§ 10.12 p.m.
§ The Under-Secretary of State, Department of Health and Social Security (Mr. Michael Meacher)
I beg to move,That the Social Security Benefits Up-rating Order 1975, a draft of which was laid before this House on 11th June, be approved.
§ Mr. Speaker
It might be for the convenience of the House if we discussed at the same time the second motion,That the Supplementary Benefit (Determination of Requirements) (No. 2) Regulations 1975, a draft of which was laid before this House on 11th June, be approved.
§ Mr. Meacher
The purpose of these two instruments is to increase in the one case the main national insurance and industrial injuries benefits and in the other the supplementary benefit rates in the way described by my right hon. Friend the Secretary of State in her statement to the House on 22nd May. The increases will come into force from the week beginning 17th November, just over seven months after the last uprating, which took place in the week beginning 7th April 1975.
I shall deal first with the draft order and then turn to the draft regulations. By leave of the House I should like to deal later with any points of detail raised during the debate on either the order or the regulations.
The Government are committed by law to increasing pensions and other long-term benefits in line with the movement in the general level of earnings unless the movement in the general level of prices would be more advantageous to those concerned. For short-term benefits the criterion is the movement in the general level of prices. My right hon. Friend is statutorily obliged, under Section 125 of the Social Security Act 1975, to review benefits in every tax year in order to determine whether the rates have retained their values in relation to the general level of earnings or prices and, if not, to adjust them. This order represents the outcome of my right hon. Friend's statutory review for the year 1975–76.
The House will be aware that this is the first occasion on which benefits have 376 been increased by means of an order. Previously—14 times since 1948—an up-rating Act has been necessary. I make no political point here since the 1973 Social Security Act of hon. and right hon. Gentlemen opposite similarly provided for upratings by order.
As regards the details of the increases proposed, I should remind the House that the last uprating, which increased pensions and benefits, as I have said, from the week beginning 7th April 1975, took into account the movement in earnings and prices up to August 1974. Since the interval between that uprating and the one now proposed for November will be just over seven months, my right hon. Friend considered the movement in both earnings and prices over the seven months from August 1974 to March 1975. I realise that later information is now available but, when the Government's proposals were formulated and announced to the House before the Whitsun Recess, the information on which those proposals were based was the most up to date. Changes in the movement of earnings and prices after March 1975 will of course be reflected in the next following uprating.
The reason for the early announcement of our proposals was that, in order to effect the uprating and deal at the same time with the other improvements which are also to become operative from the week beginning 17th November, the local offices of the Department have had to start issuing order books containing the new rates subject to parliamentary approval. I am sure that the House will accept the need for an early start on the very heavy programme involved, to which my right hon. Friend referred when she made her statement on 22nd May. The programme is a heavy one because, apart from the increases provided by this order, there are the increases in supplementary benefit rates provided by the regulations which the House is also considering, and increases in war pensions to be made by means of instruments under the Royal Prerogative. At the same time, the new non-contributory invalidity pension will be introduced, the supplementary benefit discretionary additions for extra heating and dietary needs will be increased, and 377 the changes in supplementary benefit disregards which are already enacted will be implemented. I shall return later to these changes in supplementary benefit.
Turning now to the specific proposals which are reflected in the order, these are based on the movement in earnings over the seven month period to which I have referred, from August 1974 to March 1975, of nearly 15 per cent. The movement in prices over the same period was just over 13 per cent., so that it is to the advantage of pensioners and other longterm beneficiaries if we have regard to the movement in earnings rather than prices.
Benefit rates are generally rounded, and the proposed increase of £1.70 in the standard rate of retirement, invalidity and widows' pensions, from £11.60 to £13.30, represents an actual increase of 14.7 per cent. The pension for a married couple will go up by £2.70 from £18.50 to £21.20, an increase of 14.6 per cent. There will be proportionate increases in the rates for children and in the reduced rates payable to younger widows and to pensioners who have not satisfied the contribution conditions in full.
I do not intend to take up the time of the House by comparing all the proposed increased rates with the existing ones since a complete table was circulated, together with my right hon. Friend's statement in the Official Report, and there is a list in Appendix 1 to the Government Actuary's Report which accompanies the order, and which I am sure hon. Members have seen.
Short-term benefits for sickness and unemployment will go up in line with the movement in prices. The standard rate for a single person will be increased by £1.30 and go from £9.80 to £11.10—an increase of 13.3 per cent. For a married couple, the increase will be £2.10, from £15.90 to £18—an increase of 13.2 per cent. Earnings-related supplement of up to £9.37 can, of course, be paid in addition.
Maternity allowance and industrial injury benefit will go up by the same amounts as sickness and unemployment benefits. Other pensions and benefits under the industrial injuries scheme will go up in line with long-term benefits. The pension for 100 per cent. disablement will go up from £19 to £21.80 and 378 the industrial injuries widow's pension will be increased from £12.15 to £13.85.
Turning to the order itself, I am sure that hon. Members on all sides of the House will welcome its brevity and simplicity. Article 1 is formal. Article 2, together with the Schedule, provides for the increases in benefits by amending the rates and amounts contained in Schedule 4 to the Social Security Act 1975. No increase is proposed on this occasion in maternity grant, death grant or age addition, which are benefits that my right hon. Friend is not obliged to review under section 125 of the Act. Article 3 provides for the dates from which the various increases in benefits are to take effect—generally the appropriate day in the week beginning 17th November on which a particular benefit is normally paid. The other provisions of Article 3 are technical and have traditionally been included in the commencement orders relating to uprating Acts.
I turn now to the draft regulations which provide for increases in the scale rates and in certain other amounts laid down by Schedule 2 to the Supplementary Benefit Act 1966. The scale rates are the basic element in the calculation of a person's supplementary benefit requirements, and the increases proposed in the main scale rates are the same as the national insurance pension and benefit increases to which I have already referred. They will come into operation at the same time as the national insurance increases, that is from the week beginning 17th November 1975.
Turning to the details of the increases, Regulation 2 provides for new rates of £13.70 for the single householder and £21.55 for a married couple. These represent increases in the long-term scale rates of £1.70 for a single householder and £2.70 for a married couple. The long-term scale rates apply to supplementary pensioners and to people, other than the unemployed, who have received a supplementary allowance for two years. Where a supplementary pensioner or his wife is over 80, the scale rates will continue to be 25p higher at each point.
