§ Mrs. Wise
I beg to move Amendment No. 31, in page 13, line 12, leave out from 'deemed' to end of line 15 and insert:'to exclude any of the payments made in respect of that child as listed in subsection (4)'.The Committee might find the amendment a little cryptic, and it is therefore necessary to explain its purpose and how it arises. Unfortunately, subsections (3) and (4), with which the amendment deals, are themselves cryptic and difficult to follow, so I had better begin by explaining their purpose.
An anomaly was created, through the introduction of the child benefit scheme, for widows and certain other people receiving State allowances. Those people were to lose £1 from their allowances and also the appropriate part of the child tax allowance. This was to be replaced only by the single payment of £1 child benefit. Therefore, whereas other taxpayers would lose the child tax allowance, with the child benefit moving in to balance up the payment in their favour, that was not so in the case of widows, who would actually be worse off. The Government therefore took appropriate action to remedy that anomaly, and I am at one with them in that.
However, in considering subsections (3) and (4) it seemed to me that there was an opportunity for improving the situation of widowed mothers, guardians and those receiving certain other State allowances for children. I believed that 1250 it would be a pity to miss that opportunity.
The effect of the amendment is therefore to exclude from the reckoning of the taxable income of the parent concerned not only £52 a year—the equivalent of the child benefit—but the whole of the amount being paid by the State in respect of that child. Therefore, under the amendment the whole of the widowed mother's allowance attributable to the child or children would be excluded from the reckoning. That would, of course, have the effect of improving considerably the tax position of widows and certain other one-parent families and guardians. The people concerned are listed in Clause 31(4). but those who scrutinise the list may not find it crystal clear about those to whom the payments refer.
Perhaps I should explain that, for instance, in Clause 31(4)(a) the child's special allowance under the 1975 Social Security Act relates to the amount that is paid in respect of a child or children to a divorced woman whose ex-husband has died. The guardian's allowance is the amount that is paid to guardians in cases where both parents have died or where one parent has died and the other is missing, or where one parent has died and the other parent is in prison.
§ Mr. Patrick Jenkin
I am trying to follow the hon. Lady's argument, Can it be stated, briefly, that she is arguing that the child benefit should become a payment on top of social security benefits rather than instead of them?
§ Mrs. Wise
No. I mean that there is a constant complaint that widows and other people in receipt of similar benefits are penalised by the tax system at least to this extent. I am arguing not that the child benefit should be an additional 1251 payment but that the amount paid to a widow in respect of children should be tax-free. We are often told that the whole of a widow's pension should be tax-free, but I am not asking for that now. I am asking only that the amount paid in respect of children should be tax-free. That would be worth while. There are, of course, other things that I should prefer, but I am inevitably forced into a rather messy approach because we on the Back Benches have to work on the basis of things that are put before us. If we were starting with a clean sheet, I should like to have a greatly uprated child benefit and I should prefer other things to be more neat and tidy.
However, it must be said that child benefit was in any case designed specifically to help families with two parents rather than those already in receipt of State benefits. That is why a widow is docked £1. It is because the child benefit is not specifically designed to help the widow. The effect of this amendment would be to relieve from taxation the amount of the widow's benefit which relates to children.
§ Mr. Robert Sheldon
My hon. Friend said that £1 is docked from the widow. Does she understand that the widow is no worse off and that the purpose of the clause is to ensure that that is so?
§ Mr. John Ovenden (Gravesend)
Is my hon. Friend aware that widows are the one category of people who are no better off as a result of child benefit and that while two-parent families, where the husband is paying the standard rate of income tax, are 30p a week beter off as a result of child benefit, widows do not have a net gain? Is that a fair situation?
§ Mrs. Wise
It is precisely because I want widows with children, and guardians and those who are receiving industrial death benefit, to be better off that I am introducing the amendment.
I have no complaint about the clause as far as it goes. It is intended to remove the anomaly that leaves widows and others worse off. The Government want to bring them back to square one. That is fine as far as it goes, but it does not go far enough.
1252 All hon. Members know that there is considerable pressure from widows and that the pressure is particularly justified in relation to their children. That is why I am not seeking to relieve from tax all the widow's pension or any part other than that relating to children. I am endeavouring not only to bring them back to square one but to take them on a little to square two or three. That is a very desirable objective.
I shall explain the categories to whom clause 21 (4) applies because some hon. Members may not be aware of them. Subsection (4) (b) refers to an allowance under Section 70 of the Social Security Act 1975, namely, the industrial death benefit and the amount paid to a widow for the children whose father has been killed in an industrial accident.
Subsection 4 (c) is self-explanatory and includes the widow's allowance which widows receive for the first six months. The amendment would affect only that part of the allowance relating to children. The same applies to the retirement pension, for the few pensioners who have dependent children. The widowed mother's allowance and the invalid care allowance, which also are listed in subsection (4) (c), are self-explanator.
The amendment should meet with approval, especially on this side of the Committee. We are aware that families with children are often hard-pressed. Families with only one parent are particularly hard-pressed. We should like to have found a way of helping all one-parent families, but it was not possible under the clause.
Within the limits of what is possible within this clause, the amendment helps as many one-parent families as is humanly practicable. I commend it to the Government Front Bench and hope that Ministers will accept it. They would have found it easier to accept if they had accepted our earlier amendment in which we tried to find the money for this amendment. It is not our fault if our Front Bench, aided and abetted by Opposition Members, ensured that tax concessions would go to the better off. We tried to find the money to help poorer people. The Government flung that back in our faces, and I suggest that they must now find that money from somewhere else.
I commend the amendment Lo the Committee. It is designed specifically to help 1253 widows and others with children in relation to the income they receive from the State for those children.
§ Mr. Patrick Jenkin
I listened to the hon. Member for Coventry, South-West (Mrs. Wise) with considerable attention. I am not sure that she has explained the purpose of her amendment accurately. It seems to me—I might be wrong, but this is a measure of the complexity that we face—that subsections (3) and (4) are intended, following the change of last September to which I might refer later in the debate on the Question "That the clause stand part of the Bill", to reflect the broad proposition that child benefit is intended primarily to help those who, in the words of Frank Field, earn their poverty, those who are earning but who do not get the benefit of the child tax allowance.
If that is right—and I believe that it is at the core of the whole system and was always envisaged with child tax credits which were the subject of the Green Paper published by the previous Conservative Government—it must follow logically that, where families are getting other benefits from the State through the social security system, to that extent the child benefit comes in substitution for those other benefits and not in addition to them.
It is a separate question whether one needs to make some additional provision for widows. That has been argued on other occasions. These provisions go a good deal wider than widows. They refer to people in receipt of retirement pension, invalid care allowance and so on. It is not only one-parent families.
The point about widows—perhaps I shall take the hon. Lady with me here—is that when the Government made their announcement on 23rd September they forgot about them. They forgot that widows had not suffered the clawback of their family allowance. As soon as the Government published the results of their study and announced a change of tack for the second time in child benefit, the organisations representing widows and one-parent families, Gingerbread and others said "You are making them worse off by £1 a week". The Government did not address their mind to widows, but that is a matter that can be pursued on another occasion.
1254 The Government then had to announce a special £52 addition which put the widows back, as the hon. Lady said, to square one, but one cannot move on from that within the framework of the child benefit scheme and say that chid benefit will be paid in addition to the national insurance benefit, which is what the hon. Lady's amendment provides, whatever she may have said.
§ Mrs. Wise
The right hon. Gentleman is wrong. My amendment is not working within the framework of the child benefit scheme. It is working within the framework of the tax scheme, which is different.
It may be that the Government included subsections (3) and (4) in the clause because of child benefit. That is their problem which they are solving, but it is not the problem to which I have addressed myself.
My amendment is not about the child benefit scheme. Any wide discussion about child benefits would be out of order. My amendment is about giving tax concessions to widows and certain others on low incomes. The right hon. Gentleman is right in saying that it is not only widows who are concerned but pensioners with dependent children and some others.
That is what the amendment is about. It is not about child benefit. The fact that the Government had to tidy up the situation because of child benefit gave me the opportunity to put forward the amendment, but it is not about child benefit. If the right hon. Gentleman wants to discuss child benefit, I suggest that he does it on the Question "That the clause stand part of the Bill".
§ Mr. Jenkin
It is all very well for the hon. Lady to say that. It may have done for procedural reasons, but the amendment is hung on these provisions which are the direct consequence of the decision that child benefits should be a tax-free benefit and that the child tax allowance should be reduced.
I have been studying the Questions which a number of hon. Members below the Gangway on the Government side have been putting down on the subject. The hon. Member for Gravesend (Mr. Ovenden) is one and the hon. Member 1255 for Kingston upon Hull, East (Mr. Prescott) is another. It seems to have come as a surprise to them—so much so that the amendment is starred—that child benefit will be in substitution for national insurance benefits, and, indeed, for a wide range of means-tested benefits, and not in addition to them.
