HC Deb 07 April 1976 vol 909 cc425-40
The Secretary of State for Social Services (Mrs. Barbara Castle)

I will, with permission, Mr. Speaker, make a statement about increases in social security benefits. My right hon. Friend the Chancellor of the Exchequer yesterday announced the main features.

Before making my statement, Mr. Speaker, may I be permitted to place on record the deep sense of loss I am sure we feel on all sides of the House at the death of Brian O'Malley. He was a brilliant Minister, a formidable debater, a fair and honourable parliamentary opponent and, not least, a warm and loyal colleague and friend. His contribution to the work of my Department was outstanding and I know he will be sorely missed by the whole House.

The increases in benefit will take effect in the week beginning 15th November. The standard single rate of retirement pension and of invalidity pension, and the rate of widow's pension, will be increased by £2 from £13.30 to £15.30. For a married couple the increase will be £3.30 from £21.20 to £24.50. There will be proportionate increases for younger widows, and for pensioners with pensions at modified rates, and an extra 95 pence for each dependent child of widows and other pensioners.

As my right hon. Friend indicated yesterday, now that the rate of inflation is coming down it would no longer be appropriate to base the uprating on a reference period which lies wholly in the past. However we are confident that the proposed increases of 15 per cent will be considerably larger than the actual and likely movement of earnings and prices from the time of the last uprating to November.

Since the Labour Government came into office in February 1974, the real value of the single pension has risen by 16½ per cent. and that for a married couple by over 15 per cent. The 1976 uprating will do more than maintain that advance; it will raise the real value of pensions to a new peak. It will also maintain the married pension rate at broadly one-half, and the single pension rate at broadly one-third, of net average earnings.

Similarly, short-term benefits for sickness and unemployment will be increased to take account of the actual and likely movement in prices from last November to this November, again with a comfortable margin to spare, but on this occasion we have decided in addition to make a proportionately bigger improvement in the short-term rates compared with the long-term ones, thus narrowing the gap between them. The weekly benefit for a single person will go up by £1.80 to £12.90 and for a married couple by £2.90 to £20.90, increases of more than 16 per cent. Maternity allowance and injury benefit will go up by the same amounts. Injury benefit will become £15.65 for the single person and £23.65 for the man with a dependent wife. Increases payable for dependent children of people drawing short-term benefits will also be raised.

War and industrial injuries disablement and widows' pensions will go up in line with long-term benefits. For example, the pension for 100 per cent. disablement will for the former Army private and the person injured at work go up by £3.20 to £25. There will be comparable increases in the additional allowances which can be paid with these pensions. The therapeutic earnings limit will go up from £7 to £9.

The rate of mobility allowance, which was only recently introduced at a higher rate than originally announced, has also been reviewed but, as it will have been running for less than a year, we do not propose to increase it on this occasion.

As regards supplementary benefit, the increase 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. To coincide with the uprating, the Supplementary Benefits Commission will be making increases in the discretionary additions for extra heating. These will be over and above the increases in the scale rates and will operate from the same dates. The detailed increases are from 55p to 70p, from £1.10 to £1.40 and from £1.65 to £2.10—that is, in increase of more than 25 per cent. in each rate, as compared with the 15 per cent. or 16 per cent. by which benefits generally will rise. The discretionary additions for special dietary needs will also be increased from 60p to 75p and from £1.35 to £1.75.

My right hon. Friend the Secretary of State for the Environment has it in mind to make appropriate adjustments in the needs allowances for the rent and rate rebate and rent allowance schemes. He will shortly be consulting his Advisory Committee on Rent Rebates and Rent Allowances about this.

For the convenience of the House full details of the new rates of benefit are available in the Vote Office, and will be circulated in the Official Report. Shortly after the Easter 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 Government Actuary's Report.

My right hon. Friend the Chancellor of the Exchequer also gave details of the improvements to be made to the family income supplement scheme. The new income limits and the higher maxima will take effect on 20th July. Details are included in the papers in the Vote Office and draft Regulations for affirmative Resolution will be laid after the Easter Recess.