The ordinary scale rates, which apply to the unemployed and to people who have received a supplementary allowance for less than two years, will be increased by £1.30 for a single householder to 379 £10.90, and by £2.10, to £17.75, for a married couple.
Scale rates for other adults and for children are also being increased. The special rates which apply to the blind will go up by the same amounts as the corresponding rates for sighted persons so that their preference will be continued. Increases in the amounts added for attendance requirements are also proposed, of the same amounts as the increases proposed in the attendance allowance itself.
A claimant who lives as a member of another person's household receives a standard weekly addition for rent. This is to be increased by 5p to £1 a week. As a result of the changes in the scale rates and standard rent additions made by these regulations, the income of adult non-householders will go up by £1.40 a week for supplementary pensioners and other long-term recipients, and by £1.10 for other non-householders.
I apologise for this continuous stream of detailed factual information. I can assure hon. Members that there is only a little more. Perhaps I can complete what is a rather long list.
Over and above the increases provided for in the regulations, my right hon. Friend announced on 22nd May that the Supplementary Benefits Commission will be increasing the discretionary extra heating additions from 40p, 80p and £1.20 to 55p, £1.10 and £1.65 respectively. The standard additions for special diets are also to be increased, from 50p to £1.12 to 60p and £1.35 respectively. All these changes will take effect from 17th November 1975.
I should also remind the House that increases in the amounts which may be disregarded in the calculation of a claimant's resources, provided for in the Social Security Benefits Act 1975, will come into effect at the same time as the new scale rates. About 12 million people will benefit from the increases proposed in the draft order and the draft regulations and from the associated changes proposed in war pensions.
The uprating provides a way of protecting from the effects of inflation those whose standard of living depends upon social security benefits. Our prime objec- 380 tive remains to bring inflation under control. That is why we have expressed our intention to return to an annual review of benefits. But while we continue to experience inflation at an exceptionally high rate, we are determined to protect pensioners and other beneficiaries, especially those receiving supplementary benefit, who are by definition amongst the poorest in the community. On the basis of our record we can be justly proud of what has so far been achieved. Since coming into office we have already, in two upratings, increased the standard rates of retirement pensions——
§ Mr. James Dempsey (Coatbridge and Airdrie)
When my hon. Friend outlines these discretionary allowances will he say whether he has considered discretionary allowances for telephone services for old age pensioners?
§ Mr. Meacher
My hon. Friend has drawn attention to an important point. There is nothing in this order or in these regulations to assist in that respect. He will know that under the Chronically Sick and Disabled Persons Act 1970 there is provision for local authorities to provide the disabled, who are by and large the elderly, with assistance in this respect. There is also provision by the Supplementary Benefits Commission in exceptional cases, but, I believe, in very few. I would advise the hon. Gentleman's constituents who are affected to get in touch with their local authority social services department, which is the proper authority to assist.
Since we came to office we have already, in two upratings, increased the standard rates of retirement pensions by about 50 per cent., and by November, under this uprating order, if the House approves it, the increase will be about 70 per cent.
§ Mr. Meacher
I shall come to that point if the hon. Gentleman will permit me.
Prices, on the other hand, had increased up to last month by less than 32½ per cent. since February 1974—or, going back to the last uprating under the previous Conservative Government, which is fairer, prices have increased by just over 39 per cent. since October 1973. Therefore, in broad terms, up to last 381 month, since the time of the last Conservative Government uprating, prices had risen by just under 40 per cent. while benefits had risen by just under 50 per cent.
The financial consequences of the increases in national insurance and industrial injuries benefits are dealt with in the Government Actuary's Report, Cmnd 6083, which was laid before the House together with the draft order to which I have already referred.
The annual cost of the proposals embodied in the draft order and the draft regulations is about £1,015 million. There will at the same time be an additional annual cost of £32 million for war pensions and of £11 million for the increases in supplementary benefit discretionary additions. Of this total, £908 million a year will fall on the National Insurance Fund. This will be taken into account in the review of contributions for 1976–77 which will be undertaken later this summer and which will reflect the need to ensure that the fund remains soundly financed.
On the basis of what I appreciate has been a detailed speech, which was no doubt difficult to follow, I have pleasure in commending this order and the regulations to the House——
§ Sir Brandon Rhys Williams
Before the Minister finishes may I remind him that he pointed out that the volume of figures was difficult to absorb. I hope that he will be able to help us with some guidance as to the principles which were followed in making this tremendous range of benefit increases. He mentioned increases in percentage terms within the global total. Do all the increase correspond to one percentage increase or to an increase in terms of pence or pounds per week?
Mr. Deputy Speaker (Mr. Oscar Minion)
Order. What was meant to be an intervention is developing into a speech. I do not know whether the Minister would care to reply to it before I propose the Question.
§ Mr. Meacher
The broad principle behind the percentage increase is to take account of the increase in earnings in the seven previous months, the figure of seven representing the difference in time between the announcement of the uprating and 382 the date when it will be carried out. That is the broad principle that underlies all the figures I have given, except for the short-term rates, when it is the movement of prices for the same period that informs the figures. If the hon. Gentleman wishes to raise other points, I suggest that he waits until he catches your eye, Mr. Deputy Speaker.
§ 10.30 p.m.
§ Mr. Norman Fowler (Sutton Coldfield)
I should, first, like to welcome the Minister back to the social services. I think that this is the first speech he has made in the House since his appointment——
§ Mr. Fowler
In that case I will keep my welcome even shorter, with no disrespect to the hon. Gentleman, whom we are glad to see back.
This is the second uprating we have had this year. The last increase in pensions and benefits was made in April. The new increases for which the Government seek approval will be paid in November.
The reason for these further increases is not the generosity of the Government, as one might have thought from the Minister's speech. It is not a positive step towards improving the real living standards of people who are retired and are in need. It is a desperate attempt to keep up with inflation. It is an action that has been forced upon the Government by the disastrous collapse of their economic policies.
The crucial question concerns the level of inflation. The increases are based on a 15 per cent. increase in earnings between August and March and a 13 per cent. increase in prices. That is equivalent to a 25.7 per cent. annual increase in earnings and a 22.3 per cent. annual increase in prices. By any standards those increases are high enough, but the economic situation has deteriorated even further. Rather than improving, the position has worsened and inflation is already eroding the value of the increases we are debating tonight.
