" which is not an educational toy, as some hon. Members may think, but a paper of monumental complexity by Mr. Maclements, an econometrician who talks not in sentences but equations and whose name is engraved on our memories even if his work is not engraved on our minds.

The important points to be resolved in Committee concerned the number of categories there should be, which ages should be included in them and what the relative benefits were to be. Various amendments reflected various views. The Committee looked to the Government to share with it their thinking on these important subjects, which have been examined by the Department since 1946 and on which the Department is known to have done a lot of work.

We were grievously disappointed. When the Minister replied he relieved himself of a party political speech dealing with inflation in the developed countries, the lobbying activities of outside organisations and the Treasury's borrowing requirement. A few minutes from the end of his speech, as reported in column 99, he addressed himself to age-related benefits. He readily conceded the principle. He told us how long he had believed in it and said not a word about the central matters raised in the debate, namely the number of categories there should be and the relativities between them.

The Department has the information because it pays age-related benefits on account of the children of those on supplementary benefit. The excuse the Minister gave in Committee of needing more information was totally unconvincing, as the Committee sank beneath the weight of Mr. Maclement's calculations. In not offering any constructive criticism of our amendments the Minister failed to display his normal courtesy to the Committee. Simply to say, as he did that he would get round to it at some point in the future, was no excuse for not addressing himself to the positive points put in the amendments, the principles behind which he so readily conceded.

The reason why the Minister was reluctant to move became clear by accident after an intervention by my hon. Friend the Member for Rushcliffe (Mr. Clarke). The Minister clearly believed that our amendment involved a sizeable increase in public expenditure. He was quickly disabused of this by my hon. Friend. The Minister then said: So, what the hon. Gentleman is suggesting, which is certainly not what would be acceptable to my hon. Friends, is that, assuming one has a total, global sum to distribute at the outset ֵ one should have a lower base level of child benefit in respect of some people."—[Official Report, Standing Committee A, 19th June, 1975; c. 95.] This is precisely what age-related child benefit is—a lower base level of child benefit in respect of some people and a higher base level in respect of others.

When the Minister said that he accepted the principle of age-related benefits he inevitably accepted that some people will be worse off because they have younger children and others will be better off because they have older children. If it is believed that the support which Governments give to families should be related to the age of children it inevitably means altering the existing pattern of benefits, which are not based on that principle.

We readily concede the point made by the Minister in Committee that if we introduce age-related structures at the inception of the scheme and have no extra funds, we shall make a few families worse off than under a non-age-related scheme. We believe that the price is worth paying to get the structure right.

The picture is not nearly as black as the Minister painted it in Committee when he said that many people would be far worse off than they would otherwise have been. Those with only one child under live who would stand to gain least from an age-related structure will gain anyway as the Bill gives them child benefit for the only child, whereas family allowances did not cover them. Second, those families with more than one child will, in the majority of cases, have some children over five who will be benefiting from a higher rate. Third, any loss suffered by a family in the initial years is compensated for in later years as the child grows up. Over the operation of the scheme there is no loss to families but instead a considerable benefit because they get the money when they need it.

12.45 a.m.

The Minister mentioned as another reason for delaying introducing age-related benefit the possibility of introducing other refinements at the same time, namely, a higher rate for the first child and having different rates for very large families. The Opposition accept that there is a case for both these refinements, but they are separate from age-related benefits, which are already a feature of our legislation. Adequate research has been done already and their introduction should not be delayed while work is done on other matters not connected with the issue.

On Standing Committee A over the years we have come to recognise one argument as absolutely irrefutable, namely, the Minister's "technical reasons" argument, which he develops at length. For technical reasons, we are told, age-related benefits cannot be introduced in 1977 when the scheme starts and will have to wait until 1979. This has to do with the programming of the computer, and we accept, reluctantly, this mechanical constraint. Our amendment refers to 1979 as the year of introduction of age-related benefits.

Therefore, we believe that the Government have not shown the determination that they should have shown. They concede the principle. We are giving them four years in which to do any sums which need to be done and to programme their computer. This is adequate time. If the Government resist because the transition to age-related benefits involves a redistribution of income from families with younger children to families with older children, they will never introduce child benefits.

We hope that the Government will accept the case pressed on them by Lord Kaldor, Professor Brian Abel Smith and the Women's National Advisory Committee of the Conservative Party, whose advice they ignore at their peril, and will announce that age-related child benefits will be introduced by 1979, though it will be a Conservative Government who have the pleasure of implementing them in that year.

Mr. Andrew F. Bennett (Stockport, North)

I find the comments of the hon. Member for Ealing, Acton (Sir G. Young) odd, as I found them odd in Committee. He suggests that the case for age-related benefits is overwhelming and puts a category in the amendment. In Committee he suggested a different category. I am puzzled about what would happen about the five-year-old child, because the categories he has picked out are those under five and those over six up to 16. I do not believe that there is an overwhelming case for saying that the category should be under five, five to 16 and over 16, but I believe that there is a strong case for saying that there should be age-related benefits.

It emerged in Committee that there was still a great deal of work to be done on deciding exactly where the boundaries should be drawn and how much emphasis should be placed on such factors as the amount to be paid for the first child. The Department made out a case showing that the child under five years of age costs much less than the child of 16 or 17. But we have other conflicting evidence suggesting that the children who live in most poverty are young children and that perhaps because the wife's earning capacity ceases with the birth of the children or because the family may not have accumulated many resources they have greatest need.

There is therefore a reasonable case for the Government carrying out more research into these aspects, first, to decide what weighting should be given to the first child and then to decide how many categories are appropriate. I hope that we shall have differential rates for different age groups and possibly for the first child. In particular, I urge the Government to consider Amendments Nos. 6 and 7 which take their commitment a little further by going from "may" to "shall" and then going on to the appointed day. I should much prefer to see provision made for a particular date, but there is a case for accepting the traditional approach in legislation of this type and, instead of putting the date in the Bill, including it in a later order. The Government should report to the House fairly soon—certainly before April 1977—on the progress, their research and their proposals for differential rates. Having agreed to report to the House, I hope that the Minister will give a commitment of his firm intention to introduce differential rates from April 1979.

