HC Deb 09 December 1980 vol 995 cc786-94
The Secretary of State for Social Services (Mr. Patrick Jenkin

With permission, Mr. Speaker, I should like to make a statement on the arrangements for paying social security benefits.

The House will recall that last February we debated arrangements for paying social security benefits and the implications for the sub-post office network. Widespread anxieties had been aroused in the country by misleading reports of what were thought to be the Government's intentions arising from a study of payment arrangements carried out last year in consultation with Sir Derek Rayner. Since then the Social Services Committee has studied the matter and issued its own report. The Government are publishing today their reply to the Select Committee, as Cmnd. 8106. Copies are available in the Vote Office. Because we want to consult widely on the changes that we now propose, this reply is in the form of a consultative document. It includes, as I promised last February, the full report of the original study by officials.

The consultative document makes it clear that we stand firmly by my right hon. Friend the Prime Minister's pledge of 28 February that retirement pensioners will continue to have their pensions paid weekly at post offices if they wish. We also repeat our commitment to safeguard the sub-post office network. The Government consider that these commitments can be fully honoured without sacrificing our wish both to give the public more choice and to save taxpayers' money by increasing efficiency.

Three main changes in the system of payment are proposed. The first change is that those who so wish may have their pensions or child benefit paid direct to a bank account by automated credit transfer. Such payments would be four-weekly, in arrears. There would be no compulsion.

Secondly, my Department will make a number of internal changes, which will produce useful administrative savings and which the Select Committee recommended should proceed.

Thirdly, we propose that child benefit should be paid four-weekly for most mothers. People in receipt of suplementary benefit, family income supplement, the additional benefit for one-parent families and widows, pensions, together with mothers with four or more children, would be able to continue with weekly payment. This is a much larger group for weekly payment than the team of officials suggested, and it takes account of our concern to protect vulnerable groups.

In the light of the anxieties expressed by the House, the Government have paid particular attention to the effect of these changes on Post Office finances and on sub-post offices. If these proposals were implemented, clearly there would be a reduction in DHSS business in post offices. By about 1987–88 my Department would hope to reduce its administrative costs by about £38 million a year, at today's prices. About £25 million of these savings would come from reduced charges paid to the Post Office. In these circumstances the Government have thought it right to use the opportunity presented by the British Telecommunications Bill to allow the Post Office to conduct across its counters a wider range of business for the public sector.

After discussing this with the Post Office the Government are satisfied that if this Bill is approved there will be considerable scope for new counter business. The Government estimate that, allowing for some expansion of current business, sales volume across the counter should increase by about 8 per cent. in the next five years compared with about 6 per cent. of business likely to be lost as a result of the DHSS changes under the Government's proposals. The Post Office accepts these estimates.

These proposals will save taxpayers' money and provide more modern methods of paying benefits without damage to the sub-post office network. However, we are anxious that there should be full opportunity for public discussion of these proposals. We shall therefore be discussing them with all the main interests, including the National Federation of Sub-Postmasters, over the next three months before taking final decisions.

Mr. Norman Buchan (Renfrewshire, West)

The Secretary of State purports to say in the statement that his main concern is to allay fears about misleading reports relating to sub-post offices, but we have, sadly, grown accustomed to reading between the lines of frequent ministerial statements. Does not this proposal conceal a number of other extremely serious matters?

Let us look at the question of the post offices, for a start. If the right hon. Gentleman is transferring extra work to the sub-post offices, I take it that, as he has no other means within his power, this is a transfer of jobs from the public sector to the post offices. Has the right hon. Gentleman consulted the other sections of public industry—for example, the gas and electricity boards? Is it not the case that where jobs are to be transferred to the post offices there will be a job loss in the public sector, but that the profits will be made within the banks, to which so much of the work will be transferred?