Let us consider what the increases when payable will be worth in today's money. The retirement pension for a 383 single person is now set at £13.30 and it falls to be paid not now but on 18th November. If inflation continues at the rate we have experienced over the past six months, that pension will be worth £11.35 when it comes to be paid. If inflation continues at the rate experienced over the past three months, it will be worth £10.65. In today's money the retirement pension for the married couple is set at £21.20. If inflation continues at the rate experienced over the past six months it will be worth just over £18, and on the three months' figure it will be worth just over £17.
That is the horrifying truth of our economic crisis. Inflation is defeating all our hopes. It is hitting at the most vulnerable sections of the public. It is striking at those least able to protect their own interests, the retired, the sick and the disabled—all the people whom these benefits are meant to protect and help. Beyond doubt, inflation presents us with the greatest social problem the country faces.
Even now, Department of Health and Social Security Ministers go around the country talking of a rosy pensions future and of the new Social Security Pensions Bill, omitting to mention that the Bill does not come fully into effect until 1997. The Opposition are concerned about the current generation of pensioners, the people who are retired now, the people whom the order is about and who under the Labour Government are losing out.
That point was made clearly by the Child Poverty Action Group which said in a memorandum to the Government.For the first time since the depression of the inter-war years the Government are planning real cuts in the living standards of the poor. Real cuts in benefits are planned because the November increase will not make up for the rate of inflation between now and the end of the year.It would be comforting to think we were running harder even to stay in the same place, but we are running harder only to see the position deteriorating faster all the time. The truth is—and I think it would be good for the Under-Secretary of State to acknowledge this when he makes his winding-up speech—that no uprating order will be able to cope with the kind of inflation that we now face. This order does not cope and 384 no succeeding order will cope unless action is taken.
Nevertheless, I am interested in Government policy on the frequency of upratings which the hon. Gentleman mentioned. This is the second uprating we have had this year. We have reached the stage when upratings take place at the rate of one each seven months. I accept that there is nothing in social security legislation which precludes that. The Government have admitted that the up-ratings are the direct product of the super-inflation we are now experiencing, yet even now the Government say that the six-monthly reviews which are proposed are impracticable.
In her statement in May the right hon. Lady the Secretary of State made it clear that she intended to move back to annual upratings. The hon. Gentleman has also made that point clear tonight. This is a question of some importance in considering the order. It is right that we should know the exact nature of the Government's objections to the proposal for regular six-monthly reviews. The usual reason which has been given is that there are administrative difficulties. That has been the argument of the right hon. Lady and her right hon. Friend the Minister of State, Department of Health and Social Security. The Government's case is that, irrespective of the rights of the matter, administrative difficulties make more regular reviews impossible.
A new light has been thrown on this departmental excuse by The Sunday Times in an article published last Sunday. The article goes back to the 1964 pensions increase which was announced in November 1964 but which, in spite of enormous pressure, was not paid until April 1965. The excuse used at that time was administrative difficulties. In his book the Prime Minister wrote:Through sheer administrative difficulties it was impossible to bring them into effect until early Spring … it was simply not possible.That has already been challenged by Lord George-Brown. The noble Lord has explained that it was not administrative difficulty but the acute economic crisis which forced that delay 10 years ago. The argument is now supported by the late Richard Crossman in his diaries. Mr. Crossman reveals that the Government had worked out a scheme. 385 According to him, Peggy Herbison, the Minister responsible at the time, had worked out a back-dating scheme as instructed but she received nothing but almost universal hostility from the Cabinet.
Let me make my point absolutely clear. It is clear that the then Labour Government had decided that it was possible to have the back-dating of pensions—in other words, though the pension would be paid in April, it would be backdated to Christmas. Of course that is not the same as being able to pay out a pensions increase at the time a Government want it to become due. The same excuse of administrative difficulties trundled out by the Prime Minister in his memoirs and demolished so effectively by Mr. Crossman appears to be being used again. We would welcome the hon. Gentleman's statement of policy.
My hon. Friend the Member for Rushcliffe (Mr. Clarke) will deal with the part of the order dealing with supplementary benefits, and I know that many of my hon. Friends want to take part in the debate. I wish to reiterate one point. No system of uprating will compensate the pensioners for the kind of inflation which we are now facing in Britain. It should be a matter of agreement between the parties that our aim as a Parliament is to protect the interests of retired people. It follows that it should also be a matter of agreement between the parties that inflation should be tackled. But the Government have failed to tackle inflation—and that failure to act affects no group more harshly than the millions of retired people.
§ 10.40 p.m.
§ Mr. William Molloy (Ealing, North)
I suppose we should congratulate the hon. Member for Sutton Coldfield (Mr. Fowler) on taking on a difficult task this evening. He referred to difficulties which occurred 10 years ago but he conveniently forgot to mention that Labour had introduced the largest increase in the old-age pension that this country had ever seen. Millions of old people had been suffering from an economic crisis, and the Labour Government in the period 1964–66 made a real contribution by uplifting the standards of living of those people.
Although there has been an argument, indeed a post mortem, in regard to the 386 events of past years, the fact was that the then Minister, Miss Peggy Herbison, investigated the situation and was appalled at the neglect that she found in the Department. My hon. Friend the Member for Bethnal Green and Bow (Mr. Mikardo) was involved in an examination of the situation and it was discovered that the Department was run down and that there was hardly a computer in the place to assist in resolving complicated issues.
While I am on that topic, it might be as well to draw attention to the amount of complication that has entered this sphere of activity. The quicker we get back to Aneurin Bevan's solution—he always had an immaculate solution and indeed has demonstrated it sometimes almost from the grave—the better. Why not do away with the contributory elements? Let us do away with all the cards and stamps. There is even a machine to spoil the stamps once they are stuck on. All that effort is going into one simple requirement: that of making available to British people from the cradle to the grave medicaments, the service of doctors, amublance men and the facilities of our great hospitals. Surely it is right that we should seek to do so without all the complication of stamps and cards. One day this country will arrive at a proper solution.