I hope that the Government will accept Amendments Nos. 6 and 7.

Mrs. Margaret Bain (Dunbartonshire, East)

My party supports Amendments Nos. 6 and 7.

Older children are more expensive to look after than younger children. I understand that the Government believe in the principle of radical egalitarianism so that working-class parents can give their children the opportunity of a full education beyond the normal school leaving age. This is a category with which I am deeply concerned. Within the State comprehensive education system, grants are available to working-class parents if their children stay on at school after school leaving age. The children queue outside the headmaster's study for forms, after which the children get together and ask how much each was given following that session. As a result, working-class children feel different from the rest of their colleagues at school.

The cost of educating a child who stays on at school after the school leaving age is high. I refer to expenses incurred for school uniform, a blazer and skirt for a young adult, theatre and cinema trips, and visits abroad, which are part of full-time education and which are necessary if these youngsters are to enjoy equal opportunties.

Many children take part-time jobs delivering milk and newspapers or Saturday jobs. However, it is not easy for them to find employment lucrative enough to compensate parents for the fact that their children are receiving full-time education. It is not always advisable for these children to take employment out of school hours as they fail asleep during school hours and are unable to cope with their lessons. As an ex-teacher I am aware of that problem.

The parents of children who stay on at school after school leaving age, especially working-class parents, should be given as of right an allowance to enable them to afford the education which they desperately seek for their children. Far too often parents have to make a choice between sending their children out to employment or allowing them to continue with full-time education. The age-related benefit is important in that case.

Dr. Keith Hampson (Ripon)

The third report of the Expenditure Committee in 1974 drew the attention of the Minister to that problem. It recommended educational maintenance allowances for the 16–18 year old age group and covered the points mentioned by the hon. Lady. I wonder how often State Departments co-ordinate their activities.

Mrs. Bain

That is similar to the allowances which are available to the children who stay on at school after leaving age and who must stand in the queues outside the headmaster's study and be subjected to questions about their fathers' employment. That leads to a division in society which those of us who believe in radical egalitarianism wish to abolish.

I hope that the Government will assure us that age-related benefits will be available to all people in our society.

Mr. O'Malley

The hon. Member for Ealing, Acton (Sir G. Young) does not listen to me. His speech was an almost exact repetition of what he said in Committee. I enjoy debates even when there is some repetition, but I am rather less tolerant of repetition at five minutes to one o'clock in the morning. My hon. Friend the Member for Stockport, North (Mr. Bennett) effectively answered the hon. Gentleman, and there is little I need say in addition.

There is strong support on both sides of the House for age-related child benefits. There is a strong case to be made for a system of earnings-related child benefits. Indeed, the very existence of the system from which we are moving to a child benefit structure makes it the easier option in terms of the development of such a structure. When we start a flat-rate system of child benefits we shall be left with residual tax allowances. They are residual because of the age grading in the child tax allowance system. It is, therefore, perhaps the simplest option to move towards age-graded child benefits. There is a strong case to be made for those benefits in their own right, even if age-graded child tax allowances had never existed. There is nothing between the two sides of the House on that matter, and we recognise the strength of the case.

There is also a question to be asked about the position of the first child. On the birth of the first child the mother has to give up her employment and there is a loss of income. In addition, money has to be found for the bringing up of the child. That subject needs to be examined in detail. Secondly, we must consider the position of very large families.

It is essential that public resources should be deployed in the most sensible way. We all recognise that public resources, certainly within the next few years and perhaps permanently, will never match the demands for improvements in benefits and public services generally. The Department is engaged upon a detailed exercise of examining the major areas of child poverty. I am not twitting the hon. Member for Ealing, Acton, when I say that there is already an impressive amount of published literature on this subject, and I recommend examination of that literature to hon. Members on both sides of the House. It indicates that, although there is a strong case for age-related benefits, there is also a case for differential child benefits in other circumstances. It is sensible to pursue the researches that are going on and to decide nearer the time how the then available public resources can be used most beneficially.

I understand the wish of the House for the establishment of the principle of variation in rates of child benefit. All we have said in Clause 5(2) is that different rates may be prescribed.

1.0 a.m.

The Government accept the principle of a variation of rates in child benefit, but varying rates cannot be introduced before 1979. The Government consider it better to await the results of the studies being made within the Department before deciding on the fairest method of distributing among families the resources available for child benefit. However, I am certainly prepared to accept Amendments Nos. 6 and 7 in the name of my hon. Friend the Member for Stockport, North as a means of providing reassurance, not just to the House but to interested organisations outside, that it is not intended to continue with flat-rate benefit indefinitely. On the contrary, the Government intend to develop benefits within the limits available under the public expenditure programme as a flexible means of bringing help to particular categories of families.

The amendments as drafted are defective. I understand that the draftsmen will need to improve on my hon. Friend's efforts. But I am prepared to accept them this evening hoping that my hon. Friend will understand that they will need revision in another place. I will take into account his view about 1979 and consider it before the Bill is considered in another place.

I understand very well the case put by the hon. Lady the Member for Dunbartonshire, East (Mrs. Bain) about the older children. That is one reason why I made my comments about age grading. I, too, have been a teacher in a working-class area and I know exactly the problems that she mentioned. I hope that the House generally will feel that by accepting my hon. Friend's amendments the Government are showing good intent and that we shall make this variation in rates. But it would not be sensible, in the light of the limited available public resources in the next few years, when we are not certain of the best way in which to use those resources, to write any provision into principal legislation or regulations.

Mr. Kenneth Clarke

Will the Minister confirm that there is no need for this Amendment to have any effect on public resources and that his last comment is rather beside the point?

Mr. O'Malley

I know that the hon. Member for Ealing, Acton said that, but, in spite of the hon. Member's denial, my comments remain true. If we begin with a limited amount of public expenditure and divide up the available amount in a different way from the flat-rate system, a number of families will be affected. If one exactly matched the flat-rate benefits now existing, one could devise an age-related scheme in which the hon. Member's comments would be justified, but we are four years away from that. I do not use the public expenditure argument against the hon. Member. I merely say that in terms of priority and using the limited available public resources, we should be sure of our ground before we act in principal legislation of this kind.

