§ Order for Second Reading read.
§ Mr. Speaker
May I inform the House that I have selected the amendment in the names of the Leader of the Liberal Party and his colleagues?
§ 4.3 p.m.
§ The Secretary of State for Social Services (Mr. David Ennals)
I beg to move, That the Bill be now read a Second time.
This measure deals with a wide range of issues in the sphere of social benefits. Some clauses are designed to improve or simplify the operations of some of the major achievements of this Government —the Social Security Pensions Act, the new range of benefits for the disabled, and the child benefit scheme.
These changes are detailed, and so far as I know they are non-controversial. Nevertheless, they are adjustments in the law which need to be made if our social security schemes are to work effectively. I do not propose to detain the House this afternoon by going into these technical clauses, although they constitute the bulk of the Bill; we shall of course be debating them in Standing Committee.
Apart from the technical provisions, the Bill has four main purposes. I want to deal with each of these in turn, taking, first, the change which the Bill proposes in the earnings rule; secondly, the proposals relating to student support; thirdly, those which concern occupational pensioners' unemployment benefit; and, finally, the improvements in relation to the provisions for mobility and in some other spheres. I shall ask the indulgence of the House if I take a little time over this, because they are important measures.
Before turning to each of these four sets of proposals, let me make a general point. In the present economic situation it is surely common sense for the Government to consider where savings can be made in the social security budget by removing or diminishing the title to 1175 benefit of people who have adequate financial provision from another source.
The uprating of benefits which became operative a fortnight ago was, in the Government's view, right and it was something of which we are proud. We shall go on protecting those who depend on the benefits of our social security schemes. But the reverse side of this medal is that we should take action to ensure that benefits are not made available where the need for them and the justification for them is manifestly not established. Clauses 4, 5 and 13 of the Bill will between them produce a saving in public expenditure in a full year of about £75 million. That is the central theme and motive of the Bill.
I turn first to the earnings rule, which is dealt with in Clause 5 and parts also of Clause 6. As the House will know, the retirement pensions which the National Insurance Scheme provides for men under 70 and women under 65 are not unconditional. They can be drawn only if the person concerned has retired. Once he or she has retired, retirement pensions are subject to reduction if the pensioner returns to work and has substantial earnings. This has been the situation ever since the post-war Government accepted the Beveridge recommendation that there should be a retirement pension, rather than an old-age pension payable at a fixed age.
I accept that the change from an old-age pension to one conditional on retirement has never been fully accepted by the public. Indeed, there would be advantages in terms of simplifying our pension scheme and reducing the costs of its administration if the retirement condition could be abolished completely. In the long term, this is not an option which the Government would want to rule out. But, in the immediate future, the cost of paying pensions to every contributor at 65 or 60, even if they remained in full-time work, is beyond anything that we could reasonably afford. Indeed, it would cost a very great deal, and, as I have said this Bill is essentially about saving money. We must proceed on the basis that for the time being the retirement condition remains.
But if we are to operate a retirement condition in a sensible way we must have 1176 some sort of relatively simple test to distinguish those who can be treated as retired from those who cannot. Earnings offer a straightforward yardstick to apply. It is a matter of judgment where the dividing line should be drawn, but the Government would certainly argue that the present earnings limit of £35 a week, which came into operation this year and which then represented about 55 per cent. of average male earnings and over 95 per cent. of average female earnings, gets the answer about right. A pensioner can earn up to £35 a week and still be accepted as retired, and is eligible to draw his full pension. That means that it is open to him to do a good deal of part-time work—and in some cases full-time work—while still satisfying the retirement condition. Those who are debarred from drawing their pensions by the £35 limit will largely be people who have never retired in any true sense.
§ Mr. Eldon Griffiths (Bury St. Edmunds)
I have listened with great interest to the right hon. Gentleman's remarks about the problem of drawing lines. Is there not one line that can clearly be drawn, namely, between those who are compulsorily retired, for example, from the public service, and others who are not compulsorily retired? Why does he not accept that line? The police service would be a good example.
§ Mr. Ennals
That is a quite different point, which I do not want to deal with at the moment. That matter conies later in my statement. The hon. Gentleman cannot have been listening to what I was saying. I am dealing now with the earnings rule, not with occupational pensioners.
The present law requires that the £35 limit shall be replaced next April by one of £50 a week. This flows from a decision taken by the House almost two years ago, in the proceedings on what became known as the Social Security Benefits Act 1975. I know that some of my hon. Friends, especially those who, by their votes, carried the relaxation phasing vote in January this year, are unhappy that the Government are now seeking to alter that decision taken by the House. I can assure them that only the specially difficult financial situation we now face—considerably more difficult than it was in January 1975—has led the 1177 Government to ask the House to change what was then decided.
Our attitude to the earnings rule has not changed since my hon. Friend the present Financial Secretary said at the conclusion of the debate on 29th January 1975:Both the Chancellor and I accept the case for phasing out…. We recognise the need to continue this progress over the forthcoming years until the earnings rule is removed."— [Official Report, 29th January 1975; Vol. 885, c. 523-4.]
§ Mr. Arthur Palmer (Bristol, North-East)
On the matter of the occupational pension, is my right hon. Friend aware—he surely must be—that when an attempt was made to alter this principle of the right to unemployment benefit it was fought very bitterly by the Labour Party when in opposition?
§ Mr. Ennals
Will my hon. Friend be patient? I have not reached that issue yet. I promise the hon. Member for Bury St. Edmunds (Mr. Griffiths) and my hon. Friend that I shall deal thoroughly with the matter. Perhaps they will be patient, and perhaps it would be better if I were a little less patient in giving way to interventions, even though they are honestly intended. I am sure that some of my hon. Friends who were very doubtful about our decision to return to the House on the issue will be relieved at the statement I have just made concerning the Government's intentions.
Meanwhile, however, our proposal to keep the figure at £35 will mean that the cost of pensions will be substantially less in 1977–78 than if we allowed the £50 limit to come into force. The change will affect only a handful of existing pensioners; the savings will come very largely because we shall not have to make any new awards of pension to people who are earning £40, £45 or £50 a week and are at present deferring their retirement.
