HC Deb 30 July 1976 vol 916 cc1088-160

11.48 a.m.

The Secretary of State for Social Services (Mr. David Ennals)

I beg to move, That the Child Benefit and Social Security (Fixing and Adjustment of Rates) Regulations 1976, a draft of which was laid before this House on 28th June, be approved.

Mr. Deputy Speaker (Sir Myer Galpern)

With this we may take the following Prayers: That an humble Address be presented to Her Majesty, praying that the Child Benefit (Determination of Claims and Questions) Regulations 1976 (S.I., 1976, No. 962), dated 18th June 1976, a copy of which was laid before this House on 28th June, be annulled. That an humble Address be presented to Her Majesty, praying that the Child Benefit (Residence and Persons Abroad) Regulations 1976 (S.I., 1976, No. 963), dated 18th June 1976, a copy of which was laid before this House on 28th June, be annulled. That an humble Address be presented to Her Majesty, praying that the Child Benefit (Claims and Payments) Regulations 1976 (S.I., 1976, No. 964), dated 18th June 1976 a copy of which was laid before this House on 28th June, be annulled. That an humble Address be presented to Her Majesty, praying that the Child Benefit (General) Regulations 1976 (S.I., 1976, No. 965), dated 18th June 1976, a copy of which was laid before this House on 28th June, be annulled.

Mr. Ennals

The purpose of the Regulations is to provide for the rate of child benefit announced on 25th May and for consequential adjustments in social security benefits. Last year we passed the Child Benefit Act, creating this new benefit for all children. These Regulations, together with the Orders and Regulations laid before the House at the same time, complete the subordinate legislation needed to start the scheme in April 1977.

The House is well aware of the background to these Regulations. Following my statement of 25th May we had the Supply Day debate on 28th June. The matter has also been well aired in the national Press. Suffice it to say, therefore, that the rates of child benefit, which we are proposing should be paid from April next year, are in the Government's opinion the highest that can be afforded at the present time—within the net resources which can be made available. From next April over 6 million mothers will be £1 better off. All tax-paying families will gain 30p, while working families not paying tax will gain up to the full value of the £1 for the first child.

The main difference between the full Child Benefit Scheme which was envisaged when legislation was brought forward last summer and the scheme being introduced next April is that we have not proceeded with the intention to incorporate in the rate of benefit the full value of child tax allowances for children under 11. This, the aptly-termed transfer from wallet to handbag, would have resulted in substantial falls in take-home pay, about £2 for a first child and over £1 for each other.

In this second year of pay policy, which relates in an entirely new way to take-home pay, it would in our view have been folly to put it all at risk by making substantial reductions in pay packets at a time when we could not point to a reasonable increase in family support for the family as a whole. Instead, we have chosen to make a more modest start to this transfer from father to mother. In 1977 this transfer will amount to 70p.

I know that there was disappointment on both sides of the House, and outside, over the fact that we could not introduce the full scheme next April as we had envisaged on the pay policy and public spending fronts. The only realistic alternative to what we have proposed would have been to postpone the scheme. This we would not do. We were determined to introduce the Child Benefit Scheme, even if only in a modest way. This we are doing.

Some hon. Members have said that what we are proposing is simply family allowances under another name. Let me make just two points about that. Family allowances do not cover first children, and they are shackled with complicated rules of entitlement because of the exclusion of the first child. Child benefits are different in both respects. They cover the first child in the family and entitlement is a great deal simpler. This is a genuine Child Benefit Scheme, and it fulfils our election manifesto commitment to introduce a cash benefit for the first child payable to the mother.

In opening the debate on 28th June, I made it absolutely clear that the Goverment had not abandoned the scheme. Those who suggest otherwise are deliberately misinterpreting the Government's objectives. In that debate I said: We shall not have achieved all that we want until we have provided a larger payment to the mother in place of child tax allowances which are of no benefit to the poorest. The Government are committed to introduce the whole scheme when economic circumstances permit. Later I said: The Government will be free, in the light of the economic situation, to expand the child benefit scheme by variations of the level of child benefit paid to the mother on the one hand and the adjustment of tax allowances on the other."—[Official Report, 28th June 1976; Vol. 914, c. 120–7.] The Government's proposals are a base on which we can build. They open the way for us to consider the further implementation of the scheme. As the House knows, a working party was set up by the Labour Party/TUC Liaison Committee to look at ways of phasing in the full scheme.

My right hon. Friend the Chief Secretary and my right hon. Friend the Minister of State have played a full part in the discussions of the working party, which has been trying to find a way forward which is as widely acceptable as possible. I should like to take this opportunity of paying tribute to the constructive and concentrated way in which the working party has approached its task. It last met only yesterday afternoon, and as a result of its deliberations a statement was issued. A copy of that statement has been placed in the Library of the House

Mr. Patrick Jenkin (Wanstead and Woodford)

There is a little confusion here. In the Library of the House last night there seemed to be two statements. One of them was the Labour Party statement, giving the names of the people who took part in the working party. The other was the statement which I was informed had been deposited by the right hon. Gentleman the Minister of State. The words after the introductory words were exactly the same. Was there some reason why the official statement could not contain the names of the people who had participated?

Mr. Ennals

There was no reason at all. My right hon. Friend, as soon as the paper was available from the working party, in his anxiety to ensure that all Members of the House would be able to see it—particularly the right hon. Member for Wanstead and Woodford (Mr. Jenkin) and his hon. Friends wishing to take part in the debate—himself put it in the Library of the House. I really do not understand the complaint of the right hon. Gentleman. The statement is precisely the same. If this is the right hon. Gentleman's only niggle in the debate, so be it.

I have already paid tribute to the working party. As the right hon. Gentleman knows, it included representatives of the National Executive Committee of the Parliamentary Labour Party and of the Trades Union Congress, and my two right hon. Friends.

The working party has been considering ways of phasing in the full Child Benefit Scheme within the lifetime of this Parliament. That is consistent with my previous statements about our commitment to introduce the scheme. The working party agreed in principle that the objective should be to phase in the full scheme by 1979. It suggested that it should be done, first, by making child benefits free of tax and clawback in April 1977 and reducing child tax allowances by an equivalent amount—this would have no further effect on take-home pay—and, secondly, by withdrawing the remaining child tax allowances over the following two years and converting the net resources thus released into increases to the tax-free child benefit rate.

In this way substantial progress towards eliminating child tax allowances would be achieved without any further effect on take-home pay in 1977, and child benefit itself would, as originally intended, be made tax-free. The full Child Benefit Scheme would have been introduced by 1979.

Since the statement was issued by the Labour Party and the TUC only last night. hon. Members will not expect me this morning to be in a position to say anything more than that the Government will consider these proposals urgently and carefully. The scheme proposed would, of course, involve a number of significant changes from the existing plans—including appropriate arrangements for those groups not entitled to child benefit. These problems will require careful consideration, and I assure the House that we shall waste no time.

All sections of the Labour movement are, in any case, committed to the eventual introduction of the scheme as it was envisaged when the legislation was passed, having been introduced by my right hon. Friend the Member for Blackburn (Mrs. Castle).

Before turning to the affirmative order itself, may I say that I recognise that hon. Members may, in the course of the debate, wish to raise points on the other instruments—for example, the Regulations dealing with the administration of the scheme. My right hon. Friend will be glad to deal with these in his reply to the debate.

I now turn to the affirmative order itself. Regulation 1 is formal. Regulation 2 deals with the rate of child benefit. It provides that this shall be £1 for the only, elder or eldest child and £1.50 for each other. There are certain exceptions to these rules. The two principal ones, which I shall comment on later, are one-parent families and children in the care of voluntary organisations. Regulation 2(2) provides for an extra 50p for the only, elder or eldest child in a one-parent family. The purpose of this is to ensure that lone parents will receive the same level of income as they now do by way of the child interim benefit, which effectively introduced child benefit, at £1.50 a week for the first child in a one-parent family in advance of the main scheme. The definition of a one-parent family in this Regulation is the same as for child interim benefit.

Regulations 2(3) deals with children looked after by voluntary organisations. Normally only an individual can get child benefit, but we have made a special exception pursuant to Section 24(5) of the Child Benefit Act so that voluntary organisations can draw the benefit for children in their care who are not paid for by local authorities. This should be of some assistance to voluntary organisations, especially those which are running community homes. The Regulations governing this are in paragraph 17 of the Child Benefit (General) Regulations. A child benefit of £1 will be payable for each such child.

Regulations 2, paragraphs (4) and (5) and Regulation 3 all deal with the interaction between child benefit and national insurance benefits. It may help to explain the general principle that lies behind them. Additions for children paid to people getting national insurance benefits have always been fixed on the basis that, taken with family allowances, they provide the total support required for the child. Thus, child dependency benefits for first children are now £1.50 higher than for others because first children do not qualify for a family allowance. The Child Benefit Act amends the Social Security Act so that benefit for children under the latter is in all cases payable at the rate now payable for the child in respect of whom FAM is not payable. Section 17 of the Child Benefit Act enables social security benefits to be reduced to take account of child benefit. The general effect of these Regulations is to secure that the position of people with children on social security benefits will remain as it was.

The main State support for these families comes, of course not from child benefit but from the social security benefits they are geting which are regularly uprated. The approach adopted in Regulation 2(4) and (5) for social security beneficiaries who are one-parent families follows that adopted for child interim benefit. For long-term benefit, such as widowed mother's allowance, it is better not to put the parent to the trouble of claiming a small amount, which would be paid by means of another order book but which would give her no financial advantage because the child dependency benefit would be correspondingly reduced. These are the "specified benefits" in Regulation 2(5).

For short-term benefits, the same approach would not be appropriate because lone parents would then have to claim the child benefit increase when they were not receiving the short-term benefit. This would be inconvenient all round, and we think it more sensible in these cases to pay the additional child benefit as a matter of course and to reduce the child dependency benefit. This will be achieved by Regulations made under the Social Security Act.

Regulation 3 deals with the adjustment of social security benefits to take account of child benefit itself. The effect of the adjustments is to secure that a beneficiary will receive the same total amount by way of child benefit and child dependency benefit for each of his or her children. Regulation 4 is a transitional provision to make sure that a person getting child interim benefit will also get the increase of child benefit.

I commend the Regulations to the House, confident that they will be accepted as a significant step towards the full implementation of an important social reform which is widely supported both inside and outside this House.

12.4 p.m.

Mr. Patrick Jenkin (Wanstead and Woodford)

I noticed a marked difference in the tone of the Secretary of State this morning in putting these regulations before the House, compared with his tone in the debate on the Supply Day on 28th June. It is fair to say that he was today a good deal more contrite in his recognition of the disappointment that had been expressed, not just on both sides, as he said today, but in all parts of the House when he made his original statement in May. There was hardly anyone at that time who had a good word to say for what he announced. What he has put before us today is what he announced on 25th May, and he will not be surprised if it does not get a very friendly reception.

I shall not repeat what I said on 28th June. I spelt out clearly what the Government ought to have done. Because the right hon. Member for Blackburn (Mrs. Castle) had not left enough shots in the locker for the right hon. Gentleman when he took over, he had to accept that there was no chance, this time round, of any general improvement in family support. Nevertheless, with a child benefit of £2.34, together with a premium for third and subsequent children and residual child tax allowances for children over 11, and in respect of the slices of tax above the basic rate, he could have introduced a scheme that would have done very much more both for mothers and for the working poor than this miserable scheme does. Certainly it would have cost no more and might have cost less than the £95 million that this scheme costs.

Despite all the strictures both when the right hon. Gentleman made his statement and in the debate on 28th June, this is not to be. Nor are we to have the scheme suggested by Frank Field in his letter to The Times on 5th July, nor anything like the scheme put forward by Pat Healy, the social services correspondent of The Times on 28th June. All that we are to get is this simple extension of FAM worth precisely 30p a week to tax paying families.

Here again, I must join those who have protested against the Government continuing to call this "child benefit". It is an insult to those who devised the tax credit principle in 1972. It is an insult to those who framed and debated the Child Benefit Bill through 1975. But, above all, it is an insult to those who put their faith in Labour promises at the 1974 elections. These orders do not provide for child benefits. They provide for a simple extension of family allowances, with all the disadvantages to which the family allowance system has been subject.

Frank Field was quoted in Sunday Telegraph of 30th May, immediately after the Government's original announcement, as saying: Every one of the 70,000 families on Family Income Supplement—paid to people in full-time work who earn below a prescribed wage and depending on the size of their family—will actually be at least 20p worse off a week under the scheme. And that is without taking loss of allowances for school meals and other rebates into account. Mr. Field is also quoted as saying: It is quite obscene. The Minister stood up to make an attack on poverty and he has actually made it worse. Nor can the Government conceivably claim that this scheme has the support of the House. On the contrary, they avoided a humiliating defeat on 28th June only by running away from the vote and abandoning the rest of the business that night. So contemptuous of Parliament was the Secretary of State that, on the very night of that abject scuttle, he tabled this clutch of regulations providing for this extension of FAM. He, in effect, lifted two fingers not only to his right hon. and hon. Friends, who had made no secret of their dismay at what he was doing, but to the whole House of Commons.

Mr. Ennals

The right hon. Gentleman refers to me as having been contrite. Per- haps he would care for a moment to contemplate the position in which I feel myself, having said in October 1974 that we would attack family poverty by increasing family allowances and extending them to the first child through a new system of child credit payable to the mother, and I am now laying the orders to do so, when the right hon. Gentleman, having before the 1970 election made promises also to increase family allowances, for four years did not do so. How does he compare my feelings with his own?

Mr. Jenkin

The right hon. Gentleman gave the answer to his own point in the documents that he put before the Cabinet in May and which were quoted in the article in New Society. He warned his Cabinet colleagues that, unless they did something pretty dramatic, they would not reach the level of benefit which children were getting under the Conservative Government.

I do not complain that the Government are taking refuge in their much publicised working party. I do not complain about the fact that the Government, when confronted with the enormity of their retreat, should seek to pacify their revolting supporters—[Interruption.] Maybe I should have said "their supporters who have revolted." But the fact that they should want to do this in a blaze of publicity is further evidence of the lack of support they enjoy from their own Back Benchers.

Hitherto child tax credits—or child benefits—have been a bipartisan policy. My hon. Friend the Member for Kensington (Sir B. Rhys Williams) together with his mother has over many years advocated a cash benefit in substitution for a child tax allowance. It was a Tory Government who first put forward an administratively workable scheme in an official document—the Tax Credits Green Paper in 1972. It was an all-party Select Committee that accepted the principle of payment to the mother. The Child Benefit Bill enjoyed all-party support in its passage through the House last year. Finally, all parties were equally dismayed when the Government abandoned the scheme.