Sir George Young

The hour at which we are debating this matter is not the responsibility of the Opposition. I am as anxious to return to my home as I am sure the right hon. Gentleman is to return to his.

He said that I had not attended to his remarks. I did not leave the Committee room once. I hung on his every word in Committee and I read all his speeches several times. He accused me of repetition, but what he has said has been a repetition of what he said in Committee, but without the party political piece, which he has kindly spared us at this late hour.

We could have benefited from having the advantage of hearing the Government's views on the amendment in Committee. We could have known whether we had the brackets right and the relativities right. As the Minister refused to comment on them in Committee, we had to table amendments this evening leaving out the relativities and simply stating the ages at which we thought the break points should occur. We do not accept the right hon. Gentleman's argument that more research needs to be done. For many years his Department has been paying out supplementary benefit for a number of children, and paying out at differential rates according to their age. They have the information that they need on which to base age-related child benefits. There is no need for more research on the subject. Indeed, there is a surfeit of research, as I discovered when I looked into the matter. There are data available from other countries as well as this country. There is no basis for arguing that more work needs to be done.

The right hon. Gentleman wishes to introduce other refinements. We do not object to his other refinements regarding extra benefit for the first child or for larger families, but we do not see that as

Question accordingly negatived.

Amendments made: No. 6, in page 3. line 34, leave out 'may' and insert 'shall'.

No. 7, in page 3, line 36, at end insert 'as from a day to be appointed by the Secretary of State'.—[Mr. Andrew Bennett.]

an excuse for not building into the Bill at the beginning the structure that we seek on age-related benefits. The case is unanswerable. Indeed, the Minister has made no attempt to demolish it. I ask my hon. Friends to support the amendment and to amend the Bill accordingly,

Question put, That the amendment be made:—

The House divided: Ayes 21, Noes 104.

Division No. 278.] AYES [1.08 a.m.
Bain, Mrs Margaret Knox, David Welsh, Andrew
Bottomley, Peter Le Marchant, Spencer Wilson, Gordon (Dundee E)
Clarke, Kenneth (Rushcliffe) Luce, Richard Young, Sir G. (Ealing, Acton)
Crawford, Douglas Reid, George
Evans, Gwynfor (Carmarthen) Stewart, Ian (Hitchin) TELLERS FOR THE AYES:
Ewing, Mrs Winifred (Moray) Stradling Thomas, J. Sir Brandon Rhys Williams and
Eyre, Reginald Thompson, George Mr. Jim Lester.
Fairgrieve, Russell Watt, Hamish
Henderson, Douglas Weatherill, Bernard
Armstrong, Ernest Gilbert, Dr John Parry, Robert
Ashley, Jack Grocott, Bruce Pavitt, Laurie
Atkinson, Norman Harper, Joseph Pendry, Tom
Bates, Alf Harrison, Walter (Wakefield) Penhaligon, David
Bean, R. E. Hatton, Frank Price, William (Rugby)
Beith, A. J. Hooley, Frank Radice, Giles
Bennett, Andrew (Stockport N) Hooson, Emlyn Richardson, Miss Jo
Bidwell, Sydney Howells, Geraint (Cardigan) Roberts, Gwilym (Cannock)
Bishop, E. S. Jackson, Colin (Brighouse) Roderick, Caerwyn
Boardman, H. Jackson, Miss Margaret (Lincoln) Rodgers, George (Chorley)
Buchanan, Richard Johnson, James (Hull West) Rooker, J. W.
Callaghan, Jim (Middleton & P) Johnston, Russell (Inverness) Sedgemore, Brian
Cartwright, John Kilroy-Silk, Robert Sillars, James
Castle, Rt Hon Barbara Lestor, Miss Joan (Eton & Slough) Skinner, Dennis
Clemitson, Ivor Loyden, Eddie Small, William
Cocks, Michael (Bristol S) McElhone, Frank Smith, Cyril (Rochdale)
Cohen, Stanley MacFarquhar, Roderick Snape, Peter
Cook, Robin F. (Edin C) Mackenzie, Gregor Spearing, Nigel
Cox, Thomas (Tooting) Mackintosh, John P. Stallard, A. W.
Craigen, J. M. (Maryhill) Madden, Max Stoddart, David
Cryer, Bob Marks, Kenneth Taylor, Mrs Ann (Bolton W)
Davies, Ifor (Gower) Marshall, Dr Edmund (Goole) Thomas, Ron (Bristol NW)
Dean, Joseph (Leeds West) Marshall, Jim (Leicester S) Thorpe, Rt Hon Jeremy (N Devon)
Dempsey, James Meacher, Michael Tinn, James
Doig, Peter Mellish, Rt Hon Robert Tomlinson, John
Dormand, J. D. Millan, Bruce Wainwright, Edwin (Dearne V)
Duffy, A. E. P. Miller, Mrs. Millie (Ilford N) Wainwright, Richard (Colne V)
Dunnett, Jack Morris, Alfred (Wythenshawe) Walker, Terry (Kingswood)
Edge, Geoff Murray, Rt Hon Ronald King Ward, Michael
Ellis, John (Brigg & Scun) Noble, Mike White, Frank R. (Bury)
English, Michael O'Malley, Rt Hon Brian Wise, Mrs Audrey
Ewing, Harry (Stirling) Ovenden, John Young, David (Bolton E)
Flannery, Martin Owen, Dr David
Fraser, John (Lambeth, N'w'd) Palmer, Arthur TELLERS FOR THE NOES:
Freud, Clement Pardoe, John Mr. Donald Coleman and
George, Bruce Park, George Mr. James Hamilton.
Mrs. Castle

I beg to move Amendment No. 8, in page 3, line 38 at end insert— '(3A) In the year beginning with the appointed day and in each subsequent year beginning with the anniversary of that day, the Secretary of State shall consider whether the rate or any of the rates then in force under this section should be increased having regard to the national economic situation as a whole, the general standard of living and such other matters as he thinks relevant.'