However, of course, the story does not end there. As I have said, the £35 limit, taken as a proportion of average earnings, can fairly be said to represent a level at which earnings are consistent with retirement. If the earnings limit is to be determined on this basis, it would not be logical if it failed to rise as earnings do, and it is for such a rise that Clause 6 makes provision. As from the general uprating of benefits which will take place next year, the earnings limit will be one 1178 of the figures which the Secretary of State is bound by law to review and to raise in line with the general movement of earnings. So we have not set a figure that is now immutable.
If these measures were not carried, the cost of raising the limit next April from £35 to £50—about £45 million—would have to be borne by contributors and taxpayers in general. Extra retirement pensions for 35,000 people, 15,000 of them married men, would cost £40 million before tax. A further £15 million would be spent on the higher benefits, which retirement and invalidity pensioners, and certain other long-term beneficiaries, can draw for their dependent wives. In addition £5 million in contributions would be lost. Against this gross total cost of £60 million, the Government Actuary estimates that £15 million would be obtainable in increased tax revenue. This gives the net figure of £45 million which I have mentioned, and which is the sum that we must save.
One reason for giving the detailed figures was that I knew that the right hon. Member for Wanstead and Woodford (Mr. Jenkin) questioned the figures on Thursday. Any points that he raises in his speech, which follows mine, will be dealt with by my right hon. Friend the Minister for Social Security in replying to the debate. I believe that this is a sensible economy which will be justified in the light of the current economic situation.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
The figure of £60 million in the Financial Memorandum to the Bill is a gross figure.
§ Mr. Ennals
That is right. It is a gross figure. The figure of £45 million is the net figure.
I come now to the question of students and the proposal in Clause 13 to remove their entitlement to supplementary benefit in the Christmas and Easter vacations. In practice, this will not make any material difference to the majority of students, as I shall explain.
At present, students can qualify for supplementary benefit during the vacations, provided they register for work. For the current academic year, their maintenance grants include a vacation element of an increased amount of £11.35 per 1179 week for the Christmas and Easter vacations, which is enough to cover their requirements by supplementary benefit standards if they are staying with parents or relatives. Only a minority, living as householders with continuing rent commitments or other special needs, will get benefit. For the long summer break, there is no vacation element in the grant, and more students will receive benefit, although many will no doubt get temporary jobs.
The Government agree with the views of the Supplementary Benefits Commission that supplementary benefit is not, in principle, the appropriate forum for students to look to for their maintenance. The proposal in the Bill is to place on a permanent and statutory basis what we consider to be sensible arrangements for students. These are, broadly, that, subject to a hardship scheme, which is to be introduced to cover contingencies such as students who have inescapable rent commitments and other hardships, supplementary benefit will not be paid during the Christmas and Easter vacations. During these times students must look to their recently-increased maintenance grants.
§ Mrs. Audrey Wise (Coventry, South-West)
Is this hardship provision to be at a lower level or with more stringent conditions than the Supplementary Benefits Commission's means test? If it is to be similar, why do we need two identical but separate schemes?
§ Mr. Ennals
We shall be working out the nature of the hardship scheme, and discussions are now taking place with my right hon. Friend the Secretary of State for Education and Science. I cannot give details of the criteria now, but we felt that if we were to make any change—this proposal involves only £1 million—we should have a hardship scheme.
§ Mr. John Garrett (Norwich, South)
Is my hon. Friend aware that this scheme continues the fictional assumption that parents who are assessed as making a parental contribution actually make it? Is he also aware that three-quarters of such parents do not make a contribution towards a student's upkeep?
§ Mr. Ennals
My hon. Friend's point is valid, but it emphasises the fact that 1180 it is not the task of the Supplementary Benefits Commission or unemployment benefit to deal with the question of student maintenance during short vacations. As for long vacations when students are genuinely available for work, we are dealing with a different situation, and, as my hon. Friend knows, it is not the intention of the Government to legislate in this respect.
§ Mr. Ian Mikardo (Bethnal Green and Bow) rose—
§ Mr. Ennals
I have much to deal with and I have given way many times. Nevertheless, I give way.
§ Mr. Mikardo
I am very much obliged to my right hon. Friend. What he says is puzzling. Some hon. Members are trying to follow what he is proposing in order to decide what we shall be doing at the end of the day, and I am therefore grateful to him for giving way. He said that it is not the business of the scheme to do such things. I have always understood that it is the business of the scheme to ensure that nobody who falls below the safety net—to use the shorthand term—for whatever reason, is not raised to that level. A student with children or other dependants or who has rent to pay will fall below the safety net level.
I return to the point made by my hon. Friend the Member for Coventry, South-West (Mrs. Wise). If the new scheme provides the same amount of money for the same needs, there is no point in it. If it provides less, or anything different, it violates the principle of the universality of the safety net.
§ Mr. Ennals
I shall ask my right hon. Friend to deal in greater detail with the points made, including those made by my hon. Friend. I made it clear that there would be a hardship fund and that the sort of thing with which it would be concerned would be precisely the sort of matters that my hon. Friends have raised, namely, rent commitments during the short vacations. It would be wrong to make a change, because, after all, it is a change both in supplementary benefit, which requires legislation, and in unemployment benefit, which does not require legislation but will be dealt with by regulation in due course. But the principles here are the same. We felt it right 1181 that there should be a hard ship fund to ensure that no one would be in hardship as a result of this arrangement. I am saying, therefore, that other of these points will be dealt with thoroughly by my right hon. Friend when he replies to the debate.
There is no question, as some Press comments have suggested, of this arrangement becoming operative immediately. Some people have thought that it would come into operation before Christmas. The intention is that, subject to the Bill's becoming law, it should operate from the academic year 1977–78—that is, with the Christmas vacation of 1977 being the first affected.
Certainly there is no question that, as the NUS National Secretary was reported last week as saying in The Times,he result will be that thousands will have to leave their courses.What is involved here is a sensible realignment of sources for student support, subject to hardship provision, which I believe is thoroughly justified on merits, and which in no sense represents any unfair picking on any students.