I do not know why that should be so. It should not be so, because on 8th November my hon. Friend the Member for Wallasey (Mrs. Chalker) asked the Secretary of State for Social Services'whether he will confirm that under the Child Benefit Act 1975 increases in child benefit for first children will be taken into account for unemployment and sickness benefit purposes, but that increases in child benefit in respect of second and subsequent children will not be taken into account.'That is what we are talking about. The Minister for Social Security replied:I can confirm that the rates of child benefit which will apply from April 1977 will require the allowances paid for first children, with unemployment or sickness benefit, to be reduced—by the amount of child benefit—but not those for second and subsequent children."—[Official Report, 8th November 1976; Vol. 919, c. 58.]That is exactly what is happening, and, according to the logic, purposes and intent of the scheme, it is exactly what should happen.
I understand the hon. Lady's intention in the amendment, but the effect is not to try to give a special allowance for categories of parents with national insurance children's benefit at a huge range of different rates. That is one thing to which one hopes that the child benefit scheme will ultimately bring some sense.
§ Mr. George Cunningham
Is the right hon. Member being completely logical about this? Surely at first, if child benefit is being paid only to such an extent as it is wholly financed by reduction in tax allowances, there is a case for saying that the child benefit ought not to be offset by a reduction in other benefits, even if, when we have gone the whole way the incidence of child benefit ought entirely to replace those other benefits.
§ Mr. Jenkin
Perhaps I should not have given way to the hon. Member, because I was coming to that point. What the Government are doing—and they may have been a little coy about it—is to meet the case that the Chancellor described last November when he said this 1256 was causing great concern among large numbers of people.
This is the problem, which has been referred to frequently since the Ashfield by-election, of people finding themselves better off out of work than in work. The Government are taking one small step to put that right. We are giving additional child benefit to families who are in work and making sure that it does not accrue, for whatever reason, to those who are out of work.
If people are in receipt of taxable benefit when they are out of work, they do not end up by being worse off, but there are certain categories of people who get benefit which is not taxable, who are in receipt of sickness, unemployment, and invalidity benefit. Those benefits are not taxable. What will happen with those people is that, after having been unemployed for part of a year—unemployed or sick for two or three months—they will have enough income to absorb the full child benefit tax allowances and, therefore, will suffer the effect of the reduction of child tax allowance pound for pound. They would have been 30p a week better off, but if they are off work sick and have some other benefit set off pound for pound by child addition in national insurance schemes they will suffer a reduction. There is no answer to that. There will come a point where there is a cross-over, and the double deduction will mean cancelling the extra 30p when they are in work.
I think that that is the logic of the scheme, but we need to know whether it is what the Government intend. It means that they are not responding to the deep public concern about people who are better off out of work. One could make a long speech on that subject alone. My hon. Friend the Member for Norfolk, North (Mr. Howell) has pursued it with a tenacity that hon. Members on both sides of the House must admire, whatever they think of the case—and I think that it is very strong. The problem is now widely recognised to exist and is causing great concern.
The Government are now meeting the problem, but not in the way that would make real sense by making sure that all national insurance benefits were brought within the tax net. They are reducing the net income of those who are out of 1257 work and who draw benefits which are not taxable.
§ Dr. McDonald
The right hon. Gentleman's remarks are interesting but have nothing to do with the amendment, which is concerned not with unemployment benefit or sickness benefit but with the list of benefits in subsection (4). The point of the amendment is to exclude all the child allowance portion of those benefits from taxation. It has nothing to do with child benefit either. I suggest that the right hon. Gentleman keeps the rest of his remarks for debate on the clause.
§ Mr. Jenkin
The hon. Lady must allow me to make my own speech. I am pointing out that what the Tribune Group is trying to do through the amendment of the hon. Member for Coventry, South-West is contrary to the whole concept and purpose of the child benefit scheme. The Under-Secretary of State for Health and Social Security, who follows these matters with great perspicacity, will not have been surprised at my saying that the Government are meeting a case put with great force by my hon. Friend the Member for Norfolk, North, who has been subject to much abuse because of it, and by many of my right hon. and hon. Friends, that there are large numbers of people who find themselves better off out of work or who suffer so little detriment that they feel that the incentive to work has largely disappeared. The Chairman of the Supplementary Benefits Commission thought that the figure was one in 10, but, to judge from the interviews with them, the voters of Ashfield recognised that it was much higher.
I have paid tribute to the Government for meeting the problem, but they are not doing it in the most humane way. They are reducing the net income of those who are receiving untaxed national insurance benefit—sickness benefit, unemployment benefit and invalidity benefit. If that is not the Government's intention, they will presumably want to put the matter right. Incidentally, I am glad to see that the Secretary of State for Social Services is here.
The question of the means-tested benefits is perhaps outside the scope of the amendment, but I should like to say that I have received from the Minister for 1258 Social Security a letter in which he assured me:We fully accept the principle that the improvement of universal benefits should reduce dependence on means-tested benefits.But exactly the same applies to the national insurance benefits, the dependency benefits for children. What is happening is intended, no doubt, to go some way—not far, but a small first step—to redress the balance, so that those in work will have the advantage of child benefit for the addition and it will not accrue to those out of work. But the consequence is that if their benefit when out of work is not taxable they can suffer the deduction twice. The double deduction may not merely offset the 30p extra, which depends on the ratio of the number of weeks in and out of work, but may go beyond it, and they may end up worse off over the year.
That seems to me to be the position that stems from the two subsections and at any rate part of the point raised in the amendment. I can only advise my right hon. and hon. Friends that, admirable though the intention of the amendment may be to try to do something to help widows, it is not the right way or the right vehicle. Therefore, it would not be right for us to support it. I should like to know whether I have correctly spelt out the Government's intention in relation to the difference in the treatment of dependency benefit and child benefit when somebody is in work.
§ Mr. Robert Sheldon
My hon. Friend the Member for Coventry, South-West (Mrs. Wise) gave a warm welcome to the introduction of child benefit. I think that she echoed in that welcome the feelings of most people concerned.
The complexities to which my hon. Friend referred arise essentially from two basic causes. First, we are trying to bring about a change from a tax allowance to a benefit. Secondly, there is the question of phasing. At each stage, as we move from tax allowance to benefit and as we try to phase this over a period of years, we must try to ensure that nobody loses and that, to put in a small Treasury point, it does not cost too much. Clearly these are problems.
When I refer to its not costing too much, I mean not costing too much as a necessary consequence of a change in 1259 the structure rather than a Cabinet decision, which can be taken at any time, to increase the sums made available to those in need. That is a different matter. Those are the reasons for the complexities.
The amendment seeks to exempt from tax the taxable dependency allowance for dependent children of widows and others. My hon. Friend gave a detailed description of those concerned—widows, retirement pensioners and others. Therefore, I need not go over that in more detail.
I should point out one matter which my hon. Friend certainly understands and which I am sure the Committee will accept. The benefit is only for those who have sufficient income to take advantage of the tax changes. The child tax allowance did not give assistance to those who did not have sufficient taxable income against which to offset the allowance.
A number of my hon. Friends felt that it was wrong that there should be an artificial distinction between allowances and benefits which meant that those who had as much need as others were unable to take advantage of allowances because their income was insufficient. We sought to remedy what we felt to be wrong. Unfortunately, for the reasons that I have given, the result has been the complexities that we see in this clause.
§ Mrs. Wise
Does my right hon. Friend accept that the amendment refers not to child tax allowances but to making certain tax-free payments for children, which is a different matter? For example, whereas he wants to make £1 of the £6.45 paid as guardian's allowance tax-free, I want to make the whole amount tax-free. That is not the same as a reintroduction of the child tax allowance.
§ Mr. Sheldon
I understand the point made by my hon. Friend. I was trying to establish the purpose behind the move towards child benefits. If we can establish the purpose behind it, we can see how successful we have been in meeting this purpose and how far we might wish to deviate from the original intention. That is why I mentioned at the outset the intention of the scheme.
The intention was not to try to achieve a larger benefit, since that could be done 1260 through the social security system. We were trying to achieve a move to child benefit from tax allowances to help those whose income is not sufficient for them to benefit from the child tax allowances. We have been able to meet that objective in the complicated manner that I have described.
We have had the particular problem of widows. That problem arises because for the ordinary taxpayer in receipt of family allowances there was a clawback provision. In the case of the allowance for dependent children there was no claw-back. We had to introduce the changes proposed in Clause 21 so that these families would be no worse off. It was never the intention to make them better off.
I understand my hon. Friends seeking an opportunity to say that these families should be better off. But I am relating the issue to the original intention of child benefit. If my hon. Friends feel that the benefits available under the social security system are inadequate, they are right to press the Department of Health and Social Security for increased benefits. These matters will arise again. I do not need to instruct my hon. Friends about how they should proceed.
This was simply a matter of changing the child tax allowance to child benefit to ensure that people with insufficient income to gain benefit from child tax allowance received that benefit and were not made worse off as a result.
§ Mr. Ovenden
I repeat the question that I asked in a previous intervention. Is there any justification for making two-parent families on the standard rate of tax better off and widows no better off? Why should they not be 30p a week better off like two-parent families?
§ Mr. Sheldon
The answer lies in a complex series of arithmetical calculations. It is an administrative problem. It is not a major problem, and it can be remedied by other means, but not in this way.
