HC Deb 12 April 1978 vol 947 cc1389-405
The Secretary of State for Social Services (Mr. David Ennals)

I shall, with permission, Mr. Speaker, make a statement about the increases in social security benefits which will come into effect from the week beginning 13th November.

Under the 1975 Act, pensions and other long-term benefits must rise in line with earnings or prices, whichever is greater, and short-term benefits must rise in line with prices. As a result of our success in the battle against inflation, we expect earnings to rise substantially more than prices during the 12 months to November 1978. As my right hon. Friend the Chancellor of the Exchequer has announced, the single person's pension will go up by £2 from £17.50 to £19.50 and the rate for a married couple by £3.20 from £28 to £31.20. The same increases will apply to widows' and invalidity pensions. These are increases of about 12½ per cent. over a period when we expect prices to rise by only 7 per cent. I am satisfied that these increases will be sufficient to meet the statutory requirements. Thus, these new rates will provide a further improvement in the real value of pensions of over 4 per cent.

This will be the sixth occasion on which we have increased pensions since we came into office just over four years ago. Between October 1973, when our predecessors last increased pensions, and November 1978, pensions will have risen by 150 per cent. in cash terms. The real value of the pension will be more than 20 per cent. higher than the pension rates which we inherited. This is proof of the Government's determination not only to protect pensioners' interests but to improve their position in society. This is a remarkable achievement for a period during which this country has faced the biggest economic crisis for over 40 years.

The earnings rule limit will go up from £40 a week to £45.

The graduated pensions which many people earned under the scheme introduced by the Conservative Party in 1961 will be increased by 3.6 per cent. from November. This is in line with the forecast of price increases from this month—the beginning of the new pension scheme.

Short-term benefits for sickness and unemployment will go up by £1.05, from £14.70 to £15.75, for a single person; and for a married couple by £1.70, from £23.80 to £25.50. Maternity allowance and injury benefit will go up by the same amounts. Injury benefit will become £18.50 for the single person and £28.25 for the married man with a dependent wife. This will fully compensate for the rise in prices since last November.

War and industrial injuries disablement benefits will increase in line with other long-term benefits. For example, the 100 per cent. rate of pension for war disablement and for work injury will go up from £28.60 to £31.90. The additional allowances which can be paid with these pensions will get comparable increases.

Turning now to the civilian disabled; the therapeutic earnings limit, which is applicable to all incapacity benefits, will go up from £10 to £11 a week. The non-contributory invalidity pension, which last November was extended to disabled married women unable to go out to work or do their housework, will go up from £10.50 to £11.70.

I have already announced that the rate of mobility allowance, which was increased to £7 last November, will go up again to £10 in July.

The increase in the main supplementary benefit scale rates will be the same as those of the national insurance benefits to which they are related. They will come into force at the same time. The other scale rates will, of course, also be increased.

In November, the Supplementary Benefits Commission will also increase the discretionary additions for extra heating and for special dietary needs.

My right hon. Friend the Secretary of State for the Environment intends to make appropriate adjustments in the needs allowance for the rent and rate rebate and rent allowance schemes and will be consulting his advisory committee on rent rebates and rent allowances.

The increase of child benefit paid out last week brought the rate up to £2.30 for each child. We are increasing this in April 1979 by £170 to £4. This new rate of child benefit will be reached in two stages, 70p in November and a further £1 in April next year. A mother with three children, who from April 1977 drew £4, now draws £6.90 and from next April will get £12 each week. For the great majority of working families this will be the highest level of support which has ever been provided. One-parent families will also be given extra special help. The £1 premium for the first child will be doubled next November. Lone parents with one child who now draw £3.30 will, by next April, get £6, and those with two children will get £10 instead of £6.50.

The Family Income Supplement which is payable to working families bringing up children on low incomes will also be included in the November uprating. Detailed proposals will be announced later.

We shall be spending upwards of £1¾ billion next year as a result of the changes I have just announced. The full-year cost of the benefits uprating, apart from child benefit, will be about £1,300 million, and the child benefit cost over £500 million. The 1978–79 cost is about £670 million in total. More precise details of the costs will be made available later.

Any changes in contribution rates for 1979–80 resulting from the review will of course require the approval of Parliament.

For the convenience of the House, I am circulating details of the new rates of benefit in the Official Report and copies will be available in the Vote Office. I shall shortly be laying the necessary draft uprating order under Section 124 of the Social Security Act, accompanied by a Government Actuary's report in the usual way. I shall also be laying a draft order increasing child benefit.