Mr. Deputy Speaker (Mr. George Thomas)

With this amendment we are to take the following:

No. 9, in page 3, line 41, at end insert: '(5) The Secretary of State shall within the period of twelve months of the appointed day and in every period of twelve months thereafter, review the prescribed level of child benefits for the purpose of determining whether the benefit has retained its value in relation to the general level of prices obtaining in the United Kingdom. (6) For the purpose of any such review the Secretary of State shall estimate the general level of prices in such a manner as he thinks fit. (7) If on any such review the Secretary of State concludes that the child benefit has not retained its value as mentioned above then he shall prepare and lay before each House of Parliament before the expiration period of twelve months referred to in subsection (5) above, the draft of an uprating order increasing the prescribed level of child benefit to such extent as he thinks necessary to restore its value. (8) If a draft order laid before Parliament in pursuance of the section is approved by resolution of each House, the Secretary of State shall make an order in the form of the draft and such order shall come into effect not later than the period of one month after the expiration of twelve months referred to in subsection (5) above'.

No. 10, in page 3, line 41. at end insert: '(5) The Secretary of State shall lay before Parliament a reappraisal of the purchasing power of child benefit one year after the passing of this Act and thereafter not more than one month after the costs of providing for the essential needs of a family consisting of two parents and two children has changed by more than two per cent. from those at the date of the previous appraisal. (6) For the purposes of reviews under the foregoing subsection the Secretary of State shall publish, at monthly intervals, a Family Cost Index, being a statement of the average costs of feeding and caring for children in families of different sizes and circumstances, giving data as to the initial outlay at the births of first and subsequent children and of the continuing weekly cost of first and subsequent children at different ages; and in estimating the general level of prices for the purpose of a reappraisal, the Secretary of State shall have regard to the latest Family Cost Index.'.

Mrs. Castle

The House will be aware that in this amendment I am fulfilling a promise that I made to my hon. Friend the Member for Stockport, North (Mr.

Bennett) that I would consider very carefully his request that I should examine the possibility of guaranteeing a review at regular intervals—he suggested probably annually—and the possibility of bringing forward an amendment on Report. I have considered the point which my hon. Friend made to me.

In Standing Committee I made clear that I was opposed to the automatic indexation of this benefit for reasons which I shall explain in a moment. But when my hon. Friend suggested that the Government should, at any rate, go further than the Bill stood and should commit themselves to examine the level of the rates of child benefit every year, I felt that that gave us the best of both worlds. It gave an element of commitment to bear the rates of child benefit in mind while retaining the flexibility which we need in deciding those rates. Having considered his suggestion, I have decided to embody it in this amendment which I am recommending to the House.

This amendment provides for an annual review of child benefits. It means that every year, as Secretary of State, I shall be under a statutory commitment to examine the rates of child benefit and their relevance to the Government's social and economic policies. Of course, the House will be aware of this commitment and the timing of this amendment, and will be able to question the Secretary of State on the outcome of the review This marks yet another advance on the previous practice in this field.

As I pointed out to the Standing Committee, at present neither family allowances nor child tax allowances have any provision at all for uprating. The changes in rates have to be made by amending legislation, and so the provision in Clause 5 before this amendment is introduced is in itself an advance on what went before, because it provides for changes in child benefit rates to be made by Affirmative Resolution. Therefore, Clause 5 puts child benefits on the same footing as supplementary benefit and family income supplement which we know have in practice recently been uprated annually.

The provision that I am making in the amendment, together with the existing provision in the clause, brings the arrangements for review in the Bill into line with the Conservative Government's own provision for review which they outlined in the Green Paper on their tax credit scheme.

I remind the House of what the Green Paper on tax credits said about upratings and review. I quote from paragraph 119 of Cmnd. 5116: The scheme would serve as a major new means of family support. But, if it is to succeed in that, the benefits it provides could not he allowed to fall far behind those of the social security schemes. This means that the annual review of national insurance and supplementary benefit levels which the Government now undertakes would have to be matched by regular re-appraisals of tax credit levels. So the Conservative Government in their Green Paper on tax credits drew a distinction between the automatic up-rating of general national insurance benefits following annual review and the procedure which should be adopted, in their view, for tax credits or child benefits. Is the hon. Member for Rushcliffe (Mr. Clarke) pregnant with intervention?

Mr. Kenneth Clarke

I am grateful to the right hon. Lady for giving way. Does she not accept that the words she has quoted were written in 1972 before we made the great change in 1973 over to statutory annual reviews of important benefits? Would she also accept that those words were written when the rate of inflation was hugely below the rate of inflation which we are now suffering, which makes uprating of benefits far more important a matter than it was when those words were written?

Mrs. Castle

The subsequent provision for statutory annual review of national insurance benefits makes no difference to the distinction which the Conservative Government themselves drew in paragraph 119 of the Green Paper on tax credits. They referred specifically to the annual review of national insurance and supplementary benefit levels". They carefully did not say that such a review should include the tax credit levels, whether the annual review was statutory or not. They merely said that the tax credit levels should be subject to regular reappraisals as a matching operation—a watching operation, but not a synonymous one.

As for the argument about the level of inflation, as we said repeatedly in Standing Committee—we are very laboriously going over identical ground to that covered in great detail in Standing Committee—we cannot meaningfully plan for a long-term change in social security provision on the assumption that the present exceptional level of inflation will continue. One could not possibly base any pension or child benefit policy on any such assumption because, if inflation continues at such a level, we shall be in an entirely different ball game.

Sir B. Rhys Williams


Mrs. Castle

It is very late. I must get on.

In introducing its tax credit scheme, the Conservative Government of the time said there was a difference, and they were right. There is a difference between routine national insurance benefits and this new benefit. Indexation of the child benefit is inappropriate. National insurance benefits are major means of support when earning capacity is interrupted, but the child benefit is a tax-free supplement to families whose major source of income is earnings. Clearly maintenance benefits must be capable of moving automatically in line with changes in the cost of living. The child benefit is in a different category.