I understand why hon. Members bring to these debates a number of matters which would normally be discussed in a debate on social security, but such debates do not occur as frequently as Finance Bill debates. I understand that there are not many opportunities for raising such issues. Many arguments find their way into Finance Bill debates.
§ Mr. MacGregor
I accept the right hon. Gentleman's remarks and I understand that the purpose of the clause is to ensure that widows and others are not worse off as a result of the introduction of child benefit. But we are offering the Financial Secretary a simple and easy way of ensuring that widows and others are better off without waiting for a social security debate.
§ Mr. Sheldon
The difficulty about that is that it would not be simple, because, unfortunately, the system is not simple. Apart from the not inconsiderable moneys involved, there is the problem of the next stage of the phasing operations. This proposal would make it more difficult to carry out the final phases in the move towards a full child benefit system which we all wish to see.
My hon. Friends are anxious to bring about certain social security changes, and they are importing those arguments into this very limited debate. I feel that the remedy for this lies elsewhere. We have met the aims which the Government set out to achieve in the change from child tax allowances to child benefit, and, despite the complexities, that is the right way to proceed.
§ Mr. Patrick Jenkin
The Financial Secretary has said that this is inherent in the scheme. Will this be the pattern in subsequent stages of the child benefit? Will he say something about the double deduction because of the reduction in the child tax allowance?
§ Mr. Sheldon
The right hon. Member should also await a debate on social security before bringing these matters forward. In the transition from child tax allowances to child benefit, the exact nature of the next stage has yet to be settled, but when it is settled the House will be informed.
§ Mr. George Cunningham
With the greatest respect to the Financial Secretary, I do not think that in future we can rely on separate discussions on social security matters and personal income tax matters. The two are so inextricably intertwined, and will be so for at least the next five years, that the House must find sensible ways—although the House never does this—to discuss these subjects at the same time and with the same people taking part, preferably upstairs and not on the Floor of the House.
§ Mrs. Wise
My right hon. Friend said that the purpose we seek to accomplish in the amendment would be better done by changes in the rates of benefit. I believe that there is a good case for making these particular payments tax-free, but for the sake of argument I shall accept for the moment the Financial Secretary's statement that we should do it by increasing benefits. If he had said that the Government intend to increase benefits by the equivalent amount of that in my amendment, I would have accepted his method. But he is not saying that. He is telling me to do something that I have learnt in my three years in the House that it is not possible to do. I am not convinced by his remarks.
If the Government provide the means of ensuring the kind of result that we are seeking, we shall take advantage of it. If they do not, we must try to find whatever means we can. Slowly and painfully we are learning that some means exist.
It ill becomes the Treasury to try to put the whole responsibility for this kind of thing on the Department of Health and Social Security. It is my conviction that the efforts that the DHSS would make in this direction are constantly and consistently thwarted by the Treasury. Therefore, we are justified in placing the responsibility quite firmly on the backs of the Treasury. It thwarts other efforts, so it should deal directly with the problems. Let the Treasury grapple with the efforts to help widows and retired people. It must not simply say that this is a problem for the Secretary of State for Social Services.
This has nothing to do with the child benefit scheme as such or with the phasing out of child tax allowances. We agree with the phasing out of the allowances. The amendment is about making certain payments in respect of children tax-free.
§ Mr. Newton
I have a lot of sympathy with the hon. Lady, but I have now departed from her. She says that the amendment has nothing to do with child benefit, but the practical effect of creating tax-free income for these categories is exactly the same as a tax allowance. So far as the dependency allowances are the same for the different categories, this proposal would be exactly the same as a tax allowance, equivalent to the value of the 1263 dependency allowances or to a flat-rate tax allowance. So far as the dependency allowance is varied, the tax allowance will be different for one category or another. But the practical effect of granting a slice of tax-free income is identical with that of a tax allowance.
I cannot understand why, instead of operating in this complex way, the hon. Lady does not operate on Clause 20(2), under which additional relief is given to widows and others in respect of children—a straightforward tax allowance for the group she is trying to help. Surely it is better to operate by way of a tax allowance which Ministers proposed to increase.
§ Mrs. Wise
We are dealing with Clause 21, and if I sought to introduce an amendment relating to Clause 20 I should be ruled out of order. That is a good reason for proceeding on the basis of this amendment, which is in order.
This proposal is not the same as providing a child tax allowance, because it is related not to the existence of children and parents in general but to the existence of particular categories with special problems. That is different from the original purpose of child tax allowances.
The Government are seeking to make £1 of the widowed mother's allowance, the guardian's allowance and the industrial death benefit tax-free. I am seeking to make the whole of it—which in most cases means £6.45—tax-free. That would directly benefit people with children and with these special problems. They are old, they are widows, or they are invalids. This is worth while. It is unlikely to be done by other means, and the Government do not offer any other means. They say "Do not put pressure on us now. Put pressure on us in some other way at some other time." I believe that these people need some help now.
We have exposed the Opposition's inability to grasp complex matters and their refusal to be particularly interested in these matters when it comes to the crunch. But I have not been looking for their support. That is their decision. The amendment is worth while, it will help those who need help, and I urge my hon. Friends to support it.
§ 11.30 p.m.
§ Mr. Newton
I apologise for intervening at this stage, but I do not apologise too much because it is clear that hon. 1264 Members on the Government side of the Committee who intend to vote for the amendment have not fully appreciated what they are doing. I do not want to labour the point except to say to the hon. Member for Coventry, South-West (Mrs. Wise) that if a child dependency allowance is £2 a week—I take the figure out of the air—or £104 a year, the effect of exempting it from tax is the same as granting that same person a child tax allowance of £104 a year.
To that extent, if what the hon. Member wants to do is to help widows and other single parents there is no doubt—and it is she who has not grasped the point—that it would be simpler to increase the existing tax allowance for widows and others in respect of children—not tax allowances generally, but the allowances we have specifically directed to those about whom the hon. Lady is talking.
The fundamental objection to either of these courses, which we would normally hear from the Labour Benches and which we have heard from the Minister, is that they help only those who pay tax. I do not have any objection to that, although clearly it is not much help to many single-parent families. What the hon. Lady is asking her hon. Friends to vote for is a method of helping single-parent families who are better off than the average, those who are paying enough tax—[Interruption.] It is clear that the hon. Lady and her hon. Friends do not understand what is being proposed. It is that additional benefits should be given to those whose incomes are large enough to pay sufficient tax so that if they receive some of the income tax-free they save money. By definition, any family not earning enough income to pay tax will not benefit from what the hon. Lady proposes.
§ Mrs. Wise
Bearing in mind what the hon. Member and his hon. Friends are always telling us about the low level of pay at which tax bites, I am surprised that he is not grapsing the point. A one-parent family of only one child can start paying tax on earnings of about £26 a week. I do not consider that that is a family too well off to be worthy of consideration.
§ Mr. Newton
I agree. The point is that these families are already getting the additional tax allowance proposed in the previous clause. To that extent they are 1265 already well below the tax threshold if their income is as low as the hon. Lady suggests. What she cannot get away from is a matter of pure logic. It is an argument we have heard often enough from her hon. Friends, namely, that in trying to help people by tax-free income or tax allowances, we are helping those who are comparatively better off.
In certain contexts that is a reasonable thing to do. But we are not talking about the argument from an incentive point of view. We are talking about helping the less well off. Labour Members appear to think that those of us who attach importance to the arguments about incentive are necessarily excluded from worrying about the less well off. It is
§ one of their myths about the Conservatives. At the moment we are not talking about the taxation argument, which is totally different. We are talking about how to help the less well off. The hon. Lady's proposition is not sensibly directed to that end. If what she wants to do is to help those who are paying significant amounts of tax, she could find simpler ways of doing it. She has fallen between two stools, and she would do better not to take too many of her hon. Friends into the Lobby to make fools of themselves with her.