I am sure that the whole House will welcome this further increase we are giving to the living standards of pensioners and greatly increased help we are providing to families with children. The new level of child benefit will substantially reduce the number of people who can be better off on benefit than at work and bring substantial help to that minority of poor families who have been unable to benefit from child tax allowances.

Mrs. Chalker

The Secretary of State will be aware that the Opposition welcome the statement and particularly the increases in child benefit, which are a major part of the Opposition's family policy. May I ask him to clarify one point that he made when dealing with pensioners? He said that the increases were 12½ per cent., but the written copy of his statement alludes to 111½ per cent. We should be grateful for clarification.

May I ask him two further questions on the pension increases? Has he given consideration to the 53-week pension year, which was suggested at the end of last year, to overcome the annual difficulty that we face in requests for a Christmas bonus? Secondly, the right hon. Gentleman will have noted his requirement under the Social Security (Miscellaneous Provisions) Act to review the earnings rule. When may we expect such a review?

The Opposition note the continuing and worrying growth in means-tested benefits. May I ask the Secretary of State what action he and his Department are taking to reduce the dependency on means-tested benefits and thereby to simplify the whole of the British benefits system, which is getting itself into increasing chaos for those who apply and those who have to deal with such applications?

Mr. Ennals

I very much welcome the fact that the hon. Lady has welcomed the statement, particularly the boost for child benefits. I thought that she might have done it with a little generosity and that her words might have produced some support from her hon. Friends. No doubt she has noted the comments of the Child Poverty Action Group which called this a tremendous Budget for the family. I mention this because the Group has so often been quoted by the hon. Lady.

If I said 12½, per cent., it was a slip of the tongue because the figure is 11½ per cent. That is the basis of our asssessment of what will be the November-on-November earnings figures.

The hon. Lady asked about a 53-week pension year and a Christmas bonus. No decision has yet been taken about a Christmas bonus for this year. On the earnings rule, I referred to the increase from £40 to £45, and there will be a further statement on this subject.

The hon. Lady also asked what further action we would take to reduce the number of people dependent on means-tested benefits. The introduction of rent and rate rebates has substantially decreased the number of pensioners who are dependent on supplementary benefits and that is an important step. However, the main contribution in this respect is the new pension scheme, which is designed to ensure that people will retire with pensions that will be well above the level that would make them dependent on supplementary benefits. That is the great achievement.

Mr. Ioan Evans

Is my right hon. Friend aware that the increase in public expenditure to meet the needs of those whose need is greatest in the community will be generally welcomed? We now have a caring, sharing Government. I welcome the increase for old-age pensioners and the fact that, despite our financial difficulties, they are to get an increase in real terms, but will my right hon. Friend look at the fact that many retirement pensioners are entitled to supplementary benefit but are not claiming it? Will he encourage them to put in claims for the new rates which he has announced?

Mr. Ennals

My right hon. Friend the Chancellor of the Exchequer has helped pensioners not only in terms of the pension uprating but by tax concessions and allowances. It is not only a family Budget but very much a Budget for elderly people, and the response that it has had from most of the organisations representing elderly people shows a different attitude from that adopted in previous years.

We have said many times that we are worried about the number of people who do not claim benefits. We constantly seek the help of hon. Members and the Press to make the benefits known. One of the reasons that they are not taken up is that many people have incomes that are only marginally below supplementary benefit level. There is also the fact that sometimes the action of hon. Members opposite in equating supplementary benefit claimants with scroungers is a disincentive. I hope that they will show a new attitude and that we shall do everything we can to encourage people to claim the benefits to which they are entitled.

Mr. Bowden

Is it not outrageous that the cash allowances for war pensioners' vehicle schemes have not been increased for 12 years? Will the Secretary of State please do something about this?

Mr. Ennals

This matter is under consideration.

Dr. Edmund Marshall

Can my right hon. Friend give us an assurance that the child dependency allowances in relation to retirement, invalidity and widows' pensions will be increased in November by the same order as the increase in child benefit over the coming year?

Mr. Ennals

If the child dependency allowances are long-term, they will be based on the figure of 11½ per cent. and if they are short-term, they will be based on the 7 per cent. figure.

Mr. Pardoe

Can the right hon. Gentleman say something more about his statutory requirement to meet the rise in earnings? Is he aware that his estimate that earnings from November to November will rise by only 11½ per cent. is astonishing when we bear in mind that the latest Government estimate from August to August is 14 per cent.? The Secretary of State's estimate implies a very tough phase 4 indeed. Will he give us the basis of his calculations?