Surely if ever there was an occasion for an all-party approach to find a solution to the problem that the Government claim they face, it is now. It is an impertinence for the Labour Party to have arrogated to itself the sole custody of a social advance that has been propounded, supported and contributed to by all parties in the House of Commons. It is a particular impertinence when it is the Labour Government who have betrayed the trust that the public put in them.

But when one studies the conclusions of the remarkable statement of the working party, one marvels at the ingenuousness of hon. Members on the Government Benches. Take, for example, the first objective in paragraph 2(i): By making Child Benefits free of tax and clawback in April 1977 and reducing Child Tax Allowances by an equivalent amount (this would have no further effect on take-home pay)". That is quite right—it would not. Nor would it have any further effect on cash going to mothers or to the working poor. Nor would it have any further effect on the poverty trap or on the incentive to work. When one reads that paragraph one does not know whether to laugh or weep.

We have nothing better in the second objective in paragraph 2(ii), which says: By withdrawing the remaining Child Tax Allowances over the following two years and converting the net resources thus released into increases to the tax-free child benefit rate. But this is exactly what Ministers have promised for the last two and a half years. Yet they have not done it. Why should anyone believe that they would do it next time? All through 1974 and 1975 they made promises to exchange child tax allowances for child benefit, but when it came to the pinch they ratted on it. Why should anyone believe them again?

In paragraph 2(ii) one key question on which that operation will depend ended in disagreement among members of the working party, and on another the result was total silence.

Take the question of cost. We are told that the TUC and the national executive committee of the Parliamentary Labour Party believed that there must be more money after 1977–78. However all that Ministers could say was that they would inform their colleagues of that epoch-making conclusion on the part of the TUC, the PLP and the national executive committee.

On the question of the switch from the wallet to the purse—and the consequent reduction in take-home pay—and that is what this argument is all about—we find that the working party was wholly silent. This is the crucial hurdle which the Cabinet refused to jump on 25th May, yet there is not a single word in this communique about that.

Mrs. Barbara Castle (Blackburn)

The right hon. Gentleman really is talking more nonsense than usual, even though that is difficult to do. If he looks at paragraph 2(ii) he will find that is exactly the definition of the switch—of the withdrawing of the remaining child tax allowances and converting them into tax free child benefits, which we all know goes to the mother.

Mr. Jenkin

But six out of the eight members of the working party say that more money is necessary, whereas the others say nothing. Paragraph 2(ii) is wholly silent, and one is left in complete ignorance. The eight participants in the working party should have spelt out clearly that they realise that this would involve a reduction in take-home pay. There is not a single word in the statement about what will happen in 1978 or 1979.

Mr. George Cunningham (Islington, South and Finsbury)

If the right hon. Gentleman is complaining about things not being spelt out he should read the paragraph again, because the point he is making is spelt out. There could have been a decision in Parliament last month when we had the debate on this matter. If the Opposition had put down a substantive motion at that time in the right form it would have been carried, and the right hon. Gentleman knows it. No Government could have ignored that. But the Opposition did not have the guts to put down such a substantive motion.

Mr. Jenkin

I can understand the Labour Party taking refuge in its difficulties in abusing the Opposition. The fact is that it was the Government who ratted in the debate on 28th June, and the hon. Member knows it.

I find this curious communique a very unsatisfactory document, and I am not surprised that the Secretary of State is not accepting it but merely undertaking to consider it. I understand that the right hon. Member for Blackburn and the right hon. Member for Lanark (Mrs. Hart) played a leading role in this gripping serial. True to form, like Pearl White, "with one bound they were free". The main hurdle the Cabinet jibbed at is not spelt out at all. The fatuous document ducks the main issue. I am sorry that any serious politician should be prepared to put his or her name to so futile an exercise. Like the Secretary of State's original announcement on 25th May, the document is, in the memorable words of my hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis): regarded by mothers of children as a betrayal, and by fathers of children as an insult."—[Official Report, 25th May 1976; Vol. 912, c. 288.] It is the latest wretched chapter in this wretched business.

I do not feel inclined to waste too much time on the details of these regulations, because they are hardly worth the effort. We welcome the change in payment to voluntary organisations looking after children. But I have three points which I would like to raise. What steps will be taken to make sure that claimants who are worse off as a result of this scheme—people on FIS and means-tested benefits—do not claim it? The position is the same as it was with the child interim benefit, when all the voluntary organisations representing single-parent families had to spend a great deal of money putting out leaflets to people likely to be affected to ensure that they did not claim the interim benefit, or, if they had claimed it, that they surrendered it in July.

Mr. Ennals

The right hon. Gentleman raised this matter earlier, but since he has raised it again, I suggest that he should not base his assumptions on Government policy on what Mr. Frank Field has said.. He has put a question to me and I shall readily answer it. We shall be considering the means-tested benefits, including FIS, before next April to make certain that people will not lose out. Will he accept that from me right now?

Mr. Jenkin

I welcome that, so far as it goes, but we shall have to see what the Government do. Second, where have the Government got to in their study of the question of children overseas of taxpayers who pay their tax here? In Committee on the Child Benefit Bill the Government had to be reminded by my hon. Friends the Members for Ealing, Acton (Sir G. Young) and Rushcliffe (Mr. Clarke) that this was an unresolved question. The Select Committee had recommended that the tax credits should not be pa id to overseas children and that the tax allowances should not be continued. In a unanimous part of the report—because it was not voted upon—the Select Committee put its faith in what it called an extension of covenant schemes.

In Committee and on Report all that my hon. Friends could get from Ministers was that they would look at the matter again. The only other mention of it was in the leaked Cabinet documents in New Society, where it appeared that the Secretary of State was having to make provision of about £45 million for overseas dependants. These regulations have the same rules as FAM, so that no FAM is paid for children overseas except in certain limited circumstances. But what will happen when, if it ever happens, the child tax allowances are reduced? The Government must say where they stand on this, because until we know we cannot judge the merits of their proposals.

Finally, let me refer to the leaflet that I mentioned last month entitled The New Child Benefit. Claiming for one child. The leaflet is lettered CHI(T) which I suppose should be pronounced "cheat". It was to be published in September. It was produced for a real Child Benefit Scheme, because it refers to the withdrawal of child tax allowances. It would have referred to benefits paid to poor families which would have been very much greater than this scheme for less overall cost to the Exchequer. On Tuesday the right hon. Gentleman was frank enought to say that 13 million copies of this leaflet had been produced before the Cabinet changed its mind about the scheme. So we are to have what the Secretary of State engagingly called, at col. 239 of the Official Report, "an information slip", which is to be put into the leaflet. The leaflet says that if the claimant is geting a tax allowance for a child under 11 that would end at the same time. Presumably the information slip will say that it will not.

Perhaps I may suggest to the Secretary of State what he ought to put into that information slip. He should say: Since we printed this leaflet telling you how to apply for the new child benefit we have changed our minds. Partly this is because Barbara Castle did not make enough provision for the cost, but mainly because we decided that your husband would not understand—or even that he would not like it—if you got more cash from the Post Office and his take-home pay was reduced. We realise that this would have given you more help to feed and clothe your children, and given more money overall to poor working families. But we believe that your husband would not like that so we have changed our minds. You may ask why we should pay more attention to your husband than we do to you. Well, that is what the social contract is all about. It is about looking after well-heeled trade unionists not looking after mothers or single-parent families or the working poor. So, instead of putting several more pounds into your purse as we promised at the last election, all your family will get next April is an extra 30p. Perhaps there should be a footnote along these lines: Mind you, if you already get FIS, rent rebate, rate rebate or free school meals, and so on, you will not even get 30p. You might end up worse off. So watch it! It would end: This leaflet tells you how to apply if you can be bothered. That is what the information slip should say. If the Government wanted to be completely honest with mothers they could print across the front, in big blue letters MOTHERS OF BRITAIN UNITE. NEXT TIME, VOTE CONSERVATIVE.

Mr. Ennals

Before the right hon. Gentleman sits down, he obviously has a very good—

Mr. Jenkin

I have finished my speech. I have sat down.

12.25 p.m.

Mrs. Barbara Castle (Blackburn)

I am grateful to the Government for hav- ing postponed the debate on these Regulations until the working party had completed its discussion and produced its report. It we had not reached agreement in the working party, some of us would have felt obliged to vote against the Regulations today in spite of the political difficulties of doing so, and we would have done so because, whatever my right hon. Friend might say, the Regulations as they stand are not a genuine Child Benefit Scheme.

Reinforced by the new clause in the Finance Bill which applies income tax and clawback to this social child benefit, as they stand the Regulations saddle us firmly with the indefinite postponement of child benefit. I am grateful for the tone with which my right hon. Friend spoke, but he spoiled his speech by ignoring, and he will make a mistake if he goes on ignoring, the fact that there are three essential characteristics to child benefits. The first, of course, is that they include the first child. It is this one to which my right hon. Friend keeps referring with such pride because the Regulations extend family allowance to the first child. The second essential characteristic of child benefit is that it is tax-free and, thirdly, it replaces child tax allowances by a cash payment payable to the mother. These other two, taken together, are really the dominant characteristics of a child benefit, because family allowance payable to the first child is nothing of the kind. By themselves the Regulations meet only the first of these three essentials, and by themselves they make the achievement of the other two more difficult.

We all know that, at a time of economic stringency, to devote £95 million to extending the payment to the first child without any move in the other two directions pre-empts scarce resources which are needed to make the switch from pay packet to purse more palatable. But since my right hon. Friend announced the Government's decision to postpone the scheme and to introduce these Regulations instead, three things have happened, and it is, of course, characteristic of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) that either he should have totally ignored these important changes or he should have misrepresented them.

The first change is that during the discussion on the Finance Bill my right hon. Friend the Chief Secretary accepted an amendment moved by my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) and supported by a number of us on the Labour side.

Mrs. Lynda Chalker (Wallasey)

And on this side.

Mrs. Castle

Yes, but the initiative was my hon. Friend's.

The amendment limited the child tax allowance to one year, and by accepting that the Government took the first important step towards admitting that they were prepared to have another look at the policy on which they had embarked The second important change was that the liaison committee of the political wing of the Labour movement and the trade union movement rejected the Prime Minister's statement that we could not embark upon child benefit proper until 1979.

It is important to realise that we are meeting against the background of an agreement in the working party which totally repudiates that threat. That is a fundamental change that we should be unwise to ignore. The liaison committee decided that the full scheme must go ahead, and it set up the working party on which my hon. Friend the Member for Islington, South and Finsbury and I were happy to serve.

This leads us to the next important change, which the right hon. Member for Wanstead and Woodford felt it necessary to try to denigrate. Something important and potentially exciting has been happening in the working party. We have gone into all the issues involved frankly and thoroughly. It has been a welcome extension of the principle of open government.

Those of us on this side who have been critics of the Government's abandonment, for all practical purposes in this Parliament, of the Child Benefit Scheme, have been able to look at the agreed figures involved and face them squarely with the trade union movement. As a result we have reached agreement, and a joint statement was issued yesterday. The importance of that statement is that it makes clear that what we have been discussing is the full introduction of child benefit within the lifetime of this Parliament. My right hon. Friend was a little out of date when he repeated the Government's commitment to introduce the whole scheme "as soon as economic circumstances permit". That commitment was repudiated by the working party as inadequate. We considered ways of phasing in the full introduction of the scheme within the lifetime of this Parliament.

I am amazed at the continuing and convenient myopia of the right hon. Member for Wanstead and Woodford on our statement, which says that the switch would mean starting to withdraw child tax allowances this year, completing the process over the following two years and transferring the money involved progressively to the mother.

Mr. Patrick Jenkin

It does not say that.

Mrs. Castle

It says: The Working Party are agreed in principle that the objective should be to phase in the full Child Benefit Scheme by 1979 on the following basis:

  1. (i) by making Child Benefits free of tax and clawback in April 1977 and reducing Child Tax Allowances by an equivalent amount;
  2. (ii) by withdrawing the remaining Child Tax Allowances over the following two years and converting the net resources thus released into increases to the tax-free child benefit rate."
I do not see how there can be any dubiety about that.

Mr. Patrick Jenkin

The right hon. Lady claims too much for her document. She left out the words in brackets at the end of sub-paragraph (i): this would have no further effect on take-home pay". Sub-paragraph (ii) refers to withdrawing child tax allowances and converting the net resources thus released into child benefit free of tax, but it is silent about whether any reduction in take-home pay will be acceptable. As this was the central point of which the Cabinet jibbed, and which was made by the Secretary of State when he announced the new scheme, the working party could at least have recognised that this would be the consequence.

Mrs. Castle

The right hon. Gentleman is so barren of legitimate criticism that he has to invent it. He is adding to his reputation for minimal clarity of mind.

Sub-paragraph (i) of the report spells out to the most idiot child that it is referring to April 1977. The switch from tax and clawback on FAM to a reduction in child tax allowances would have no further effect on take-home pay in April 1977, but what the report says about withdrawing the remaining tax allowances over the following two years is announcing to the world that this will have a progressive effect on take-home pay. How can it not do so? It is useless to try to explain this to someone who does not want to see because his whole case falls once he admits it. However, it is an important declaration of policy.

In April 1977, we should start phasing out child tax allowances. By abolishing income tax and clawback on what my right hon. Friend the Secretary of State likes to call child benefit, there will be no effect on take-home pay next April, but in the following two years there will be a progressive effect until child tax allowances have been eliminated. The trade union movement says that it wants child tax allowances abolished by the 1979 financial year. How the right hon. Member for Wanstead and Woodford can say that there is no commitment to the switch is beyond human credulity.

This is important, because the working party looked at tables agreed by the Treasury, the trade union movement and the rest of us, which demonstrated the effect on take-home pay. We also took into account possible levels of child benefit, the options open to us and their effect on overall family support by the end of the period.

The right hon. Member for Wanstead and Woodford tried to make a great deal of the fact that we have no financial commitment here. It is remarkable that the trade union movement has said that within the next two years—even in advance of a firm Government commitment on additional resources—it wants to see child tax allowances phased out. This has been the result of an invaluable educational process.