The hon. Member for Sutton Coldfield was right to say that the Government in these orders were endeavouring to cope with ever-increasing inflation. He must also acknowledge that 15 or 20 years ago no Government would have dreamed of increasing, within six months or a year of the original provision, any form of supplementary benefit or pension simply because there had been a minor increase in inflation of 4 or 5 per cent., even though that was a terrible thing for the 10 million people who found themselves in a desperate situation.
Let me say at the outset that I welcome the orders. The Opposition would have had a better case tonight if, in view of the rapid rise in inflation, they had appealed for provisions on the lines of the present orders to be brought in, but they must make some sort of excuse as to why it is necessary in any case.
However, I believe that this House, the economists and people in the City are 387 inadvertently completely misleading Ministers and Members of Parliament in the figures which they are giving us in relation to price rises. The average housewife knows that hardly a week passes without a little increase in the price of something. For example, the price of a writing pad which my wife bought recently has risen over the past month from 5p to 23p. Horse lovers no longer buy a couple of penn'orth of carrots because it is cheaper to buy apples. The economists miss this sort of thing—the price of dresses; the boy's cap; the pair of stockings for the lad starting a new term at school. These things are not considered by the very clever gentlemen who work out the wonderful figures about inflation and price rises.
What is happening? Some trade unionists say "You are saying to us that the profit element must be maintained. It has been maintained for nearly five years. The case is made and the price increase is allowed. Many of the wage increases for working men are not put into the bank but are used to pay for the increased prices, rates and rents." I admit that there must be an all-round contribution. I am one of those who happen to believe that there must be massive restraint in the wages sector. But there must be a corresponding restraint in the profit sector—on the million-and-one little articles which the ordinary housewife must buy.
The order is essential to meet an already encroaching form of increase in the cost of living of the ordinary family, which is hitting pensioners and those on supplementary benefits hardest. The Government have acknowledged this, and that is why the order has been introduced. It is the result of humane thinking and consideration for this sector of the population.
By itself, the order is not the answer. We cannot go on and on having wage increases—this is the key—argued for by trade unionists to meet the increased bills of the grocer, the greengrocer and the landlord, and the rates. That is why these increases are wanted. When they are granted, there is further escalation of prices, so the round starts again. We all know the argument. Somehow or other it must stop.
388 For this order to have any effect, and if the Minister is not to return to the House in a month's time with something similar, at the rate we are going, he and his Department must increase their influence on other Departments. There must be a sensible collaboration between trade unions and employers in halting inflation. We are all agreed that this must be the key. That is the real contribution.
I believe that the impressive official figures from authoritative sources about price increases are a load of baloney. The average housewife is much more experienced as to what she has to pay out. She has to pay a couple of pence extra here in the morning and a few more pence extra in the afternoon, for six days a week, on odds and ends which are causing a big hole in her purse.
The first thing that we must do to make any reality of this sort of order is to ensure a much more savage and realistic control of the prices of all sorts of little things which the economists ignore but the increasing prices of which irritate the housewife. By adopting a much more realistic policy of controlling prices we shall have the right to go to the unions and the wage and salary earners with the argument that the curve on prices is dipping and that they must therefore hold back on pay demands. The only people who would be entitled to creep up to a higher standard would be the sort of people who would benefit from this order.
In spite of our economic problems, it would be a sadder House of Commons if this order had not been presented tonight. At least it shows that the House and the Government have not forgotten the less fortunate in society.
§ 10.51 p.m.
§ Mr. David Penhaligon (Truro)
If the hon. Member for Ealing, North (Mr. Molloy) is suggesting that inflation is higher than the 26 per cent. that I understand it has now reached, we are indeed in dire straits.
I am grateful for the Under-Secretary's explanation of the reviews. I was struck by how unbelievably complicated is the system we have evolved for paying benefits in this category. I shall endeavour to concentrate on the bulk of those involved in these orders—the pensioners and those on supplementary benefits.
389 We have been told that the pensioners are being given an increase of 14.6 per cent. to cover inflation for seven months based on wage inflation for the period. That figure is the equivalent of 25 per cent. on an annual basis. I looked out the latest figures tonight in the Library and I discovered that we are now suffering wage inflation at a rate of 30.5 per cent. It could therefore be argued that in this review the pensioners have lost 5 per cent. under even a statutory obligation, as the Under-Secretary described it, to increase pensions.
The fact is that under a system of historic reviews in a period of rising inflation pensioners are always behind. There is no great need to explain that point, but it follows that when we manage to reduce inflation these people might do very well from the review.
One aspect of inflation which is not often mentioned in connection with pensions is that if over a period inflation is running at 10 per cent., at the end of that period the pension is worth 5 per cent. less than the original figure. If inflation rises to 30 per cent. the real value of that pension is 15 per cent. less on average. It is this which has made the increased upratings or shorter periods between upratings necessary.
The hon. Member for Sutton Coldfield (Mr. Fowler) argued for a system of six-monthly reviews. If that were introduced I would not oppose it, but surely it is time to look not for a specific period of review but for a system by which pensions are automatically increased if a certain level of price increase is exceeded—let us say 10 per cent. That would protect the real value of the pension over a period.
I turn to the abolition of the Christmas bonus. My wife runs a village sub-post office in Cornwall. Until I was elected it was my job to serve on Saturday mornings, but I am now banned from doing so. I met many pensioners, and it was a great education. The Government underestimate how much the Christmas bonus was appreciated. It meant that there was at least one time in the year when many of our pensioners were not desperately short of money. I still think that the abolition is bad.
390 Leaving that aside, I point out that the £10 per head was in real terms a week's extra benefit a year. It was 2 per cent. of the pensioner's average income per year. We can look at the matter in two ways. It can be said that the money which the Government save by not paying the Christmas bonus has, in effect, postponed the increase in pensions for seven weeks. That is approximately the period over which the average pensioner will receive the extra benefit before the time when he would have received his Christmas bonus. In that sense the Government have not brought forward the increase but have put it back to 1st January 1976. Alternatively, it can be said that the pensioners have received a 2 per cent. drop in their income by this move—and that is how I view it.
Adding the 5 per cent. that I mentioned earlier to the 2 per cent., we at least have a case that the pensioners have had a real drop in their total income for the year of about 7 per cent., as a result of the review and inflation. We all know that we must do something to try to reduce public expenditure and to balance the books, but a net reduction in pensions of 7 per cent. is not the place to start.
