HC Deb 22 May 1975 vol 892 cc1623-36
The Secretary of State for Social Services (Mrs. Barbara Castle)

With permission, Mr. Speaker, I should like to make a statement about increases in social security benefits.

My right hon. Friend the Chancellor of the Exchequer told the House in November 1974 that we were planning to make a second uprating in December this year to follow the one which took place in the week beginning 7th April. As the Chancellor made clear, the short intervals between upratings are a recognition of the exceptionally high rate of inflation we are experiencing, but as inflation is brought under control we intend to move back to an annual cycle of upratings. So far as this year is concerned, I am glad to inform the House that we have decided to bring forward the date for this second uprating to the week beginning 17th November 1975. But there will not be a Christmas bonus. A bonus is bound to be somewhat arbitrary in coverage and excludes a number of people who benefit from a general uprating.

The standard single rate of retirement pension and of invalidity pension, as well as a widow's pension, will be increased by £1.70 from £11.60 to £13.30. For a married couple the increase will be £2.70 from £18.50 to £21.20. These increases are in line with the movement in earnings of nearly 15 per cent. that has taken place in the period from August 1974 to March 1975, which is the relevant period for calculating this uprating. Younger widows and pensioners entitled to pensions at modified rates will get proportionate increases, and there will be additional increases for children.

Short-term benefits for sickness and unemployment will be increased in line with the movement in prices of just over 13 per cent. in the period August 1974 to March 1975. The rate for a single person will go up by £1.30 to £11.10, and for a married couple the increase will be £2.10 to £18. Maternity allowance and injury benefit will go up by the same amounts.

War and industrial injuries pensions will go up in line with long-term benefits. As regards supplementary benefit, the increases in the main scale rates will be the same as those in the related national insurance benefits, and they will come into force at the same time. The social security benefit increases will not generally reduce rent and rate rebates and rent allowances, since my right hon. Friend the Secretary of State for the Environment proposes, after consulting his advisory committee, to make corresponding increases in the needs allowances for those schemes.

To coincide with the uprating, the Supplementary Benefits Commission will be making substantial increases in the discretionary additions for extra heating to take account of increased fuel costs. These increases will be over and above the increases in the scale rates but will operate from the same date. The detailed increases are from 40p to 55p, from 80p to £1.10 and from £1.20 to £1.65 a week. The discretionary additions for special dietary needs will also be increased from 50p to 60p and from £1.12 to £1.35.

The changes in supplementary benefit disregards, which are already enacted, will be implemented from the week beginning 17th November, together with all the other improvements which will then become operative.

The week beginning 17th November will also be the date when our new noncontributory invalidity pension will start to be paid to persons other than disabled housewives. The rate at which this new benefit will be introduced will be £7.90 instead of £6.90 as originally envisaged.

The House will realise that, together with the increases in Family Income Supplement which I have already announced will take place in July, this represents a very heavy programme of work for the local offices of my Department. The programme can only be carried through in the time available as a combined exercise with a single operative date. To attempt to advance any part of the programme would cause duplication of work and inevitable delay in the payment of increases and benefits to large numbers of claimants. I have discussed the programme with the staff associations involved and I am confident that it will be completed in time.

My right hon. Friend the Chancellor of the Exchequer took account of this uprating of benefits in the Budget which he presented last month. The cost of the increases in benefits in the financial year 1975–76 will be about £395 million.

The increase in expenditure needs to be set in the context of an automatically rising income to the National Insurance Fund under the new earnings-related system of contributions. Of the full year cost of the uprating, which is £1,060 million, £910 million will fall on the fund. This latter cost will be taken into account, with other relevant factors, in the review of contributions which, in accordance with the Act, I shall be making during the summer. Following this review, the Government will propose whatever changes for 1976–77 are needed to ensure that the fund is soundly financed, including, if necessary, increases in the main rates of contributions. The changes will be effected by an order needing affirmative resolution after the Summer Recess, and there will be a report by the Government Actuary.

For the convenience of the House I am circulating details of the new rates of benefits in the Official Report. These, with copies of my statement, are available in the Vote Office. Immediately after the Whitsun Recess I shall be laying a draft uprating order, under Section 124 of the Social Security Act, for affirmative resolution. The order will be accompanied by a separate Government Actuary's report.

I am sure that the whole House will welcome these further measures to mitigate the effects of inflation on pensioners and other beneficiaries.

Mr. Norman Fowler

The whole House will recognise that the last statement was made in November and that the need for these reviews is becoming more frequent.

May I ask the Secretary of State a number of short questions. First, why does the right hon. Lady still resist six-monthly reviews of pensions, for which we have pressed? Is it really only because the proposal comes from the Opposition side? Will she give the assurance that if inflation continues at its present rate she will reconsider her policy for at least 1976?