As my right hon. Friend announced yesterday, the full year cost of the increases in long-term benefits is about £1,070 million. The short-term increases I have announced will cost some £290 million. All in all, the full-year cost of the whole of this uprating programme, including the increase in family income supplement and in the supplementary benefit heating and dietary additions, is about £1,390 million, of which just over £1,150 million will fall on the National Insurance Fund. The contribution rates which have just come into force will be sufficient this year to finance the rates of benefits which I have just announced.

Mr. Patrick Jenkin

The whole House will wish to be associated with the tribute paid by the right hon. Lady to Brian O'Malley and to extend to his widow and daughter our profound sympathy. We may have had disagreements with Brian O'Malley on political matters, but he earned great respect from this side of the House, not only as a knowledgeable and effective debater but as a man of charm and complete integrity. He will be very sadly missed.

Turning to the right hon. Lady's statement, is she aware that by fixing the level of benefits in this uprating by reference to future estimates of inflation, rather than by basing them on past inflation, she has effectively eliminated any protection for pensioners and others against the peak months of inflation, which were between March and November last year? Is she aware that this is not what the House and country understood by the pledge to keep upratings in line with prices or earnings, whichever was the more favourable, that she spelled out in the 1975 Act?

Is she aware that if it is the combination of the appalling level of inflation under this Government and the huge prospective borrowing requirement announced by the Chancellor of the Exchequer yesterday which has forced this harsh decision upon her, it would have been a little more honest of the Chancellor to have made that clear instead of trying to pretend that by giving 15 per cent. he was conferring a benefit upon pensioners? Is she aware that if pensions had been uprated in line with past price rises, the increase would have been 22½ per cent?

Does she realise that many people will find it incredible that she has increased short-term benefits by more than she has increased long-term benefits, bearing in mind that long-term benefits are taxable, while short-term benefits are not?

Does the right hon. Lady realise that war widows will now get a smaller percentage increase than will the unemployed, even though the widows pension is taxed and unemployment benefit is tax-free? Where is the sense in that?

Does the right hon. Lady recognise that a 16 per cent. uprating in the short-term benefit is bound to widen the gap between the net income of the man at work and that of the man who is out of work? Take, for instance, a married man with two children earning £40 a week. That net increase for the man in work from the tax cut and the national insurance increase is £1.58 per week whereas for the man out of work the improvement in income will be £3.88. That is a widening of the gap by £2.30. How does that make sense?

The right hon. Lady has already announced the uprating in the contribution. Is she aware of the resentment caused among the self-employed by the substantial increase in the upper limit for the self-employed which raises the earnings-related contribution limit from £3,600 to £4,900? And that that means an extra contribution of £104 for the man at the top of the scale, for which he will receive no additional benefit?

Does the right hon. Lady realise, and did she tell the Chancellor of the Exchequer, that this more than offsets any reduction in tax, even if the TUC agree with the tax relief given by the Chancellor in his Budget yesterday?

In short, does the right hon. Lady believe—[HON. MEMBERS: "Too long."] I am not surprised that hon. Members opposite do not like it. It is not a very palatable message for the country. Does the right hon. Lady believe that the country will understand or forgive an up-rating which helps the unemployed more than it helps war widows, creates added disincentives to work, deepens the poverty trap, penalises the self-employed and, most serious of all, comes before us as a disreputable attempt to conceal the harsh but inevitable fact that she cannot honour the pensions promises on which she and her party went into the last two elections?

Mrs. Castle

No doubt we shall have an opportunity to debate these matters. I should welcome such an opportunity to enable us to deal at length with the many points raised by the right hon. Gentleman. First and foremost, the Chancellor of the Exchequer said yesterday that the forecasting method would be used on this occasion. By his denigration of this costly and important uprating, the right hon. Gentleman has been trying to out-TUC the TUC, which has of course welcomed the increase as very substantial and as a fulfilment of the Government's policy.

I totally repudiate the right hon. Gentleman's suggestion that we have in any way gone back on our manifesto policies or on our declared attitude in the legislation that we introduced. As I said in my statement, the real value of pensions has increased substantially under the Labour Government, and it will continue to increase under this uprating. The pension rates introduced in last November's up-rating, were, by February of this year, still worth 10.7 per cent. more in real terms on the single rate and 9.4 per cent. more on the married rate than the rates obtaining in October 1973 under the Conservative Government. By next November, even at the end of the period of uprating, a margin of that real improvement will remain. An increase of 15 per cent. will then be added to it at a time when inflation is being brought under control. That will leave pensioners substantially better off in real terms than they ever were under a Conservative Government.