Sir Brandon Rhys Williams (Kensington)

The whole House will be grateful for the right hon. Lady's account of what has been taking place in the working party. It is of great interest. Since the meetings of the working party are not open to the public, though the right hon. Lady has described them as an extension of open government, does she feel that the Labour movement is committed to the findings of the working party?

Mrs. Castle

Yes, I do say that. The general council sent its representatives with full plenary powers. Although the whole thing is ad referendum, they had full powers. I was there representing the National Executive of the Labour Party, which gave full plenary powers to both myself and my right hon. Friend the Member for Lanark (Mr. Hart)—it did that at a meeting on Wednesday—to try to negotiate a solution so that we could get the Child Benefit Scheme within the lifetime of this Parliament, despite all the difficulties which have been discussed about pay policy and so on. That was the objective of the working party. It was as much an educational process among ourselves as anything else. I shall come later to the point made by the hon. Member for Kensington (Sir B. Rhys Williams).

The agreed objective of the document is outlined in sub-paragraphs (i) and (ii). The explanation of sub-paragraph (i) is that in April 1977, although we shall have taken a step in the right direction by making the benefit nearer to child benefit by making it tax-free, there will be no further effect on take-home pay.

The statement starts with the recognition that the Government are not prepared to make more than £95 million available for the start of the scheme next April. That does not mean that all the parties to the discussion approved of that fact. I do not alter by one whit my view that the Government could and should have made more money available for the full introduction of the scheme next April. It delights the right hon. Member for Wanstead and Woodford to say that I had left no shots in the locker, but he does not know the state of the Contingency Fund. The Child Benefit Scheme was to be financed out of the Contingency Fund. I maintain that there was ample margin in the fund to have enabled the Government to start the scheme in full next April if they had been prepared to make extra money available.

One of two things happened. The Government either switched their priorities for the use of the Contingency Fund or—this is my deduction—they made this postponement the first round of their future public expenditure cuts. Therefore, we were left with only £95 million, which was less than adequate to make an effective switch.

Within the realities facing us, however, the proposals to which we agreed have the virtue of clearing the way for a progressive switch, first by making the benefit tax-free and secondly by starting to phase out child tax allowances. That agreement—there are no Government caveats on sub-paragraph (i) to which I have referred—will mean an amendment to next year's Finance Bill to repeal the steps that were taken in this year's Finance Act to impose income tax and claw-back on this new benefit.

I repeat that Government representatives on the working party accepted that the transfer of the child tax allowances to the mother should be completed over the following two years. That agreement, again, is not subject to any caveats about public expenditure. It means that the Chancellor will not again, in the coming two years, be able to bolster pay policy at the expense of the mother. This commitment by Government representatives on the working party is of extreme importance from that point of view.

Indeed, as a result of the agreement, if the Chancellor wants to secure the acquiescence of the TUC to further future editions of pay restraint over the next two or three years he will be under strong compulsion, if he wants a pay policy at all, to make more money available for child benefit in future years. The TUC has made it clear in the statement that it would not be happy to see take-home pay reduced unless there were an overall gain to the family. That would clearly be one of the conditions for the negotiation of future wage restraint.

Therefore, to that extent the situation has been dramatically transformed. Instead of child benefit falling victim to the pay policy negotiations and being lost, it will gain from any future pay policy negotiations, because the TUC is committed to phasing out child tax allowances over the next two years and has said that it will find it tolerable only if there is to be an overall gain to the family. That is a vital change of approach.

In this matter the TUC is backed by representatives of the Parliamentary Labour Party and the NEC. Indeed, the statement makes it clear. I quote: The TUC and Labour Party representatives, however, believe that it will be necessary to allocate additional resources from the Exchequer to increase the child benefit rate in 1978 and 1979. For their part, the Ministerial representatives have made it clear that while no commitment can be given about the additional resources to be made available, they will advise the Government that the TUC and Labour Party representatives expect the Government to accept that there is a financial commitment in the agreement reached on the phasing in of the scheme as it concerns the overall level of family support in those years. That becomes a new framework within which any future pay policy negotiations will have to take place.

As I said, the working party has already agreed the figures involved in the different steps that would be necessary in phasing out the tax relief and phasing in a more generous child benefit to give different degrees of overall increase in family support.

Finally, we unanimously recommend the liaison committee to keep the working party in existence to review progress with the introduction of this scheme. One of the first things that the working party could do, if this recommendation were accepted, would be to meet again and decide in what way to publish the information that we have agreed. I believe that we should let the public know the detailed statistical figures which have been agreed with the Treasury. Therefore, we should publicise the alternatives and their costs. That will be a vital part of the educational process of preparing people's minds for the switch. People will not then be able to say that they are not aware of what is involved.

Great gains have come from the row that we have had with my right hon. Friend and the Government. First, we have saved the Child Benefit Scheme for this Parliament's lifetime. Secondly, the Government have been forced to admit the inter-relationship between tax reliefs and social benefits. Thirdly, they have been forced to agree that this interrelationship ought to be subject to open public discussion and not merely be decided unilaterally by the Chancellor.

What the working party has done might mercifully be the first step in putting future Budgets into commission instead of making them the private perogative of the Chancellor of the Exchequer.

12.49 p.m.

Sir George Young (Ealing, Acton)

The right hon. Member for Blackburn (Mrs. Castle) accused my right hon. Friend the Member for Wan stead and Woodford (Mr. Jenkin) of myopia. I think that she suffers from the equally distressing disease of amnesia—perhaps terminal amnesia—because she seems to forget her role in creating the confusion in which we now find ourselves. If, when Secretary of State, she had transferred the funds from the Contingency Fund to her Department's budget, had insisted on a date being written into the Bill when it went through, and had encouraged her right hon. and hon. Friends to vote for it. the scheme would have been implemented in April next year and we should not have had this series of debates on the Child Benefit Scheme which we have had over the last three or four months.

What is to be the position of children overseas who have parents in this country? In our debates on 28th June the Secretary of State interrupted my right hon. Friend to demand what was the Conservative Party's posture on overseas dependants. Our position was stated when the Child Benefit Bill was going through the House, but we have not had any response from the Government. They have had 13 months in which to consider the treatment of children overseas, and we have not had an inkling of their policy. The House is owed an explanation by the Government of what they are going to do about the 500,000 children overseas—that is the Secretary of States estimate—who stand to lose the child tax allowances if the working party's recommendations go through.

Secondly, what is to happen to the child tax allowances next year? The right hon. Lady refered to the amendment to the Finance Bill that was accepted by the Government, which means that the child tax allowances are increased only for this year and go back to the previous level next year. Will the Government allow that amendment to stand, or will they seek to re-amend the Finance Bill or, perhaps, bring in fresh legislation to revert to the previous position?

Thirdly, when will the Government respond to the recommendations of the working party? The Secretary of State said that as the report had been published only last night it might be premature to give the Government's response today, but it would be help if we could know when we shall have a definitive statement from the Government about their reactions to the working party's representations and what their strategy on family poverty is to be for the rest of the lifetime of this Parliament.

There is a difference between what the Government representatives are alleged to have said on the working party—namely, that the scheme will be fully implemented within two years—and the statement by the Prime Minister that it would not be possible to implement it over that short period. Some clarification is needed on that.

When the right hon. Lady outlined the achievements of the working party she seemed to think that in six weeks on the Back Benches she had managed to do something that she failed to do in two and a half years in government. At a stroke, apparently, the inter-relationship between social security and taxation has been resolved, and many other issues have miraculously been solved since she left office and went on the Back Benches. The right hon. Lady deceives herself. The more she accuses the Opposition, or even her colleagues, of causing the confusion that exists, the more she reveals her own guilt in this total confusion that is her responsibility and that of no one else.

I am sure that no one on the Opposition side of the House will wish to vote against the regulations, but they are a depressing substitute for the full scheme, and it is increasingly clear that the whole scheme will be implemented not by a Labour Government but by a Conservative one.

12.54 p.m.

Mr. George Cunningham (Islington, South and Finsbury)

I do not want—and I think that this goes for probably all hon. Members—to repeat the arguments for or against a Child Benefit Scheme. It would be unnecessary in this company to make the case for the switch. What we ought to be considering today is the likelihood of changes brought about by the announcement yesterday of the working party in the arrangements that the Government announced in May.

I understand and accept the irritation of the Opposition at being excluded from a working party of the nature of this one, and it would be a bad thing, whichever party was involved, if the other side did not make the kind of points that the right hon. Member for Wanstead and Woodford (Mr. Jenkin) has made today, but there is no question of decisions belonging to the House of Commons being seized and taken over by anybody outside this House. In so far as parties and party-related bodies make recommendations and work out paths to progress, they can be given effect only by decisions taken by this House, and I regret that the opportunity that the House had last month to take a decision that could never have been ignored by the Government on the subject of child benefits was not seized by the Opposition.

Let me elaborate that. This House of Commons, which does not work for most of the time, can be made to work only if Oppositions are prepared, when they believe that there is a majority of the House opposed to what the Government are suggesting on any issue, to put forward a substantive motion that will attract the votes of those Members, wherever they sit in the House, who are opposed to what the Government are suggesting.

If at any time the Opposition say "Oppositions are here to oppose and criticise but not to take on part of the responsibility for substituting a decision of the House for what the Government want" this place might as well pack up and go home. It will never work on that basis. I appeal to the Opposition to realise that when that sort of thing appears it is no good putting forward an Adjournment motion. It is ridiculous to expect Members to vote for the House to adjourn at 10 o'clock when there is other business to follow. The Opposi- tion must be prepared to put forward substantive motions, and if the credit for the result goes to those on the Government Benches who support them and not sufficiently to the Opposition, who have put up 300 votes to carry the thing, that is part of life and the Opposition will get their credit, in so far as they do not get it this side of the pearly gates, when they get up there.

Mr. Andrew F. Bennett (Stockport, North)

One of the problems on that occasion was that the Opposition could not guarantee anything like 300 votes. They were clearly split, and, as the House today shows, only a few Conservative Members had their heart in it.

Mr. Cunningham

There is that point, but I am putting forward a general consideration, which is that when it is possible to get a majority of the House to vote against the Government we should always do so. Governments are all the better for a good beating.

I put forward an amendment to the Finance Bill limiting the tax allowances to the present year, and I am grateful to all the Opposition parties who joined in that operation. Without their support the proposal would not have worked. The Government would not have accepted it, because they would not have been sure that they would be defeated if they opposed it. That was an operation not just by this side of the House; it was an all-party one.

The right hon. Gentleman has been far from helpful in trying to interpret the news release. Some of its language is convoluted, particularly that in paragraph 4, but there is nothing convoluted about paragraph 2(ii). The hon. Gentleman seems to doubt whether people were accepting that there should be a reduction in take-home pay in 1978 and 1979. I prefer to use the words "wage packet", because one takes home child benefit just as one takes home pay. Of course there will be a reduction in the wage packet in 1978 and 1979. We cannot abolish child tax allowances and not reduce the wage packet. It would never have occurred to me to add that, because it is so obvious that it does not need to be said.

The arrangement next year is complicated, and I recall the difficulties in trying to explain it to others. In relation to paragraph (i) it was necessary to say that this would not have any effect on the wage packet, but in relation to paragraph (ii) it was not necessary to say that it would have such an effect, because obviously it must.

Mr. Patrick Jenkin

If both the right hon. Lady and the hon. Gentleman say that this was the clear intention when they drew up the document, I accept that that was their intention. However, I think that it could have been more clearly expressed.

There is another point, and it is related to pay policy. I listened with great interest to what the right hon. Lady said. It was in the context of the pay policy for the period beginning October of this year running though April next year that it was felt by the Government that it was impossible to accept the reduction in the pay packet that would have been involved in adoping a true child benefit scheme. Since this is in fact supposed to be related to the pay policy, presumably in 1977—78, surely that point should have been stated. If it is envisaged that the pay policy will give a sufficiently large increase to offset the reduction in child tax allowances, that is one thing, but it should have been spelt out. It was the key argument.

Mr. Cunningham

I think that my right hon. Friend was right—that the right hon. Gentleman is still not comprehending this matter. Shall I try to speak slowly? Let us forget about fiscal years and talk just about the point at which changes occur. Next April there will be a technical change, which will put a plus into the wage packet and a minus in the wage packet of precisely the same dimensions. Therefore, there is no effect, in money terms, as regards the Government, the family or the wage packet. We all accept that that is the limitation upon what is being done next year. It is a system change, not a money change. I shall come later to the question whether such a change is desirable. I think that it is, but it does need to be justified.

There were two reasons for that—first, that there is not additional money to do anything else next April, and, secondly, that the trade union movement—and I think it is fair to say others—felt that, given the pay policy that applies up to the middle of next year, no reduction in the wage packet additional to that implied by the Government's own proposals is acceptable during the period of operation of this year's pay policy now starting. So nothing of that is imposed.

We could have made an additionl move in the transition next April either by additional money or by a reduction in the wage packet—in shifting that money, but only that money, over to the child benefit. Neither of those two things was possible, for the reasons I have stated. However, in the following two years—April 1978 and April 1979—one should—there is a question mark—take from the wage packet and add to the child benefit. That automatically, by definition, means that the wage packet is being diminished.

Mr. Kenneth Clarke

Perhaps the hon. Gentleman could help to enlighten me on this. I have his paper. Amongst the things it says is that some of the representatives believe that will he necessary to allocate additional resources from the Exchequer in the later years and they include the Trades Union Congress representatives, who I have no doubt are arguing that they will not contemplate a reduction in the wage packet and they want additional resources to stop it.

So it still looks from the document as though there were some members of the working party asserting that husbands were too stupid to understand that a reduction in their wage packet might involve an increase in family income if the scheme were to be introduced properly.

Mr. Cunningham

Let us talk about 1978. Let us assume that in 1978 in the remaining part of child tax allowances there is a reduction of half. That must reduce the wage packet. There is no way of it not doing so. When one talks of increased resources to make that acceptable, what one is talking about is making a reduction of £X in the pay packet, moving £X on to the child benefit and an extra bit added to the child benefit to make the increase in family income a sufficient inducement for people to put up with the reduction in the wage packet. Any questions?

We all know that that is the nature of the operation, surely. That is the name of the game. I should be prepared to accept a phasing that involved a straight switch of £X from the wage packet to £X on to child benefit, and anyone who really believes in the system should accept that. However, there is a problem; and, given that we all want to raise child benefit, anyway, I believe that it is legitimate to say that it is a very considerable thing, especially for the larger family, to reduce the wage packet to that extent. Therefore, it is legitimate to go for additional resources of one kind or another, which will mean that what is lost in the wage packet will be made up for in the child benefit, and one will get a bonus on top in the child benefit and not in the wage packet: one will lose £X but will gain £X-plus on the child benefit.