§ Question put, That the amendment be made:—
§ The Committee divided: Ayes 41, Noes 129.1267
|Division No. 132]||AYES||[11.35 p.m.|
|Allaun, Frank||Kinnock, Neil||Selby, Harry|
|Atkinson, Norman||Lamble, David||Skinner, Dennis|
|Beith, A. J.||Latham, Arthur (Paddington)||Smith, Cyril (Rochdale)|
|Bennett, Andrew (Stockport N)||Lestor, Miss Joan (Eton and Slough)||Spearing, Nigel|
|Bidwell, Sydney||Loyden, Eddie||Thomas, Ron (Bristol NW)|
|Canavan, Dennis||MacCormick, Iain||Thorne, Stan (Preston South)|
|Cook, Robin F. (Edin C)||Madden, Max||Thorpe, Rt Hon Jeremy (N Devon)|
|Crawlord, Douglas||Maynard, Miss Joan||Watkins, David|
|Evans, Ioan (Aberdare)||Mendelson, John||Wigley, Dafydd|
|Flannery, Martin||Miller, Dr M. S. (E Kilbride)||Wilson, Gordon (Dundee E)|
|Grimond, Rt Non J.||Newens, Stanley||Wise, Mrs Audrey|
|Hooley, Frank||Penhaligon, David|
|Hoyle, Doug (Nelson)||Richardson, Miss Jo||TELLERS FOR THE AYES:|
|Kerr, Russell||Rodgers, George (Chorley)||Dr. Oonagh McDonald and|
|Kilroy-Silk, Robert||Rooker, J. W.||Mr. John Ovenden.|
|Archer, Peter||Dunnett, Jack||Lyons, Edward (Bradford W)|
|Armstrong, Ernest||Eadie, Alex||Mabon, Rt Hon Dr J. Dickson|
|Ashton, Joe||Ennals, David||McCartney, Hugh|
|Bates, Alf||Ewing, Harry (Stirling)||McElhone, Frank|
|Bean, R. E.||Foot, Rt Hon Michael||MacFarquhar, Roderick|
|Bishop, E. S.||Fowler, Gerald (The Wrekin)||MacKenzie, Gregor|
|Bienkinsop, Arthur||Fraser, John (Lambeth, N'w'd)||McMillan, Tom (Glasgow C)|
|Booth, Rt Hon Albert||Freeson, Reginald||Mahon, Simon|
|Boothroyd, Miss Betty||Gilbert, Dr John||Mallalieu, J.P.W.|
|Brown, Hugh D. (Provan)||Golding, John||Marks, Kenneth|
|Buchan, Norman||Gourlay, Harry||Meacher, Michael|
|Buchanan, Richard||Graham, Ted||Millan, Rt Hon Bruce|
|Callaghan, Jim (Middleton & P)||Grant, George (Morpeth)||Mitchell, Austin Vernon (Grimsby)|
|Campbell, Ian||Grant, John (Islington C)||Moonman, Eric|
|Cant, R. B.||Hamilton, James (Bothwell)||Morris, Alfred (Wythenshawe)|
|Carmichael, Neil||Harper, Joseph||Morris, Charles R. (Oponshaw)|
|Castle, Rt Hon Barbara||Karrison, Walter (Wakefield)||Morris, Rt Hon J. (Aberavon)|
|Cocks, Rt Hon Michael||Katton, Frank||Moyle, Roland|
|Cohen, Stanley||Horam, John||Murray, Rt Hon Ronald King|
|Coleman, Donald||Howell, Rt Hon Denis (B'ham, Sm H)||Noble, Mike|
|Conlan, Bernard||Hughes, Robert (Aberdeen N)||Oakes, Gordon|
|Cowans, Harry||Hunter, Adam||Ogden, Eric|
|Cox, Thomas (Tooting)||Irvine, Rt Hon Sir A. (Edge Hill)||Orme, Rt Hon Stanley|
|Crawshaw, Richard||Irving, Rt Hon S. (Dartford)||Palmer, Arthur|
|Crowther, Stan (Rotherham)||Jackson, Colin (Brighouse)||Pavitt, Laurie|
|Cunningham, G. (Islington S)||Jackson, Miss Margaret (Lincoln)||Pendry, Tom|
|Davidson, Arthur||John, Brynmor||Radice, Giles|
|Davies, Denzil (Llanelli)||Johnson, James (Hull West)||Rees, Rt Hon Merlyn (Leeds S)|
|Davis, Clinton (Hackney C)||Jones, Alec (Rhondda)||Robinson, Geoffrey|
|Deakins, Eric||Jones, Barry (East Flint)||Ross, Rt Hon W. (Kilmarnock)|
|Dean, Joseph (Leeds West)||Kaufman, Gerald||Rowlands, Ted|
|Dell, Rt Hon Edmund||Kerr, Russell||Sheldon, Rt Hon Robert|
|Dempsey, James||Lamborn, Harry||Shore, Rt Hon Peter|
|Doiġ, Peter||Lewis, Ron (Carlisle)||Silkin, Rt Hon S. C. (Dulwich)|
|Douglas-Mann, Bruce||Luard, Evan||Silverman, Julius|
|Dunn, James A.||Lyon, Alexander (York)||Small, William|
|Smith, John (N Lanarkshire)||Walker, Terry (Kingswood)||Woodall, Alec|
|Snape, Peter||Ward, Michael||Woof, Robert|
|Spriggs, Leslie||White, Frank R. (Bury)||Wrigglesworth, Ian|
|Stallard, A. W.||White, James (Pollok)||Young, David (Bolton E)|
|Stewart, Rt Hon M. (Fulham)||Whitlock, William|
|Strang, Gavin||Williams, Rt Hon Alan (Swansea W)||TELLERS FOR THE NOES:|
|Thomas, Jeffrey (Abertillery)||Wilson, Alexander (Hamilton)||Miss Ann Taylor and|
|Thomas, Mike (Newcastle E)||Wilson, William (Coventry SE)||Mr. David Stoddart.|
§ Question accordingly negatived.
§ Question proposed, That the clause stand part of the Bill.
§ 11.45 p.m.
§ Mr. Patrick Jenkin
Clause 21 is the key provision in the structure of the child benefit scheme because this provision reverses the relevant provisions of last year's Finance Bill and makes the child benefit a tax-free benefit. It is the heart of the tax credit principle first put forward by the Conservative Government in their Green Paper on tax credits. Because it occupies such a key position in that structure, a debate on Clause 21 is in reality a debate about the principle of the child benefit scheme—and child benefit relates to tax credits for children.
There are consequential matters contained in Clause 22 dealing with the reduction of child tax allowances, in Clause 23 which deals with children overseas, and in Clause 24 which deals with students which will be dealt with in Committee upstairs. We are debating Clause 21 on the Floor because it is the provision that sets out the principle of the child benefit scheme—namely, that it is a tax-free payment to mothers for children. The Chair has indicated that a fairly general debate on the child benefit scheme and references going beyond freedom from tax would not be out of order.
It is right to remind the Committee that a tax-free payment was always envisaged, certainly at the time of the Green Paper and at the time of the Child Benefit Act. That legislation was taken through the House by the right hon. Lady the Member for Blackburn (Mrs. Castle), who I am glad to see present for this debate. It was only the Cabinet's surrender to the male chauvinists in the Labour Party a year ago, when it was decided to abandon child benefit, that upset that principle.
It is worth pointing out that the pamphlet "The Great Child Benefit Robbery" 1268 sets out a detailed analysis of the rôle played over the years by the Prime Minister in his attitudes to family support. It is clear from quotations from the Cross-man diaries that the Prime Minister has never understood or accepted the case for a tax-free cash payment to mothers. The pamphlet points out that a so-called survey of Back-Bench opinion was in fact a survey of Government Whips, and it states:A feminist backbencher has since said that if you asked the Whips today about votes for women they would no doubt be against it".The Prime Minister was against the child benefit scheme and, therefore, last May that scheme was abandoned and child benefits were then said to be simply a taxable extension of family allowances.
Amendments were tabled to last year's Finance Bill at a late stage to change the whole pattern of what was envisaged at an earlier stage. [Interruption.] The Minister for Social Security says that the scheme was not abandoned. He will no doubt agree, that the tax-free cash payment, which he calls the central pillar of the Government's system of family support, was abandoned last May. From that dismal surrender has flowed all the trouble.
§ The Minister for Social Security (Mr. Stanley Orme)
The right hon. Gentleman may say that it was abandoned in May, but when the working party was set up and the phasing-in started the child benefit was introduced.
§ Mr. Jenkin
The Minister anticipates almost my next words. He is now conceding that last May it was abandoned, and he is trying to say that some attempt to recover the position was made later in the year.
I shall not list the long sad saga of order, counter-order and disorder that followed the surrender of last May. I am sure that hon. Members in all parts of the Committee have been made fully aware by their constituents of the confusion which has ensued.
1269 Let me restate briefly the Conservative view of what the Government should have done. I spelt it out in the debate on 28th June last. They should have introduced the child benefit not at £1 a week but at £2-plus, and the figure is probably £2.34 as the precise equivalent of the under-11 child tax allowance. They should have paid the 30p premium for third and subsequent children. They should have eliminated the child tax allowance at the under-11 level, retained the child tax allowance over 11 where that exceeded the under-11 rate, and retained the full child tax allowance for rates of tax in excess of 35 per cent., so that someone paying 40 per cent. would get relief at 5 per cent., and so on.
That would have produced five clear advantages. It would have given real help, not just 30p a week, to the working poor. It would have cased the soul-destroying impact of the poverty trap. It would have reduced the imbalance between those in work and those out of work. It would have given real help to those one-parent families in work; and it would have switched resources substantially from the wallet to the purse. It would not have left anyone worse off, except perhaps a few very wealthy families, and I concede that it would not have have given 30p to standard rate taxpaying families. The right hon. Member for Blackburn, however, had left the Government's cupboard in the Social Security Department so bare that there were no resources for a general improvement in family support. I spelt out last June what could and what should have been done, but it was not done and that is a matter of great regret.
I recognise that it cannot now be done for 1977–78, and we are now stuck with Clause 21 and the other consequential clauses. But I must state clearly without any "ifs" and "buts" that it will be our intention, when we win the next General Election, to introduce a full child benefit as soon as it is practicable as the first stage of phasing in a tax credit scheme. For the present we must face the consequences of last May's "surrender to chauvinism", to quote the right hon. Lady, plus last September's belated attempt to recover the position.