As for the short-term rates, the whole House should be showing a little concern at the widening gap between the short-term and long-term rates, particularly in a period of high unemployment. That is why in this uprating we have sought deliberately to narrow the gap which has been growing to this disturbing extent.

Mr. George Cunningham

Is it the Government's intention in future to base all upratings on an estimate of earnings or prices in the year before the time when they take effect? If it is, what will they do if their estimate proves to be too modest? Will the difference be made up in the uprating the following year? Does the Secretary of State accept that there are many pensioners who feel that they suffered from having past inflation taken into account while inflation was getting worse, and that now, when inflation is going down, they will not get the benefit of having past inflation taken into account? Is not this a worrying feature to hon. Members on both sides of the House?

Mrs. Castle

I can only report to the House on the present uprating, and that is what I am doing. I am telling the House the reason for it and what it means. In a full year the uprating will cost over £1,300 million. That is more than the annual rate of the last uprating, which was just over £1,000 million, on the old method.

Therefore, in this situation of falling inflation it is clear that we have more than safeguarded the pensioners in terms both of prices and of the movement of earnings. Indeed, the House should realise the extent to which pensioners have been given preferential treatment during a time of acute economic stringency. Under the Labour Government, pensions have increased in real value by 16.5 per cent. for the single pensioner. During the same period gross earnings have risen by 4.7 per cent. It is clear that if we had this time adopted the historic method, an additional burden would have been put on the worker and the wage earner of £500 million for this uprating, and it would have had inevitable consequences in due course on the contribution rate.

I ask the House to say whether, in striking a balance at a time of difficulty between carrying out in full our promises to the pensioners and recognising the heavy sacrifices that we are asking wage-earners to make, we have not achieved social justice.

Mr. Paul Dean

May I add my tribute to the late Brian O'Malley, who succeeded me as Minister responsible for pensions? His passing is a great loss to all of us, particularly to those who are concerned with pensions.

Does the right hon. Lady recognise that in her statement she has announced a substantial change from previous policies and has shown an odd sense of priorities? In recent years the long-term beneficiaries—pensioners, war pensioners and widows—have always had a bigger increase than have the short-term beneficiaries, but she has reversed that policy in her statement.

Mrs. Castle

It was the Conservative Administration which started this differential treatment and linked the increase in short-term benefit to the movement in prices only, whereas the increase in long-term benefits under our legislation is linked to the movement of earnings or prices, whichever is the more favourable. We have continued a differential, but people connected with social affairs have been concerned at the extent to which the use of this formula has widened the gap between long-term and short-term benefits and caused undoubted hardship to certain unemployed and other short-term benefit families. We therefore thought that a modest adjustment was fully justified. Thus, instead of an increase of £1.60, which would have been payable if we had stuck to the old formula, we have an increase of £1.80—only a small gesture, but I am sure in the right direction.

Several Hon. Members rose——

Mr. Speaker

Order. I am in some difficulty. Obviously we cannot debate this matter now. There is a lot of other important business to be disposed of. I shall allow four short questions.

Mr. Dan Jones

I applaud the compassion of the Government and the Department in dealing with the old and the sick, but what is being done to eliminate the growing number of skivers who batten on to the social security system? I have had a large number of letters from my constituents who are becoming enraged at the flagrant abuse of social security benefits. Is the Department prepared to look at this problem with a view to eliminating it?

Mr. Speaker

Order. That would be considered a short question in Wales.

Mrs. Castle

I cannot accept my hon. Friend's contention that there is a growing number of skivers. At a time of exceptionally high unemployment that is a somewhat unwise statement to make. We are conscious, of course, that some abuses take place. That is why we have our inspectorate system and why we pursue any cases of abuse with the utmost rigour. Our successful prosecution rate is running at about 14,000 a year. That in itself is proof that where evidence is brought to us of abuse we pursue it, but a lot of the claims that abuses are taking place are not substantiated.

Mr. Penhaligon

I should like the Liberal Bench to be associated with the comments about Brian O'Malley. He was in charge of the first Standing Committee that I attended, and on many occasions his persuasive explanation of Government policy elicited my support.