May I try now to say why the change next year seems to be to be desirable, although it has no financial effect whatsoever? I have confessed before that in these matters I am a Fabian. It is important to get started and to keep going. It was very important to get something additional done next April. What we are doing next April is reducing the child tax allowances by a massive proportion. It would mean a reduction, as it stated in the paper, from £300 at the basic level to an average of £180. For reasons which it is unnecessary to go into here, we should make it £195 for the first child and £170 for the later children —to ensure that no individual family loses as a result.

That does not present administrative problems. It am prepared to assert without justifying it, but I am absolutely satisfied that it is true. That is an enormous reduction in tax allowances—from £300 to £195 for the first child and to £170 for the other children.

Mr. Kenneth Clarke

I thank the hon. Gentleman for giving way again. We have been told that the working party is a great exercise in open government, as I understand it. If the hon. Gentleman is asking us to accept what he has just said, it can only be because the representatives of the Treasury on the working party said so, I assume. If we are to be reassured by this document, will the hon. Gentleman confirm that the Treasury representatives on the working party clearly contemplated having different levels of child tax allowances for the first child as opposed to other children?

Mr. Cunningham

I think that the different levels are stated in the document.

Mrs. Castle


Mr. Cunningham

In that case, I am prepared to say that one cannot achieve a change that has nil effect for every family unless there is a different level of tax allowances for the first child than for other children. That presents no problem, because it merely means that the Inland Revenue has to add a differential to the tax allowance for every coding notice: it adds it on once for people with one child and once for people with 50 children—there is no difference. It is a case of adding the differential, which would be £25, on to the coding allowances of each family that is claiming children allowances. Hon. Gentlemen who think about this for five minutes will find that that is correct.

Next year it is desirable to make this change to get something done and to keep going, to achieve this very considerable reduction in the tax allowances, and I hope that the Opposition will agree that it is well worth doing, though not what they or we would have hoped for.

We should now concentrate on the next two years. It just might be useful for us to clear our minds about what the processes need to be in the next two years —1978 and 1979—always assuming that some measure of additional resources will be available to ease the transition. If the change next year is effective, we shall have a relatively modest remaining children's tax allowance to eradicate and shift over to child benefit.

We would do it in two halves and we could in the first year eradicate something like 75p a week off the first child and 57p off all the other children. What we should be thinking about now is this ratio: what addition to the purely switched money is necessary in order to make the switch acceptable? I suggest that we should have in our minds a rule of thumb, which is that if at any time, by reducing tax allowances, we took out of the wage packet a figure of X. it ought to be sufficient to add to child benefit X and a half. If that inducement is not sufficient to lead people to accept the reduction in the wage packet I do not believe that they really believe in the switch.

Hon. Gentlemen will always ask whether we are able to find additional resources—by extra Government spending or switched Government spending or to find that bonus of 50 per cent. to add on top of the money that we are simply switching from tax allowance to child benefit. One of the things that will make it easier to do is that the whole of the extra bonus does not need to be in the form of truly additional Government spending. For my part, I would say that one of the sources of funds that we could use for that purpose is the money now used for those people who pay tax above the basic rate. It is inherent in a Child Benefit Scheme that the advantages go equally to people whether they are well off, or middling, or poor. There is no justification for continuing what has until now been a merely accidental result of the taxation system, giving a higher benefit to those who pay the highest rate of tax. Those funds ought to be used in order to increase the child benefit for everyone.

Secondly, we ought to have in our minds the possibility that it will be difficult in 1978–79. We all know that. But at that time all tax allowances and all benefits will have to go up, because of inflation. What we ought to do is to distort that inflation rise away from tax allowances that are not related to children—that is, the single man's allowance, the married man's allowance and the working wife's allowance—towards those allowances or benefits that are related to children. If we did that only to a minor extent we would find large sums of money, and that, I suggest, is one of the important respects in which we could ease the transition from tax allowances to child benefits.

Having got this change agreed for next year, I think it is now time for us to start working on exactly what arrangements are needed by 1978 and 1979. The considerations that I have just mentioned are the ones on which we should try to get as much all-party agreement as possible, so that this can be got through and completed by April 1979.

1.13 p.m.

Mr. A. G. F. Hall-Davis (Morecambe and Lonsdale)

I have listened with interest to the hon. Member for Islington, South and Finsbury (Mr. Cunningham), and I shall perhaps refer briefly to some of his points in the course of my own short contribution. Although it is always dangerous to talk on behalf of people on one's own side of the House, never mind on the other side, we must recognise that everyone here is a strong supporter in principle of the change to child credits. This gives the discussion a somewhat two-edged nature in that there has been a general unity of purpose but some fairly sharp disagreement as to why we have reached the particular stage we are in at present.

When the Secretary of State made his statement about the postponement of the scheme—I am sorry I missed his contribution today, but there was another function that I particularly wanted to attend which fell at the time he was speaking —I thought it was the sort of action which made one despair of democracy. Most hon. Members here do not talk about it very much, but in fact we are usually Members of this House because we think that democracy will work. I think that it would work better under the Conservative Party than under the Labour Party, but basically the thing which unites us and enables us to go through the days of stress and strain is a common belief in democracy.

When the Secretary of State made his statement, it made me despair of democracy. I thought then, and I still ask myself, what sort of nation does this Government think we are? I have always thought that the Labour Party regarded itself as ardent reformers and torch bearers, prepared to carry their causes into the streets and argue them in the market place. But when we come to one of the great reforms of the decade, one that is clearly supported by the great majority of the Labour Party, where has the Government's ability to campaign for justice evaporated to? Suddenly, overnight and without warning, rather than standing up and arguing for something which they think is desirable, they took fright and believed that their whole policy would come crashing down in ruins if the reforming party of the Left actually proceeded with a major, much-needed and generally supported reform.

I should like to comment on the report of the working party and on some of the comments of the hon. Member for Islington, South and Finsbury. The hon. Gentleman said "always assuming that additional resources would be available". All I can say is that after the experience of the last two months I do not have any great confidence in the working party's report being implemented by the hon. Gentleman's party. I see no reason why there will be any greater ease in making additional resources available on the part of the Government, or any greater determination, the year after next than at the moment. All I can say is that I hope that the hon. Member for Islington, South and Finsbury will maintain his campaign, as I am sure he will, and maintain his pressure.

I should like to join issue with the hon. Gentleman because I think that he is failing to show the courage that perhaps he feels his own Front Bench should have shown, because he constantly referred to the need to put in a sweetener when the change is made. I sympathise with the hon. Gentleman as he spelt out, at any rate helpfully to me, the mechanics of the working party's recommendations, because I was one of those who, like the right hon. Member for Blackburn (Mrs. Castle), toiled through the sittings of the Select Committee on tax credits considering the evidence. It is not easy for everyone quickly to grasp the essentials of the scheme. What I hoped the hon. Member for Islington, South and Finsbury would refer to was the inherent advantage in itself of paying the benefit to the mother rather than allowing the family income to be increased by a tax allowance in the pay packet.

All the evidence given to the Select Committee by experienced workers in the social field and others was that the fact that the wife would have a second pay packet coming in would not only give her control, as was assumed would be the case in the great majority of families, but would allow her to use the money as a budget balancer, if I may use that expression. She would have a family cash reserve in her hand which she could use as a second tranche of income between pay packets if she was one of those people who found it difficult to budget even at weekly intervals —and that must be increasingly difficult for many people. Alternatively, if she wished, she could use it as a reserve to allow the vouchers to build up for some exceptional item of expenditure which she knew she would have to meet. As supporters of the scheme, we should make it clear that there is this particular advantage which is valuable in itself.

I hope that the hon. Member for Islington, South and Finsbury and those like him will not lose their courage if by any chance the Government feel that extra resources will not be available after 1977 and that progress with the switch to child credits will therefore have to stop. It will be worth going on even without an increase in family income. We cannot emphasise that too often or too strongly.

I do not believe that there would have been the rumpus that the Government anticipated from the husbands. I did not think that we were all brontosauruses in this place. I did not think that we failed to realise that the day of husband and wife participation, the day of equality of opportunity was here. It was staggering to see a Labour Government behaving as if they were facing the social conditions and attitudes and the family relationships which may have ruled before 1914, which were much weakened by 1939 and which I should have thought had totally disappeared by today.

The Minister of State, Department of Health and Social Security (Mr. Stanley Orme)

indicated dissent.

Mr. Hall-Davis

The right hon. Gentleman shakes his head. If that is so—I have heard him speaking fervently on other subjects—he should abandon the House of Commons and take to the streets as a campaigner for community education. He would be doing a more valuable service than any of us here. Plenty of people are willing to take our places here and would probably do a better job. Certainly some would do a better job than I would. If the right hon. Gentleman thinks in that way, he should be out preaching reform in an entirely different occupation.

This proposal is a misjudgment. It may be a considered and genuine misjudgment, but it is a misjudgment all the same. If there are such people, it is to just those families that the child benefit should be of greatest benefit, and perhaps the only way of bringing them help.

It also depresses me that Labour Members make so little reference to the possibility of switching resources within a given total of expenditure. I hope that I am not misquoting him, but I think that Mr. Jack Jones, when expressing his reluctance to see Government expenditure reduced, said that it was possible to switch within a given programme. That is true. That is a lesson that the right hon. Member for Blackburn—I am sorry that she has left the Chamber—should particularly keep in mind.

One thing which I find the greatest demonstration of doctrinaire politics is the determination of the Labour Party to push through the Bill to abolish pay beds. My father was a general practitioner, so I have some sense of how people feel about sickness and its treatment, and I hope I am sufficiently flexible to understand why Labour Members feel strongly on this issue. But if I had to choose between deferring the satisfaction of a wish to get rid of pay beds and deferring the introduction of a child credit scheme on an acceptable basis—in other words, with a sweetener—I know which I would choose. If I had been the right hon. Lady, I should have made sure that I had my child credit scheme buttoned up, and if I had to accept a deferment of the abolition of pay beds for a year or two I would have considered it a worthwhile sacrifice.

I would therefore have more respect for the Labour Party's claim that it cannot find any extra money for child credits if it was not so determined to reduce Government income by the abolition of pay beds and to press on with the other highly controversial forms of Government expenditure which we have been debating at length this Session.

To end on what I hope is a more agreeable note, one of the things which at least relieved some of my despair at the way in which our democracy works is the clear fact that the response of Back Benchers has made an impact on the Government. The hon. Member for Islington, South and Finsbury chided us for not putting down a substantive motion. I should have been surprised if the Labour Party had imperilled the Government's continuation in office on this issue however strongly it felt, but the House has served notice on the Government that they have been given a year's grace and no more.

I hope that the Government will not then be allowed to think up ill-founded excuses as they did this time. For me, it will be no excuse to say that the money is not available to make these changes while the Government go on pouring out money on what, to me, are many much less deserving causes which warrant a much lower priority than the Child Benefit Scheme.

1.27 p.m.

Mr. Andrew F. Bennett (Stockport, North)

It is with considerable disappointment that I consider these Statutory Instruments and the Government's announcements that preceded them. That disappointment arises partly because I was on the Committee that considered child benefits and I remember accepting, with some little doubt, the assurances of my right hon. Friend the Member for Blackburn (Mrs. Castle) that if we did not actually write the date into the Bill, it would mean the same thing. Those assurances were clearly given on behalf of the Cabinet. It is disappointing that the assurances given in Committee and on Report have not been carried out.

I am also disappointed about the allowances being paid at different rates. One point that was pressed hard in Committee was that we should provide in the Bill for different rates for different categories of children. One of the ironic things is that we were assured then that it would be impossible to do so by April 1977, that we should have to wait. The argument was about whether it should be "may" or "shall". Yet the Government have been able to introduce the benefits at different rates—but sadly in exactly the opposite direction to what the Committee wanted, in that the rate is lower for the first child.

The Secretary of State had only just taken up his post then, and because of the way in which the Budget is put together he had little chance to comment on it, but I am also disappointed that in the Budget this year the Chancellor made the whole problem worse rather than better. If he had money to spend, it should have gone, this year, not on tax allowances but on increasing family alowance or providing for the introduction of child benefits earlier than next year.

Perhaps my greatest disappointment is that once again we have put off a real opportunity to attack family poverty. The problem now is to make the best of the present situation. I recognise that the working party has produced modest proposals. We should not be too critical. Perhaps we should hope that on this occasion the promises turn out to be better in practice than the working party suggested. I hope that the Minister can assure us of a firm commitment by the Government at least to see the promises in the working party's report carried out. I am especially pleased that the working party is to continue in being to monitor progress to this end.

I also welcome the changes in organisation next April, but they will present the Government with a knotty problem. What will the Government do about people who receive neither child benefit nor family allowance, but get a tax allowance for overseas dependants? If we can get that little problem out of the way next April, we shall be making progress in the right direction.

I seek some assurances, which I hope will be realised. To go with those assurances I also ask for interim action. The first assurance for which I ask is that the Government will not again increase the tax allowances. I ask, instead, for help to be given by improving the child benefit. Next, I hope that there will be a firm commitment to transfer some of the money paid out in child tax allowance at the higher rates to the payment of child benefit, which will help families who pay no tax. I hope that the Minister will give those two simple assurances.

I realise that to press the Minister to give a date for the completion of the phasing is much more difficult, but I still ask it. The final assurance for which I ask is that the Minister will try to make the allowance for the first child at least as good as that for the second child and subsequent children. I ask him, if possible, to give careful consideration to making the allowance for the first child higher than that for the second child.

In Committee we discussed family poverty and where it hit hardest. It is generally accepted that the costs of a child in the family increase with the age of the child, and the present tax structure, which takes that into account may be right. But I am sure that it is the arrival of the first child that causes greater hardship to the family, by reducing total earning capacity. We should try to overcome that problem by securing that the benefit paid for the first child is the highest benefit, because the change in the family circumstances caused by the arrival of the first child is more significant than is generally recognised.

The two major attractions of the Child Benefit Scheme are that it involves no means test and thereby makes progress in breaking out of the poverty trap, and that it solves the problem of take-up. Those are two major problems with many of the existing benefits. If we are to put all the emphasis on child benefit, we have to be careful what we do with the means-tested benefits in the meantime. During the past two years there has been a great deal of pressure from hon. Members on both sides of the House for the Government to reconsider some of the means-tested benefits that help the family.