The right hon. Gentleman reiterated the Prime Minister's pledge that retirement pensioners will continue to have their pensions paid weekly at post offices, but we have to look closely at the Prime Minister's pledges, do we not? Was she not on the verge of breaking one firm pledge in relation to the link between pensions and prices, only to be saved by the wets in the Cabinet? If the pension is to continue to be paid weekly to pensioners, will it be a question of opting in or opting out? Will difficulties be laid at the door of the old-age pensioner to get this secured?

There is a contradiction in the statement on child benefits. The right hon. Gentleman said that there would be no compulsion, but there will be compulsion. He also said that most families will be put on a four-weekly payment, with a series of exceptions. By definition, that means that most families will be four weeks' payments in arrears. How much will be saved by that four weeks in arrears for most families? Is it the £50 million that we have read about in the leaks? What will happen to that £50 million? Will it be used for the child benefit allowances, or is it yet another simple cut at the expense of children?

Will the right hon. Gentleman also confirm the figure that he gave earlier this month? In 1978–79 35 per cent. of child benefits were drawn weekly. I understand that that figure has risen to 45 per cent. in a single year. Will the right hon. Gentleman confirm that figure, which he gave in an answer only a few weeks ago? If so, is it not a sign of increasing pressure on all families, and not only those in the category mentioned in the document?

Does the Secretary of State not understand that one of the crucial points of the child benefit allowance is that it is paid to women? If he is putting most families on a four-weekly payment basis, will that not create a number of problems for women who have to budget weekly, because this part of the budget is being attacked by these proposals?

Last night the Chief Secretary to the Treasury referred to the Opposition breaking the consensus on the Welfare State. Is not a quiet counter-revolution taking place under the Government, in that administrative measures and statements of this kind are attacking and eroding the whole basis of the Welfare State? We are pledged to expose, halt and reverse that process.

Mr. Jenkin

I congratulate the hon. Gentleman on his first appearance at the Opposition Dispatch Box in his new job. I shall answer his questions.

Of course, there will be a need to consult other public sector organisations on the additional business that will go to the post offices. That is why we are publishing the reply as a consultative document.

The hon. Gentleman asked whether pensioners would have to opt for weekly payments. No, Sir. There is no way in which my Department can pay pensions or any other benefits into bank accounts without the beneficiaries telling the Department where their bank accounts are and giving the reference numbers. Therefore, they will be opting for automated credit transfers. If they do not opt for ACT, they will continue to be paid weekly.

The effect of paying the child benefit four weeks in arrears will be a saving of £50 million in the year in which it comes in, which we hope will be towards the end of next year. But that is merely moving it forward into the following year. No long-term saving will be achieved. I confirm that the latest figure shows that 45 per cent. of mothers cash their child benefit weekly. We estimate that, with the exceptions, about 20 per cent. of families would still be entitled to the weekly payment.

The real point made by the hon. Gentleman was that mothers would be incapable of managing their affairs with the child benefit paid monthly. Is he aware that Belgium, France, Ireland, Italy, Luxembourg and West Germany pay child benefit four-weekly and that Denmark and the Netherlands pay their child benefit quarterly? Is the hon. Gentleman saying that mothers in England or Scotland are incapable of managing their affairs as well as are mothers in other countries? If he takes that view, I do not agree with him.

Mr. Buchan

I am not the only one who takes that view. Almost every group in this area recognises the immense value of a weekly payment going to the mother, so that she may have flexibility in her budgeting because of the problem; that arise elsewhere. For example, does the right hon. Gentleman realise that local authorities that collect rents on a fortnightly or monthly basis have arrears problems?

Is the right hon. Gentleman now admitting, although he did not say so, that, despite the fact that he said that this will not be compulsory, for the bulk of families it will be compulsory?

Finally, does the right hon. Gentleman realise that, Common Market or not, we are concerned with the Welfare State as it has been constructed in this country? The examples of Belgium and France are as nothing compared with the experience that we have had during the past 12 months under this Administration.