Mr. Ennals

When I announced a year ago the uprating for last November, my estimates were challenged by hon. Members on both sides of the House, but they turned out to be accurate to the nearest 0.1 per cent. It is my expectation that the forecast this year will be no less accurate. In the current pay round, more than 95 per cent. of employees who have reached settlements have settled within the 10 per cent. guidelines. Although the average increase in earnings for the current round will probably turn out to be somewhat above 10 per cent., I am confident that a pensions increase of 11.4 per cent. will cover the rise in earnings from November 1977 to November 1978.

Miss Joan Lestor

I warmly welcome the assistance to families which has been announced, but can my right hon. Friend say what thought he has given to ensuring that local authorities reflect the obvious need for an increase in boarding-out allowances and other payments made to people who are fostering children in the care of local authorities?

Mr. Ennals

This is a question for local authorities to decide, but I certainly hope that they will note not only the spirit but the fact of the announcement made today and that this will be reflected in whatever allowances they may decide. However, it is a matter to be decided by local authorities.

Mrs. Bain

May I add the congratulations of this Bench on the upratings announced by the Secretary of State and join his condemnation of those Conservatives who have campaigned so actively against those whom they define as scroungers? May I ask for an assurance that, in terms of discussions on rent and rate rebate schemes, he will include representatives of the Scottish Office in view of the high level of local authority tenancy in Scotland? Has he made any assessment of how much of the £1¾ billion will be clawed back, in view of the importance of this to lone-parent families who have often found that what has been given with one hand has been taken away with the other?

Mr. Ennals

I appreciate the hon. Lady's comments. Obviously all the benefits apply to Scotland as much as to England and Wales and I am sure that they will be noted and appreciated in Scotland. The question of rent and rate rebates is a matter for my right hon. Friend the Secretary of State for the Environment and I know that he will take into consideration Scottish interests and representations, and I have no doubt that the advisory committee will reflect this.

Mr. Ovenden

I congratulate my hon. Friend on his announcement about the doubling of the premium for single-parent families on child benefit, particularly as this is the second doubling of the premium in a relatively short period. Is he aware that all those concerned with the welfare of one-parent families will be grateful for what he has done, but would he accept that one of the problems arising from his statement is that the gap between short-term and long-term supplementary benefit rates will widen? Does he not now accept that there is a strong case for shortening the waiting time for long-term benefit, particularly where families are involved? Will he say whether he has given any consideration to reducing the qualifying hours for FIS for one-parent families?

Mr. Ennals

On the last question, this is a matter which has the interest and concern of my right hon. Friend and myself. We have on a previous occasion said in the House that we hope to have an opportunity of making a move which will be of further assistance to one-parent families. But I am sure that my hon. Friend is right. This second boost to one-parent families will be of great help. About 240,000 lone parents should benefit from it. It will mean a very substantial cash boost for them.

My hon. Friend is also right that the fact that there is a 4½ per cent. difference between the inflation rate and the earnings rate means that the gap between short-term and long-term benefits is increasing. But I have to say that very many people who are dependent upon short-term benefits also have other means, such as earnings-related supplements, tax refunds, and FIS, which continue to be received by them for up to a year, and many people are covered for occupational sick pay by their employers. Therefore, they are not all totally dependent, as many pensioners are, on what they receive in national insurance benefits.

Mr. Boscawen

I recognise the importance of keeping pensioners well ahead of the rise in the cost of living, as the Secretary of State has been doing. Does the Secretary of State not recognise that the increase in the contribution paid earlier this month was to take up the new second pension scheme's requirements? Will there not be a very substantial increase next April to cover the whole of this latest increase in November?

Mr. Ennals

No, I do not think that that will be so because, as the hon. Gentleman knows, we fixed the new rate that was linked with the new pension scheme. I do not expect that there will be a need for significant changes, but I shall be reviewing the contribution position in the autumn. There will have to be certain changes made then because different rates will then be required for those who are wholly within the earnings-related pension scheme and for those who have contracted out. The hon. Gentleman's fears are not justified in terms of an increase which will be significant or disturbing.

Mr. Faulds

Does my right hon. Friend note and welcome the degree of improvement in generosity of the hon. Member for Wallasey (Mrs. Chalker) compared with the usual mean-mindedness of Thatchery?

Mr. Ennals

Yes, I did note that.