The Government's argument has been that as we are committed to putting all our resources into the new Child Benefit Scheme it would be foolish to put extra resources into means-tested benefits. There has, therefore, been resistance by the Government to considering the means-tested benefits. If the Child Benefit Scheme were to be introduced in April we would have accepted that strategy and agreed that all the resources should go to the scheme. But, as the major part of the scheme is being deferred, the Government should reconsider the existing means-tested benefits with a view to their being uprated as an interim measure.

I refer particularly to the maternity allowance and maternity benefit. If the Government are concerned about poverty —as I think they are—they should recognise that the arrival of the first child of the family brings hardship, and should accordingly uprate of maternity benefit.

Mrs. Helene Hayman (Welwyn and Hatfield)

Is my hon. Friend aware that maternity grant has fallen so far behind that it would need to be raised from £25 to £55 to bring it back to its original purchasing power?

Mr. Kenneth Clarke

The hon. Lady should declare an interest.

Mrs. Hayman

I gladly declare an interest.

Mr. Bennett

I thank my hon. Friend for that expert information. It well illustrates the problem. The Government might justifiably have done nothing about the allowances if the money were committed to child benefit.

Have the Government thought out what they intend to do about the family income supplement when the child benefit allowances become larger? If not, a problem will arise there. Will they consider phasing out the family income supplement and saying that the people who once qualified for it will not have to be means tested again?

I was disappointed at Question Time earlier this week when the Under-Secretary of State said that the number of hours of full-time work done by the single parent was still a matter of consultation, and the small improvement in family income supplement for one-parent families could not be introduced quickly.

The take-up rate of means-tested benefits is appallingly low. That applies to the help that is given to parents to visit their children in hospital. Help is provided if they apply to the Department of Health and Social Security office, but sometimes the cost of getting to the office is higher than the benefits received. It would be simple for the doctor at the hospital to prescribe money to help parents to visit their children. The doctor can happily prescribe expensive drugs. The amount of money involved would be small.

The provision of school uniforms raises acute problems for families in poverty. The Government should see whether a little more can be done in that direction.

The diversion of the allocation of resources to child benefit would help the low-income groups. I hope that the Government will reconsider all these benefits, with a view to ensuring that the take-up rate is improved and the benefits are more worth while. I press the Government to make sure that any promises given today for the introduction of a high rate of child benefit are bettered in practice. Because this major improvement has had to be deferred, I ask the Government to look hard at means-tested benefits, to ensure that there is a higher take-up rate and that the benefits are worth more in real terms.

1.38 p.m.

Mrs. Lynda Chalker (Wallasey)

. The Secretary of State's speech today was in much quieter tones than were his speeches during the past few months. The complications revealed by the regulations brought to my mind the well-echoed phrase that we are considerably complicating our legislation. Whenever we try to take one step forward we complicate the issue by introducing exceptions and changes. When we eventually sort out the child benefit legislation, we must simplify it so that we do not set up for continuing generations of civil servants ever more problems and work.

The Secretary of State said that the Government had not been able to follow through their promise. When the right hon. Member for Blackburn (Mrs. Castle) was Secretary of State, the Cabinet was sincere in wishing to introduce this legislation, but its profligacy in other Departments has meant the collapse of an essential promise to families —particularly women. The Government would not agree to transfer money from the wallet to the purse.

It seems to me that the points raised by the hon. Member for Stockport, North (Mr. Bennett) about the expense of the first child clearly underline the real problems, which are faced more by the mother than by the father, with the coming of the first child. In many single-parent families, particularly where the child is cared for by the mother, we see extreme cases of poverty. This shift of resources could have helped to ameliorate the situation to a far greater extent.

The regulations raise a number of queries. In the Child Benefit (Claims and Payments) Regulations 1976, No. 964, Regulation 3(2) states that: Where, in the case of a husband and wife residing together, a claim is made by the husband and not by the wife, the Secretary of State may require the husband to furnish him with a written statement, signed by the wife, that she does not wish to make a claim. I am concerned about the word "may", I believe that the word should be "shall" Legislation transferring resources or providing an option between husband and wife is always written in favour of the husband, and very rarely is it written in balanced terms. Little points like these give rise to inquiries to Members of Parliament and letters from Members of Parliament to civil servants, involving additional expense.

I return to the thorny question of the 13 million copies of the leaflet. Whenever a leaflet is sent out by the Government, there is a duty on the Government to ensure that its meaning is clear. If we are to have queries because according to the original printing, the benefit was really a child benefit and not a family allowance, and now it is a family allowance because the child tax allowances are not being withdrawn, the Government will be spending not just money on an amendment slip but a great deal of civil servants' time and, therefore, Government money in sorting out the queries that arise from lack of clarity in their instructions to people who are eligible to claim.

On Tuesday last at Question Time the Secretary of State referred to the demand for proper instructions creating an additional Government expense. I wonder whether the right hon. Gentleman has considered the Government expense that will be incurred in sorting out notifications that are distinctly unclear. I hope that in the coming year, before we reach the next regulations dealing with the next stage of child benefit, the Government will appreciate that "child benefit" and "family allowance" are not synonymous, that these points are unclear and must be clarified. I shall continue to hammer away on this matter.

As the right hon. Member for Blackburn said, the Government's extension of £1 a week for the first child is not and never has been a child benefit. The coun- try knows it; we all know it. Perhaps it is time that the official documents said so.

Mr. Ennals

Everything that we are doing to alter the regulations flows from the Child Benefit Act, and therefore it is child benefit in that sense. We could not have done what we are doing without introducing quite new legislation. Everything has been done under the Child Benefit Act, which does not in any way deal with taxation. The Act does not deal with child tax allowances, and therefore it is quite separate.

Mrs. Chalker

I was quite aware of what the right hon. Gentleman has just said. I am also aware of the immense amount of confusion that already exists when talking to people who are trying to do a good job in the Department of Health and Social Security, and of the problems that will arise until we get the wording clearly defined in all aspects of our literature and stop talking about two things as if they were one and the same thing.

I turn to what the Government intend to do about those families who pay tax in this country and have children overseas. This is a thorny problem. One of the duties of the Government is to govern. Therefore, we look forward to hearing what the Government intend to do on this issue.

In this debate we have had a certain amount of criticism from the hon. Member for Islington, South and Finsbury (Mr. Cunningham) who, I am sorry to say, is not here at the moment. He referred to the way in which the Opposition voted, or did not vote, on 28th June. He accused them of not making their position clear. I remind him of the vote that was taken in this House on the Report stage of the Child Benefit Act. The Minister may recall that the Conservative Opposition put down an amendment to introduce child benefit in April 1977. I well remember the right hon. Lady the Member for Blackburn telling the House that it was not necessary to have a date, and that it would all be all right. So the Government went into the Lobby against the Conservative Opposition and voted against the date of introduction. Unfortunately, the Opposition lost by nine votes. Had the right hon. Lady been a little more far-sighted 12 months ago, a real child benefit scheme would be coming forward now.

It behoves hon. Members on both sides of the House to realise that votes are registered not as a result of a single experience but after a succession of attempts have been made to get legislation on to the statute book. This determines the success or failure of Government and Opposition to change the course of family support and all the other like measures with which we are concerned.

The hon. Member for Islington, South and Finsbury referred to a step-by-step approach. He said that we are better off now with the results of the joint working party and the liaison committee, because we are taking the first steps towards what we all intend to see on the statute book. He referred to the success of his amendment, supported by the Conservatives, on the Finance Bill, and we do not deny that it was a great step in the right direction. But one thing that is forgotten by the working party—there is certainly no reference to it in the document which was issued last night—is that there also needs to be a step-by-step approach with the TUC and with the individual unions, and by the men of this country, towards convincing the current wage packet recipients that in 1978–79 they should forgo something of an increase rather than forgo something that they already receive, to make sure that the wives receive the child benefit as of right. It would be excellent if the economy were so to improve that there was no detriment to the husband's wage packet in 1978–79 when the transfer of resources to the wife was completed.

It should, however, be emphasised that what we are doing now is to say that we accept what the working party has announced. There will have to be a reduction in the take-home pay by men if, in the present economic conditions and with the present forecast, we are to keep to our objective of ensuring that child benefit is paid to the wife.

I hope that the Minister will be able to clarify what advice he will give to single parents who claim FIS and the child interim benefit. They will face a major dilemma when the scheme goes on the statute book. Those people in receipt of other benefits will be in great difficulties in knowing what to claim and when. Knowing the complications of other types of social security legislation, I believe it would be a great step forward if the Minister could ensure that where a child interim benefit is being claimed by single-parent families, the whole matter of how they can best receive their proper deserts should be spelt out in clear unequivocal language, so that they succeed in looking after their families to the maximum extent and getting away from the poverty which they so often experience.

It will be no surprise to hon. Members to hear that I feel that this is a miserable scheme. I welcome the promise of the right hon. Member for Blackburn and some of her hon. Friends that they will see that the child benefit scheme is implemented properly within the lifetime of this Parliament. I am further heartened by the fact that the Minister of State and the Chief Secretary to the Treasury were on the working party, because if they are committed to the working party document we may see legislation that is a little less stupid and that will produce a full child benefit by the end of this Parliament.

I hope that the plans are being worked upon hard at the moment, because the lifetime of this Parliament is not a fixed matter. There are many who would wish to see the lifetime of this Parliament considerably curtailed, for the benefit of families. The right hon. Member for Blackburn said that in the coming year the Government should not seek to bolster pay policy at the expense of mothers. She is prepared to fight for this. Many of my hon. Friends are prepared to do so too, along with the right hon. Lady and her hon. Friends. I hope that the next time we try to fix a firm date for the implementation of a scheme that will alleviate family poverty there will be support from the Government Back Benches who today so loudly echo our voices. We shall support them in trying to eliminate this inequity.

1.53 p.m.

Mrs. Helene Hayman (Welwyn and Hatfield)

I hope that the hon. Member for Wallasey (Mrs. Chalker) will forgive me if I do not follow her in all that she has said, although I shall have something to say about voting records a little later. Earlier today we were asked to give two cheers for the Supplementary Benefit (Amendment) Bill. Perhaps we could manage one cheer, or at least half a cheer, for the speech of my right hon. Friend the Secretary of State, at least in so far as it referred to the working party's report. When accepted and implemented, the working party's recommendations will ensure that we have more than we would otherwise have had. My fear was that, after the Government statement and the plans to introduce simply the £1 a week, that would be the end of it and that would be all we would see in terms of the implementation of the Child Benefit Scheme.

The three-year plan for a phased implementation is a great disappointment to those of us who wanted to see the scheme introduced in April 1976. Let us not start lighting any celebration bonfires. However, the situation is better than it would otherwise have been. The Secretary of State deployed a great semantic argument about whether we should call this family allowance or child benefit. I shall restrain myself from making the change in terminology and calling it a child benefit until we see the £1 a week and the other family allowances being transformed from a taxed and clawed-back benefit to a non-taxed benefit.

Until we see the necessary amendment in a Finance Bill to alter what we did recently in introducing exactly the same taxation provisions for this benefit as we have always had for family allowances, I shall refrain from making the change. Admittedly that alteration will not make any difference in money terms. That will be my personal threshold for changing the terminology.

This is not an occasion for any one of us to go over the whole argument about child benefit and the advantages of the scheme. I am sorry that the hon. Member for Morecambe and Lansdale (Mr. Hall-Davis) has had to leave the Chamber, because I wanted to take up a point he made relating to the question of the transfer from wallet to purse and the advantages of child benefit as a scheme which gave an amount of money to the mother rather than to the father. The hon. Member called on my hon. Friends to say that we would accept the scheme even with no increase in family income —simply on a straight transfer basis. That is exactly my position.

I would accept the scheme with a no-cost element because I believe in the transfer. But the transfer that is essential for me is not the transfer from man to woman within the family. It is the transfer from those at the highest end of the tax scale, and taxpayers in general, to those who do not pay tax at all, to those families that have never had any advantage from tax allowances. That is the most important redistribution in terms of the scheme as a whole. That is why, even with a no-cost effect, I would have supported the scheme.

Mr. Orme

I follow my hon. Friend's argument and agree that it is valid. My hon. Friend must accept that there are millions of people who need to be persuaded that this is a real change in social policy.

Mrs. Hayman

I realise that it is a change in social policy.

There is one point on which I would argue with my right hon. Friend, and it is a matter on which none of us can produce statistics. It relates to how many men would find the transfer unacceptable. My right hon. Friend would pitch the figure slightly higher than I would —possibly considerably higher. There are certain cases when men do not hand over an adequate sum in housekeeping to women who have no other means. The majority of families, however, do not work like that. The majority of families can grasp the concept of family income. The majority of families know that take-home pay—earnings, cash—has to be seen globally.

If the male members of the community to whom my right hon. Friend referred, and who have been made the scapegoat, can grasp the advantages of having food subsidies so as to keep down prices, which in turn holds down housekeeping costs and reduces demands from wives for more money, I do not believe that they cannot also grasp the much simpler concept of cash coming through the Post Office.

It is important that we make this change, and not simply schematically. We must have this as an additional resource to improve family income. It is not just the transfer from man to woman that is important. It is also important that we give better support to families and children than we have done for many years. We have seen the balance shift too much—because of the taxation system and because we have let family allowances fall behind—in favour of single people and childless couples and away from families. That is where the Child Benefit Scheme will help. We have made significant steps forward.

I hope that my right hon. Friend the Minister of State will be able to give a firm Government assurance to the effect that the working party's report will have the Government's endorsement and that we shall see Government action in 1977, 1978 and 1979.

Finally, I return to the question raised by the hon. Member for Wallasey of who is to blame for not voting. Perhaps she is right. Perhaps a year ago we should have insisted on writing in the date for implementing the scheme, but we did not. By "we" I mean my hon. Friends and myself. We did not join with the Opposition to do that.

We then came to an event much nearer to hand, namely, the vote of 28th June. By that time many of us had learned our lesson. Many of us were perfectly prepared by then to defeat the Government. I do not think for one moment that this would have involved the overthrow of the Government—or that the Government would have regarded that as a possibility, either—on a substantive motion concerning child benefits, but we were deprived of that opportunity by the parliamentary tactics of the Conservative Party.