If there were an effective way in which we could amend the order I should be tempted to do so, but although there are times when I do not understand very well how the House works, I understand that that is impossible. Therefore I can only welcome the uprating. But I ask the Minister to look into my arguments, which indicate that there is a case that the pensioners are not being as well treated in the review as the Minister said.
§ 10.58 p.m.
§ Mrs. Lynda Chalker (Wallasey)
While they welcome the uprating, my constituents are very fearful about exactly the matters the hon. Member for Truro (Mr. Penhaligon) has just described. It is vital that the Government get to grips with the root cause of our having to continue to consider further upratings which are necessary in order to bring pensioners up to the level that we hope to see them reach compared with the rest of the working population. To have to raise pensions simply because we cannot control our public expenditure, because we cannot run the economy properly, is a denial of government.
391 The seriousness of the situation was brought home to me more vividly than ever before when, last week, a pensioner in my constituency sent me a 100,000-deutschemark note, telling me that in the 1930s, when he purchased it, it was worth one and a half old pennies.
§ Mrs. Chalker
I am corrected by the hon. Gentleman, who remembers that age better than I do.
The words of every letter that I receive each day from pensioners worry me no end. It is not only the pensioners but the lower income families and the one-parent families who are trying to deal with increases which are not calculated within the Family Expenditure Survey or the retail price index. These are the people who are up against it, and the children in some of the families are today, unfortunately, turning to other ways of finding money. That is something which we should not encourage.
It is not just a question whether they can live much as they did before. Perhaps some can, but I have yet to find them. It is now that the telephone is being returned; that the television is being returned; that they cannot use the night storage heating which they were sold as an economic means of keeping themselves warm—all because they cannot afford them.
Despite the increases in the dietary allowances which the Under-Secretary mentioned with great skill, with all the figures at his fingertips, there are people with great disabilities and a special need for food which is not in the general range at which we look in considering price increases.
It is the total inability of the system to care for those most in need while nothing is done to stop those with the greatest greed which depresses me. I welcome what the Under-Secretary said, but I wonder whether the hon. Member for Ealing, North (Mr. Molloy) could have made those remarks when the Under-Secretary was speaking, rather than interrupting all the way through.
With the problems that elderly people face they will not die happily and they 392 feel they will die a lot sooner. I notice that we are doing nothing to help with the death grant, but I shall leave that matter to another hon. Member.
I should like the Under-Secretary to answer this question: Why are we spending a great deal in organisation and the issue of new 12-week order books, instead of continuing with the overstamping of pages in the order books? I understand from a subpostmistress in my constituency that instructions have been received no longer to overstamp increases in benefits but to issue new books every 12 weeks. That seems a total waste of public money, when the extra might be given to those in need.
We welcome the fact that there will be an increase, but we ask the Government to go one step further—to control inflation so that the increase will have some merit when it gets into the pockets of the beneficiaries and pensioners.
§ 11.3 p.m.
§ Mr. Hal Miller (Bromsgrove and Red-ditch)
After that powerful intervention by my hon. Friend the Member for Wallasey (Mrs. Chalker) I can be brief. The question I wish to put to the UnderSecretary—to whom I pay tribute on his second appearance in two days and on his mastery of a complicated brief—without probing deeply and unkindly, is whether I may have a breakdown of the population of 12 million people whose standard of living depends on social security benefits.
I hope that the Minister will illustrate the breakdown of that population, because he must be aware—and the House should be aware—of the rising tide of discontent about the number of people who are in receipt of supplementary benefit and who are perfectly able to work and are capable of finding work and moonlighting.
I had in my advice bureau a constituent, admittedly a Labour shop steward, who said that his will to work was crumbling because his neighbour was able to lie in a deckchair, watching the grass grow, while he was on piece work and his wife was complaining about how late he came home.
If these benefits are to be increased in future in the manner set out in the order, there will be a rising demand that the people benefiting from the increases 393 should be subjected to much closer scrutiny than is carried out at present for those in receipt of unemployment benefit.
The points that I wished to make other than that are comparatively minor. None the less, they are very real to those who are affected. I wish to refer in particular to the position of widows and to express regret that the order makes no attempt to improve the lot of younger widows whose pensions are not uprated to the full amount when they reach the age of 50. I hope that the Minister will be able to indicate that that point will be considered by his Department when the position has to be reviewed again.
The feeling amongst all widows is that it is unfair that their pensions should be taxed to the present extent. The Minister has not been entirely candid with the House about the effect of taxation on some of the increases proposed in the order. I do not think that they are entirely net figures.
The hon. Member for Truro (Mr. Penhaligon), who has left the Chamber—we get accustomed to Liberal Members departing when they have made their contributions—referred to the Christmas bonus. I support what he said on that matter. However, what he did not make plain was that the Christmas bonus represented a lump sum—a sum which the pensioner might not have been able to save out of the weekly pension—which, when the Christmas season came, enabled him to give small gifts to the closest members of his family, particularly the grandchildren. It had not only a sentimental, but a real value to the pensioner, because it was suddenly available and represented, as it were, something that he might have been able to save.
Finally, I want to refer to the continuing inequities for the self-employed—for example, the directors of small firms—who have become fully employed from 5th April and whose benefits will not be payable until 1st January 1977. The effect of inflation is leaving them still further behind. That aspect also applies to those for whom unemployment has unfortunately begun near the end of a year.
For example, a constituent of mine wrote to me this week saying that he had 394 become ill in November 1974 and was assessed for his benefit on his tax year 1972–73. With inflation continuing at the rate that we have been discussing this evening, these inequities become even more intolerable. I should like to hear from the Minister that these aspects will be examined.
§ 11.9 p.m.
§ Mrs. Jill Knight (Birmingham, Edgbaston)
What concerned me most about the Under-Secretary's speech introducing the order was its almost self-congratulatory note and the suggestion implicit in it that the order and all that it implies was enough—[Interruption.]—I wonder whether I may ask you, Mr. Deputy Speaker, to protect me from the interventions of the hon Member for Ealing, North (Mr. Molloy).
The Government must be told in no uncertain manner that what they are proposing in these orders is not sufficient to meet the plight in which many elderly and needy people find themselves today.