Does the Secretary of State not understand that changing the reference period for the calculation of inflation will be seen by thousands of pensioners for what it is—little short of a money-saving fiddle? Can she not see that to put benefits up by 15 per cent. in the same year as incomes will rise by 3 per cent.—and that is how the public will see it—is not good public relations? Surely the time has arrived for a major restructuring of the supplementary benefits system.

Mrs. Castle

I am interested in the assumption behind the hon. Gentleman's question that there is something sacrosanct about the historical method. We were attacked for using it when we did use it. We were told that the forecasting method was more appropriate. But it is still in fulfilment of our policy that

The following are the new rates:
Existing Weekly Rate Proposed Weekly 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 15.30
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 9.20

we are giving complete forward cover for price increases.

Since last November's uprating up to mid-February the increase in the Retail Price Index was 3.9 per cent. That is still about 11 per cent. short of the figure by which pensions will rise in the autumn, and no one in this House will expect an inflation rate of 11 per cent. in nine months. Therefore we have given an ample margin of cover.

On earnings, the second guarantee was that pensions would rise in line with wages. Under this formula this time they will rise more rapidly than earnings.

Mrs. Bain

On behalf of my colleagues in the Scottish National Party I wish to pay tribute to Brian O'Malley, whom we all came to respect as a man of integrity and who was deeply concerned about the less-well-off sections of our community. Like the Government, we shall all regret his passing.

Am I right in assuming that widows' pensions and the child interim benefit will still be regarded as taxable income? Does the right hon. Lady envisage the situation where this will move towards non-taxable income, since these people now face the same responsibilities as married couples?

Mrs. Castle

Yes, of course, they are certainly taxable and they always have been.

Mr. Greville Janner

When does my right hon. Friend propose to review the rate for the mobility allowance?

Mrs. Castle

I have reviewed it this year, as I said in my statement, and as I am bound by statute to do. I have therefore reported that fact to the House. But as the enhanced rate has not been in operation for a year we do not propose to increase it this time.

Following is the information:

