SOCIAL SECURITY (ABOLITION OF WAGE STOP RULE) (Hansard, 19 March 1975)

§ Mr. John Ovenden (Gravesend)
I beg to move, That leave be given to bring in a Bill to abolish the wage stop rule in relation to the payment of social security benefits. The wage stop rule is the rule contained in paragraph 5 of Schedule 2 of the Supplementary Benefit Act 1966.

§ Mr. Speaker
Order. Will hon. Members who wish to conduct loud conversations do so outside the Chamber.

§ Mr. Ovenden
The rule applies to all men who have to register for work as a condition of receiving supplementary benefit. The rule demands that unless there are exceptional circumstances the amount of supplementary benefit payable shall not exceed what would be the individual's net weekly earnings if he were engaged in full-time work in his occupation. I am asking leave to introduce the 1645 Bill firstly because I believe it is fundamentally wrong that we should deliberately condemn families to a life below the poverty line, which is precisely what the wage stop rule was about.
In November 1974 there were 8,000 supplementary benefit claimants subjected to the wage stop. The figures for family size, which are available only for November 1973, show that 60 per cent. of claimant families then were families with five or more children, and that another 30 per cent. had three or four children. On that basis we can calculate that in excess of 35,000 children are affected.
It is also evident that the larger the family the larger will be the wage stop deduction, and the further below the poverty line the children will have to live. The average wage stop deduction at present is about £2. But in the case of three-, four- or five-children families it is quite possible that this deduction can be three or four times the amount.
The rule is often misunderstood. It is not supposed to be a weapon against the work-shy. The Supplementary Benefits Commission has enough weapons in its armoury to deal with that problem without needing the wage stop rule.
In its 1967 report the commission stated: The purpose of the wage stop is not to provide an incentive for a man to get work. The wage stop does not require a man to get less than he would when working. What it does do is to ensure that an unemployed man's income is not greater than it would be if he were in full-time work. The question we must ask ourselves is this. Are we justified merely because some families have to live in poverty when the breadwinner is in full-time work in condemning them to live in poverty when they are eligible for State benefits? The question really is this. In a humane Welfare State, can we tolerate a rule which means consciously and deliberately deciding that certain people should live below a level that we have ourselves decided is the poverty level? We are accepting a situation in which parents cannot afford to feed or clothe their children decently because of a rule which belongs more to the days of the Poor Law then to the days of an enlightened Welfare State.
1646 It is right that we as a society should be concerned about a situation in which a man may earn less in work than he can receive in State benefits. However, the reason why we should be concerned is that we should question the type of society which pays a man less than a living wage for doing a week's work. The continuation of the wage stop rule will do nothing to change that society. It will only continue to mask the injustice. I believe that the abolition of this rule will give a boost to the implementation of a system of family benefits that is needed by families in work to move them above the poverty line.
Above and beyond the moral argument on this question there is a problem of administration. The wage stop rule places an impossible burden upon the officers of the Department of Health and Social Security, because it is virtually impossible to administer fairly. First, it must be decided what an unemployed man's normal earnings would be. This means, I understand, that regard must be had to likely future earnings and that judgment must be exercised—I am told—over past earnings. Past earnings, of course, particularly in the days in which we are living now, can often be rendered meaningless by inflation.
The commission's rules state that any skill or experience should be taken into account in assessing a man's earning power and that there should be discussions with the claimant about his normal earnings. Yet in the majority of cases investigated by the Child Poverty Action Group, it was found that this was not done. The vast majority of wage-stopped claimants are assessed on the National Joint Council rates for light labourers, and, although these rates now include a guaranteed minimum income, they take no account of overtime. We all know that to a man with a large family it is the overtime earnings which make the difference between living and existing. The commission's rules mean that the National Joint Council rates are applied to all men after a year's unemployment, irrespective of their past earnings.
The rule is particularly harsh when applied to the disabled. Some men are no longer able to continue their former jobs because of disability, and not only suffer the drop in living standards to supplementary benefit rates but if they 1647 register for work they become candidates for the wage stop.
There are numerous examples which the Child Poverty Action Group has quoted. There is the case of Peter Rothman, who had earned good money as a skilled gas fitter in Liverpool until he had to leave the job because of osteoarthritis. Stuart Brown was a well-paid lorry driver until he suffered a heart attack. Ray Jameson had been a £40-a-week sanding machine operator when a stroke left him partially paralysed. Mike Bracken, who had been doing a skilled manual job, is no longer able to do that because of cervical spondylosis. Robert Chaffer, who had infantile poliomyelitis and now suffers from partial but progressive paralysis, continued to work, against medical advice, as a process operator in a steel works until his health gave out.
All these cases produced by the Child Poverty Action Group have been affected by the wage stop rule. One of them was told "There aren't any jobs for you, so you might as well sign on." By signing on, he made himself a candidate for the wage stop, and this was promptly imposed. All these cases, who were formerly skilled men, are classified according to the earnings of light labourers, jobs they never did previously.
The proper administration of this rule demands that due regard should be paid to rent and rate rebates and family income supplement due to the man concerned when in work. It is impossible to say whether this happens.
Recently I asked my hon. Friend the Under-Secretary of State to give 1648 information on how the introduction of rent and rate rebates had changed the number of people affected by the wage stop. He was unable to provide me with precise figures. I do not blame him for that, because I believe that it would be a massive task properly to monitor the rule.
Undoubtedly if the rule were carefully applied some injustices could be avoided. but at the same time that would reduce the saving to public funds of the wage stop rule and increase the administrative costs. We could well reach a point where the rule actually cost the Exchequer money, and I am sure that it would then be scrapped.
How, then, can there be any justification for keeping a rule which saves us money merely because it is applied over-harshly and haphazardly and is improperly administered?