I am particularly concerned with the plight that faces elderly people who have tried hard to provide for themselves—people who are not wealthy but who patiently, carefully and thriftily, all through their working lives, have put a little money aside and perhaps bought a share or two here and there. What about those who put their money into British Leyland? How greatly they have been cheated. The same applies to those who put money into Massey Ferguson. There are many such instances. These are not the kind of people who ought to be cheated or insulted. They ought to be congratulated, because they have tried to protect themselves and provide for themselves.
What is happening today is totally cheating them. Some have put their little bit of money into property, and because of that they are almost universally regarded by the Labour Government as wearing horns and a tail. Those who have put their money into property have not only been cheated; they have been treated monstrously by the various Acts which have gone through the House under this Government.
It is a damned sight easier to get rid of a husband than it is to get rid of a tenant. Tenants can treat their landlords 395 abysmally. They can withhold rent and remain in the property for months. I have two old-age pensioners in my constituency who had a tenant in a flat of theirs. These are not wealthy; they are simply people who have tried to provide for themselves. They have found that due to the present legislation it has been impossible for them to turn out the tenant who not only failed to pay rent for many months but grew hashish in the garden and did other things which were totally unsatisfactory. These people, who tried to provide for themselves by rent from their property, have been cheated.
There are other elderly people who, throughout their working life, have tried to provide for their dependants. I have in mind a case in my constituency of two elderly people who tried to provide for their mentally handicapped daughter. They left what they thought at the time was sufficient money to care for this woman, who is now in her fifties and will never be able to support herself. The money they left has turned out to be nowhere near enough. The mentally handicapped woman herself not only has no resources, except what her parents left her; she has been denied such things as attendance allowances, or any help at all. Elderly people today cannot be compensated for the effects of inflation simply by the orders before the House this evening. Some of them are desperately worried about the rates burdens they have to bear—as, indeed, we all do. Others have been hit in different ways. For instance, the Government have imposed a luxury VAT rate on such things as electric blankets. Elderly people rely on these things, and it is not enough to give them a bit to cover some of the effects of inflation and then to hit them in these other ways and imagine that that is equitable for these poor people.
My hon. Friend the Member for Wallasey (Mrs. Chalker) mentioned telephones, as also did the hon. Member for Ealing, North (Mr. Molloy). I wonder whether the Minister has tried to get a free or assisted telephone for any of his constituents. I have. It is almost impossible to get telephones for these elderly people. It is quite true, as my hon. Friend the 396 Member for Wallasey said, that people are now having telephones removed.
The message from the Conservative Party to the Minister tonight is that these orders are not enough. The Government must realise that the mere giving out of more money, much as we all welcome it, is not enough to meet the terrible conditions in which many elderly people find themselves today.
§ 11.15 p.m.
§ Mr. Robert Boscawen (Wells)
It is quite like old times to hear the Under-Secretary, with his agile mind, reeling out vast lists of figures on social security. I have no doubt that they will read extremely well in the Official Report, but those of us who have not the same quick and ready thinking as the hon. Gentleman were not able to absorb all that he said.
One feature of the hon. Gentleman's speech which I was able to absorb was that what he is doing tonight is purely a reflection of the failure of our society. We are spending £1,000 million to enable pensioners to stay where they are, and many of them will not even be able to do that. We are not even improving and extending pensions and filling in some of the gaps. My hon. Friend the Member for Birmingham, Edgbaston (Mrs. Knight) spoke of the need for a death grant for those who do not get one. I have been pressing the need for this for some time, as did the Under-Secretary when he was in opposition. But he cannot do it now, because of our total failure to come to grips with the real menace facing us today. The Government have to give the lead. Unless we come to grips with inflation, the people whom we are discussing this evening will suffer most.
Let us look at some of the items in the average person's budget for which the general movement of prices does not cater. The increase in postal rates will probably have a greater effect on pensioners than anyone else, and the rates are likely to be increased still further. Many pensioners cannot get out to pay their bills, and have to do so by post. For many of them, the post is their only means of communication with families and friends.
Then there is the gross and substantial reduction in bus services in country areas, 397 and we see increases in fares on what few services remain. Pensioners will be more affected than anyone else. Social security offices are being curtailed in number. In my constituency, many local offices can no longer be reached by telephone, because of staff shortages. They have to be visited. It may be that some pensioners cannot get there themselves and have to rely on friends to go on their behalf.
These are some of the effects of inflation on ordinary people in retirement, who are hit harder than those fortunate enough to be active and young. But the real failure is that we are not making any improvement by means of this order. There is no extension of the non-contributory pension or of the earnings disregards for the non-contributory invalidity pension. There is no improvement in the maternity grant or in the death grant.
The order is a confession of failure. If the Under-Secretary had been sitting on the Opposition benches, he would have condemned the Government, and rightly, for having allowed the terrible scourge of inflation to get out of hand and to hit elderly and disabled people harder than anyone else.
§ 11.19 p.m.
§ Sir Brandon Rhys Williams (Kensington)
There is much that I would have liked to say about this important and costly pair of orders, but in the minute or so that I have available I want only to refer to the date of the coming into operation of the benefits. Here we are, on Midsummer Day, and these benefits will not come into effect until 17th November. Candidly, we cannot go on with the obsolete methods which the loyal and hardworking staff of the Department are asked to put into practice.
Machines are available which would make it possible to carry out changes of this kind in a few days. How much longer will Ministers be content to carry on with the caterpillar programme of reform of the administrative procedures of the Department? It is only seven months since the last increase and it will take us five months to bring in this one. Let us suppose that the rate of inflation continued to go ahead at the rate it moved in May. We should then have to introduce upratings faster than this, or we 398 should have the entire pensioner and national insurance population dropping into penury—and the machine would collapse.
This is something to which we shall have to return. My suggestion is that we should immediately institute an inquiry into the administrative methods of the Department of Health and Social Security. I am not criticising the people who work the out-of-date system; I am criticising the Ministers who do not hasten ahead to introduce better methods and better machines. If it is not clear to the Minister that something has to be done at once it very soon will be. A public inquiry is required.
§ 11.22 p.m.
§ Mr. Kenneth Clarke (Rushcliffe)
The debate has included several references to our personal pleasure in welcoming the Under-Secretary back to his old job and to taking part in uprating debates. I assure him, on behalf of most hon. Members, I am sure, that we do not regard his return as being the equivalent of being sent to Siberia, even if some of the comments made at the time of the change suggested that that was so.