In September the Government changed tack yet again. The child benefit was 1270 now not to be taxed, as this clause achieves that objective. There was to be no clawback—that is to go too. The child tax allowances were not to be left as had been earlier proposed but were now to be reduced. The result of that dramatic change of direction has been to produce the shambles which is now widely acknowledged.
Officials in the Inland Revenue, the Department of Health and Social Security and the Post Office—three giant Departments—have struggled manfully to perform the miracles that they have carried out to get the scheme as far ahead as it is. They have done it against all odds. The fault that the matter has been so mishandled rests squarely with Ministers who have forced these huge Departments to grapple with radical changes of policy and who have allowed totally inadequate time for the Departments to react to them in the sensible and measured way in which administration should be carried out.
The measure of the difficulties that those Departments have faced becomes clear from an answer I received from the Minister for Social Security to a Question I tabled immediately after the Budget. I asked the Secretary of State for Social Servicesif he will list successive changes of Government policy on child benefit and consequential arrangements since the Child Benefit Act became law."—[Official Report, 14th April 1977; Vol. 930, c. 62.]From the Minister's answer one can identify no fewer than 11 distinct and separate changes in policy that have taken place since the Act became law.
The story started with the decision on 25th May 1976 to make the child benefit a taxable allowance, and last year's Finance Bill did just that. This clause is intended to reverse that. The story ended with the special transitional arrangements for students that were announced on 29th March 1977. There have been 11 separate changes in policy. I shall not list them all. They can all be seen in Hansard. I referred to 23rd September 1976 and the announcements by the Chief Secretary. Three of them were special changes in FIS. There was an announcement about the effect on free school meals and about the effect on students, as well as the new student arrangements announced on 28th March 1271 and the full child tax allowance for students aged over 19, coupled with the benefit from increases in parental contributions.
There have been 11 separate changes of policy during the course of the year. How on earth people are expected to grapple with that is past understanding. In fact, they have not been able to do so. Practically nobody outside the House can begin to understand how the child benefit scheme now works and its effects. What is much more serious, however, is the position of the staffs of the Post Office, the Inland Revenue and the DHSS who must grapple with these changes. One asks how they are expected to cope, and the answer is that they cannot and are not doing so. In the eyes of these staff, the child benefit scheme has become a bad joke. However, it was the fault of Ministers and not of the staff. It is entirely the fault of the Treasury Bench. These staffs are the victims of the Government's ineptitude.
§ Mr. Jenkin
If that is so I am glad to hear it, but is it really suggested that this is a sensible way to administer a major change in tax and social policy—to dribble out a whole series of decisions with the last one being announced only five days before the scheme is due to begin? Do the Government regard that as sensible administration? Of course it is not. Two major changes of tack in the course of one year have resulted in the chaotic introduction of the scheme. One-child families would receive tax-free benefit under the clause, but how many hundreds of thousands of such families have not yet claimed child benefit tax-free? If the child tax allowances are cut, such families will realise that they are losing out, and presumably they will then claim quickly.
But what of the single parent in part-time employment who is below the tax threshold and who stands to gain most because there is no child tax allowance to be cut?
1272 We know that the outturn of the child interim benefit was 10 per cent. below what was estimated—£19 million against £21 million. One family in 10 did not claim CHIB before the end of the year. What steps are the Government taking to reach the families who have not yet claimed child benefit and will not get the benefit of Clause 21?
In a telling speech on Second Reading of the Finance Bill, the right hon. Member for Blackburn said that it was a disaster that no part of the tax cuts in the Budget would go to families with children. She referred tothe major flaw in the Budgetandserious flaw in the Bill".—[Official Report, 28th April 1977; Vol. 930, c. 1530.]I do not often agree with the right hon. Lady, and I hope that she will not consider it an insult if I agree with her on this occasion. The right hon. Lady was right. She and I support the concept of the full child benefit. I was at the Treasury when the scheme was invented, and the right hon. Lady piloted the Child Benefit Bill through the House and gave it flesh and blood. Neither of us envisaged that the introduction of the scheme would make it impossible for the Government to switch resources to the family when taxes were being cut. This has happened, and we must ask whether it is an inevitable consequence of this form of child benefit.
My wife's child benefit book provides for a benefit of £2.50 a week until next April. when my youngest child but one reaches the age of 19. After that, there will be £1 a week for the remaining child under 19. But that goes through to May next year.
We were told at Question Time today that it was intended to increase the benefit not in November but in the next Budget. One of the arguments canvassed before the Select Committee was that benefit payments should appear in the books as units that could be given different values by a relatively simple administrative step. For example, up to a certain date the units would be worth, say, 50p and after that 60p—a 20 per cent. increase that could be achieved with the minimum of trouble. There would be no question of changing the books. The vouchers are 1273 already dated and post office staff would have to check only the date. That is a simple way of providing tax-free increases.
What are the objections to such a scheme? We were told in the joint study of the Labour Party and the TUC which considered whether the rates of chid benefit should be changed from April thatThere would be severe operational difficulties. As far as DHSS is concerned, the order hooks have already been printed at the £1/£1.50 rate and would all (about seven million have to be overstamped. This would involve staff costs of well over £1 million. It would inevitably result in confusion for staff and public alike, at a high administrative cost, for no net gain to families. And there is a real risk of breakdown with people being without order books for the proper amount, and even without orders books at all, for some weeks.Much of this seems to be happening already. Although this was forecast, it could be avoided if we had books of units. I do not understand why this cannot be done. The Government must examine the matter, especially in light of the administrative savings.
Then there is the argument that this would mean more public expense. This raises the question of whether a tax-free payment, such as this is under Clause 21, is public expenditure or whether it should be regarded as a deduction from tax in the way that tax allowances are now regarded. Is that one of the probems that the Government are facing with this question of varying the rate? I cannot believe that it need be.
In the public expenditure White Paper—
§ Mr. Jenkin
The hon. Gentleman is always anxious to rewrite the rules of the House. If he wants to call it a Blue Book I shall not complain, but we know it as the public expenditure White Paper.
What the Government did—this was commented on favourably by the Sub-Committee of the Expenditure Committee—was to show the gross child benefit paid and then the deduction of the reduction in child allowance. The Government said in paragraph 7 of the White Paper:it is this net cost which is included in the programme totals".1274 I say that that is a sensible way of looking at it, but it means that the net cost is still regarded as public expenditure. It replaces tax allowances, and tax allowances and tax credits have the same ecomic effect, almost however one looks at it. That is why the Americans talk about tax expenditure. One wonders whether this is not the right way of dealing with it.
My third question to the Financial Secretary is this. When will this child benefit be increased? We were told this afternoon that it would not be in November, and there is a suggestion that it might be increased next April. Will it be increased only by the amount of the reduction in the tax allowance, or will there be a real increase in value in this tax-free child benefit under Clause 21?
In the Second Reading debate, the right hon. Member for Blackburn said:I am alarmed because by thenthe right hon. Lady meant by November, but she will be even more alarmed in April—it will be administratively too late to increase child benefit. If the Chancellor comes along with more tax reliefs in the autumn, under the formula of the Bill we shall be compelled to leave the children out."—[Official Report, 28th April 1977; Vol. 930, c. 1532.]That is what is to happen. There is now no intention of increasing child tax benefit although the £1 or £1.50 was fixed a year ago, in May 1976, and it will be April 1978 before there is any question of increasing it.
I think that this gets us into a difficult situation indeed. The Government can increase the tax allowance without reference to the Contingency Reserve, but they cannot increase child benefits because that is a charge on the Contingency Reserve and it cannot be done. If that is so, are not we in an absurd situation?
The economic effect of an increase in tax allowance and an increase in child benefit is the same. If the limiting factor is the size of the public sector borrowing requirement—and that is the central feature of the IMF Letter of Intent—whether it is a tax cut or an increase in child benefit, in either case it puts more cash into the hands of the taxpayer. I must ask the Financial Secretary to spell out exactly how the Government see this. What are the administrative constraints? 1275 Is it a question of the printing of booklets, or is it a question of the economic classification of public expenditure limits?
There is a fourth question that arises out of this tax-free child benefit under the clause. Do the Government accept the proposition that over a prolonged period families with children have fallen back relative to families without children? Do they accept that there is a need to redress the balance? Many studies have exposed this trend. I mention only two. First there is the CPAG—the Child Poverty Action Group—Budget memorandum in which tables show that family allowances in 1976–77 were half their real value of 30 years earlier. Another study which has come into my hands is that of the Outer Circle Policy Group. It showed the relativities of child tax allowance to single and married allowances and went back to before the war. It showed that child tax allowances had relatively been sharply reduced.
Incidentally, that report also shows that child tax allowances, expressed as a percentage of the single person's tax allowance, tended to increase under Tory Chancellors but to reduce under Labour Chancellors.
When one looks at the combined figure of family and child allowances, one sees a steady decline over the years with benefits going to families with children, in relation to the single and the married couples. The CPAG's conclusion is thatsupport to children whose parents are working has been steadily eroded.When this is combined with the effect of the disastrous lowering of tax thresholds in real terms over the last three years, Ashfield begins to fall into place. One point that my hon. Friend the Member for Ashfield (Mr. Smith) made throughout his campaign was that people were paying too much tax. The electorate agreed with him, and he won.