Secondly, so that we can fully judge the effect of the abolition of the Christmas benefit, which, as the right hon. Lady realises, was introduced by a Conservative Government—can she say how much public expenditure is involved here, as she will be conscious of the very grave disappointment that her announcement will have caused?

Thirdly, is the right hon. Lady aware that the whole House is agreed that the old level of disregards for supplementary benefit purposes is totally inadequate, and, as legislation has been passed some months ago, could she not see her way to making an earlier change of policy here?

Fourthly, will the right hon. Lady confirm that she is continuing to insist that disabled housewives will receive the new non-contributory invalidity pension later than other disabled? Is this not defying what has been the clearly expressed wish of this House, and is she aware of the great anger that that is causing?

Lastly, is it not a fact that because of the present rate of inflation the real value of pensions and national insurance benefits will have dropped dramatically by November? Is it also not a fact that if the Government fail to get inflation under control not even these increases will suffice for very many people in Britain today?

Mrs. Castle

Considering the fact that the uprating we introduced only last month put pensioners and other beneficiaries, in real terms, in a considerably more favourable position than at the time of the October 1973 uprating of our predecessors, I find this conversion to more generous treatment slightly belated on the part of the Opposition spokesman.

With regard to six-monthly upratings, we have said that we are going to increase pensions and benefits as frequently as is necessary to protect the pensioners from the effects of inflation. This is what we have done. This will be an increase only seven months after the last one, which has, as I have said already, put the pensioners and other beneficiaries in a greatly improved position.

A single person, for instance, will be, in real terms, nearly 12 per cent. better off following the April uprating than he was under the last Conservative Government's uprating, and a married couple nearly 11 per cent. better off in real terms. There is, therefore, a margin here.

The Government's policy is as I have outlined. It is our intention, as inflation is brought under control, to revert to annual upratings, but in the meantime we have once again made the improvements as and when they became necessary. Once again we are increasing supplementary benefit in full line with the increase in the basic pensions, and, as I have announced, there will be substantial increases in the heating and dietary discretionary allowances and continuation of the help over rent and rates, which I believe will insulate the beneficiaries against the present difficulties.

Mr. Norman Fowler

And the disabled housewives?

Mrs. Castle

As for disabled housewives, at the time we debated this matter I made it clear, as did my right hon. Friend the Minister of State, that it was not administratively possible to include disabled housewives at this stage.

Mr. Greville Jamter

Will my right hon. Friend accept that many Government supporters who have protested against the anomalies in the £10 Christmas bonus will greatly regret its passing? Does she not feel that it would be better to remove the anomalies than to remove the bonus?

Mrs. Castle

I agree with my hon. and learned Friend that there were anomalies. Although we brought a million more people under the Christmas bonus last year, that still left many deserving groups excluded and a grave sense of resentment in many quarters. Yet the cost of that bonus was more than £90 million. I can only assure my hon. and learned Friend that it proved administratively impracticable under both Governments to extend the Christmas bonus to those on supplementary allowances who might be considered to be the most hard hit. It was totally out of the question, and both Governments recognised that. We think that it is better to spend what resources the country has on a general increase through this general uprating.

Mr. McCrindle

Is it not significant that the one benefit which lags behind in the Government's review is family income supplement? As this remains the only, albeit ineffective, weapon to deal with the problem of family poverty, does not the right hon. Lady agree that, until such time as the Government are able to introduce their own scheme, there should not be a situation where FIS increases are announced about six months after the other general upratings?

Mrs. Castle

On the contrary. The hon. Gentleman has it wrong. Obviously he missed my announcement earlier, which I repeated today, that family income supplement will be increased, in advance of the November uprating, in July of this year.

Mr. Powell

Is the right hon. Lady aware that many people will consider that she is to be commended for proposing to eliminate the unsatisfactory method of a Christmas bonus, which caused in many cases great and in some cases justified irritation and a sense of grievance?

Mrs. Castle

I am grateful to the right hon. Gentleman. It is true that, if there is a bonus of that kind, arbitrary distinctions have to be drawn between people. They create anomalies, and they create almost more grievances amongst those left out than they do happiness to those who are included.

Mr. Bidwell

Do these increases in the State retirement pension have any relationship to the declared object of the Labour Party and this Government of raising pensions in real terms in relation to national average earnings? I assure my right hon. Friend that, despite the difficulties of the country and the Government, working people ande the trade union movement as a whole are quite ready to make sacrifices for the 4 million old-age pensioners who are really up against it.