Apart from the financial savings, it will relieve much of the pressure upon local offices of my Department, the Department of Employment, and the Employment Service Agency, which, in recent years—but only very recently—have had to deal with an increasing number of claims concentrated around the Christmas and Easter holidays. We have to recognise that this is an entirely new feature, which has arisen only in very recent times.
§ Mr. Christopher Price (Lewisham, West)
On the Government side of the House there is great interest in the hardship fund. Does my right hon. Friend realise that an increasing number of students are not the 18-year-olds who are generally thought of as students but mature people with families, who have paid as much in contributions as anybody else in the country, and that the hardship fund will need to be considerably enhanced if it is to satisfy hon. Members on this side?
§ Mr. J. W. Rooker (Birmingham, Perry Barr)
On a point of order, Mr. Deputy Speaker. Is it possible for the debate to be adjourned until a Minister from the Department of Education and 1182 Science can be present on the Front Bench, or, alternatively, for a message to be sent that a Minister from that Department is required here? It is clear that my right hon. Friend will not be able to answer the points made about students.
§ Mr. Ennals
I indicated to my hon. Friends that this was an issue that would be dealt with in much greater detail by my right hon. Friend in winding up the debate. I know that he will seek to satisfy the concern that has been expressed.
I am anxious to come to another contentious issue, namely, unemployment benefit for occupational pensioners. This must be the main substance of my speech, because a good deal of concern has already been expressed about it. It is highly controversial and, as my hon. Friend said, it is an issue that has been under debate for many years.
I start with the advantage—some would say disadvantage—of having first raised the issue when I was Minister of State in this Department and made an announcement of Government intentions in 1969. I told the House on 15th December of that year of the decision that the Labour Government of that day had reached. The story goes back much further than that, because it was the Minister of Pensions and National Insurance—Peggy Herbison, back in 1966 —who first referred the issue to the National Insurance Advisory Committee. She did so because even then there was public concern, summed up in the feeling that unemployment benefit was never intended to be paid to people who had basically retired from work, and had done so on a substantial occupational pension.
The National Insurance Advisory Committee considered the matter for nearly two years and reported in January 1968 to my right hon. Friend the Member for Lanark (Mrs. Hart), who had by then taken over as Minister of Pensions and National Insurance. In its report, Cmnd. 3545, the Advisory Committee agreed that there was a serious misuse of the national insurance scheme in the existing provisions, and they made recommendations to deal with it. The Advisory Committee concluded that there was no satisfactory way of tightening up the availability condition and that more positive measures were needed. Accordingly, it proposed restrictions on the unemployment benefit 1183 of occupational pensioners, on a sliding scale starting at £5 a week. We introduced—I was then Minister—a number of easements into the Committee's recommendations and sought to take action by regulations.
However, the 1970 General Election intervened before the regulations, which were subject to the affirmative resolution procedure, could be debated. At that point, therefore, hon. and right hon. Gentlemen on the Opposition Benches, having assumed responsibility in government, accepted the principle of my proposal and included it in their National Insurance Bill in May 1971.
What happened next will probably be within the recollection of a good many hon. Members. When the relevant clause was debated in committee upstairs, my right hon. Friend the Secretary of State for Education and Science and Paymaster General, who was leading for us in the Standing Committee, moved an amendment, which was carried against the Conservative Government as the result of the abstention of five hon. Members on the then Government side of the Committee.
I have gone into the history of this matter at some length, because it puts into perspective how it comes about that now, five and a half years later—in fact, almost 10 years after the issue was referred to NIAC—I am presenting a legislative proposal on it to the House.
Three points seem to me to stand out The first is that over many years there has been repeated concern on this issue of the payment of unemployment benefit to occupational pensioners and, what is more, common concern by Governments of both parties to deal with it.
Secondly, the approach has been one of gradually easing the restrictions making the application easier and simpler in order to achieve a necessary saving and to ensure that they did not bite unduly hard on those affected. I shall have more to say on this later.
Thirdly, what I think is now clear in a way that perhaps it was not five years ago is that this is not a problem to which the answer can lie by way of any amplification of the availability test, nice as that would be in theory and as it has been argued progressively by speakers on both sides of the House. Availability for 1184 work is, in a sense, an attitude of mind. It can be determined only by offering a person a job and seeing whether he accepts it. But job opportunities for elderly workers are very scarce, particularly in the rural and coastal areas to which many occupational pensioners retire and, in present employment conditions even more than at other times, it would be in practice just not on to test their availability by the offer of a job. In fact, the advisory committee reached the same conclusion in 1968, when employment conditions were very much better than they are now.
What I am saying to the House is that the arguments for a change in this matter were strong in 1968–69. They were considered even stronger in 1971 and I believe that they are stronger still today. The need for restraint in Government expenditure is greater than ever. In addition, there is a need which we have to recognise that we must ensure that public funds are properly spent and that there is no misuse or abuse of public funds.
§ Mr. Dennis Skinner (Bolsover)
If there has been public concern over these years, so much so that it resulted in all this effort coming to naught as a result of its being presented to the House of Commons—in other words, getting nowhere—why is it that the level of £25 is not even equitable to the £18 the last time it was thrown out? On the subject of availability for work, did my right hon. Friend say something entirely opposite to what he is saying now when we had the argument about the Spanish holiday fiasco? Will he also accept that occupational pensions are deferred pay?
§ Mr. Ennals
I want to come to the argument about deferred pay. Of course, there will always be opposition to any legislation that seeks to take away anything that anyone now considers to be an absolute right. No one can ever expect that there will be support for it. I think that it is time the nettle was grasped. This view has been held on both sides and it is time that we took some action about it.
§ Mr. Anthony Steen (Liverpool, Wavertree)
The Minister says that he is concerned about the level of public expenditure. In that case, why will he not introduce legislation to restrict supplementary 1185 benefits to unemployed school leavers who have not paid a penny into the National Insurance Fund? There are a thousand and one jobs that they could do in the community.
§ Mr. Ennals
There is a whole range of reactionary proposals which could come from hon. Members opposite. In fact, I am surprised that the hon. Member for Aberdeen, South (Mr. Sproat) is not here with some of his proposals to deal with the situation. I am dealing with people who can afford to face whatever difficulties may follow from this legislation.