Several Hon. Members rose

Mr. Speaker

Order. I propose to call those hon. Members who have been rising to their feet.

Mr. Kenneth Lewis

Is the Minister aware that there are a great many people, including many old people, who, because they have a small amount of capital, cannot receive either supplementary benefit or the various rebates, including heating and electricity rebates? Is not this an undue penalty upon thrift, and will he do something about it?

Mr. Ennals

The assumption that the payment of supplementary benefit requires that someone should have no capital is not correct. However, it is right that, in deciding what assistance is needed by a particular person, one should take into consideration his other resources, otherwise it would cease to be a benefit that could be administered in any practical way.

The fact that pensioners are able to have a degree of capital and to own property without the requirement that they should be denied supplementary benefit shows the extent to which our system is very generous.

Mrs. Wise

Is my right hon. Friend aware that in this matter people are now dealt with far more generously than ever before? Does he recall that when this Government came to office the earnings rule for pensioners stood at £9? Will he dwell a little on the comparison between £9 and the new rate of £45?

Does he also recall that when we came to office there was no premium for one-parent families? There was no special tax allowance. Both of these have been introduced by this Government. Therefore, will my right hon. Friend accept our congratulations especially in relation to child benefit, and accept that we realise that he and his hon. Friend have had a hard job to persuade the Treasury? But it is much better to listen to the voice of the Labour movement than to the voice of the Treasury.

Mr. Ennals

Let me straight away disabuse my hon. Friend of the thought that there ever has been a battle between myself and my right hon. Friends in the Treasury, who are always generosity in the extreme. Certainly they have enabled me to make a very encouraging statement.

I agree with my hon. Friend. I have a great feeling of pride that at this stage we are able to say that, in spite of the difficulties that our country has passed through, we have ensured not only that the pensioners are protected against inflation but that they have a real increase in their standard of life. I have a great sense of pride that we have been able to introduce, with the support of all parts of the House, a child benefit scheme which is absolutely essential to bring support not only to needy families but to all families and especially to the mother. The fact that we have distinguished especially the special needs of one-parent families shows the extent of our concern.

There has been a degree of uprating of new pensions for disabled people which did not exist at all when this Government came into office. This means that our record of social concern is one in which we on this side of the House are entitled to feel a great deal of pride.

Mr. Ridsdale

Will the Secretary of State look particularly at the position of those over 70 years of age, whose savings have been particularly undermined by the severe inflation of the last four years? In doing this will he bear in mind that the increase in pensions is still 40 per cent. below the increase in the average wage—150 per cent. compared with 190 per cent.?

In order to help the people over 70, years of age, will the Secretary of State try to hurry up the payment of pensions between the date of announcement and November? Is it possible to bring the date forward in some way? In spite of the complacency and the shouts from Labour Members, I can assure the House that there are many pensioners who are still being hard-hit by inflation.

Mr. Ennals

Over the years, when for many working people there has been a reduction in their standard of life—we cannot duck that issue—we have ensured that the improvement in the real benefit for pensioners has moved ahead faster than the real benefit for earners in this country. This is very important. It has increased by 21 per cent. since we came to office. Of course, therefore, we have looked at the needs of the over-seventies and the under-seventies in deciding on the announcement that I have made today. We have made great progress in comparison, on a net basis, with a pension and the net income of earners. A single person now receives more than one-third of the average earnings of someone at work and a couple receives more than a half of the average earnings of someone at work.

Mr. Peter Bottomley

Can the Secretary of State say whether the level of child benefit is now higher in relative terms compared with average earnings than it has been since the war? May I congratulate him on reflecting the view on all sides of the House that people who are not economically active—pensioners and children below working age—should get a fair deal? I think that he deserves congratulations, and I give them to him unreservedly.

Will he remind the recipients of supplementary benefits that come November they are likely to get a reduction in their supplementary benefit, because the non-means tested benefits have been increased? It is not a party political point, but it is one of grave concern especially to people over retirement age, who get an increase in pension but then see the supplementary benefit decrease when they do not expect it.

Mr. Ennals

On child benefits, the announcement that I have made will mean that the level of family support, the level of child benefit, compared with previous family support—we have also to look at taxes and family allowances as a basis of comparison—is significantly higher than that in the highest year of the previous Government, which was 1971. An accusation has been made, I must say laughingly, by hon. and right hon. Gentleman opposite about the poor becoming poorer. I have announced, on behalf of this Government, the highest level of family support that there has ever been. Child benefit is taken into account in assessing the level of supplementary benefit. Part of the purpose of child benefit is to decrease dependence upon means-tested benefits. It would be an overlapping benefit if one failed to take that into account.