It is pure hypocrisy for the Opposition to press for a rigid indexation of the new benefit. They rejected it for child benefits under their tax credit scheme. The Government amendment would secure a regular reappraisal of the scheme. A statutory duty is placed on the Secretary of State to examine the rate in the light of the overall social and economic policies.

To go beyond this would be to undermine the flexibility to develop the scheme through age relation or other means pressed strongly by the Opposition in other amendments. The more rigidly benefits are tied to index-linking, the less scope there is for reviewing the structure of the scheme in the light of experience. Interesting views have been expressed about possible future developments and there has been considerable research and discussion.

I think Parliament would wish to be flexible about the emphasis it puts on different factors of family support in future. Parliament will be able to call successive Secretaries of State to account and the amendment would also ensure that, whatever the pressures, the scheme could not be overlooked. It would have to be examined and seriously considered in the light of general developments.

I note with interest that the Opposition has now moved from the demand for six-monthly upratings to annual upratings and I am glad to see that the potent arguments we produced in Committee have at last edged out some of the more extravagant political posturing of the Opposition and that truth and honesty have begun to grow, even in the mind of the hon. Member for Rushcliffe (Mr. Clarke). I hope he will accept the amendment with the gratitude it deserves.

1.30 a.m.

Mr. Kenneth Clarke

I have never seen a more pathetic put-up job than Government Amendment No. 8. It is a supposed concession to a supposed rebel on the Government benches and is a meaningless piece of verbiage which carries the Government's obligations no further forward than those which would lie on any Government in relation to any benefit. This is offered as a concession to a back bencher who in Committee got most passionate when withdrawing his amendments save when he was voting against them when the Opposition took up the best of his ideas.

These amendments deal with a matter which the Government should have taken more seriously and allowed the House to debate at a more civilised time. I am referring to the requirement for the benefit to be uprated annually in line with other benefits. In Committee we proposed that the period should be six months, and it remains our policy that six-monthly reviews of all benefits is practicable and desirable. That has been our policy since the February 1974 General Election. We have not been converted to the Secretary of State's point of view. We know that the Government felt strongly about and would have to resist strongly the proposal for six-monthly reviews. We therefore decided to try for some move- ment from them in this debate towards putting the new child benefits into the system of 12-monthly reviews which the Government doggedly defend.

Although the Opposition made a move to eliminate the 12-monthly versus six-monthly argument we do not and will not resile from the principle that the new benefits should be put into the statutory uprating procedure. The Government are statutorily committed to regular reviews of benefits. This results from the 1973 legislation in which we imposed a statutory obligation on governments to uprate pensions and benefits in relation to prices.

When the Government began in October 1974 they strengthened the uprating procedures and went on to make it a statutory obligation to uprate retirement pensions in line with earnings and prices. At that stage it seemed that we all accepted the importance of index-linking of benefits in highly inflationary times such as we now have.

We must be clear about what will happen if we do not index link a benefit at a time when inflation is running at 34 per cent. Not to do so cuts the real value of the benefit and in that circumstance it is hopeless to talk about flexibility. Before October 1974 the Secretary of State took index linking exceeding seriously and one of the points she has put forward is how inadequate it is to provide a benefit which does not embody a regular review procedure and index-linking against inflation.

Mrs. Castle

I have said that there is a distinction between maintenance benefit and this provision.

Mr. Clarke

That distinction was not drawn at the time when the Government were emphasising the importance of index linking in the right hon. Lady's pension provisions. Talking about her pensions Bill and this aspect of it the right hon. Lady said: Possibly the most vital aspect of the whole Bill is its provisions for fully protecting the value of all pension rights. Each year's earnings during a person's working life will be revalued in line with the general movement of earnings since the year in question, so that his or her eventual pension will fully reflect the improvements in living standards which have taken place."—[Official Report, 19th March 1975; Vol 888, c. 1491.] When the right hon. Lady was setting out the whole scheme in the original White Paper she said that inflation proofing was one of the most precious aspects of the new scheme.

Having said that, the right hon. Lady now seeks to draw a distinction between that statutory obligation which she spent her time strengthening in the case of other bnefits and resists adding child benefit to the review procedure even on the modest level of linking it to prices only and not prices and earnings as she has done with long-term benefits and pensions.

In inflationary times child benefit should be linked to prices, and it is wrong to go back to quotations from 1972—made in calmer and less inflationary times—to try to suggest that there are valuable precedents for not inflation-linking child benefits now. The right hon. Lady quotes with approval paragraph 119 of the tax credit Green Paper of 1972. Apparently the right hon. Lady reads great significance into the then Government's declaration, first and most important, that the benefits provided by the tax credit scheme could not be allowed to fall far behind those of the social security schemes. This means that the annual review of national insurance and supplementary benefit levels which the Government now undertakes would have to be matched by regular reappraisals of tax credit levels. This evening the right hon. Lady put great emphasis on the difference that is made there between the use of the words "review" and "reappraisal", when it is clear that the purpose of the paragraph is to say that it would be wrong to bring in a tax credit scheme and then allow social security benefits to exceed them and to get out of line with them.

If the right hon. Lady is in doubt because of the 1972 quotation as to precisely what the Opposition are saying, the fact is that since 1972 a lot of water has flowed under the bridge. We have introduced statutory uprating procedures. The minute difference of wording in that tax credit Green Paper will not bear the weight that the right hon. Lady seeks to put on it. Our position is that it is inconceivable that the Government should introduce a child benefit Bill, and claim that they are seriously hoping to benefit families by this structure in the long term, without bringing it into the uprating procedure.

To leave out child benefits would be a retrograde step in the present situation because child allowances for tax purposes are always reviewed and reappraised by any Chancellor of the Exchequer in the course of considering his Budget. Here one gets into the snags when one looks at the previous history. There has not been a statutory obligation in the past, although child tax allowances are always reviewed by the Chancellor of the Exchequer annually, together with all the other matters.