I ask the House to treat this matter very seriously. I honestly believe that there are times when things like this bring the House into disrepute—[Interruption.] —times when the Opposition say one thing in government and something quite different when they are out of office. I believe that we must face these problems of public expenditure, and that this is one field in which we can face them. It is appropriate that we should look very closely at the actual measure that I am bringing forward.
The benefit that I am restricting is unemployment benefit, which, at any one stretch, can last only for a maximum of one year. Some hon. Members have argued that we are taking away the right for five years between the ages of 60 and 65. But unemployment benefit is limited to 312 days, and there is no question of its lasting for the whole period between 60 and 65.
The relevant provisions of Clause 6 provide that the level of £25 for occupational pensions, at which unemployment benefit would start to be reduced, should be reviewed and uprated, in line with earnings, as part of the general annual review of benefits from and including the review in 1978. This will be done in the same way as the earnings rule is reviewed and changed.
How will occupational pensioners be affected by this? Here again, I think there has been a misunderstanding in some quarters. The proposals relate only to occupational pensioners aged 60 and over. Their unemployment benefit will be reduced by 5p for every 5p for which their occupational pension exceeds £25 on a sliding scale. Thus, with an occupational pension under £25 there would 1186 be no effect. With an occupational pension of £30, the unemployment benefit payable—I am now referring to a married man with the full entitlement to flat-rate benefit and maximum earnings-related supplement at 1977 rates—will still be £28.08. With a pension of £40 it will be £18.08 and with a pension of £50 it will be £8.08. Only where the occupational pension is £58.10 or more a week will the unemployment benefit for a married man become totally extinguished.
The Liberal amendment refers to increasing hardship for a disadvantaged section of society, but here we are talking about a married man who will be getting a degree of unemployment benefit even if he has a pension well over £50. For a single man the corresponding figure is £50.10. These figures make it clear that there is no question of hardship.
§ Mr. Patrick Jenkin
There is just one point here which has not emerged from the Secretary of State's explanation. If, on the sliding scale, a man gets an increase in his occupational pension and loses his unemployment benefit, he will be actually worse off in the end, because the increase in his occupational pension is taxed but his unemployment benefit is not.
§ Mr. Ennals
That situation is in no way changed as a result of this legislation. Occupational pensions have always been taxed, and short-term unemployment benefit is not taxed. The legislation in no way changes that.
§ Mr. George Cunningham (Islington, South and Finsbury)
Let us get this straight. At the moment, if someone gets an increase in his occupational pension he keeps his unemployment benefit and therefore he is not actually worse off. In future, he will lose any unemployment benefit. What he gains in his occupational pension will be taxed, but the unemployment benefit which he loses is not taxed, so he will be actually worse off. Will the Secretary of State confirm categorically that the situation described by the right hon. Gentleman is correct, and that a man will be worse off in the situation that has been described?
§ Mr. Ennals
I do not want to get my words wrong in any way. I shall ask my right hon. Friend to deal with this matter when he winds up. That is the purpose 1187 of having a right hon. Friend to wind up the debate.
I now deal with those who will be affected by this measure. All told, there are in this country about 2.7 million occupational pensioners, men and women, at all ages over 60. Of these, we estimate that about 70,000 may be registered as unemployed in 1977. Of these about 40,000 are likely to be receiving unemployment benefit. We estimate that about 16,000, or 40 per cent., are likely to be affected by the provisions in the Bill because their occupational pensions exceed £25. That means that 16,000 will be affected, out of a total of 2.7 million over 60. Who will these 16,000 people be? [AN HON. MEMBER: "Hospital porters."] Not at all. The majority are likely to be those in some form or other of the public sector. I know that there is concern about Post Office workers. I checked with the Post Office, and it confirms that the average pension for monthly-paid former employees is about £21 per week. For weekly-paid former employees it is about £11.50. Therefore, one can see that the majority of those retiring from the Post Office are not affected by the legislation.
§ Mr. John Ovenden (Gravesend)
I believe that my right hon. Friend is saying that the Post Office is taking these calculations on the basis of all present retired post office pensioners. But what is the current average level of pension for those retiring today and in the future? My right hon. Friend says that he has consulted the Post Office, but has he consulted the Union of Post Office Workers, the Post Office Engineering Union, and the other unions involved?
§ Mr. Ennals
Of course I have had discussions with the unions. They opposed these measures. I was able to explain to them that they would not affect the majority of their members. The figures I gave were of monthly paid employees in the early stages of retirement. The average is about £21 a week. Over the most recent period, the average pension of retiring civil servants is about £22 a week. Averages necessarily represent a wide spread of figures—some more, some less
My information about the spread in the Civil Service is that of the 25,000 or so 1188 new pensioners in the year ended on 30th September 1976—the up-to-date figures —13,000 were below £15, 5,000 were between £15 and £25, 2,500 between £25 and £35, 2,000 between £35 and £50, and 2,500 above £50. In other words, over 70 per cent. were under the £25 figure. Therefore, their benefit will in no way be affected even to the tune of £1. I also appreciate that there are people for whom the aggregation of more than one small occupational pension will produce a total in excess of £25.
§ Mr. Arthur Palmer (Bristol, North- East)
I apologise to my right hon. Friend for intervening too soon earlier in the debate. That was a measure of my indignation. Supposing these individuals had saved their money in some other way, for example, by private investment. There might conceivably be an energetic millionaire living in Park Lane who wants to go on working. He would be entitled to draw his pension without let or hindrance. Why should these particular people be singled out in this way?
§ Mr. Ennals
This is not a strict means-tested benefit. On another occasion, my hon. Friend said that it was deferred pay for people who retire.
The perfectly reasonable view of the National Insurance Advisory Committee is that if retired people who have been paying contributions in expectation of their retirement on a particular day, also get unemployment benefit, it could be said that they are being compensated twice. These are people who are in retirement. They knew that they would retire at that age.