Existing Weekly Rate Proposed Weekly Rate
£ £
Standard rate of unemployment and sickness benefits:
Higher rate 11.10 12.90
Increase for wife or other adult dependant 6.90 8.00
Lower rate 7.80 9.20
Widow's allowance (first 26 weeks of widowhood) 18.60 21.40
Maternity allowance 11.10 12.90
Invalidity allowance payable with invalidity pension, when incapacity began before age:
35 2.80 3.20
45 1.70 2.00
60 for men or 55 for women 0.85 1.00
Attendance allowance:
Higher rate 10.60 12.20
Lower rate 7.10 8.15
Retirement pension for persons over pensionable age on 5th July 1948 and for persons over 80†:
Higher rate 7.90 9.20
Lower rate 4.90 5.60
Non-contributory invalidity pension 7.90 9.20
Invalid care allowance 7.90 9.20
Increase of non-contributory invalidity pension and invalid care
allowance for wife or other adult dependant 4.90 5.60
Guardian's allowance 6.50 7.45
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 7.45
Any other child‡ 5.00 5.95
Increases for children of all other beneficiaries:
First child 3.50 4.05
Any other child‡ 2.00 2.55
* An age addition of 25p is payable to retirement pensioners who are aged 80 or over.
† Excluding the 25p age addition.
‡ Family allowances bring the total payments up to the amount payable for the first child.
Existing Weekly Rate Proposed Weekly Rate
£ £
Injury Benefit* 13.85 15.65
Disablement benefit (100 per cent. assessment)* 21.80 25.00
Unemployability supplement ‡ 13.30 15.30
Special hardship allowance (maximum) 8.72 10.00
Constant attendance allowance (normal maximum) 8.70 10.00
Exceptionally severe disablement allowance 8.70 10.00
Industrial death benefit:
Widow's pension during first 26 weeks of widowhood 18.60 21.40
Widow's pension now payable at £13.85 rate 13.85 15.85
Widow's pension now payable at £3.99 rate 3.99 4.59
* The Rates for beneficiaries not over the age of 18 will also be increased.
† Increases for adult dependants and children will be the same as those payable with unemployment and sickness benefits.
† Invalidity allowances and increases for adult dependants and children will be the same as those payable with invalidity pensions.
All ranks receive the same increases, officers' rates being expressed in pounds per annum.
Part I: Disablement Benefits
Existing Weekly Rate Proposed Weekly Rate
£ £
Disablement pension for private at 100 per cent. rate 21.80 25.00
Unemployability allowances*:
Personal allowance 14.20 16.30
Increase for wife or other adult dependant 7.90 9.20
Existing Weekly Rate Proposed Weekly Rate
£ £
Comforts allowance:
Higher rate 3.70 4.30
Lower rate 1.85 2.15
Allowance for lower standard of occupation (maximum) 8.72 10.00
Constant attendance allowance:
Special maximum 17.40 20.00
Special intermediate 13.05 15.00
Normal maximum 8.70 10.00
Half and quarter day 4.35 5.00
Age allowance with assessments of:
40 and 50 per cent. 1.60 1.80
60 and 70 per cent. 2.40 2.75
80 and 90 per cent. 3.40 3.90
100 per cent. 4.80 5.50
Exceptionally severe disablement allowance 8.70 10.00
Severe disablement occupational allowance 4.40 5.00
Existing Annual Rate Proposed Annual Rate
Clothing allowance:
Higher rate 30.00 36.00
Lower rate 21.00 23.00
Part II: Death Benefits
Existing Weekly Rate Proposed Weekly Rate
£ £
Widow's pension—private's widow:
Standard rate 17.20 19.80
Childless widow under 40 3.99 4.59
Rent allowance 6.70 7.50
Age allowance for elderly widows:
Between age 65 and 70 1.70 1.95
Over age 70 3.40 3.90
Widower's pension 17.20 19.80
Widow's children:
Eldest child 6.70 7.65
Other children with family allowances 5.70 6.65
Other children without family allowances 6.55 7.50
Motherless and fatherless children aged:
Under 15 Eldest child or other children with no family 6.70 7.65
Over 15 allowances 8.20 9.15
Under 15 5.70 6.65
Over 15 Other children with family allowances 7.20 8.15
Adult orphans 13.30 15.30
* Invalidity allowances and increases for children will be the same as those payable with invalidity pensions.
Existing Ordinary Rate Existing Long-Term Rate* Proposed Ordinary Weekly Rate Proposed Long-Term Weekly Rate*
£ £ £ £
Ordinary scale:
Husband and wife 17.75 21.55 20.65 24.85
Person living alone 10.90 13.70 12.70 15.70
Any other person aged:
Not less than 18 8.70 11.00 10.15 12.60
Less than 18 but not less than 16 6.70 7.80
Less than 16 but not less than 13 5.60 6.50
Less than 13 but not less than 11 4.60 5.35
Less than 11 but not less than 5 3.75 4.35
Less than 5 3.10 3.60
Existing Ordinary Rate Existing Long-term Rate* Proposed Ordinary Weekly Rate Proposed Long-term Weekly Rate*
£ £ £ £
Blind scale:
Husband and wife:
If one of them is blind 19.00 22.80 21.90 26.10
If both of them are blind 19.80 23.60 22.70 26.90
Any other blind person aged:
Not less than 18 12.15 14.95 13.95 16.95
Less than 18 but not less than 16 7.60 8.70
Less than 16 but not less than 13 5.60 6.50
Less than 13 but not less than 11 4.60 5.35
Less than 11 but not less than 5 3.75 4.35
Less than 5 3.10 3.60
Existing Weekly Rate Proposed Weekly Rate
£ £
Non-householder rent allowance 1.00 1.20
Attendance requirements:
Higher rate 10.60 12.20
Lower rate 7.10 8.15
* Where the claimant or a dependant is aged 80 or over a further 25p is added to these long-term rates.
Existing Amounts Proposed Amounts*
£ £
Prescribed amount for a family which includes one child 31.50 39.00
Increase in the prescribed amount for children after the first 3.50 4.50
Maximum supplement payable for a one child family 7.00 8.50
Increase in maximum for each additional child 0.50 0.50
* From 20th July.
That the draft Pool Competitions Act 1971 (Continuance) Order 1976 be referred to a Standing Committee on Statutory Instruments, &c—[Mr. Edward Short.]
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