Mr. Sainsbury

I welcome the general increase in pensions, but will the Secretary of State clarify his intentions about the Christmas bonus, which has been very much appreciated by many pensioners? Does the right hon. Gentleman recall that there was general agreement in all parts of the House in a recent debate that it would be most undesirable for this bonus to become a political football? I hope that the Secretary of State will give positive clarification at an early date.

The following are the new rates
Existing weekly rate Proposed weekly rate
£ £
Standard rate of invalidity, widow's and Category A retirement* pensions; Category B retirement pension at the higher rate* and widowed mother's allowance 17.50 19.50
Increase of invalidity pension and Category A retirement pension for wife or other adult dependant; Category B retirement pension at the lower rate* 10.50 11.70
Earnings limit for retirement pensioners† 40.00 45.00
Standard rate of unemployment and sickness benefits; maternity allowance 14.70 15.75
Increase for wife or other adult dependant (applicable to unemployment and sickness benefit only) 9.10 9.75
Widow's allowance (first 26 weeks of widowhood) 24.50 27.30
Invalidity allowance payable with invalidity pension, when incapacity began before age:
35 3.70 4.15
45 2.30 2.60
60 for men or 55 for women 1.15 1.30
Attendance allowance:
Higher rate 14.00 15.60
Lower rate 9.30 10.40
Retirement pension for persons over pensionable age on 5th July 1948 and for persons over 80§:
Higher rate 10.50 11.70
Lower rate 6.30 7.05
Non-contributory invalidity pension, invalid care allowance 10.50 11.70
Increase of non-contributory invalidity pension and invalid care allowance for a wife or other adult dependant 6.30 7.05
Mobility allowance 7.00 10.00
(from 5th July 1978)
Guardian's allowance, child's special allowance, increases for children of widows, invalidity, non-contributory invalidity and retirement pensioners, and invalid care allowance beneficiaries 6.10 6.35‡
Increases for children of all other beneficiaries 2.20 1.85‡
* An age addition of 25p is payable to retirement pensioners who are aged 80 or over.
† And wives of retirement and invalidity pensioners.
‡ This takes account of the increase in child benefit from November 1978.
§ Excluding the 25p age addition.
Mr. Ennals

All I can say is that this matter is under consideration and that when a decision is taken an announcement will be made in the House.

Following is the information:

Existing ordinary rate Existing long-term rate* Proposed ordinary weekly rate Proposed long-term weekly rate*
£ £ £ £
Ordinary scale:
Husband and wife 23.55 28.35 25.25 31.55
Person living alone 14.50 17.90 15.55 19.90
Any other person aged:
Not less than 18 11.60 14.35 12.45 15.95
Less than 18 but not less than 16 8.90 9.55
Less than 16 but not less than 13 7.40 7.95
Less than 13 but not less than 11 6.10 6.55
Less than 11 but not less than 5 4.95 5.30
Less than 5 4.10 4.40
Blind scale:
Husband and wife:
If one of them is blind 24.80 29.60 26.50 32.80
If both of them are blind 25.60 30.40 27.30 33.60
Any other blind person aged:
Not less than 18 15.75 19.15 16.80 21.15
Less than 18 but not less than 16 9.80 10.45
No specific rates for blind persons less than age 16.
All ranks receive the same increases, officers' rates being expressed in pounds per annum.
Existing weekly rate Proposed weekly rate
£ £
Disablement pension for private at 100 per cent. rate 28.60 31.90
Unemployability allowances*:
Personal allowance 18.60 20.75
Increase for wife or other adult dependant 10.50 11.70
Comforts allowance:
Higher rate 4.90 5.40
Lower rate 2.45 2.70
Allowance for lower standard of occupation (maximum) 11.44 12.76
Constant attendance allowance:
Special maximum 22.80 25.40
Special intermediate 17.10 19.05
Normal maximum 11.40 12.70
Half and quarter day 5.70 6.35
Age allowance with assessments of:
40 and 50 per cent. 2.00 2.20
Over 50 and not exceeding 70 per cent. 3.10 3.40
Over 70 and not exceeding 90 per cent. 4.40 4.80
Over 90 per cent. 6.20 6.80
Exceptionally severe disablement allowance 11.40 12.70
Severe disablement occupational allowance 5.70 6.35