Mrs. Castle

I agree with my hon. Friend. It has been a very important reform to embody in a statute the obligation on the Secretary of State to uprate in line with average national earnings. As my hon. Friend said, we have kept that promise and we are implementing it. Of course, it is impossible to forecast what national average earnings will be in November. But I can give some idea about how this is beneficial to the pensioners concerned by giving the figures for our first two upratings. In July 1974 and April 1975 the upratings amounted to an increase of 50 per cent. for a period in which price increases were 33½ per cent. and average national earnings increased by nearly 35 per cent. In other words, we kept them even further ahead in real terms.

Mr. Hordern

Although the Opposition welcome this uprating in social security benefits and the fact that it has come only seven months after the previous one, does the right hon. Lady accept that the advance has occurred only because of the very high increase in inflation? Assuming that this increase

MAIN INCREASED CONTRIBUTORY AND NON-CONTRIBUTORY BENEFIT RATES
Proposed Weekly Rate Existing Rate
£ £
Standard rate of invalidity, widow's and Category A retirement* pensions; Category B retirement pension at the higher rate* and widowed mother's allowance … … … … … … … … 13.30 11.60
Increase of invalidity pension and Category A retirement pension for wife or other adult dependant; Category B retirement pension at the lower rate* … … … … … … … … 7.90 6.90
* An age addition of 25p is payable to retirement pensioners who are aged 80 or over.

is allowed for in the borrowing requirement, can she say how long it will be before she has to come to the House with proposals for another uprating? If it should be after only six months, when that occurs will she be able to say that that sum has been allowed for in the borrowing requirement?

Mrs. Castle

I agree that it is far better to bring inflation under control than to have frequent upratings. Equally, it is right in a period of exceptional inflation to have upratings sufficiently frequently to protect those concerned.

Mrs. Kellett-Bowman

It is not protecting them.

Mrs. Castle

I remind the hon. Member for Lancaster (Mrs. Kellett-Bowman) that, since coming to office, we shall have increased pensions and long-term benefits by 72 per cent. We believe that that is a very good record.

Several Hon. Members

rose—

Mr. Speaker

Order. We have a very important debate to follow. I am afraid that we must move on.

Following is the information:

Details of New Rates of Benefit

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. The last uprating took into account the movement in earnings up to August 1974. On the basis of the latest available information on the level of earnings, namely the Department of Employment's provisional monthly index of average earnings for all employees for March, the movement of earnings to be taken into account for the next uprating is nearly 15 per cent. Over the same period prices, as measured by the general index of retail prices, rose by just over 13 per cent.

Thus it will again be to the advantage of pensioners and other long-term beneficiaries for their benefits to be increased by reference to the movement in the general level of earnings, rather than prices.

The following are therefore the new rates:

Standard rate of unemployment and sickness benefits: £ £
Higher rate … … … … … … … … … 11.10 9.80
Increase for wife or other adult dependant … … … … 6.90 6.10
Lower rate … … … … … … … … … 7.80 6.90
Widow's allowance (first 26 weeks of widowhood) … … … … 18.60 16.20
Maternity allowance … … … … … … … … 11.10 9.80
Invalidity allowance payable with invalidity pension, when incapacity began before age:
35 … … … … … … … … … … 2.80 2.40
45 … … … … … … … … … … 1.70 1.50
60 for men or 55 for women … … … … … … 0.85 0.75
Attendance allowance:
Higher rate … … … … … … … … 10.60 9.20
Lower rate … … … … … … … … 7.10 6.20
Retirement pension for persons over pensionable age on 5th July 1948 and for persons over 80*:
Higher rate … … … … … … … … … 7.90 6.90
Lower rate … … … … … … … … … 4.90 4.30
Non-contributory invalidity pension … … … … … … 7.90 6.90
Invalid care allowance … … … … … … … … 7.90 6.90
Increase of non-contributory invalidity pension and invalid care allowance for wife or other adult dependent … … … … 4.90 4.30
Guardian's allowance … … … … … … … … 6.50 5.65
Child's special allowance; increases for children of widows, invalidity, non-contributory invalidity and retirement pensioners, and invalid care allowance beneficiaries:
First child … … … … … … … … … 6.50 5.65
Any other child† … … … … … … … … 5.00 4.15
Increases for children of all other beneficiaries:
First Child … … … … … … … … … 3.50 3.10
Any other child† … … … … … … … … 2.00 1.60
* Excluding the 25p age addition.
†Family allowances bring the total payments up to the amount payable for the first child.
STATUTORY INSTRUMENTS
Ordered,
That the Value Added Tax (Boats and Outboard Motors) Order 1975 (S.I., 1975, No. 745) be referred to a Standing Committee on Statutory Instruments.—[Mr. Dormand]