It is true, as my hon. Friend said, that these allowances have historically not kept pace with increases in personal tax allowances of other kinds. I see the Minister nodding in approval. I have no doubt that he agrees with the strictures of my hon. Friend, and I should not wish to see a future Government allow that deterioration in the position to continue. As I have mentioned that family allowance has suffered badly because it has not been in the annual review procedure, I shall inspire the right hon. Lady to reopen the usual exchange about the record of the previous Conservative Government in dealing with family allowance. I counter that by pointing to the introduction of FIS, on which the right hon. Lady now relies heavily.

It is inescapable that the review of family allowance has been inconsistent and the result has been that already, before we come to the present stage, child tax allowance and family allowance which the Bill seeks to replace have fared badly under the non-statutory review procedure. If they are to be excluded from the wide-ranging statutory provisions now with us we are in a serious situation.

If it is the case that the Government will introduce the child credit scheme at neutral cost and if the scheme is not regularly reviewed, there will be a cut in the living standards of families. It will not prove to be of any benefit except to a tiny, most insignificant, section of families. It is for that reason that we think it important to include this in the annual review. If it is not included, if the right hon. Lady has her way, the purchasing value of the new benefits will decline.

Our fear, expressed in Committee, was that if the right hon. Lady insists on this —and I suspect that it is forced on her by the Treasury—we shall have a lopsided position in her Department whereby various benefits will come within the statutory review procedure simply because they came along at a time when the House was quite happy doing this, while other benefits such as the recently-introduced mobility allowance and the child benefit will not be included. Despite the distinction being drawn by the Secretary of State, these are being left out only because she is under pressure to cut public expenditure.

Given that lopsided position, the constant temptation will be for the statutory reviews to carry on so that retirement pensioners, invalidity pensioners and others will get their benefits inflation-proofed at the expense of families receiving child benefit and those who need the mobility allowance.

This leads to another important question, namely what effect does the new declaration about cash limits on public expenditure have on the prospect of uprating? The Secretary of State must be anxiously considering the implications of that for her Department. We support such cash limits. But at some stage the right hon. Lady has to explain how it will apply in her Department and what views she is being invited to take by her colleagues on the cash benefit side of her Department's spending.

Fortunately for the right hon. Lady the question of the future spending of the health service is beyond the scope of this debate. Cash benefits are very much in point when we look at the statutory review procedure. We want to know how she will apply cash limits to the cash benefit side of her Department, given that she has an obligation in law to carry out an uprating on so many benefits in line with the level of inflation—in some cases related only to prices, in others to prices and earnings.

Is it to be the case that if the Chancellor puts cash limits on the Department and if the rate of inflation runs at a high level, so that benefits which are the subject of a statutory duty take up most of the cash, as a matter of course those benefits left out, such as child benefit, will go to the wall? That is the situation we fear. That is why we trust that when reviewing public spending commitments the Government will make it clear that cash benefits cannot be an area for great savings and that, now that there are so many benefits in the statutory uprating procedure, such a vital benefit as child credit should be included.

The right hon. Lady announced Amendment No. 8 as a great concession to her hon. Friend the Member for Stockport, North (Mr. Bennett). I am sure that the hon. Member shudders every time we mention his name. We ought perhaps to give more credit to him for at least having had the courage to expound some worthwhile sentiments and put some worthwhile cases. The way in which he behaved in supporting the amendments would make a paper tiger look ferocious. I wait to hear the reaction of the hon. Gentleman to Amendment No. 8. No doubt he will express his gratitude for this surprising concession.

Mrs. Castle

Will the hon. Gentleman tell the House how many times he divided the House against his own Government's refusal to include family allowances in their annual statutory uprating?

1.45 a.m.

Mr. Clarke

I am sure that the answer is none. However, I am trying to recall the occasions on which it was raised in the last Parliament and the amendments which were voted against by the hon. Members who tabled them. I am also trying to recall the right hon. Lady's reaction to the introduction of family income supplement against which she voted regularly when in opposition but which she has been making great use of now that she is in government.

The Secretary of State regards this as a concession hard won by her hon. Friend the Member for Stockport, North and therefore rises to his defence. She has conceded in Amendment No. 8 that In the year beginning with the appointed day and in each subsequent year beginning with the anniversary of that day, the Secretary of State shall consider whether the rate or any of the rates then in force under this section should be increased having regard to the national economic situation as a whole, the general standard of living and such other matters as he thinks relevant. One should hope so, because one cannot conceive that any Secretary of State will not, as part of the regular annual reappraisal of the expenditure of his or her Department, have regard to the national economic situation as a whole, the general standard of living and such other matters as he thinks relevant", which would let him off any hook which might otherwise impale him. It professes good intentions and confirms that future Governments will go through the process of thinking about the level of benefits, just as past Governments have done.

It is nonsense to write in such transparent verbiage into legislation when it carries the matter no further and is meant to be a concession in response to pressure which comes, not only from this side of the House, but from many interested groups outside to have the new benefit put into the uprating procedure.

This is another example of the Government professing good intentions and wearing their heart on their sleeve when it comes to family poverty, but when one examines what they are prepared to do one finds that it takes matters no further. They are prepared to contemplate a situation, in highly inflationary times, in which mothers and families might go to the wall in a crisis because they have no statutory protection but an annual review. Perhaps the Secretary of State will consider withdrawing Amendment No. 8. We cannot see the point of writing it into the Bill. We shall press Amendment No. 9 in the hope that the annual benefit will be extended to cover the new benefits.

Sir B. Rhys Williams

I support Amendment No. 9 and wish to draw attention to my variant of it, Amendment No. 10, and particularly that element of it relating to the Family Cost Index.

We are dealing with the question of uprating. The Secretary of State's view is that uprating is right for beneficiaries of national insurance but not for mothers. What is the distinction between beneficiaries of national insurance and mothers who are responsible for children? The right hon. Lady believes, with the rest of her party, that national insurance beneficiaries, being trade unionists, are likely to be useful people, whereas mothers are a nuisance. Nevertheless, she gave a commitment in Committee to reappraise the situation and thereby secured the withdrawal of an embarrassing amendment which she feared her hon. Friend might press. Her hon. Friend's conscience does not appear to be an engine strong enough to carry him as far as the Opposition Lobby. However, we agree with much of what he says.