I echo everything that my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) said. He pointed out that the only way that Governments will be defeated properly is by Oppositions persuading hon. Members on the Government side that in this instance they are right. If they exercise that persuasion, we shall have the moral courage to defeat a Government on a specific issue. I say to Conservative Members—I know that they are sensitive about this, but so am I—that that is a more honourable way to defeat the Government than by trying to blackmail the Government into not bringing sick members to the House to vote.

2.3 p.m.

Mr. D. E. Thomas (Merioneth)

I support the hon. Member for Welwyn and Hatfield (Mrs. Hayman) particularly in terms of her final remark about what happened on 28th June. As the House will recollect, there would have been no Division at all that evening if it had not been for the parliamentary tactic adopted by my party, supported by the Scottish National Party. It was only as a result of that tactic that we were able to have a Division. A motion not having been put down on that evening, those of us who wanted to register our position clearly—including some hon. Members on the Government Benches—were not able to do so.

On going to the Table Office early this morning, I was surprised to find that, apparently, there was not a motion down for Monday evening. This may be corrected within the Standing Orders of the House before the House rises this afternoon. But I was very interested—wishing, of course, to propose a rather radical amendment concerning public expenditure—to see that there was nothing that I could amend.

Mr. Andrew F. Bennett

There is merely a motion to reduce the salary of the Chancellor of the Exchequer.

Mr. Thomas

I am very grateful for that information. That means that my amendment can now—

Mrs. Hayman

The motion is not amendable.

Mr. Patrick Jenkin

I hope that the hon. Member for Merioneth (Mr. Thomas) will lend his weight in the examination in the Procedure Committee. The change that was effected some years ago, concerning voting on motions and amendments, made it exceedingly difficult for Oppositions ever to vote on their own motions, because they are amended by Government and the vote comes on the Government amendment. That is what is wrong with our procedure at present. That is why Oppositions, if they want to have a vote, have to resort to the fictions of the Adjournment of the House and the reduction in salary.

Mr. Thomas

I take part of the right hon. Gentleman's point, although I did not think it applied to the evening of 28th June. I would certainly join him in any debate on this issue in the Procedure Committee.

As the Secretary of State knows, throughout the whole debate I was not convinced about the Government's real reasons for deferment, as put forward by them. I believe that the real reason is partly related to the overall depletion of the social wage now introduced by the Government following the public expenditure cuts. The impact of those reductions is related to the desire of the Labour Government to contain the real wages of working people.

The argument put forward by the Secretary of State about the impact on take-home pay is one that he has been unable to defend adequately in the House. He was not able to defend it adequately when he first made the statement, and I do not think he was able to do so when he opened the debate on 28th June. I have been pestering him with interventions on this issue, asking whether it would not have been possible—even accepting the logic of his own position—for the great advertising resources of his Department to be put in action in a campaign of education on this issue prior to the transfer, if the full implementation of the scheme were to take place.

I am aware of the extensive advertising resources being used by the right hon. Gentleman's Department because of the low take-up of means-tested benefits generally. I am not satisfied that that advertising budget could not have been extended to include a simple explanation, perhaps on the lines suggested in the addendum to the leaflet by the right hon. Member for Wanstead and Woodford (Mr. Jenkin). He will no doubt be brought in to draft leaflets for the DHSS after his contribution here. A simple, clear advertising campaign, explaining the nature of the transfer, would in my view have been acceptable to most trade unionists whom I have consulted on this issue in my constituency.

I welcome the setting up of the working party, although I am slightly concerned that we are witnessing the introduction of a new compromise tactic into the politics of the Labour Party. Those who read the manifesto of the Labour Party at General Elections must now put in a new rider. Not only are manifesto commitments subject to possible delay by the Government; they are also subject to renegotiation—

Mr. Ennals


Mr. Thomas

—by the Labour Party itself, taking along with it the TUC establishment and also the Government. No doubt we shall have renegotiated manifesto commitments whenever the Government feel that they must reduce public expenditure. They can always introduce new working parties in order to befuddle the issue.

Mr. Ennals

Can the hon. Gentleman substantiate his argument by showing in what way we have failed in our manifesto commitment? It is true that we have not gone beyond that commitment—we shall go further, but we have not done so yet —but we have fulfilled our manifesto. Since the hon. Gentleman has referred to the drafting ability of the right hon. Member for Wanstead and Woodford (Mr. Jenkin), I should like to see the leaflet that the right hon. Gentleman might have written explaining why the Conservatives after 1970 did not increase family allowances. I suppose that he did not need to write it, because the electorate knew that the Conservatives were not going to do it anyway.

Mr. Thomas

I have no brief for the Conservatives. I have been concerned with the low level of support in both parties. As to the manifesto commitment, if the Secretary of State insists that the exact wording—the very letter—of the manifesto has been implemented, my reply is that I took part in the 1970 General Election campaign, and the commitment to child benefit as a major element of support for family income, as a major plank of social policy in the Government's programme, was one that I took to heart. I am certain that this was also the view of the majority of the supporters of the Labour Party. It was certainly the view of those pressure groups, representing one-parent families, which have been campaigning so strongly on this issue.

I do not think that the arguments put forward on 28th June, those put forward in the Press, and those advanced by the various organisation that have been pressurising the Government to know the reason for the Government's decision not to implement the scheme properly, have been answered. The major question that must be answered is why the Government are now relying, in their family poverty strategy, on family income supplement as the basis of their family support. Strong criticisms were made when family income supplement was first introduced by the Conservative Party, because it was a means-tested benefit and because eligibility and take-up were so divergent. I understand that the take-up is only about 60 per cent. of eligibility—

The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins)

The hon. Gentleman is wrong. The figure quoted in the debate on the uprating order 20th July showed that there was a take-up of 75 per cent. That was the level in 1974.

Mr. Thomas

If there has been an increase in the take-up, I am very glad to hear it. But, even if it is said that the take-up has risen from 60 per cent. to 75 per cent., we are still discussing 25 per cent. who are eligible and are not taking up the benefit.

Another of my fears is that the decision not to go ahead with the full implementation of the scheme will mean that families below the tax threshold again will not be directly helped. This is a matter that we discussed earlier, when we talked about the relationship between the tax threshold and the level of benefits.

The one consensus to have emerged from this debate is the need for a thoroughgoing analysis of the link between the tax threshold, the tax allowance system and the benefits system. This is an issue that I should like to see the Government tackle. There is no reason why, even in a situation of reduced public expenditure, the Government should not set up an inter-departmental working party, taking in the TUC and the national executive of the Labour Party, to look at the inter-relationship between the tax system and the benefits system. This was proposed as an urgent course of action by the CPRS when it produced its paper "Joint Framework on Social Policies" last year. Within the Treasury and the DHSS, there has been no further development to look at the need for integration and the impact of interaction, especially on low-income families.

One matter that has not been answered adequately by the Minister is the case put forward by Pat Healey in The Times of 28th July. I think that the Minister intended to answer it in his winding-up speech on 28th June but, as so often happens, he was side-tracked by Opposition Members. It would be useful if he could say in detail why the Government do not accept that the straight transfer with a reduction of 5p in the level of benefits would have been possible. Why was not it possible for the Healey proposals to be implemented? I do not endorse the scheme in detail, because, obviously, I am in favour of additional public expenditure to enable the full child benefit scheme to be implemented But if the Government's position is otherwise they should say why they consider the Healey proposals for a reduction of 5p and paying an additional premium for families adversely affected by a benefit reduced to £2.45 is not feasible.

I come now to the child benefit, or family allowance, as it is now to be implemented in these regulations and its impact on one-parent families and on those now receiving child interim benefit. If we approve these regulations, we shall extend the whole plethora of difficulties that have been faced by one-parent families under child interim benefit to all families.

The Department is aware of the complexities caused by introducing child interim benefit as part of the jungle of means-tested benefits. Most one-parent families gained very little from the child interim benefit. Some were worse off. It is estimated that 35,000 lone parents paying tax and getting FIS—or who will get it from 20th July—would be better off by giving up their child interim benefit, because otherwise they will lose up to 22½p a week. The child benefit to be paid to the first child in two-parent families will make the problems even more acute. Those who claim rent and rate rebates will, with the introduction of this scheme at this level, no doubt be losing 33p rebate, and they will gain, after tax, only 30p modified child benefit.

These are the real problems. Because of the level of benefits being introduced and because of the family allowance benefits, which is what we are really having, there will be even greater complexity.

The same applies to people on family income supplement. About 85,000 families, including 85,000 first or only children and about 110.000 second or subsequent children will be receiving FIS from this month. If child benefit for the first child is excluded from income for calculating FIS, the cost will be about £3 million in a full year. But it would be to the advantage of many claimants if child benefit for all children were ignored for FIS calculations. The majority would be better off to give up their child benefit and claim more FIS.

We should have a clear indication from the Government of what they intend to do about FIS, rent and rate rebates, and child benefits. Is the child benefit to be included in calculating income for these other benefits? If it is not, the terrible jungle will be made even more complicated, and a measure that was originally intended to give us a non-means-tested, non-taxable benefit, available as of right to families, will result in our having a more complex jungle of means-tested benefits.

2.17 p.m.

Mr. Kenneth Clarke (Rushcliffe)

Our debates on child benefits are becoming something of a reunion of the various campaigners on the issue. In today's debate, no one has taken part who has not previously made a speech on child benefits.

We fall broadly into two factions. There are those on one side who may soon form themselves into the Child Benefit Club and who have consistently advanced the production of the child benefit scheme from the moment that it was first conceived in the Conservative Party's Green Paper on the tax credit system through the child benefit legislation last year and the confident expectation that we had until recently that the full child benefit scheme would come into operation in April.

The other faction is the lonely and isolated one on the Treasury Bench. After yet another debate, we still await that first speech from any member of any party who does not hold office in this Government who is prepared to say a good word for the Government's decision to postpone child benefits this year. The Minister of State is looking especially lonely at the moment. However, his right hon. Friend the Secretary of State had the courtesy to explain that pressing matters would take him elsewhere. But the Minister of State is again left alone at the end of a debate to defend a decision which no one wanted.

The members of the Child Benefit Club, made up of Members of the Labour, Conservative and the Welsh National Parties who want the scheme introduced, tend from time to time to fall into squabbling amongst themselves about how the Government managed to get away with the decision to postpone the introduction of the new scheme in April 1977, when everyone wanted it.

There is an unfortunate history of voting differences between Members on the two sides over the Government's first postponement of the scheme in April 1976 and further postponement from April 1977. The hon. Member for Islington, South and Finsbury (Mr. Cunningham) berates the Opposition for not putting down a substantive motion when we last considered the Government's action. That was answered by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin). My hon. Friend the Member for Wallasey (Mrs. Chalker) also pointed out that last year, when we put down a substantive motion to ensure that the scheme came into being in April 1977, certain assurances were given and accepted, and the child benefit supporters on the Government side of the House failed to vote with us.

We are satisfied that the Opposition gave birth to the scheme, and we have voted consistently for it since, but there must be no way in the future in which it can be fobbed off again. There must be no way in which the Government can get out of their commitment. They must never again be given the pleasure of using tactics that enable them to get away with it and avoid a commitment, even though the majority of the House of Commons disagrees with them.

My hon. Friend the Member for Morecambe and Lonsdale (Mr. Hall-Davis) was right when he said that this was a sad reflection on the effectiveness of parliamentary control. There is no doubt that there is a clear parliamentary majority for going ahead with the scheme envisaged for April 1977. The Government dare not contemplate a vote of the House on the question of that commitment. Such is the power and good luck of the Executive that it has managed to get away with the postponement of the scheme. Such is the power of control of the Prime Minister and Chancellor, personally, because they are primarily responsible for the last-minute panic and sleight of hand which led to the scheme being abandoned.

What do we do now that the Government, having postponed the scheme, have produced another device to refer it to a joint working party? They are seeking to satisfy us that this course of action is adequate. Of course we welcome the efforts of the joint working party, but most of us realise that this was a way of trying to fob off parliamentary criticism. [Interruption.] Clearly it was a fobbing-off exercise. It was a very good device, although I am sure that the right hon. Member for Blackburn (Mrs. Castle) and others did their best to use the device to further their point of view.

Mrs. Castle

The hon. Member is spoiling a very good argument. We were following him with a great deal of sympathy to that point. He will not advance the cause of the observation of the will of Parliament by making party distortions of that kind. The setting up of the working party was an expression of a widespread and effective revolt against the Government.

Mr. Clarke

The right hon. Lady portrays it in that way, but I am a little more of a cynic. I think that it was a bright idea to set up the working party to see whether the TUC and the national executive of the Labour Party could be diverted. We are anxious to see where things stand now in the light of the working party report.

How far is the commitment in the working party report accepted, and is there importance in the distinction between the scheme being brought in during the working life of this Parliament and what the Secretary of State said about its being brought in as soon as financial constraints permitted.

I hope that the Minister who replies to the debate will take up the assertion in the Prime Minister's statement that nothing could be done by 1979. I hope he will say that that statement is now inoperative, officially, and has been abandoned by the Government. If he will not say that, clearly doubts about the working party are amply confirmed.

When will the Government come back with a reaction to the conclusions of the working party so that we can see how much is taken into Government policy?

I have a feeling that they will accept the step next year, which is a purely technical one and which will mean no change in the financial position of the Government or the beneficiaries. However, it is a step in the right direction and a step towards overcoming the technical hurdles. But it is the position in 1978 and 1979 that still worries me very substantially.

My hon. Friend the Member for Morecambe and Lonsdale touched on this when he said he thought it was a pity that the need for extra resources may prevent the Government from going further in 1978–79. Several hon. Members have said that they will accept a Child Benefit Scheme without any extra resources being necessary. My right hon. Friend the Member for Wanstead and Woodford made it clear that with the resources the Government have already committed to the scheme next year, we accept and could produce a workable scheme.

Of course, the TUC and the Labour Pary are anxious to do their best for family poverty, and because of this they regard it as necessary to allocate additional resources from the Exchequer to increase the rate from 1978–79. In the light of our experience of this Government in the last two years in child benefit matters I have doubts about the wisdom of putting that condition in the report. I hope that members of the working party will not find in a year's time, that there is a catch and that they have put their foot in it by allowing the condition to be written in that extra resources will be required.

The Secretary of State has covered that position by saying that he is anxious to go forward as soon as financial constraints permit. The working party has come to the conclusion, at the request of the TUC and the Labour Party representatives, that a financial commitment is needed. Ministers say that they will advise the Government that there is a financial commitment in the agreement. The right hon. Member for Blackburn looks satisfied, because she thinks the commitment is there, but I have a feeling about this. I can already hear the Chancellor, next year, explaining that the working party has always accepted that a financial commitment is necessary before further progress can be made, and because of the dire straits of the economy, unfortunately, that financial commitment must be postponed.