I have been talking about people at one end of the earnings scale. I shall now say a word or two about those at the other end. We know that in July of this year 7,000 people between 55 and 64, registered as unemployed and receiving unemployment benefit—the majority of them over 60—were in receipt of occupational pensions in excess of £35 a week. Much the greatest part of the estimated full-year saving from the proposed change of £14 million—£12½ million—will be derived from this group of pensioners with occupational pensions above £35 a week—typically, perhaps, retired civil servants and local government officers formerly in senior positions, ex-senior officers of the Armed Forces and 1189 retired bank managers or former departmental heads with insurance companies. Those are the bulk of the people who will be affected by the legislation.
We are entitled to assume that those concerned—not a homogenous group but people who consciously retire at that age—are not motivated towards continued employment after they have retired on their occupational pension. Many people are demanding that they should be able to retire at 60. They are not doing that, because they want to go on working after 60. We are talking about people who have retired. Why should we encourage retired people to search for jobs? They have an occupational pension and the jobs for which they are competing are in short supply. It is simply not sensible that we should encourage people who have retired at 60 to take up employment.
§ Mr. Deputy Speaker (Sir Myer Galpern)
Order. The right hon. Gentleman clearly indicated that some of the points being dealt with by way of interventions will be covered in the winding-up speech by the Minister.
§ Mr. Robin Corbett (Hemel Hempstead)
Why does my right hon. Friend make any assumptions about people who retire at 60? Is he telling the House that it is beyond the wit of his Department to know whether people have retired voluntarily or involuntarily? Is that not the distinction that should be made?
§ Mr. Ennals
The people we are talking about have been in employment and have retired. The vast proportion knew that they would retire at that age, and they have an occupational pension which was designed for retirement at that age. The vast proportion of the people we are talking about knew that they would retire at 60 because that was a condition of their employment, and they paid contribuntions to enable them to receive an occupational pension when they retired at 60.
§ Mr. Ennals
I have given way far too often. I have already given way once to the hon. Gentleman.
§ Mr. Michael Shersby (Uxbridge)
Is not the right hon. Gentleman aware that many people who planned to retire on their occupational pension find it impossible to live on that occupational pension, because of the inflation of the last few years, and are driven to seek further employment? Is he not also aware that many people who have valuable experience to contribute will seek employment?
§ Mr. Ennals
I am not surprised at that intervention from the hon. Gentleman. We are here talking about people who, when the legislation is implemented, will get either from an occupational pension or unemployment benefit between £50 and £60 a week. Opposition Members have been talking about a very different group of people and suggesting that unemployment benefit limits should be reduced.
If we are to seek for areas of savings, this is one saving which we should consider, on whichever side of the House we may be.
§ Mr. Ennals
No, I shall not give way.
I want to deal with the principle. I have been talking about hardship, and I have effectively proved that the measure will not cause hardship. Some people talk about unemployment benefit as if it were an unconditional benefit. It is by no means so. As long ago as 1968, the National Insurance Advisory Committee, in its report, said that it did not believe that retirement from pensionable employment necessarily constituted "unemployment", in the sense that the term is used for National Insurance Scheme purposes. The Committee doubtedwhether it was ever intended that people retiring at the end of a career in pensionable employment should qualify for unemployment benefit at all.The Committee also considered that as an occupational pension paid by an employer provides some compensation for loss of earnings in the same way as unemployment benefit was intended to do, there was an overlap between the two. That was the unanimous view of the National Insurance Advisory Committee, with one honourable exception—Lord Collison.
1191 The Committee also drew attention, even then, to several instances in the national insurance scheme where payments of unemployment benefit were already affected by payments made by an employer or former employer. [Interruption.] If my hon. Friends are interested in the principle, perhaps they will direct their attention to my remarks. It was pointed out, for example, that benefit is not payable if a person's earnings from a subsidiary occupation exceed, at present, 75p a day. Dependency benefit is withheld if the amount of the dependant's earnings exceeds the amount of that benefit. Benefit can be withheld for up to a year if a man whose contract of employment is broken receives a payment from his employers that contains compensation for future loss of earnings.
In the light of all these examples, the charge that our proposals constitute an erosion of the insurance principle is one that cannot be accepted.
§ Mr. Ennals
No, I have given way to Opposition Members on previous occasions. If I give way again, it will be unfair to the rest of the House and to those who want to take part in the debate.
Over recent weeks we have had a great deal of talk about the uprating of benefits and the abuses to which the upgrading is said to have given rise. However we are talking now not about the low-paid and the genuinely unemployed but about people who have retired with a substantial and significant occupational pension. Conservative Members are constantly demanding of the Government that we should carefully examine the social security system and ensure that funds are in no way misused. It is extraordinary that they should attack us when we have established one area in which to take action.
§ Mr. Wyn Roberts (Conway)
§ Mr. Ennals
No, I shall not give way. I wish to deal with the last section of my remarks. I have reached the last of my main headings, namely, the miscellaneous improvements that the Bill brings about. The hon. Member for Conway 1192 (Mr. Roberts) and other hon. Members will be able to catch Mr. Speaker's eye.
§ Mr. Wyn Roberts
§ Mr. Ennals
Very well, I give way to the hon. Gentleman.
§ Mr. Wyn Roberts
The Minister keeps talking about the Bill dealing with those who are well off. If that is so, why have we received many representations from the Council of Post Office Unions, for example? Concern has been expressed by that council and by other organisations on behalf of humble people of that sort.
§ Mr. Ennals
They are quite naturally and honourably making representations on behalf of what is a minority of their members. If a minority of their members finds that their substantial occupational pensions affect the level of unemployment, one would expect a union to speak up. A union would do so if only a minute proportion of its members were affected. It is only a minority, but I think it is right that the unions should speak up. I am not surprised that they have made representations.
§ Mr. Eldon Griffiths
§ Mr. Ennals
No, I shall not give way again.
§ Mr. Eldon Griffiths rose—
§ Mr. Deputy Speaker
Order. Mr. Ennals.
§ Mr. Ennals
I am grateful, Mr. Deputy Speaker. I think that I have been generous in giving way to both sides of the House. I now turn to the miscellaneous improvements and deal first with Clause 12.