The Under-Secretary's speech included a staccato-like uttering of figures which was reminiscent of tape coming out of a computer. When he reached the political conclusion of his speech he took great pride in the large sums of money involved in the current uprating.
It is significant that, as usual in debates on pensions and benefits, considerably more Conservative Members than Labour Members have taken part.
§ Mr. Clarke
It is interesting to hear the hon. Member for Rochdale (Mr. Smith) making the first comments in a pensions and benefits debate that I can recall in the comparatively short period he has been in this House.
§ Mr. Cyril Smith
It may be of interest to the hon. Gentleman to know that I took part in the last debate on pensions and I also took part in the debate on the £10 bonus for pensioners last Christmas. This is by no means the first such debate that I have attended. I am grateful to the hon. Member for giving me the opportunity to point out, particularly since our 399 debates are recorded, that the great concern of the Conservative Party tonight is reflected in the fact that there have been seven Conservative Members sitting in this Chamber throughout the whole debate.
§ Mr. Clarke
I took part in both debates to which the hon. Member refers. I am sure that his contributions were exceedingly memorable, but they have escaped my recollection. I suspect that the fact that the proceedings are being recorded may be the reason for his intervention.
The Minister's political pride in the financial expenditure involved in these measures and the percentage increases they contain was somewhat dented by the debate because the background to what is being done is that there has been a substantial cut in the living standards of those dependent on pensions and benefits and a failure, even using the mechanisms of uprating, to keep up the living standards of the poor in the type of tearaway inflation we are now suffering.
The Under-Secretary was kind enough to say that the machinery of uprating we are using was introduced by the Conservative Government in their 1973 Act, when the legislative commitment was made which bound future Governments to index-link a substantial number of pensions and benefits on a regular annual basis. Since then we have been committed to six-monthly reviews and in practice the Government have got very much nearer to that. In the present inflationary climate it is a good thing that we are doing this to give some protection against the hurricane striking the beneficiaries of these benefits. Before we look at the benefits that have been increased we have to remember that although the Government have taken over the obligation of regular reviews and are making much more speed than they are obliged to do, they are trying to prevent the introduction of any new benefits into the up-rating and index-linking machinery.
What the Under-Secretary said this evening contrasts considerably with the Government resistance to bringing the new child benefit into this uprating procedure, and the resistance which the Government successfully maintained recently in Parliament against including the mobi- 400 lity allowance in the new uprating procedure. We tried to demonstrate that this procedure did not adequately defend the real value of pensions and benefits. We realise how empty and heart-on-sleeve must be the declarations of the Government on other subjects when they decline even to include child benefit or the mobility allowance in any regular uprating procedure.
My hon. Friend the Member for Sutton Coldfield (Mr. Fowler) dealt with our commitment to six-monthly reviews. I await the Under-Secretary's explanation of the reason why the Government are still against the policy of six-monthly reviews, as the review periods are becoming shorter and a seven-month review was announced this evening.
On the last occasion when the matter was discussed the problem of administrative details was raised by the Minister. It was explained that 2,000 more staff would have to be recruited to surmount the great administrative problems of making these reviews every six months. Since this is to be a seven-months' review, I should like to know how many of the 2,000 additional staff have been engaged. How are the officers of the Department coping with the administrative difficulties laid upon them, if what the Secretary of State said recently is to be believed?
In his memoirs about his last period in office the Prime Minister claimed that administrative problems prevented the speeding up of the pensions review when he first took office. That statement was contradicted by his ex-colleagues in their memoirs and posthumous recollections in newspapers. The Opposition are doubtful about the administrative problems mentioned by the Government.
As the flames of inflation leap higher, the regular review procedure, which is based on the historic review procedure, is not protecting the living standards of the beneficiaries. The hon. Member for Truro (Mr. Penhaligon) was correct when he said that as long as there are historic reviews based on past rates of inflation, as inflation quickens we cannot adequately protect the beneficiaries. The review is based on inflation during the period from August 1974 to March 1975, but the benefits are not payable until November 1975 onwards. During this 401 period inflation was 26 per cent. in earnings and 23 per cent. in prices. As inflation is now higher, the real value of these benefits, when paid, will be substantially lower than the Minister indicated.
We must know whether, in the coming winter, pensioners will live on the basis of last year's level of inflation, and how long they will live on this latest uprating from November. The last time there was an uprating the Government announced when the next would occur. Will the Under-Secretary do so this evening? For how long will the new levels be paid after November 1975? On the Opposition commitment of six-monthly reviews, they would be paid until May 1976. I suspect that the Government will eventually accept the Conservative proposal.
When we compare the historic figures from August 1974 to March 1975, employing the basis used by the Chancellor in October 1974, we see that the current figure for inflation is about 35 per cent. The value of the increases will therefore be eroded. The reply to a Parliamentary Question yesterday disclosed that the figure for inflation was 35 per cent. However, the real value of the pension now paid will, as a result of the April uprating, be reduced from September 1975 onwards. The new pension will lose its real value in relation to the existing pensions levels if that rate is maintained.
The other problem in comparing rates of inflation with level of benefits is that the figures ignore the effect of the tax thresholds which the Government have not raised in line with inflation. That affects wage earners as well, and it has an adverse effect on the living standards of those with the lowest incomes. My hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) was right to remind us that out of these benefits many widows and pensioners have to pay a higher level of tax than they have experienced in the past.
If the combined effect is that by November 1975 the real value of the benefits will be substantially down, the abandonment of the Christmas bonus will cause great resentment to a large number of people. We accept that there always has been a case for saying that the Christmas bonus is not a satisfactory permanent feature of the national insurance system, 402 but the Government should not underrate the rage which will be experienced by pensioners when that bonus is not given.
§ Mr. Clarke
I cannot give way. The hon. Member will take the Minister's time if I give way, and he has already made the longest speech in the debate from the back benches.
The Minister mentioned the introduction of a non-contributory invalidity pension at the new rate. He did not mention that, contrary to the wishes of a Standing Committee of the House, disabled housewives will not get any new benefit in November. The Government are obdurately sticking to their decision to bring them in two years later.