Contrary to what the working party says, those who take part in these debates and who should be able to get together to enforce the will of Parliament, accept that the scheme should be introduced without further financial commitment beyond the £95 million already devoted to the new scheme. It will not be an adequate excuse next year to come back waving this paper from the working party and claiming that there is a financial commitment involved which the Conservative Party should not expect in the economic circumstances, and which, sadly, the Treasury cannot accept. There is a catch in the working party document.

This Government have a deplorable record on this matter, in failing to introduce the scheme in April 1976 and postponing it again from April 1977. The working party is just a fobbing-off exercise, and the final paragraph in its document may well be used as an excuse for going no further in 1978 and 1979.

The hon. Member for Merioneth (Mr. Thomas) touched on the point that the Government's new scheme of family allowances for the first child next year means that some claimants will be worse off if the scheme proceeds in the way in which it was first mooted. Following the experiences on child interim benefits, I pointed out to the Treasury Minister during debates on the Finance Bill that if those taxpayers receiving FIS also want to get the new family allowances, they will be worse off. The hon. Member for Merioneth just repeated that argument when he said that at least 20p loss was involved for any taxpayer receiving FIS who took the new benefit.

The attack on family poverty would actually make the working poor actually worse off if it went ahead and was operated as it is mooted. In the Finance Bill debate the Financial Secretary refused to deal with the point at all. I received the intimation that the Minister of State for Social Services would answer it in the debate on child benefits which was expected to follow, but we did not have such a debate. We are still awaiting that reply.

Today the Secretary of State said that there would be another look at the overlap with FIS and means-tested benefits before April next year to see what could be done. That illustrates that yet again the Government gave no thought to the problem when they rushed through the Cabinet the decision to produce the family allowance for the first child. They are still thinking about it. They are thinking about a fundamental deficiency in what they are proposing, which is that their substitute measure will actually make many of the working poor worse off if such people are deceived by the Government's leaflet, with its insertion slip, into applying for what looks like an attractive new benefit.

But it is not enough just to look at FIS. We know that when he looks at it the Secretary of State will find that 50p in the pound at the new allowance is taken away from FIS in addition to any tax and clawback that the beneficiary pays. I anticipate that it will require legislation. There will have to be amendments to the regulations and a change in the basis upon which FIS rate rebates and rent allowances are assessed. I hope, therefore, that the Minister of State will confirm that the Secretary of State is not just saying that he will look at these things, but that action will actually be taken by the Government to make sure that no one is worse off next year. If we cannot have that, and if the Minister of State is unable to tell the House that no one will be worse off next year if he is in the FIS bracket, the Government scheme is a disgrace, remains a disgrace and will be a disgrace when it is introduced.

There are many different points that could be dealt with under these regulations, but I should like to take up the point about overseas children and overseas residents—a subject that is covered by one of the regulations that we have prayed against. This is one of the first debates on the Floor of the House that we have had on child benefits on which this subject has come out. It was canvassed by a number of hon. Members in the Standing Committee last year. My hon. Friends the Members for Wallasey (Mrs. Chalker) and Ealing, Acton (Sir G. Young) have asked for it to be dealt with. The hon. Member for Stockport, North (Mr. Bennett) took up the point as well. He talked about it being a little problem, but the House should realise, as we move towards child benefits, that it is a very big problem, upon which the Government have so far been utterly incapable of making up their minds and which they have failed to bring before the House to explain.

The difficulty arises in the almagamation of the tax system with the family allowance system. Tax allowances go to taxpayers wherever their children reside. There are substantial numbers of people paying tax in this country—mainly immigrant families—who have children in other countries whom they are maintaining and for whom they get tax allowances. The family allowance system does not have any such provision, and it is paid only for children in this country.

When the two schemes are amalgamated the big question will arise: does one take the liberal approach of child tax allowances or the narrow approach of family allowances? The resounding answer from the Treasury was that we should take the narrow approach, but that was hardly surprising. When the implications of this point were explained to the Ministers in the Department during the proceedings on the Child Benefit Bill last year they said they would go away and think about it again. They have been doing so ever since. There have been Cabinet committees in which the Home Office, the DHSS and the Treasury have come together, but they have failed to agree. As we get near to a child benefit scheme being brought in, and we consider the cost of that, the Government are under a duty to say precisely what they intend to do.

My hon. Friend the Member for Ealing, Acton and I were told over 12 months ago that the Government were taking away their first firm proposals and looking at them again, but we have had no reply. When the Secretary of State accused us of ignoring this problem he forgot that it was the Conservative Opposition who asked the Government to look, at it again, and that it was his Government who, initially, were cheerily going ahead with the idea of drastically reducing the income of those families whose children were abroad.

The position is that if the Government, under the child benefit scheme, end the entitlement of those with children resident abroad, it will have a sharp effect upon the income of many families in this country. The basis of the Government's case in wanting to do this is the level of fraud that exists in claims for child tax allowances. Inland Revenue estimates which were used last year showed that 50 per cent. of the claims for child tax allowances for children abroad were fraudulent—in other words, that claims were being made for children who did not exist.

It is startling to have a proposal from the Inland Revenue that where a tax allowance is abused the answer is to cut it out for every beneficiary. I should like the Minister to bring the argument up to date. The 50 per cent. estimate goes back to 1968, when the number of children resident abroad was believed to be much lower than it is now. Certain of my hon. Friends in a different field of policy are trying to work out how many children there are abroad, and my hon. Friend the Member for Beckenham (Mr. Goodhart) has come up with the figure of about 500,000. Is it still believed that the 1968 percentage of frauds still applies to this very large figure. Or have the Home Office and the Inland Revenue become much better at detecting fraud and forged birth certificates from India and are forged claims no longer so successful as they were? That would clearly affect the argument.

The Government must come to a conclusion rather than just attack us and ask us whether we are aware of the cost involved. We are aware of it, and we would like to know what the Government are proposing to do. In these regulations the Government seem to be trying quietly to persevere in cutting out all these overseas children. That will mean that the genuine claimant who is sending money back to his children abroad—and there are a lot of immigrant families here who are genuinely maintaining families abroad—will suffer a sharp reduction in his family income. That reduction will be concentrated almost totally upon immigrant families and it will be a reduction in income that is not shared by neighbours who have their children living here. It would act as an inducement on the genuine claimant to bring his children to Britain. This very positive prod to people to bring their children here could result in a rush which all hon. Members would be concerned about. It is therefore important to have an answer from the Government. The Government have been asked to look again and they are agonised over it. They have never said what they propose to do. The regulations will remove the entitlement of overseas children to benefit, unless the Government change their mind. If they plan to cut out these overseas children, what consultation will they have with the immigrant organisations in this country in order to explain the substantial fall in income for heads of families living in this country?

I have raised just two matters out of the hundreds that arise under the regulations ranging from polygamous marriages to married children living at home. The debate on the regulations presents difficulties, since this is not a Committee stage and the regulations are not amendable.

The big question that still hangs over child benefit is whether the Government have the courage and political will to carry through this great reform. It was an all-party reform—a major social reform that recognised the status of motherhood, recognised the changed realities in the relationships between men and women in families, and would have brought substantial relief to family poverty. For silly reasons the Cabinet has panicked and has abandoned this worthwhile measure. The Government have made no friends in Parliament or outside by their abandonment of the scheme. We trust that they will soon be induced to reform.

We hope that the regulations will be adequate for use in a full Child Benefit Scheme and will not need further amendment. To that extent, we welcome them, but what we should really welcome would be a statement by the Minister that the Government realise the colossal error they made in postponing the scheme, an explanation of how they are going to cure this pig's ear and move, working party or not, to a full Child Benefit Scheme as soon as possible.

2.40 p.m.

The Minister of State, Department of Health and Social Security (Mr. Stanley Orme)

The Government have not abandoned the Child Benefit Scheme. We hope that the full scheme can be implemented as soon as possible. In our debates we have all learned much about the importance and urgency of this issue.

I was asked about the copy of the working party's report which I put in the Library. Copies were not available from the Labour Party when the Opposisition requested that one should be provided. I got hold of a copy and put it in the Library so that hon. Members could study it as soon as possible. The inference that the names of members of the working party were excluded on the copy which I placed in the Library because of misgivings on the part of the Ministers who signed it is not true. The report has the unequivocal support of myself and my right hon. Friend the Secretary to the Treasury. We would not have signed the statement otherwise. The fact that we reached agreement in the working party is to the credit of all those who served on it.

When I noted the difficulty that the right hon. Member for Wanstead and Woodford (Mr. Jenkin) had in understanding the report, I thought that it was probably just as well as he was not a member of the working party. He called for an all-party approach, but when he takes so long to understand the contents of a report patiently explained to him by my right hon. Friend the Member for Blackburn (Mrs. Castle) and my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham), I cannot see why he has been complaining. The interpretation of the report given by my right hon. Friend and my hon. Friend is correst, and I endorse it.

I pay tribute to everyone who served on the working party, not least the representatives of the National Executive Committee, the Trades Union Congress, and the Parliamentary Labour Party. The report presents proposals which, ad referendum, will go to the constituent bodies, and the report will be given urgent consideration by the Government. Hon. Members opposite may laugh, but I do not think that this is a particularly funny issue. It is important to get the matter resolved and to make progress.

Sir George Young

Can the Minister of State give us an absolute assurance that by the end of October, for example, we shall have a definitive statement on the Government's posture towards the working party's report?

Mr. Orme

I give that assurance. I hope that this matter can be resolved as quickly as possible, but I cannot answer for my right hon. Friends. The report will go to the Government and be considered in the normal way.

I was asked about the attitude of my right hon. Friend the Prime Minister. He approved the appointment of my right hon. Friend the Chief Secretary and myself to the working party.

Mr. Kenneth Clarke

We were smiling a moment ago at what was, with great respect, flannel from the Minister. Is he prepared to say that the Prime Minister's statement that no change can happen until 1979 can be forgotten? Is he going to advise the Government that there is a financial commitment to be accepted, or will anything that the Government say be subject to the proviso that action can be taken only as soon as economic circumstances allow? If the right hon. Gentleman cannot answer these questions today, we shall continue to smile when we hear talk of the working party's report.

Mr. Orme

I cannot answer for the Government on a report which was agreed only yesterday and presented to them last night. My hon. Friends understand that, and so should the hon. Gentleman. The Prime Minister agreed to the setting up of the working party and recognised that it would make recommendations. That is clear enough.

My right hon. Friend the Member for Blackburn said that three principles were involved in the introduction of child benefits: first that payment was made for the first child, secondly that it was tax-free, and thirdly that it replaced child tax allowances. I endorse her interpretation of the meaning of a Child Benefit Scheme.

We have discussed this issue with a number of responsible individuals and organisations, all of whom were in favour of introducing a Child Benefit Scheme. But there are inherent difficulties in such a proposal to effect a major and basic change in social policy.

The right hon. Member for Wanstead and Woodford did not have much success in interpreting the report of the working party. With a previous Secretary of State and my hon. Friend the Member for Islington, South and Finsbury among the members, we had expertise par excellence. When my hon. Friend the Member for Islington South and Finsbury puts his mind to these matters, the results are of a known quality. I am sure that my right hon. Friend the Member for Blackburn would join in my tribute to my hon. Friend for the time and effort he devoted to this work.

Mr. Patrick Jenkin

As the right hon. Gentleman is paying a valuable tribute to my pair, perhaps I may bask a little in the reflected glory. Does he not think that the statement produced by the working party would have been a little more explicit had it made clear that there was to be a reduction in the wage packet? If so, would not the misunderstandings in which it can still give rise be avoided?

Mr. Orme

This brings us back to the explanation of what the working party actually meant. We could not have had a more succinct statement—just over one page—making it clear that there will be a reduction in take-home pay. Any trade unionist or person reading that statement would have no doubt about there being a phasing out of the child tax allowance and that that would mean a reduction in take-home pay.

Mr. Patrick Jenkin

The right hon. Gentleman persists in misunderstanding the point I am trying to make. I accept that there will be a reduction in the child tax allowance—if this ever happens—and that it will be switched to the child benefit. But every trade unionist looking at this statement will ask: how will that be offset by an increase in wages? How will it be offset by an increase in other tax allowances? It was the juxtaposition of the switch within the current pay policy that persuaded the Government to abandon the present scheme. On that aspect, the statement is wholly silent.

Mr. Orme

I find this argument very strange. If I remember rightly, the right hon. Gentleman originally told the House that he wanted a straight switch with no increase in the amount that the Government were proposing for the first child, and that people would understand and accept that.

Mr. Patrick Jenkin


Mr. Orme

We are advocating a phasing-in of the scheme over three years. That is what the working party has recommended to the Government. In consequence, any trade unionist getting hold of the statement who is used to day-to-day industrial negotiations and collective bargaining will understand it on a first reading. For the right hon. Gentleman to try to read confusion into the document is beyond my comprehension.

Mrs. Chalker

The right hon. Gentleman spelt out just now that any responsible trade unionist who was used to looking at documents of this kind would understand it. I am concerned not with the elite in the trade union movement but with the larger number of people outside who, on hearing last night the substance of this matter, would not realise the full implications. The point made by my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) was that, by leaving a gap in the text, some people have already been misled.

Mr. Orme

I am talking not about the elite in the trade union movement but about the millions of average trade unionists who will understand the scheme. The Opposition are gravely disappointed that the working party should have arrived at an agreement. They do not like it. They are nitpicking and trying to split hairs to create confusion. The only confusion will be in their own minds. The statement is perfectly clear.

We had an example of the humour of the right hon. Member for Wanstead and Woodford when he read out his proposed insertion in the Department's leaflet on child benefits. It will certainly be a major job to explain this matter to families which are claiming for the first child. But the matter must be treated seriously. The Government will shortly be embarking on a substantial advertising campaign, quite apart from publishing these leaflets. We want everybody to be fully conversant with the scheme. There is no room for the nonsense that the right hon. Gentleman put to the House. It is good for party games, but we are in the business for real.

We have heard a great deal of argument about overseas children, not least by the hon. Member for Rushcliffe (Mr. Clarke). This is one issue that the Government will have to consider, and important decisions will have to be taken on this matter. It will be discussed at the same time as the working party's paper and when the Government's policy is formulated. I cannot go beyond that today.