On 13th September 1974 my predecessor announced a new cash benefit—the mobility allowance—that would be available to severely disabled people who are unable, or virtually unable, to walk because of physical disablement. Entitlement to the new allowance, unlike entitlement under the vehicle service scheme, does not depend upon ownership of or ability to drive a car. An extremely important decision was taken by my right hon. Friend. Eventually these provisions will extend mobility help to an estimated 100,000 new beneficiaries who have previously been left out simply because they are non-drivers.
1193 My right hon. Friend also announced at the same time that the tricycle was to be retained as an alternative to the cash benefit for those who satisfied the conditions for the allowance but preferred to have the tricycle.
The problems of maintaining standards of road safety led me on 23rd June 1976 to tell the House that after one further order production of the trike would cease, and that it would no longer be available to new claimants. Existing stocks and the final order should ensure, however, that existing trike holders who want to continue with them can do so for at least another five years.
We are now proposing, through Clause 12, that existing vehicle service beneficiaries should be able to switch automatically to mobility allowance, being deemed to satisfy the medical requirements for an award, and to receive it without the age restriction which applies to those who can now claim for the mobility allowance.
The main aim of the extension is to give trike holders under the pre-1976 scheme the opportunity, where they are not already eligible, to switch to mobility allowance. Others with reserved rights under the old scheme will also be covered.
Extending the availability of the allowance in this way will mean a modest increase in expenditure. The eventual cost, after taking into account savings on the vehicle scheme, will be about £3 million.
Another improvement that we propose is contained in Clause 8. It eases the conditions for entitlement to industrial death benefit where a prescribed industrial chest disease, such as pneumoconiosis, is involved. It will remove the delay and consequent uncertainty that can arise when a medical opinion, based on the results of a post-mortem examination, is awaited. This is something that we have thought right to do for some time, and this measure provides an opportunity to remove what some people have considered to be an injustice.
Clauses 9 and 10 make substantial improvement in the administration of certain benefits available under old schemes to a shrinking number of beneficiaries suffering from industrial diseases. 1194 Clause 11 will make what I believe to be a desirable simplication by enabling us to bring together the war pensions instruments for the three Services.
Clauses 13 and 19 slightly differently remove references in legislation to "cohabitation"—a word that some have found offensive. It will substitute expressions such as "living together". This is one of the recommendations made by the Supplementary Benefits Commission. Clause 15(1) eases the present requalification test for unemployment benefit, as the test operating from April 1975 has been found to be somewhat harsh in practice. This easement, which we intend shall operate from April 1978, will, I know, be welcomed by casual workers, including dockers and musicians.
I have come to the conclusion that cannot pretend that this is an exciting Bill. It does not offer many new horizons. I should have been much happier to be the Minister who introduced legislation that created the new pension scheme, the child benefit scheme and the disablement scheme. At present I am a Minister carrying out a tidying up operation. I wish that the Bill were a measure to extend the frontiers of the Welfare State. Perhaps that will come next year or the year after. Perhaps I shall be able to come before the House with such proposals. However, I claim that the Bill has a modest virtue in that it saves us £75 million in a full year. That will be a contribution to reducing public expenditure.
We are achieving this curtailment not by reducing State provision for people who have no other source of income but by ensuring that national insurance benefits and supplementary benefit do not duplicate other sources of finance that are already available. In the longer term. the usefulness of the Bill will lie in the technical provisions that it includes and the contribution that it makes towards a more sensible and streamlined system of social security. As such, I commend the Bill to the House.
§ 4.59 p.m.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
This may not be a very exciting Bill, but the debate so far has been very exciting. The Secretary of State had a pretty rough ride from a number of his hon. Friends. I do not know about my right hon. and hon. 1195 Friends, but I gained the impression that the right hon. Gentleman was not always too clear about the answers.
I am not sure at what time the Minister for Social Security will rise to reply to the debate—that is a matter for the Whips—but he already has a great many questions to answer, and by the time that I have finished he will have a few more.
Naturally, the Secretary of State focused a great deal of attention on Clause 4. That provision, as he said, has a long history. Its effect will be to deprive occupational pensioners of their right to unemployment benefit if they are unable to find work. I should make it clear that the Conservative Party is opposed to that clause and will seek to delete it at later stages of the Bill. I shall deploy the argument for its deletion later.
The Bill contains a number of provisions, some welcome, others less than welcome. For that reason it would not be sensible to seek to defeat the Bill on Second Reading. I shall suggest to my right hon. and hon. Friends that we do not oppose the Second Reading tonight. There will be other and more sensible opportunities to amend the Bill.
I notice that the Liberal Party has tabled a reasoned amendment. If that were carried it would lose the Bill. I think that the hon. Member for Rochdale (Mr. Smith) would then have some difficulty in explaining to the elderly disabled who stand to benefit under Clause 12 why he voted against the Bill and therefore prevented the extension of the mobility allowance to certain categories of people who move into retirement. How would he explain to single-parent families the failure of the House to implement what I accept are the more sensible rules for dealing with what has been called "the cohabitation rule"?
§ Mr. Mikardo
We might have another Bill tomorrow.
§ Mr. Jenkin
The hon. Gentleman suggests that we might have another Bill tomorrow. I think that he is pitching his hopes too high. The sensible course is to give the Bill a Second Reading and then to take out or to amend clauses in Committee or on Report.
§ Mr. Mikardo
That sounds great in logic. I only know—I have been here a long time—that whenever that view has been taken in the past, nine times out of 10 it has proved impossible to take a clause out.
§ Mr. Jenkin
I am prepared to rely on the precedent of what happened when the National Insurance Act 1971 was introduced with a number of "goodies" and this "baddy". It was introduced by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph). The Bill, as it was, received an unopposed Second Reading. In Committee the clause was defeated and the Government did not seek to put it back on Report. I think that the hon. Member for Bethnal Green and Bow (Mr. Mikardo) and the Liberal Party would be unwise to scrap the rest of the Bill because of their acute dislike of Clause 4.
I make it clear that if the Liberal amendment or Second Reading is pressed to a Division, I shall advise my right hon. and hon. Friends not to go into the Lobby. I suggest that we should deal with Clause 4 at a later stage.