In Committee the Secretary of State gave an undertaking that "regular reappraisals as in the terms of the Green Paper on tax-credit are what we should be aiming at." She made the distinction that child benefit is not a complete subsistence allowance for children. It seems that, as it is not enough anyway, it does not matter if it becomes hopelessly out of date.

Under this Government we must contemplate the possibility of Brazilian style inflation, and mothers will not feel reassured if the Secretary of State says national insurance beneficiaries can feel confident of support but that mothers are a separate issue and must be given different treatment.

Amendment No. 8 was tabled as a result of the commitment given by the Secretary of State. We find in it a restatement of the duties which the Secretary of State should carry out. It would have been better to omit this amendment instead of making this farcical addition to the Bill. Are we to understand that she does not think that a reappraisal of family benefits is part of her job now? How will she carry out this "consideration" in the light of the Government's social and economic policy?

What are the data on which she will found her review? Will she revert to the Retail Price Index? That takes no account of the composition or size of the family, and is defective, as it expresses changes in percentage terms, whereas we must consider the effect on families of rises in price in terms of pence per head per week. Will she depend on the Family Expenditure Survey, with its tiny samples and out-of-date figures which do not show changes in prices but show changes in spending? I do not know whether she will use either of those or whether the Department has data which it is not prepared to make public.

The Secretary of State seems afraid that Members of Parliament or the public might bring pressure to bear if they knew the facts, and therefore she is resisting my suggestion that a regular Family Cost Index should be published. The compilation of such an index would not require an enormous army of officials and would not be expensive, unlike the Family Expenditure Survey, which requires a great deal of case work. What I am suggesting is a family index based on the assessment of prices in shops, which would be far easier to compile. We went into this matter in Committee. I forced a vote. I secured my purpose, which was that all the Labour Members of Parliament in the Committee should vote against the idea.

Government supporters have shown that they simply do not want to know the facts about families. Although the Secretary of State is laughing, the impression she gives will go to a wider audience than the small number of Members of Parliament present here now.

The Secretary of State said earlier that we could not legislate on the assumption of permanent inflation. Nor can we legislate on the assumption of the permanent inferiority of mothers. Why should mothers be permanent second-rate citizens in the social security system? The Secretary of State is leading members of the Labour Party to make curious and extraordinary blunders today. She will lead them into the Lobby again on the question of uprating. The Government will have their weekly upratings on the income side of the bargain, because income tax and national insurance contributions will rise automatically as inflation proceeds. They are a fixed proportion of earnings. But having brought the money into the kitty, the Government propose to sit on it and not give it out again to families which may be facing serious hardship as a result of rising prices.

Other countries publish the sort of data I ask for and recognise the need for regular upratings. Why do we have to fall still further behind in our social legislation? I support Amendment No. 9. Its weakness is that it calls only for an annual review, whereas I should like to see a half-yearly or even monthly review.

Mrs. Castle


Sir B. Rhys Williams

The Secretary of State is in a flippant mood. We are moving towards the need for a daily review with the Brazilian type inflation which her Government have introduced. In the Weimar Republic the index of the value of money had to be changed every hour just before the final collapse.—[Laughter.] Hon. and right hon. Members may think it amusing, but millions of families do not think it amusing. And there are as many hon. Members on the Government side as on the Opposition side who do not think that we should be debating a matter that concerns millions of people at two o'clock in the morning.

We are proceeding to a vote, and Labour Members will use their votes to keep mothers in a subordinate position as second-rate citizens so far as social benefits are concerned, perpetual supplicants in a world where organised workers rule the roost.

Mr. David Penhaligon (Truro)

I missed the discussions in Committee because I was not a member of the Committee, but I make no complaint about that. The hon. Member for Rushcliffe (Mr. Clarke) will be pleased to know that I shall lead my party—which is here in some strength—in the Division Lobby with him, but he may not be appreciative of my reasons for doing so.

I shall oppose Government Amendment No. 8 because in times of great economic stringency we should do all we can to save imports, and to import the paper on which to print the amendment would be a manifest waste of money.

I shall support the Opposition Amendments Nos. 8 and 9 because I trust the Government more than I trust the Opposition in these affairs. When the Government say that they will consider the matter annually the chances are that, given a fair wind, they will probably do so generously. When the Opposition were last in government and had a chance to review annually they were consistent in their decision each year that no alteration was required. Therefore I support the Opposition amendments for reverse reasons to those given by the Opposition.

In the short time I have been in the House I have discovered that Opposition Members who pay attention to these matters are much more liberal in their attitude than are the majority of members of the Conservative Party. It is all very well to tell the Government that they must cut public expenditure by £4,000 million or £5,000 million a year and at the same time say that the Government must save such an annual review as this, thereby committing the Government to further public expenditure. I do not want to reduce public expenditure by £4,000 million or £5,000 million a year, and I certainly do not want cuts in public expenditure at the expense of people who regard child benefit as a valuable part of their income.

2 a.m.

Mr. Ian Stewart

I do not quite know how to follow those remarks, so perhaps I had better revert to the introduction by my hon. Friend the Member for Rushcliffe (Mr. Clarke). Like him, I welcome the expression of intent behind Amendment No. 8, but I am a little concerned about some of the right hon. Lady's remarks in explanation.

As she was good enough to listen to me in Committee, she knows of my anxieties about the whole basis of widespread indexation on social security and general welfare benefits. I will not repeat them at length and suffice it to say that social and economic needs change between one group and another in society over a period and if we fossilise the system and build in a strict rigidity, leaving benefits and supports in exactly the same relation to each other, we deprive ourselves of the opportunity to adjust in favour of cases that subsequently seem to us to have greater relative need.

But the difficulty is that the right hon. Lady has said that it is important to retain some of this flexibility within the child benefit. Within the child benefit perhaps, but surely not between child benefit and many other social provisions. My anxieties about the problems of general indexation are outweighed by my specific anxiety about the potential recipients of child benefit. After all, there has been a rush of indexation in one form or a another in recent years.