Mr. Jenkin

The hon. Gentleman is extraordinarily unconvincing on this subject. I made it abundantly clear that no one will be obliged to take payment into a bank or building society account. With the exception of Chat substantial group of families for which child benefit could be said to be a significant part of the family income, amities will be expected to operate on having the benefit paid four-weekly. This is the pattern in virtually every other West European country and I cannot believe that it is impossible or wrong for this country. This arrangement is overdue. We should have done it some time ago.

Mr. Paul Dean (Somerset, North)

I welcome the assurances in my right hon. Friend's statement. Will he beware of tidy solutions that administrators like but human nature abhors? Will he hold firmly to the principle of freedom of choice wherever possible, so that the large numbers of people who wish to have benefit, including child benefit, paid into bank accounts monthly will be able to do so and that those who budget weekly and wish to have weekly cash payments will be able to continue that arrangement?

Mr. Jenkin

That is the case for pensioners. I give my hon. Friend that firm assurance. I must make it clear that the Government are proposing consultation on the basis that for the generality of families, apart from the especially vulnerable groups that I have mentioned, child benefit will be paid four-weekly. I believe that that is a right proposal.

Mr. John Golding (Newcastle-under-Lyme)

Is the Secretary of State aware that moving from weekly to monthly payments will cause great hardship? Is he further aware that families operating on monthly salary budgets will not experience the same degree of hardship as families that budget weekly and find it difficult to save money from one week to the next? That is particularly so because of short-time working and the growing difficulty that working people have in managing on their pay.

Mr. Jenkin

The change will not happen overnight. We anticipate that we may be able to begin moving families on to four-weekly payments towards the end of next year, or early in 1982. Families will have between 12 and 15 months' notice of the change. The change will be progressive, as the order books are renewed. I am not talking of families on family income supplement or one-parent families, who will continue to receive benefit weekly. They are exceptions, which do not apply in other European countries, although we believe that they should be exceptions here. It is reasonable to ask the generality of families to make arrangements to tide them over during the changeover period.

Mr. John Wells (Maidstone)

What type of other public business might be introduced to the small village post offices to sustain them? I cannot see readily how a village with 400 residents can sustain a post office on the basis of selling railway tickets, for instance, because not many such people travel by train. Perhaps my right hon. Friend will consider abolishing the Tote and allowing postmasters to do its business. May we have a serious suggestion about how the small post offices will survive, since no other public business exists for them?

Mr. Jenkin

I understand my hon. Friend's anxiety. With my right hon. Friend the Secretary of State for Industry I have already had preliminary discussions with the sub-postmasters' representatives. My right hon. Friend has the primary responsibility and wishes to discuss with the Post Office a range of matters that might be open to the sub-postmasters. Obvious examples are the railways and transport generally. The energy industries are also possibilities. Sub-post offices might take over the payment of energy bills and the selling of energy stamps. That would depend to some extent on the success of the Post Office in opening up the new spheres available to it. We understand and accept the need for extra business to make up for the loss of the DHSS business so that we can fulfil our pledge to keep the sub-post office network in being.

Mr. David Penhaligon (Truro)

May we have a simple assurance that the business and income of the sub-postmaster in the rural village will not decrease as a result of the proposals?

Mr. Jenkin

I do not think that I can give the pledge precisely in that form. I wish to be honest with the House. The Post Office has accepted the Government's estimate that overall, and over a period of about four or five years, the amount of extra business available will more than compensate for the loss of the DHSS business.

Mr. R. A. McCrindle (Brentwood and Ongar)

Am I right in thinking that the Government proposal for the payment of child benefit and family income supplement is that they will be paid on a monthly basis unless the recipient opts to the contrary? If I am correct in that assumption, will my right hon. Friend give me some reassurance that maximum publicity will be given, for the benefit of people who wish to continue to be paid weekly?

Mr. Jenkin

I accept that publicity is important. People who will be entitled to weekly payments for the family income supplement and other payments will have that made clear to them. It will be made clear that they have a choice. We shall take the necessary steps to ensure that they know about that right, so that they can exercise it freely.