Before coming to the four substantial points to which the Secretary of State referred, I should like to raise three general matters. The first concerns the inquiry set up by the Secretary of State following the first annual report of the Supplementary Benefits Commission. I welcome that report. It is a valuable innovation. I also welcome the more open way that Professor Donnison is handling his responsibilities than his predecessors had been encouraged to do. The annual report is a very good example of open government.
The Committee has now started work. When is it likely to reach a conclusion? The Secretary of State said that the results will be published. When is that likely to happen?
I ask that question because there is one central issue to which the House will wish to direct its attention. I should like to quote from the most recent issue of the "SBC Notes and News":The ideal towards which the Commission would like to see policies directed is a world in which large social groups, such as pensioners, the long-term sick and students, whose needs are in total reasonably predictable, would rarely have to rely on means-tested benefits. 'Households of average size should rarely have 1197 to turn to supplementary benefit when drawing contributory unemployment and sickness benefits,' the Report states, 'Now that a more generous pensions scheme is slowly taking shape, the adequacy of family benefits in general, and the new child benefits in particular, seem to us to be the most urgent concern of the whole field of social security.'Speaking from the Opposition Dispatch Box, I strongly endorse those comments. That was the central theme of the tax credit proposals put before the House by the previous Government, of which I was a Member. That was the purpose of the child benefit proposal, which, disastrously, the Government slid away from, and which is now to be introduced only slowly, in stages. We need to lift a large number of households out of supplementary benefit altogether. That is the central message of Professor Donnison's report.
The biggest single group in this category would be pensioners. For them a tax credit solution would be a welcome way of dealing with the matter. The cost of introducing tax credits has been reduced, because the tax threshold is so much lower in real terms. Therefore, fewer people would have to be paid the full value of the tax credit which would replace the tax allowance. The Government have so far refused to embrace the tax credit principle, with the sole exception of the child benefit scheme. I want to know when the report is likely to be available. Professor Donnison has made it clear that for him the tax credit solution is the only effective way forward in this area.
§ The Minister for Social Security (Mr. Stanley Orme)
§ Mr. Jenkin
I am paraphrasing what Professor Donnison has said in a number of speeches that he has made. The relevance of the SBC's study is the need for the Government, if they can, to try to secure some coherent strategy, which is notably lacking on their side but which we, with our continuing commitment to the progressive introduction of the tax credit solution, can claim to have.
Secondly, is the Minister for Social Security able to tell us anything about the rash of minor administrative amendments that have been put to his Department by the occupational pensions interests? Many of those amendments are necessary to correct obvious misdraftings and minor administrative points in the 1198 Social Security Pensions Act 1975. The Chairman of the National Association of Pensions Funds, in his letter to the Minister on 4th October, referred to "administrative only" and "genuine drafting errors". It would seem that an opportunity has been missed to put those things right. I recognise that the question of member participation will have to be left over while further consultations continue, but I hope that the Minister will be able to tell us something about that matter.
Finally, when will the Government be able to tell us about the impact of the pay policy on improvements in pensions schemes? The Government must realise that, as the day for contracting out approaches, it is becoming increasingly important for firms to know whether and when they will be able to implement improvements which go beyond the minimum necessary for contracting out. I know that this matter has been pressed upon the Government not only by the employers and pensions interests but also by a number of trades unions.
After those three more general points, I turn to the Bill. I think that most of the minor provisions can be dealt with sensibly in Committee. However, there is one to which I must draw attention on Second Reading. I refer to the provision in Clause 19(5) dealing with the new and what seem to me to be greatly extended disclosure rules by the Inland Revenue. It may be that, as a former Treasury Minister, I am over-sensitive about that matter. I am sorry that the Chief Secretary, who was with us for a short time, has left the Chamber. I appreciate that he attends more Cabinet committees than anybody else. At least, that was so in my day.
The question of disclosure by the Inland Revenue is extremely sensitive. I recognise that earlier national insurance and pensions Acts have contained provisions dealing with disclosure for such purposes as earnings-related contributions and benefits. But Clause 19 (5) seems to blow a gaping new hole in the screen of confidentiality which must always surround matters conducted by the Inland Revenue. Subsection (5) refers to payments made under the Employment and Training Act 1973, and permits disclosure not just to another Department but to some of its agencies, that is, the 1199 Manpower Services Commission, the Employment Service Agency and the Training Services Agency.
I must ask the Minister for Social Security to tell us a little more about what is involved here. How will the confidential information given by taxpayers to the Inland Revenue under strict secrecy be protected when it reaches the hands of the commission and the agencies? Information about taxpayers' affairs is always handled in the strictest secrecy by the Inland Revenue—no Treasury Minister, not even the Chancellor himself, is entitled to have such information without the consent of the taxpayer—and that is essential to the proper operation of tax collection, which is infinitely more important than the minor matters which could be covered by Clause 19 (5).
On the face of it, it looks like a major whittling away of the barrier of confidentiality which exists, not only for the protection of the taxpayer but for the protection of the Inland Revenue itself.
I come now to the four main provisions of the Bill, and I shall deal with them in an order slightly different from that taken by the Secretary of State. I am sure that he will understand that. First, I take the change in the mobility allowance. I think that the Secretary of State recognises that although Clause 12 represents a minor improvement, foreshadowed, as he said, a little while ago, it is exchanging one anomaly for another, in the sense that instead of the mobility allowance being lost on retirement—which is the anomaly he is seeking to correct—under the new proposal a person who would have qualified for a trike will be able to take mobility allowance into retirement, as against the person who does not qualify for a trike, who will not be able to take it into retirement.
I am tempted—the House will be glad to know that it is a temptation that I shall resist—to launch into a lengthy discussion of the whole question of mobility for the disabled. However, as the House knows, there is widespread concern and real alarm throughout the country among people who feel themselves threatened by the policy announced in the Secretary of State's statement on 23rd July. I should like nothing better than to be able to make all sorts of reassur- 1200 ing noises from this Box, but I must not —I am sure my right hon. and hon. Friends will support me—fall into the trap that our predecessors on these Benches, now sitting on the Government Benches, fell into in arousing expectations, whether intentional or not, which they have not been able to satisfy. I recognise that much has been done with the introduction of the mobility allowance. More money is now being spent. But the Secretary of State does not need me to tell him that not only before 23rd July was there still much disappointment and that since 23rd July disappointment has turned to alarm.