The question of the child tax allowance and the decision on how it will be handled in future is for my right hon. Friend the Chancellor of the Exchequer. Certainly his attention will be drawn to this matter. I listened with great interest to what was said about incomes policy, but that is a matter of broad Government policy.

I shall deal now with those who could be worse off. My right hon. Friend the Secretary of State repeated today what he has said on a number of occasions—namely, that it is our firm intention that people will not be worse off. This matter is under active review. Family income supplement will not need legislation. It can be dealt with tinder the Child Benefit Act. We shall make the adjustments in time for the introduction of the scheme in April 1977.

The hon. Member for Wallasey (Mrs. Chalker), referring to Regulation 2 of Statutory Instrument No. 964, asked whether, in the case of a husband and wife residing together and a claim being made by the husband, the Secretary of State may require the husband to furnish him with a written statement from the wife stating she will not claim. The hon. Lady wanted to know why the word "shall" was not included rather than "may". I am advised that in the generality of cases—except, for example, where the wife is unable to act because she may be mentally ill—such a statement will be required.

Mrs. Chalker

I should be grateful if the right hon. Gentleman would look at this again. He will find that the position where a wife is incapacitated from making a decision is covered by other legislation. If we are to follow the legislation of previous years under this Government and the wishes of my party, I believe that the world should be "shall" and not "may".

Mr. Orme

I take the point. I am not in a position to answer a technical point now. I have given the advice that I have received, but I shall consider this again and write to the hon. Lady.

The hon. Member for Merioneth (Mr. Thomas), who explained that he had to leave, asked what was wrong with the Pat Healy proposals that were developed in The Times recently. That brings into play the TUC argument about direct transfer, and it is worth noting that if Miss Healy's proposals had been implemented and the rate had been below £2.64 large families would have been worse off unless some additional action had been taken.

Mr. Patrick Jenkin

There is common ground between the proposals in The Times on the morning of 28th June and the proposals that I put forward, on which I had been working during the weeks up to that time, to the extent that both of us recognised that the matter had to be dealt with by a premium, just as the proposal that the Chancellor put to the Cabinet before those of 25th May recognised that there should be a premium. I said that it should be for the third and subsequent children.

Mr. Orme

The point about the Pat Healy proposals—I recognise that the right hon. Gentleman came to his conclusion separately—is that it is the basic transfer argument, and that leads us on to the argument that my right hon. and hon. Friends have used about higher rates being necessary.

Mr. Patrick Jenkin

The right hon. Gentleman has put his finger on it, because that is the point that has not been covered by the working party.

Mr. Orme

But it has been covered. I shall not be drawn into going over that again. If the right hon. Gentleman is not careful, I shall call in aid my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham).

The real value of child benefit is that, as Opposition Members and my right hon. and hon. Friends have said, it acts against the means test and against the poverty trap. It is a real transfer of economic wealth, to all women but in the main to a large section of working-class women, and it gives them an economic independence that they never had before. In the equality stakes—we hear a lot about this on the Sex Discrimination Act and so on—real economic independence is one of the most important factors.

I hope that we can approve the Regulations and in the near future consider how to proceed from here. The value of today's debate is that we have been able to take some positive steps forward.

3.3 p.m.

Sir Brandon Rhys Williams (Kensington)

I have risen to take part at this stage in the debate not because I want to have the last word on the subject—I know that the House will come back to this again and again, unfortunately—but because I wanted to hear how the right hon. Gentleman dealt with the debate. Had he been more forthcoming, he would probably have made what I have to say wide of the mark.

I am disappointed to find that in 1976 we are still coming back to the old problem that has vexed social reformers for more than a century: how to cater for the breadwinner who has a large family responsibility. Even before the end of the eighteenth century William Pitt brought in tax concessions for children in his income tax scheme. Next we saw how the magistrates in Speenhamland tried to do it. They were not mad, but they had an almost insoluble problem and of course they ran into the incentive trap. Since then we have seen the development of policies of cheap food to help families, free education, subsidised housing, including particularly the Housing Finance Act 1972, under which the size of the family is part of the calculation of the allowances, the extension of private charity, local welfare schemes of various kinds, welfare foods, and in recent times FAM, FIS, tax credits and now child endowment. And yet the problem remains.

The problem is particularly acute among the low-paid and one-parent families. The House keeps coming back to it, but takes no serious action about it. The difficulty arises, too, in areas of technological or environmental decline, such as, unfortunately, we have in parts of Kensington, where one gets the miserable combination of low wages and high rents.

I should like to say why I think that it is especially urgent that something should be done right now about this problem, which has already existed for so long. There are now new adverse trends attacking the family. It may be that these things are inevitable, but they are also serious. I have often drawn attention to the fact that moving to the commitment to equal pay means that we can no longer leave it to employers to differentiate between breadwinners with family responsibilities and others—between men and women particularly. I believe that before the war the firm of Pilkington, recognising this problem, even brought in its own family allowance system. All that is now rejected, and I think rightly.

We are no longer in an era of special help for the family—through the availability of cheap food, cheap clothes, and children's shoes, and relatively cheap fuel. This places added burdens on the family budget.

We are also seeing the break-up of the extended family and of the responsible neighbourhood. Perhaps in the Rhondda Valley, which I know well, the responsible community still exists, where there is still an atmosphere of care and a system that enables mothers to get help with their children; but in most of our towns and in London one does not find that.

Then there are what I call the side-effects of women's lib. I am not arguing against women's lib. In fact, I am delighted that so many women are able to earn their own living.

However, that has changed the expectations of women as to what they are to earn and spend for themselves. They are used before marriage—and while they are still at work after marriage—to spending money at their own discretion; but when the first child heralds its arrival they find that their income will fall while their commitments will rise sharply. Single women have incomes but mothers do not. In that regard the position of mothers has not improved since the Middle Ages. They do not have the wherewithal to maintain their morale. They are still living under the feudal system, with important responsibilities to society but no incomes to spend at their own discretion.

What then, do we do about the problem of unhappy families? We see the psychological strain. We see inadequate, harassed care of so many children and nourishment probably of the wrong kind. As far as one can ascertain from the published data, it seems that larger families must depend far more on bread and potatoes and are not able to afford the more nourishing foods such as cheese and meat and milk. One sees, too, the break-up of homes and the separation of families.

We in the House cannot allow these things to continue while we wrangle about this and that. It is a glaring social need, and we are guilty if we do not act on it at once. We cannot wait to deal with the problem of family poverty.

A few years in the life of a child will shape the whole life of the citizen afterwards. I am ashamed at the way we have neglected the Finer Report. But it is not only the Finer Report families that we must attend to. We in Britain need child benefits at rates at least as generous as those obtaining in Continental countries with economies similar to our own. Why is it that in Belgium family allowances are six times as high as they are in this country? In France they are probably four or five times as high as they are here. In Germany, where the child endowment scheme was carried through two or three years ago without all the friction and upset which seems to be attending the operation here, child allowances are four or five times as high as they are here. Why?

It is up to the Prime Minister to give a lead. He has shown himself to be utterly pusillanimous about the way he has tackled it. It is his personal decision that the Child Benefit Scheme has been put off. He seems to be acting like the man who said "I am their leader. I must follow them". It is deplorable that a man in his position should have so little social conscience.

How will families fare after the November uprating? Taking a typical family with two children, for widows where there is invalidity, or where there are children of pensioners—that is an exceptional case—it will be £7.45 for the first child and £5.95 for a subsequent child. So a two-child family will enjoy £13.40 untaxed. That is little enough, it might be said. For the unemployed and other main categories of benefit, it will be £4.05 for the first child and £2.55 for the subsequent child. That will mean £6.60 for the mother, also untaxed, with which to raise two children. There again, she will be on the poverty line.

But the family allowance now proposed is £1 for the first child and £1.50 for the second, both taxable. How far will mothers be able to get on that? The difference between the benefits for unemployment—or one of the other categories covered by national insurance—and what the breadwinner gets when he goes back into full-time employment is largely what creates the poverty trap. One would have hoped that the social conscience of the Labour movement would have insisted that something should at least be done about that. But we are left with the poverty trap and a load of human misery as well.

There are three particular obstacles holding us back. Many hon. Members on both sides of the House are concerned with the idea that family allowances would constitute more public expenditure at a time when the Budget is already tight enough. But this is not public expenditure; it is expenditure by mothers that we are talking about. We are talking about a redistribution of income and the quality of private expenditure. We are not talking about Government plans for their own expenditure. The difficulty of getting the figures, and Treasury obscurantism over the years, have made it extremely difficult for Members of Parliament and social reformers to come to terms with the facts and to recognise that in dealing with family allowances we are not talking about Government expenditure; we are talking about the action of the Government, as agent, in bringing about the redistribution of private expenditure.

The Government have many responsibilities in that field, but how are they exercising them? Last year, as part of the social contract, they agreed to wage increases which, I understand are now leading to increases of some £3,000 million net in the money available to breadwinners. Today, as a result of the Chancellor's Budget package, there is a release of £300 million in one day for the benefit of wage earners. They will get it today, with their Friday pay, through the workings of PAYE. If that amount of money is available for breadwinners, why is it not available for their wives? The Government are considering the bread- winners but not their families. We do not know what the social contract will imply in subsequent years, but there is no reason to think that next year's social contract will result in a smaller increase in the total spending power of breadwinners.

What about take-home pay? The hon. Member for Islington, South and Finsbury (Mr. Cunningham) has made such a contribution in respect of child benefits that I would like to pay particular tribute to him. He and one or two of his hon. Friends, although, I am afraid one could count them on the fingers of one hand, are like the saints in Sardis. They have stuck to their guns and I hope have saved the day for child endowment.

In respect of take-home pay, however, not all husbands give a square deal to their wives, and we are in a rather messy area when we talk about the concept of the family and the responsibility for the family's cash. If mothers draw the money from the Post Office, that is take-home income. I do not believe that the majority of British people are so old-fashioned that they cannot see clearly what the Government are seeking to do. If all this money comes to the family, all that we are doing by this measure is making certain that motherhood and its responsibilities, and the rights of the children themselves, are recognised through a redistribution of income.

If other countries are much more generous in their allowances why are we in Britain so benighted, and being left further and further behind? We must recognise that the proceeds of the national effort—what goes into tax and into the pay packet—also needs to be divided among the rest of society. Mothers and children have a right to a minimum cash income of their own.

When we are paying our tax I would suggest that we must learn to say "That is ours, and this is mine." All the income that is derived from work remains within the community, but the Government have a clear responsibility to see how it is distributed.

Hon. Members know that I try to avoid partisan accusations as much as possible, but I am afraid that what families are up against here are entrenched Labour Party attitudes. We have heard a lot this afternoon about the working party, and those Members of Parliament who served on it have done their best for families. But what is the status of the working party? How is it nominated? What powers does it have? It has issued what is virtually a White Paper, and we are minutely studying the text to see what it means.

Who are the people actually on the working party? There are half a dozen Members, from the Labour side only, and representatives of the TUC. But what about the women's organisations? What about Gingerbread and the Child Poverty Action Group? Why does the Labour Party not want to hear from them? Have the Mothers' Union, the Women's Institutes and all the other bodies concerned with women's needs and the problems of the family been given an opportunity to give evidence to this powerful working party? Will they be called upon in future? Will the minutes be published?

What will be the status of the working party, which the right hon. Member for Blackburn (Mrs. Castle) said will lead to more open government? We do not know what texts it has studied or the positions taken by the various members. This is not open government but government by clique. There may be people on it whom we have learned to trust and in whose attitudes we have confidence, but the House of Commons should not

Division No. 305.] AYES [3.18 p.m.
Archer, Peter Hayman, Mrs Helene Robinson, Geoffrey
Atkinson, Norman Huckfield, Les Rowlands, Ted
Barnett, Guy (Greenwich) Johnson, James (Hull West) Sandelson, Neville
Bennett, Andrew (Stockport N) Kerr, Russell Shore, Rt Hon Peter
Castle, Rt Hon Barbara Lipton, Marcus Silkin, Rt Hon John (Deptford)
Cocks, Michael (Bristol S) Loyden, Eddie Silkin, Rt Hon S. C. (Dulwich)
Cohen, Stanley McDonald, Dr Oonagh Stewart, Rt Hon M. (Fulham)
Cunningham, G. (Islington S) MacFarquhar, Roderick Tomlinson, John
Davidson, Arthur MacKenzie, Gregor Tuck, Raphael
Davis, Clinton (Hackney C) Meacher, Michael Urwin, T. W.
Deakins, Eric Mulley, Rt Hon Frederick Walker, Harold (Doncaster)
Dormand, J. D. Oakes, Gordon Whitehead, Phillip
Dunwoody, Mrs Gwyneth Orme, Rt Hon Stanley Williams, Rt Hon Shirley (Hertford)
English, Michael Owen, Dr David
Ennals, David Palmer, Arthur TELLERS FOR THE AYES:
Fowler, Gerald (The Wrekin) Peart, Rt Hon Fred Mr. Ted Graham and
Fraser, John (Lambeth, N'w'd) Pendry, Tom Mr. Thomas Cox.
Freeson, Reginald Price, C. (Lewisham W)
Harrison, Walter (Wakefield) Richardson, Miss Jo
Mr. A. G. F. Hall-Davies and
Sir Brandon Rhys Williams.

Question accordingly agreed to.

Resolved, That the Child Benefit and Social Security (Fixing and Adjustment of Rates) Regulations 1976, a draft of which was laid before this House on 28th June, be approved.

abdicate in favour of working parties of this kind.

The intense struggle which has taken place in the Labour movement as a result of the upheaval over child benefit shows clearly what Labour's priorities are. Much though it grieves me, I must say that Labour's priority today is the organised workers first and the rest of society nowhere. Mothers and children are disregarded until there is so much hubbub that something has to be done. Then we have a patched-up remedy like the Secre-of State's miserable speech today, in which he tried his utmost to make something of £1 a week for mothers. In my opinion, £1 a week for each of 7 million mothers is an insult and a disgrace to the Labour Party.

As the right hon. Member for Blackburn said—I am sorry that she is no longer here—the regulations as they stand constitute an indefinite postponement of child benefits. Many of us are not prepared to acquiesce in that. I am not. The public must see where this House stands. Those who think that this is good enough must vote for it. The rest I recommend to abstain.

Question put:

The House divided: Ayes 51, Noes Nil.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I take it that it is not desired to move the subsequent related motions.