It is well illustrated by what has happened to pensions. In the 1950s, pensions were increased about every three years and in the 1960s about every two years. From 1971 to 1973 they were increased about every year and since then the period has shortened to an average of about nine months.

Gathered together in the Social Security Act are statutory provisions for uprating a whole range of benefits. These provisions differ. There are a number of categories. The most favoured category of long-term benefit has to be reviewed on the basis of not only the cost of living but the level of earnings. A second category, short-term benefits, has to be reviewed in the light of increases in the cost of living. There are the means-tested benefits which, although there is no statutory need to increase them at that rate, need to be increased for technical reasons. Benefits such as rent and rate rebates and the family income supplement have to be linked to the supplementary benefit scheme, or closely to it, or in line with it, because otherwise many people dependent on more than one benefit would not benefit from any such increase. That is the third category.

I understand that there is to be a fourth category which will admittedly include family allowance and one or two other benefits, such as maternity benefit and the death grant, which is to be less favoured than any of the other categories. We should consider the reasons why it is thought unsuitable to give child benefit at least the minimum status of uprating that is applied to those other benefits.

The interim benefit, being introduced prior to child benefit for the heads of one-parent families, will have a gross cost of £39 mililon, but there is a supplementary benefit offset of £16 million, a figure given by the Chancellor of the Exchequer in his Budget Statement, which is about half the total. When supplementary benefits are replaced by child benefit or the interim benefit, that is surely a maintenance benefit for those pople. I accept that it is not a large number, but it is important.

The Under-Secretary of State gave me same figures, and on the basis of the child benefit scheme costing a total of £1,300 million it seems that about £45 million of the net saving between the gross cost and the net cost would relate to supplementary beneficiaries who have no national insurance benefit. It would seem that they are specific and needy maintenance cases.

There is an argument for saying that a large part of the child benefit scheme is an income increment and not specifically related in the same way as other maintenance benefits, but if the people who will lose supplementary benefit in relation to the recipients of interim benefit or child benefit will in total be £16 million worse off—and by definition they are some of the most needy people who would otherwise look to this benefit to give them greater assistance, but because of the offset they will not be any better off—it would behove the Government to consider carefully the maintenance element in the child benefit scheme.

Because family allowances were supplemented by family income supplement, it

Question accordingly agreed to.

we index only family income supplement and leave family allowance in the cold, and if we transfer the lack of indexation from family allowance to child benefit, as inflation erodes the purchasing power, the element now represented by the family income supplement will continue to benefit. However, it is a matter of concern that that which services the family allowance element should be singled out in this unfortunate way. I hope that the Government will take into account that it is the most needy potential recipients who will be most affected.

Question put, That the amendment be made:—

The House divided: Ayes 95, Noes 15.

Division No. 279.] AYES [2.09 a.m.
Armstrong, Ernest Fraser, John (Lambeth, N'w'd) Price, William (Rugby)
Ashley, Jack George, Bruce Radice, Giles
Bain, Mrs Margaret Gilbert, Dr John Reid, George
Bates, Alf Grocott, Bruce Richardson, Miss Jo
Bean, R. E. Harper, Joseph Roderick, Caerwyn
Bennett, Andrew (Stockport N) Harrison, Walter (Wakefield) Rodgers, George (Chorley)
Bidwell, Sydney Hatton, Frank Rooker, J. W.
Bishop, E. S. Henderson, Douglas Sedgemore, Brian
Buchanan, Richard Jackson, Miss Margaret (Lincoln) Sillars, James
Callaghan, Jim (Middleton & P) Johnson, James (Hull West) Skinner, Dennis
Cartwright, John Kilroy-Silk, Robert Small, William
Castle, Rt Hon Barbara Leadbitter, Ted Snape, Peter
Clemitson, Ivor Lestor, Miss Joan (Eton & Slough) Spearing, Nigel
Cocks, Michael (Bristol S) McElhone, Frank Stallard, A. W.
Cohen, Stanley MacFarquhar, Roderick Stoddart, David
Coleman, Donald Mackenzie, Gregor Taylor, Mrs Ann (Bolton W)
Cook, Robin F. (Edin C) Mackintosh, John P. Thomas, Ron (Bristol NW)
Cox, Thomas (Tooting) Madden, Max Thompson, George
Craigen, J. M. (Maryhill) Marks, Kenneth Tinn, James
Crawford, Douglas Marshall, Dr Edmund (Goole) Tomlinson, John
Cryer, Bob Marshall, Jim (Leicester S) Wainwright, Edwin (Dearne V)
Davies, Ifor (Gower) Meacher, Michael Walker, Terry (Kingswood)
Dean, Joseph (Leeds West) Mellish, Rt Hon Robert Ward, Michael
Dempsey, James Morris, Alfred (Wythenshawe) Watt, Hamish
Doig, Peter Murray, Rt Hon Ronald King Welsh, Andrew
Dormand, J. D. Noble, Mike White, Frank R. (Bury)
Duffy, A. E. P. O'Malley, Rt Hon Brian Wilson, Gordon (Dundee E)
Dunnett, Jack Ovenden, John Wise, Mrs Audrey
Edge, Geoff Owen, Dr David Young, David (Bolton E)
Ellis, John (Brigg & Scun) Palmer, Arthur
English, Michael Park, George TELLERS FOR THE AYES:
Ewing, Harry (Stirling) Parry, Robert Mr. James Hamilton and
Ewing, Mrs Winifred (Moray) Pendry, Tom Mr. Laurie Pavitt.
Flannery, Martin
Beith, A. J. Pardoe, John Young, Sir G. (Ealing, Acton)
Bottomley, Peter Penhaligon, David
Clarke, Kenneth (Rushcliffe) Smith, Cyril (Rochdale) TELLERS FOR THE NOES:
Fairgrieve, Russell Stewart, Ian (Hitchin) Sir Brandon Rhys Williams and
Howells, Geraint (Cardigan) Stradling Thomas, J. Mr. Jim Lester.
Johnston, Russell (Inverness) Thorpe, Rt Hon Jeremy (N Devon)
Le Marchant, Spencer Wainwright, Richard (Colne V)
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