I shall touch on supplementary benefits and the rules under which they are paid. Will the Minister give an assurance that the needs allowance for rent and rate rebates will be raised by the Department of the Environment at the same time and with effect from the same date as the increase in supplementary benefits? There was considerable difficulty in a recent uprating when a gap was allowed to ensue so that people who received more supplementary benefit lost part of their rent and rate rebates until the needs allowances were raised.
Will the Minister confirm that the Supplementary Benefits Commission will liberalise its rules about the direct payment of rent? I understand that the SBC has been changing its procedure. There is a huge and rising level of council house rent arrears, which means that part of the uprating will be used for that purpose instead of for keeping up the level of benefits. I trust that the SBC will pay more rents directly.
That brings me on to the fixed rent addition for the non-householder. A supplementary pensioner or beneficiary who lives in someone else's household gets a 95p notional addition for rent. That has been raised only to £1 by this uprating, and that increase is not in line with any of the other increases. Will the Minister confirm that the Government have decided to make a substantial cut in the real value of the supplementary benefit paid to non-householders?
Finally, I come to disregards on supplementary benefits, which are not to be 403 payable until November of this year. The Minister can take no pride in saying that they will come into effect, because the disregards were legislated for 12 months ago. There has been a year's delay between the passing of the necessary legislation and the disregards coming into effect, presumably at the level fixed 12 months ago. So the value of the disregards will be very much less.
Disregards are particularly important to one-parent families living on supplementary benefit. That is a group which the whole House want to help—a group which the Government refused to help in the Child Benefit Bill. By refusing disregards for so long and not increasing them when they come into effect in November are damaging the position of one-parent families.
I have left the Minister with some questions, and many other hon. Members have asked questions. I hope he will be a chastened man when he rises to reply and that he will not follow the pattern of his right hon. Friend the Secretary of State, who constantly comes to the House, heart on sleeve, to make speeches expressing pride in her little packages of compassion, which have the effect of cutting the living standards of the people about whom she is talking.
The poor are getting poorer under the right hon. Lady. They are getting poorer mainly because of the Government's total failure to deal with inflation. We have seen the collapse of the social contract and the surrender to those who have obtained excessive wage settlements in industry. They are the people who are gaining the advantage that is being denied to pensioners and beneficiaries. That is the background and that is the sad context of this order.
§ 11.35 p.m.
§ Mr. Meacher
I have five minutes and I shall try to answer as best I can the main points that have been raised. First, the debate has rightly centred around inflation and the measures that are needed to surmount it and to prevent the need for constantly returning to the House for further upratings. That point has been made by the hon. Member for Birmingham, Edgbaston (Mrs. Knight) and my hon. Friend the Member for Ealing, North (Mr. Molloy). That is an 404 entirely appropriate point to make. The House will know that the Government are determined to take further measures to seek to slow down the rate of inflation, which we regard as pivotal. We do not accept that it is sufficient merely to pay out more money, but the point I wish to deal with is the question whether we are taking account of the situation with which my Department is faced and whether we are adequately inflation-proofing the situation of pensioners.
The hon. Member for Sutton Coldfield (Mr. Fowler) has misconceived the central question of inflation-proofing. He indicated that real cuts were planned. His hon. Friend the Member for Rushcliffe (Mr. Clarke) talked about the poor becoming poorer. We have taken the best available estimate of the future rate of inflation. The rate that the Opposition Front Bench has taken of 35 per cent. is based on the quarterly period from February to April and grossed up for the year. That is not, by and large, the best estimate that can be made. We believe that the estimate that we have made on an historic basis is the best. But even if the Opposition are right, it is the fact that if inflation accelerates as the hon. Member for Rushcliffe assumes there may be some small shortfall until we reach the peak. Given a downturn in the rate of inflation, the historic basis for inflation-proofing would mean a corresponding gain in real terms for pensioners. I do not believe that there is a better way of proceeding.
The other main point that the hon. Gentleman raised concerned the frequency of the upratings. The hon. Gentleman will have observed that the Government have taken account of their commitment to protect pensioners by introducing upratings at increasingly more frequent intervals. First it was 10 months, then it was eight and a half months, and now it is seven months. The hon. Gentleman asks for six months. I do not think that there is a great deal of difference between us on that. The important point is that the Government should operate upratings whenever necessary. That is the answer to the hon. Gentleman on child benefits. He knows that we have committed ourselves to do that. It is what successive Governments have done in respect of supplementary benefit and family income supplement. 405 The Government have committed themselves to protect beneficiaries as and when necessary. That is what we are proposing.
Further, the Conservative Party's six months' proposal has never been more than to provide mere price protection. We are concerned that protection, either in terms of earnings or prices, should be based on whatever acts more in the interests of the beneficiaries.
The third point I make to the Opposition Front Bench is that it has perhaps underestimated the extent to which we have protected pensioners. Perhaps the best comparative index for considering the situation of pensioners is in terms of the average net earnings of male manual workers. If we make that comparison we find that in October 1973 the single pension amounted to 26.1 per cent. of the net earnings of male manual workers. In July, 1974, after our first uprating, it was 29.6 per cent., a significant increase in relative terms. In April 1975 it was 31.4 per cent. That is a significant and important improvement in relative terms for pensioners.
The hon. Member for Truro (Mr. Penhaligon) made one particular point, to which I respond, concerning the abolition of the Christmas bonus. We recognise that when the bonus was first introduced it had arbitrary coverage. We attempted to improve the situation by bringing in an extra million persons, including widows and the chronically sick and disabled, but many did not have another qualifying benefit. We believe that the bonus is not the appropriate way to assist the pensioner. That is why we are bringing forward the second general uprating planned for December to the week beginning 17th November, which was the week in which the bonus would have been paid.
The hon. Lady Member for Wallasey (Mrs. Chalker) referred to dietary additions. I must tell her that they are standard additions, determined by medical advice. They are not absolute limits. If further assistance is necessary, special consideration will be given. She also asked why the Department had made a decision not to issue new order books——
§ It being one and a half hours after the commencement of proceedings on the motion, Mr. DEPUTY SPEAKER put the406
§ Question, pursuant to Standing Order No. 3 (Exempted business).
§ Question agreed to.
That the Social Security Benefits Up-rating Order 1975, a draft of which was laid before this House on 11th June, be approved.
That the Supplementary Benefit (Determination of Requirements) (No. 2) Regulations 1975, a draft of which was laid before this House on 11th June, be approved.—[Mr. Meacher.]