§ Mr. Ennals
The right hon. Gentleman will accept, will he not, that the Government programme on mobility allowance increases public expenditure threefold and extends mobility to a far larger number of people than ever before? Is it his criticism that we should increase public expenditure rather further? How would he square that with the general view of his party?
§ Mr. Jenkin
I thought that I was making my position crystal clear. I was not doing that. It would be irresponsible and of no help whatever to the disabled to make promises and not be able to satisfy them. That sort of thing does this House no good at all.
Cash may be a more flexible and more easily administered mobility benefit, but if it is to replace the vehicle on which thousands of the most severely disabled have relied, the cash must offer a real alternative. One is now hearing of very distressing cases of youngsters newly disabled, perhaps in road accidents, having to stay dependent and housebound because the £5-a-week taxable allowance is simply not enough to enable proper mobility to be achieved.
I aroused some indignation on the Government Benches—I was aware that I should—when at Question Time a few weeks ago I described the Government's policy on a flat-rate mobility allowance as a policy of equal misery for all. But so it will be—unless there is cash enough to provide mobility for those who cannot achieve independence without it. That seems to me to be the point which Ministers have missed. Moreover, as I said in supplementary questions on 23rd July, the point is all the stronger if there 1201 is no development of a suitable four-wheeled vehicle being carried out to replace the trike.
Mobility is an area where benefits once given cannot be taken away unless one is prepared to put in their place something of equal value—and I do not necessarily mean cash value—to the disabled person. If we cannot bring everyone up to the same level at once, I believe that a Government must be prepared and brave enough to discriminate. My top priority would be those who, without proper mobility cannot become self-supporting but who, if they have proper mobility, will be able to support themselves.
It is a good principle of the best social work that the aim should be to help people to help themselves. Could it not, therefore, be right to give enough help to those who really can help themselves even if we have to wait a little longer before we can match those benefits for those who are bound to remain substantially dependent whatever mobility help they receive?
I ask that as a question. I recognise that its implementation in practice would be difficult, although it is done in a way in the case of the war disabled. I have found a considerable measure of acceptance of it as a possible approach among the organisations for the disabled. In the meantime, as I said, cutting off at retirement was obviously a source of great bitterness and Clause 12 makes a small improvement. For me, however, mobility for disabled people must figure among the highest priorities for such resources as become available. My right hon. and hon. Friends and I will continue to study and consult with the organisations with a view to trying to find the best possible solution within the resources available.
I turn now to the question of students. While I quite understand the objections of the students' organisations—and I think I understand the objections of hon. Members on the Government Benches below the Gangway—I think that what the Government are doing is, in principle, right. The Secretary of State referred to the report of the Supplementary Benefits Commission, and I shall quote three short passages from paragraph 2.27 which seem to be clear beyond peradventure:students now make heavy seasonal demands1202 —that is, on the commission—which endanger the normal flow of benefits to families who may be in greater need…it should not be our responsibility to decide how much a student needs to live on…That job is better done by the education authorities, central and local.I agree with Labour Members when they asked why there was no Minister here from the Department of Education and Science. Here is an important matter, affecting quite a number of people, for whom that Department is responsible. I can only imagine that it might have been a bit embarrassing to the right hon. Lady the Secretary of State to listen to some of the rest of the debate, but she might have sent one of her junior Ministers.
I hope that the Minister for Social Security will be able to tell us more about the so-called hardship scheme. I have the impression that the Government have not thought this through; legislation on this matter is premature when we do not know what is to replace entitlement to supplementary benefit.
§ Mr. Peter Walker (Worcester)
I agree with my right hon. Friend in principle that it is wrong to introduce legislation without having the hardship scheme available, but if one were to have this legislation should it not be done in conjunction with other legislation necessary for the hardship scheme?
§ Mr. Jenkin
I entirely agree. I said that I thought it right, in principle, to take the students out of the ambit of the Supplementary Benefits Commission, but I think that it would be helpful if the Minister could tell us a little more about the hardship scheme. Further, will he deal with handicapped students? I have had an anguished letter from the Bureau for Handicapped Students, which wants to be assured that the particular category of student which it represents will not suffer, because, as it says, there are extreme difficulties for handicapped students in getting vacation jobs.
I turn to the major proposals—the earnings rule and unemployment benefit for pensioners. The Secretary of State correctly stressed the public expenditure aspect of these two proposals. Indeed, he said that public expenditure was the central motive behind the Bill. Although the National Insurance Fund is in surplus and is a separate head of public 1203 expenditure from the Consolidated Fund—it is really a notional fund, and does not exist except in so far as it is in surplus—I accept that one has to have regard to the cost of these measures when deciding what to do.
I believe—and the Treasury has done this every year—that the calculations on the earnings rule grossly exaggerate the cost of raising it from £35 to £50 a week. On the unemployment benefit issue, there are much better ways that do not offend the principle of the national insurance scheme. If the Secretary of State really believes that this cost will be incurred, perhaps he can pay for it by accepting the advice of the Chancellor of the Exchequer and tax short-term benefits, which the Chancellor believes to be right in equity.
I now turn to the earnings rule. It was a matter of great regret that the Chancellor of the Exchequer announced last February, that the Government proposed to reverse the decision which the House took, after full debate and by a clear majority, to raise the level of the earnings limit to £50 next April. The sole reason is cost.
There is no dispute between the two sides on the undesirability of the earnings rule as a permanent feature of our system. It has never been accepted by the public, and those of us who have had to defend it over the years have found it very difficult. It is a form of taxation which embodies almost everything that we find difficult to accept. It falls on the elderly and not the young. It is levied on earned income and not on other forms of income, and it is a severe disincentive to work. What may not be so well known is that it is bureaucratic. It must be costly to administer. If hon. Members doubt that, they might read a letter sent to an elderly lady living in the constituency of my hon. Friend the Member for Stratford-on-Avon (Mr. Maude) by the Department of Health and Social Security. The letter reads:The Insurance Officer has considered the information given by you about your emoluments for the year ending 5th April 1976 and has decided that:—