But there is another effect. I come to the matter on which I was invited by the Financial Secretary to put my points on the Question "That the clause stand part of the Bill": the relative position of those in work and those out of work. I know that the Financial Secretary took it on board when I said it before, so I shall be brief.
The effect of what is being done in this clause, making the child benefit 1276 tax-free, is to ensure that there is an advantage to the poor family when in work. Under the Government's scheme, the advantage is 30p to all families and £1 to poor families per week. There is no comparable advantage to those on national insurance and social security benefit. I have accepted that that is right and in accordance with the principle of redressing the balance between those in work and those out of work. It is a small step but nevertheless a step in the right direction.
If one looks at it in relation to short-term benefits for unemployment, sickness and invalidity, these are tax-free and the effect is that there will be duplication of detriment. The double detriment is because tax allowance is reduced and child benefit takes its place with 30p extra a week. But once the family goes out of work and becomes unemployed or sick, the child benefit is set, again, against their dependancy allowance under the social security scheme. At some point the detriment of double deduction will offset the advantage of the extra 30p received while in work, and those families in the course of a year will end up worse off.
That is one way of redressing the balance between those in work and those out of work. But is it what the Government intend? The right answer, surely, is a full tax credit. That would make the benefits taxable in the way in which long-term benefits are taxable and nobody would be worse off, because the advantages are set off one against the other. This benefit does not help families with students in college now who will end their courses in July. They do not benefit from the reduction in parental contribution which starts next September.
We shall no doubt debate the question of overseas children in Committee upstairs, but the Government's decision to phase out the child tax allowance for children overseas, notwithstanding that they do not get child benefit, is in line with the report of the Select Committee which examined this matter in 1972–73. It said, and I quote paragraph 109We appreciate that this change in the system will alter very materially the position of those who now claim the allowances in respect of overseas dependants and we should welcome any step which could be taken to mitigate hardship in this field.1277 It has been postponed for a year. Therefore, the Under-Secretary of State for Health and Social Security says that the word "sharply" used by the Secretary of State in the debate last June is no longer justified. That is a matter of semantics.
The paragraph continues:We doubt whether allowing tax relief on proof of remittances actually sent abroad would be satisfactory, because the proof of despatch would by no means be proof that the remittance would be bona fide for the benefit of a dependant.Then there is a key sentence:But we think that an extension of the covenant system might be further investigated.Do the Government have it in mind to extend the covenant system so that a covenant for a child overseas could qualify for tax relief as the tax credit Select Committee recommended?
What would the reaction have been if it had been a Tory Government who reduced the child tax allowances for overseas children? The reaction in the House would have been one of utter hysteria. We should have been accused of racial discrimination, of causing grave hardship to the poorest in the country, of a savage attack on the immigrant community—all of which is said in a letter to me from the Redbridge Community Relations Council.
Yet this is probably the right decision. But the Government must examine the arguments of the Select Committee to see whether there is some way of relieving what might be hardship. We are a responsible Opposition. We see the strength of the case, but we want to know about the covenant scheme.
The clause may represent a significant step on the road to a proper structure of support for families with children, but it is a minuscule step. In the words of the poet Horace,Parturiuni montes: nascitur ridiculus musAlthough I have been critical of the way in which the child benefit has been introduced, we support the benefit and I do not suggest that we vote against the clause, because it is integral to the scheme. But Ministers continue to make absurd claims for the "ridiculus mus" that they have produced. The Minister for Social 1278 Security, who, I suspect, has left to catch his train, said on 4th April:the present two systems of support for children, child tax allowances and family allowances, are being replaced by a single tax-free cash benefit".That is not true. There is only a small first step along that road. He continued:all the support for children is going where it properly belongs, to the motherThat is not true either. It will not happen for years. The Government are trying to pretend that the scheme is a great deal more important than it is and as it would have been if they had introduced our proposal.
The last word must go to the Secretary of State for Social Services, who went to Washington, County Durham, to praise the merits of the child benefit scheme. He may have said "Ha'way the staff", but he did not have the nerve to say "Ha'way the children", because they get precious little out of it. The clause is a small step and we shall not vote against it, but the Government must know that those who complain of the "Great Child Benefit Robbery" have a great deal of right on their side.
§ Mrs. Barbara Castle (Blackburn)
It was typical of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) that he should spend so much of his speech on resurrecting so many stale mythologies. To listen to him one would have imagined that if there had been a Conservative Government in office we should have had, in April this year, the introduction of a child benefit scheme that would have spread richness, light and joy throughout every family in the country. One would never have imagined that Conservative Governments never increased the family allowance in the whole 13 years they were in office, and certainly never took the step of extending it to the first child.
Let me begin by disposing of some of the mythology. We should be talking about the need to increase family support. The child benefit scheme which the right hon. Member for Wanstead and Woodford told the Committee the Conservative Government would have introduced, had they still been in office, would not have done that. When the Government announced the postponement of the scheme the right hon. Gentleman argued, 1279 as he has argued again today, that we could have had the child benefit scheme without any additional cost at a rate of £2—
§ Mr. Patrick Jenkin rose—
§ Mr. Peter Bottomley (Woolwich, West)
I believe that my right hon. Friend's comments were made when the Government were providing the extra £90 million. That was included in what he was saying. Therefore, the right hon. Lady is not quite correct.
§ Mrs. Castle
Yes, at no additional cost to what the Government were providing—I know the figures perfectly well—giving a level of child benefit of £2.35 a week.
The right hon. Gentleman then had the audacity and the dishonesty to tell the Committee that it could not be proceeded with because I had left the cupboard bare. But, by his own admission, he was not going to take anything extra out of the cupboard. That was another of his distortions and irrelevancies.
§ Mr. Patrick Jenkin
There is a lot on which the right hon. Lady and I agree. I have been rough with her and she is entitled to be rough with me, provided that we get it right. I made it clear that in my scheme there would have been no general improvement, but there would have been a big improvement for the children of those at the bottom end of the income scale. They would have got a benefit two or three times larger than has been given and there would have been a corresponding switch from the wallet to the purse. There would have been no general 30p. That is the difference between what we would have done and what the Government have done.
§ Mrs. Castle
That is the point of difference. I am saying that the Opposition do not believe in an increased level of family support.
§ Mrs. Castle
Exactly. That is what he is now saying. Therefore, he cannot say that I left the cupboard bare. The right hon. Gentleman did not believe in any 1280 additional public expenditure. What I did that emptied the cupboard, if that is the phrase that the right hon. Gentleman wants to use, was to increase old-age pensions, which I am sure the Opposition consider was extravagant, and to extend the disablement scheme, about which the hon. Member for Wallasey (Mrs. Chalker) prates. That takes money. The money cannot be there if it has been spent on helping disabled housewives and mobility allowances. That was what emptied the cupboard, again to use the right hon. Gentleman's phrase.
The right hon. Gentleman attempted to justify as highly desirable the introduction of a full child benefit scheme at no additional cost. If he imagines that would have spread enthusiasm throughout the land or got rid of any of the difficulties of the transitional anomalies, he is living in cloud-cuckoo-land.
What we ought to be fighting for tonight, and what I had been fighting for in my speeches quoted by the right hon. Gentleman, is for this country to devote an increased level of its resources to family support. I totally reject the concept that the cupboard was bare. It was always intended that the child benefit scheme should be covered by the contingency reserve which stood at £800 million.
I considered that a minimum level for the full introduction this year of child benefit would be £2.70 per week. That has been variously estimated as costing between £110 million, compared with £94 million and what the Treasury maintains is £180 million. I dispute that figure. Even accepting the Treasury's figure, I maintain that at a time of rising inflation and particularly in a year when there has been such economic overkill that we are having to give money back through tax reliefs it is scandalous to suggest that the cupboard is too bare to find £180 million.
That is the indictment that we should be making tonight. It is also an indictment against the Opposition. If we had a Conservative Government we should not have a child benefit scheme at all, let alone one at the level that I consider to be the minimum required. The evidence is that in the last few years of the Tory Party's conversion to a total abhorrence of public expenditure and to 1281 cut it at all costs, Opposition spokesmen have told us that the tax credit scheme on which they produced a Green Paper would have had to be reviewed.
The Opposition would not have introduced anything like the social improvements introduced by this Government. We know that. May we now dispense with the hypocrisy and turn to what should be done now? Increasing the level of family support is of dominant urgency.
Of course, it is useful to have a child benefit scheme for its own sake, whatever the level, because it extends benefit to those who are too poor to pay tax. But let us realise that we are talking about a tiny minority—about 250,000 families. We should be talking about the 7 million or more children whom we want to benefit and who are going short. They are the new poor in our society.
I regret deeply the postponement of the full introduction of the child benefit scheme. I accept that this is a transitional phase, which creates the type of anomalies that we discussed earlier. But I plead with the Government to recognise that this year they have deliberately refused to introduce a proper child benefit scheme at a reasonable level. At the same time they have given away £1,800 million in tax reliefs, not a penny of which has gone directly to benefit the children who are so much in need.