Mr. David Steel (Roxburgh, Selkirk and Peebles)

Does the Secretary of State understand that many people in the Post Office are just as keen on centralisation as are people in Government Departments? Is he aware that vague assurances about the overall level of Post Office income does not satisfy? What assurances can the Secretary of State give about the future of local village sub-post offices?

Mr. Jenkin

I expect that the Federation of Sub-Postmasters, now that it knows the Government's proposals, will make an early approach to the Post Office about the contract that the federation has with the Post Office on the division of business of the type that we are discussing.

The Post Office has made it clear that it regards the maintenance of the sub-post office network as being of great importance to it, as it is to the Government. We are providing time for consultation. We have not finally made up our minds. We shall study the outcome of the consultations. I made it clear in February, and I make it clear now, that we attach the highest importance to the maintenance of the sub-post office network in the villages and the rural areas as much as everywhere else.

Mr. A. W. Stallard (St. Pancras, North)

May I take the Secretary of State back to the reply that he gave to my hon. Friend the Member for Renfrewshire, West (Mr. Buchan), when he referred to practices in other European countries? May we assume that the Secretary of State will soon propose parity with all other EEC countries on pensions, heating allowances, television licences, death grants, and so on? Are we to have parity with other European countries? Is the right hon. Gentleman aware that there are great disparities between benefits paid here and benefits paid in the rest of Europe? Who is to judge which families are to be paid four-weekly? Will the housewife have the right of appeal?

Mr. Jenkin

I shall not be drawn into discussing the amounts of benefits. That is a separate issue. The point is that almost every other European country has for some years managed happily, as have European families, with monthly payments of child benefit.

Mr. Stallard But they receive more money.

Mr. Jenkin

The higher the amount of benefit the more the family depends upon it, and the more it might be needed weekly. People in other countries have managed well being paid monthly. I am sure that we can, too. I did not understand the hon. Gentleman's second question.

Mr. Peter Bottomley (Woolwich, West)

I welcome my right hon. Friend's desire to keep the sub-post offices going in order to extend choice and to achieve greater efficiency. Am I right in believing that we are discussing a consultation document? Will it be possible for people in favour of extending choice for families to suggest to the Government that the four-weekly payment should be paid two weeks into the month? Will people be able to suggest that the payment should be made fortnightly in order to provide a transition for a year or two, so that an adjustment can be made to monthly budgeting?

Mr. Jenkin

I understand my hon. Friend's anxiety and I am grateful for his general welcome. However, in a year when public expenditure will be under extreme constraint the Government would require a great deal of persuasion to forgo the saving in one year occasioned by the transfer to monthly payments of child benefit. To offer the incentive to people to transfer to four-weekly payments of pensions by automated credit transfer would also involve a cost. I must advise the House that the Government are not prepared to recommend that cost.

Dr. Oonagh Mcdonald (Thurrock)

Is the Secretary of State aware that many families who are in receipt of a weekly wage, in addition to the exceptions that he has mentioned, will suffer greatly by the transfer of child benefit to monthly payments? Is he aware that mothers use the child benefit to tide them over from Tuesday to Thursday or Friday, when the weekly wage comes in, and that the money is used to buy food and other essentials? Is he further aware that his comparison with other EEC countries would carry more weight if he were prepared to pay the level of child benefit paid in the other EEC countries, because in all such countries except Ireland the payments are well above those paid in Britain? Will he also tell the House what special arrangements he intends to make to consult the women concerned about this alteration and, in particular, the women's organisations that represent many of them?

Mr. Jenkin

The consultation will be open to anyone who wishes to participate, including women's organisations and organisations representing poor families and one-parent families, such as the Child Poverty Action Group, the National Council for One-Parent Families, and other groups of that sort. I understand the hon. Lady's point about the budgeting customs of many families, but I cannot accept it as a reason for retaining weekly payment for all families for all time. That argument applies equally to countries such as Ireland, which pay small levels of family benefit. They have managed quite satisfactorily. I cannot accept that mothers in this country are less able than people in other countries to manage their affairs on a sensible basis and to accept a change of this kind. That seems a rather demeaning view to take of mothers in this country.

Mr. Speaker

Order. I propose to call two more questions from either side before I call the Front Bench in conclusion.

Mr. Richard Alexander (Newark)

Whilst accepting my right hon. Friend's objectives entirely, may I nevertheless underline the concern that will be felt by many postmasters and sub-postmasters, not least in my constituency, and urge him to indicate at an early date the much wider range of business that they will receive by way of compensation as a result of the announcement?

Mr. Jenkin

The question of the wider range of business that the Post Office and sub-postmasters will be able to conduct is primarily a matter for my right hon. Friend the Secretary of State for Industry. Provision to enable this to be done is contained in the British Telecommunications Bill, which is currently before the House. That will be the forum for the House to explore what may be done. It will be for my right hon. Friend to conduct negotiations and discussions both with the Post Office and with the sub-postmasters to explore the many suggestions that have been put forward.

Mr. Andrew F. Bennett (Stockport, North)

Does the right hon. Gentleman agree that the major advantage of child benefit is that it is a universal benefit, which is paid to everyone? How can he justify creating first-and second-class claimants in this measure? Is he also aware of the major problem of people with a reasonable income who are suddenly plunged into poverty, perhaps by the husband leaving the family, and that at present child benefit is available immediately to cushion such people while they find other benefits? Will he guarantee that people will be able to move from monthly to weekly payment at a moment's notice if family circumstances change?

Mr. Jenkin

I can give the hon. Gentleman the undertaking that if there are sudden changes in family circumstances my Department responds, and frequently responds very quickly, to meet immediate needs of that sort. This would certainly include arrangements to tide families over in the kind circumstances that the hon. Gentleman has in mind.

Sir Albert Costain (Folkestone and Hythe)

Has the Minister made any calculation as to the loss of income that will be incurred by village post offices affected by these changes? Can he say whether any are likely to close as a result, with the loss of essential services?

Mr. Jenkin

My hon. Friend will recollect that we estimate that the loss of income over the period of four or five years is likely to be about 6 per cent., which would be perhaps about £25 million at today's prices. The estimate that we have made and that the Post Office has accepted is that the additional business from other users by 1987–88 would be about 8 per cent., or between £30 million and £35 million. So, on balance, we would expect the Post Office and sub-post office network marginally to gain front our proposals.

Mr. James A. Dunn (Liverpool, Kirkdale)

Is the Minister aware that his statement will cause concern among low-income groups, particularly those who are not in receipt of supplementary benefit and may have fewer than four children, such as widows, one-parent families and other similar groups? On what criteria is, monthly payment to be made in those circumstances, if the classification can be sustained that they are low-income groups?

Mr. Jenkin

It must be remembered that one of the categories entitled to continued weekly payment is that of families on family income supplement. When I tell the hon. Gentleman that that would include a one-child family with an income of £67 per week, a two-child family with an income of £74 a week, and a three-child family with an income of £81 per week, I think that he will recognise that that moves quite well up the income scale before people will be obliged to transfer to four-weekly payment.

Mr. J. W. Rooker (Birmingham, Perry Barr)

Can the right hon. Gentleman clear up one point arising from an answer that he gave earlier? Will he confirm that during the year when the changeover takes place, when 80 per cent. of mothers are deprived of child benefit for four weeks, the Government will spend £50 million less on child benefit than they would otherwise have spent? Will he further confirm that that £50 million will simply be lost out of public expenditure on child benefit that year and will not be transferred to the next year? If it is transferred to the next year will it be in the form of an increase in child benefit?

Mr. Jenkin

The hon. Gentleman will recognise that when one postpones the date of payment one moves forward the Government's obligation to pay, and some of that will move into the next financial year. But over the years of a family's entitlement to child benefit for a particular child, the amount of money paid will be exactly the same.