My right hon. Friend the Financial Secretary said that we must concern ourselves with those who are in greatest need. Those in greatest need today are the families on modest incomes with children to bring up at a time when inflation is continuing at an intolerable level. Out of the £900 million spent on raising the tax threshold in the Budget, only £360 million goes to parents with dependent children. Families with children are becoming relatively poorer in relation to the single person. We spread the available resources so broadly that we have to leave out the children. That is an intolerable situation, which will become doubly intolerable if—as I hopc—we have another reflationary injection of relief and easement of economic and financial stringencies in the autumn.
What are the Government going to do about the family in that situation? I totally reject the idea that it is administratively 1282 too late to increase child benefit this November. I have proof of that. When I expressed anxiety about whether we were running too late administratively to increase the pensions and other benefits in timefor the November uprating, I was told, only this afternoon, by the Secretary of State, that there was no need to worry. He said that there was plenty of time left, and that the middle of June would be a perfectly satisfactory starting date. I hope that he does not have the same trouble with the Civil Service unions that I had through apparently rushing an uprating. This House has until mid-June to decide to increase child benefit in November. We should do it.
That is what concerns me tonight. I am not concerned with the past—with my disappointment over the delay and the phasing. I am concerned with one thing only—that before it is too late we should increase the level of support for families. I ask my right hon. Friend, in his reply, to repudiate the answer that I received earlier today, when I was told categorically that there would be no increase in child benefit this year—not even as part of the annual uprating. This is what I find intolerable.
§ Mr. Peter Bottomley
I follow with some pleasure the speech of the right hon. Member for Blackburn (Mrs. Castle), especially the middle and later parts, which were on topics on which we agree.
There are various problems that could easily be considered in this debate on the clause, but I shall take up the right hon. Lady on only one or two issues. She said she wanted to deal with the mythology surrounding these matters. I thing that she created some of her own, or that she was rather selective in her memories.
What a shame that the Labour Government did not introduce the full child benefit scheme in April 1976. I think I would have the right hon. Lady's agreement on that point. It was a great pity that, as Secretary of State in those days, she could not persuade her Cabinet colleagues. Had she done so the scheme would have been in effect and running for more than a year. The uprating would have come—not automatically, because we know how the Treasury Ministers have to deal with the trade unions, and they have a blind spot when it comes to 1283 looking at elements of family support as part of the wage negotiations and bargaining.
It is a shame that all benefits are not put in the Finance Bill for confirmation. That would give Back Benchers like myself the opportunity to attack the problems of increasing child benefit directly without having to mess around with child tax allowances. There is all-party agreement for bringing in child benefit, yet we have a Finance Bill that does not give us the opportunity of looking directly at benefits that are equally a part of Government expenditure as tax allowances or other benefits. The Treasury Ministers should consider this point in future.
The House should support the suggestion of putting units on vouchers for child benefit. One reason why this has not been done in the past is not that the Post Office actually needs to read the sum on the form but to give the Treasury an excuse to delay increasing these benefits, which should be raised in line with inflation in the same way as old-age pensions.
If we have a universal system of old-age pensions and a universal system of family support through child benefit, what is so peculiar about children that we ignore the ravages of inflation on them? How are they different from pensioners? Why does the old-age pension go up automatically while the child benefit does not? Is there some distinction that I have missed in my two years in the House? Or are we supposed to assume that because some families with children are at work, they get extra increases at work because of their family responsibilities?
We know that that is not true. The 8 million old-age pensioners are treated differently from the 14 million children, who are left to muddle through in a fog of inflation, beset by the ravages described by the right hon. Member for Blackburn. Yet the House has so far seen no reason to change. In fact, the right hon. Lady led her colleagues into the Division Lobby against a suggestion that there should be even an annual review of the level of the child benefit. The picture seems to change according to whether one is on the Back Benches or the Front Bench.
1284 However, I think that the right hon. Lady will now agree that it would have been right to have not only an annual review but the automatic uprating, following that review, which we have with old-age pensions. I am not blaming the right hon. Lady for her actions; I am blaming her Cabinet colleagues for not having the foresight, the compassion or even the common humanity to recognise that dependent children should be treated on all fours with pensioners.
It is now 30 years since Eleanor Rathbone won her campaign for family allowances. For those 30 years, we did without a benefit for the first child. We now have it. But in the case of our nearest Common Market partner, France, for an additional child a mother will get £1,000 over two years. In this country she gets less than £100. Are we so down on the family?
Perhaps the reason is the composition of our political parties. The Labour movement is built around the representation of the person at work. In discussions about distributing increased production or incomes policy, do its members discuss with the Government the position of those with family responsibilities? Are they discussing now with the Chancellor and the Secretary of State for Social Services how, in the next stage of incomes policy, the tax-free child benefit can be increased so as to introduce some equity—
§ The First Deputy Chairman (Sir Myer Galpern)
Order. I have only just come into the Chair, but I have begun to wonder where the hon. Member's speech is going. He has been looking at me quizzically and smiling, and he has reason. He is not relating his argument to taxation. The question of the level of child benefit is strictly out of order.
§ Mr. Bottomley
I was smiling because I remembered a jest from the Chair earlier tonight and wondered whether I was going to be treated to another.
§ Mr. Bottomley
I say, "Good morning," to you now, Sir.
If I may try to relate my remarks more closely to the clause, I was alluding to the present discussions, which have a impact on taxation and therefore the level of tax that is not being levied on child benefit. The Government at the moment are apparently ignoring the 14 million children affected by this tax-free child benefit. They seem to ignore the 14 million parents—the 28 million people, or 27½ million if we assume that there are a number of one-parent families.
§ The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins)
The hon. Member's arithmetic is slightly wrong. Some parents have more than one child, and therefore one does not double the number of children to arrive at the number of parents.
§ Mr. Bottomley
I am grateful to the Minister, but may I draw his attention to the fact that most children have two parents? Therefore it can work out that way. If there are 7 million first children, it suggests that there are roughly 7 million families. If, on average, a child has two parents, that means there are 14 million parents. Seven million first children plus 7 million subsequent children, plus 14 million parents, totals 28 million. I may have got my sums wrong, but it seems to be logical, if we are dealing with this number, that they ought to be given more consideration than we can give in a short debate, which possibly verges on being out of order, early in the morning.
The proceedings on the Finance Bill should make provision for a serious debate on the topic with which the right hon. Member for Blackburn and I are concerned, namely increasing the level of family support. It is time that there was a family movement as effective in terms of its reasoning and logic in presenting a case to Government as the trade union movement, which represents 11 million people out of a working population of 23 million. That is much less than the 28 million people involved here.
When the Minister replies I ask him to tell us whether there is to be a proper increase in child benefit in April next and, if so, what kind of legislation will be introduced to make that possible. When will it come forward—
§ The First Deputy Chairman
Order. We are not discussing the level of child benefit. I hope that I do not have to repeat that.
§ Mr. Bottomley
Not only shall we not be able to give help to one-parent families at the level that is, perhaps, higher than the benefit specified in this clause; we shall not be able to increase it properly until we have a child benefit that is substantially higher than it is at the moment, and getting on towards the level in France.
If the Conservatives had come into government after the Child Benefit Act had been enacted and found themselves in the position in which the Labour Government now are there would have been a row that would have lifted the roof off this place—a proper row. I hope that the Government will feel as contrite and as guilty as they ought to and that when they go into opposition—shortly—they will put pressure on a Conservative Government to introduce the sort of family support that is needed.
§ Mrs. Lynda Chalker (Wallasey)
I shall try not to detain the Committee longer than is necessary, but we have had some success tonight, in that this is the first time that we have had a joint meeting of the Treasury and the Department of Health and Social Security teams on this question of child benefit being tax-free. In many of the arguments that have been bandied between the Department of Health and Social Security and the Treasury it has been the Treasury which has been pulling the strings.
I am conscious of the title of this clause. We all recognise that the child benefit should be a benefit as of right and tax-free. We cannot discuss its level at present but we do feel strongly that if we are to have a benefit as of right it should be meaningful, particularly for the lower-paid families and those who come below the tax threshold. They will not benefit to the degree that the right hon. Member for Blackburn (Mrs. Castle) wishes, or to the extent that my right hon. and hon. Friends believe is correct, without a proper child benefit scheme.
I shall not go over the 12-month ever-changing scene described in the parliamentary answer of 19th April. It suffices 1287 to say that in reaching the full tax-free child benefit in three separate stages of reducing the child tax allowance, we are still leaving the general public in considerable confusion. The volume of correspondence received by accountants throughout the country about this tax-free benefit and the reduction of the tax allowances is phenomenal. If the Government have done one thing by the manner in which they have introduced this benefit, it is to give increased work to the accountancy profession. Many have found the instructions, however simplified they may now be, a continuing source of argument and discussion as the various changes have been brought to bear over the past 12 months.
From everyone who has spoken in this short debate we have heard of the plight of families with chidren. However, there is one question that I should like to ask about those student children, if they can be called such, who are over 19.
In a Written Answer on 29th March—columns 111 and 112 of Hansard—the Chief Secretary to the Treasury explained in considerable detail the way in which the child tax allowances were to be phased for students still in full-time education on 31st December last year and how this would be worked out for the coming year. As I understand it, that process will need to be repeated. This is because the levels of grant, especially when they are discretionary from the local authorities, are likely to be changed. So we are not coming to the end of the road in simplifying the situation for parents of students over 19.
There will be great difficulties, particularly next year, when we come to the second deduction in the tax allowances. Then, we hope, the child benefit will become more the real benefit that it is intended to be. I hope that shortly we shall clarify the matter, so that parents are looking not simply 12 months ahead when thinking of the support that they will need to give to their offspring, but a little further than that, in the light of guidance given by the Treasury.
There is another issue involved in the child benefit being a benefit as of right. It is what we do about increases in costs paid by families that are not well off. The child benefit will be more than offset by the increase in the cost of school 1288 meals that is to follow this September. Adjustments are being made, but if the changes in the tax-free child benefit are not to occur until April 1978, families will have been grappling with increases in the cost of school meals for about seven months, and those increases will be far greater than the child benefit.
This, too, is a matter that has been insufficiently discussed by local authorities, the Department of the Environment, which is responsible for the budgeting of local authorities, and the Treasury. Many low-paid families will be in great difficulty because of the increase in school meal costs.
There are many benefits that interact with the tax-free child benefit. If we are to do what the Committee would wish, which is to ensure that a start is made and the still outstanding difficulties are ironed out, we must look to eventual simplification of the scheme. I repeat the words of my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) when he asked the Government to consider again a unit system that would make any further changes not a nightmare for the staff involved but a matter of simple adaptation as time goes on and the benefit becomes part of a real child credit scheme.
It is easy to understand why the right hon. Member for Blackburn protested too much. The right hon. Lady feels passionately on these matters and we understand and welcome the constant spurring that she is giving the Government Front Bench and also the thinking that she is encouraging to take place in other quarters as a result of her efforts. However, there is one thing that must be said from both Front Benches—namely, that we cannot make identical the conditions of child tax allowances and child benefit, tax free as it is. There will be problems such as the one that I have outlined.
We should be seeking to reach a tax credit position in which no one is worse off and some people—for example, those who are poorer—are better off than those who can afford to make small sacrifices. That is not to say that we should be penalising those who have made the effort. It has always been part of the Conservative case that we should ensure that those who make greater work effort should retain a greater proportion of their 1289 earnings. That is what the tax debate is all about.
We say that it is high time that the clause made its appearance. It is not all that we would wish it to be. This is not because of anything that happened during 1970–73 but because we have suffered such mammoth inflation over the past three years. We know that inflation has harmed families most, especially those with many children. The clause may begin to help but it is a tiny drop in the ocean of increased prices and the general burden that families have had to bear under the past three years of Labour Government.
§ Mr. Robert Sheldon
The hon. Member for Wallasey (Mrs. Chalker) is pleased that on this occasion at least the Treasury is involved in child benefits. I understand the hon. Lady's concern, because in the case of many others who see the hand of the Treasury behind the control of expenditure, there is frequently a misapprehension about the rôle of the Treasury.
The main task of the Treasury in these matters—the right hon. Member for Wan-stead and Woodford (Mr. Jenkin) might understand this better—is not to determine levels of expenditure bat to ensure that they fit in with the decisions taken by the Cabinet.
When my right hon. Friend the Member for Blackburn (Mrs. Castle)—she has unrivalled experience in these matters—went into the problems of the family support systems that we have examined, she mentioned the increased level of resources that needs to be found. We can treat that comment only with the greatest respect and hope that it will be possible to meet her objectives and the objectives of many others of those who take part in these debates.
I know your strictures, Sir Myer, on mentioning the question of increases in child benefits. I think that I can more easily comply with your demands, partly because I do not have responsibility for dealing with the question of increases and also because these matters were raised in Question Time today. It is obvious that even though I desired to do so I should be unable to go beyond what the Secretary of State said this afternoon on this matter.
1290 The right hon. Member for Wanstead and Woodford spoke a great deal about past matters. My right hon. Friend the Member for Blackburn said that she was not concerned with the past but with the future. The right hon. Gentleman previously suggested a scheme in connection with child benefits, and I recall that he advanced another scheme in respect of petroleum revenue tax. The right hon. Gentleman is fond of introducing schemes. He must beware of the excessive pride of parentage that can make one too devoted to schemes that may be reasonably satisfactory or useful as a basis for argument but that are not the only way of looking at matters.
Mr. Patrick Senkin
The Minister is probably right to chide me about excessive pride in the parentage of schemes, but I have always regarded it as part of the duties of an Opposition to be constructive as well as critical. I like to be able to answer the question "What would you have done, chum?" On both the petroleum revenue tax and on this provision, I have done my best to answer that question. I have told the Government what they should have done. In both cases they would have been much wiser to take my advice.
§ Mr. Sheldon
I am glad to see the confidence that the right hon. Gentleman retains in schemes that did not see the light of day. One can be a little overenthusiastic about devices that one thinks up oneself and a little more objective about those thought up by somebody else. I do not deny the right hon. Gentleman's interest and involvement in these matters, and I have some admiration for him on that score, but I am seeking to point out the penalties that come from over-enthusiasm for schemes that one devises oneself, since one does not look upon them as critically as one would examine other schemes.
The right hon. Gentleman asked how many one-child families have not claimed child benefit. He will know that they have had 12 months in which to claim. I am informed, although this matter is not within my own responsibility, that only 3 per cent. of one-child families, eligible have not claimed child benefit.
§ Mr. Sheldon
The figure is 3 per cent. of all families. I am sorry if I did not make that clear.
The right hon. Gentleman also pointed out the advantage for families in tax-free child benefit. He suggested that there was no comparable advantage available to those drawing national insurance benefits. He then dealt with the point about the problem of short-term benefits being tax-free and leading to a double disadvantage. The main problem is that we as a Government believe that the administrative problem of the taxation of short-term benefits is a matter that no Government will readily be able to accept. Those are the difficulties that face us.
I think that we are right to have started the child benefit scheme and to try to phase it in in a way that produces the least disruption to those concerned. I appreciate that anxieties of those who would wish to see it implemented over a shorter period of time, but we must pay attention to the representations made on behalf of industry, among others. Although this has led to a much more complicated form, it is the right way to handle it.
§ Mr. Peter Bottomley
When the Financial Secretary speaks of representations from industry, what does he mean? Did the CBI and the TUC come forward? Did the right hon. Gentleman get a wave of letters from people?
§ 1.0 a.m.
§ Mr. Sheldon
I thought it was general knowledge that the Labour Party-TUC committee that met on this matter expressed its anxieties. Those anxieties came from various sources, including industry. I do not say that the whole of industry made representations, but representations were certainly received from industry.
These provisions will be implemented over the three-year period starting April 1977 and this is only the first stage. A number of matters have yet to be decided.
My right hon. Friend the Member for Blackburn dealt with one of the most important points when she condemned some of the criticism that we heard from the Conservatives. She pointed out quite fairly that the child benefit is a reality. The tax credit scheme was a dream.
I am aware of the expansionary conditions of the time when the Conservatives 1292 first formed their ideas, but since then there have been substantial changes in the views of that party's Front Bench. That has some connection with the control of public expenditure, which the Conservatives believe is too high. They have spoken of the need to cut public expenditure, and I have not heard the right hon. Member for Wanstead and Woodford refute that. I am sure that their scheme would have been a prime candidate for such treatment.
§ Mr. Patrick Jenkin
Does the right hon. Gentleman realise that another major event since the Select Committee reported is that the real value of tax thresholds has been very sharply reduced and that therefore the cost of converting the tax allowance into a tax credit is very much smaller than it was at the time of the Green Paper and the Select Committee? Therefore, the Minister's arguments that it was £1,300 million and is now £5,000 million is so wide of the mark as to be ludicrous. The cost of introducing tax credits now will be much less, in real terms, than it was then.
§ Mr. Sheldon
I cannot believe that the right hon. Gentleman, if he ever had the chance of bringing in a scheme that would cost several thousand million pounds—[Interruption.] The old scheme was to have cost £1,500 million, and that figure is not likely to have been much reduced. In the debates in the Select Committee we were talking in terms of thousands of millions, and it would cost that much to introduce the scheme now.
I note the right hon. Gentleman's disclaimer on this matter. I note, too, the figure that we have been able to put on the scheme. Perhaps these matters could be debated at greater length. But the right hon. Gentleman must accept this point. At a time when the Conservatives are anxious to cut public expenditure, when their economic spokesmen have spoken of the need for a cut in transfer payments. it would have been astonishing if this scheme had not been a prime example of something that needed to be cut, or, indeed, of something that did not need to be introduced. It is against that background that we should see the Government's achievements, of which, in this field and many others, I am proud.
§ Question put and agreed to.1293
§ Clause 21 ordered to stand part of the Bill.
§ To report progress and ask leave to sit again.—[Mr. Tinn.]
§ Committee report progress: to sit again this day.