Child Benefit (Hansard, 3 June 1980)

§ 7. Mr. Peter Bottomley
asked the Secretary of State for Social Services if he will make a statement on the future relationship between increases in prices and changes in child benefit.

§ Mr. Patrick Jenkin
I am required, under the Child Benefit Act 1975, to review the rate of the benefit each year having regard to the national economic situation as a whole, the general standard 1230 of living and other relevant matters. Of course we must take into account changes in price levels, but they are not the only factors.

§ Mr. Bottomley
I am grateful to the Secretary of State for that answer, but I am more interested in the political side of the matter. Would it not be a good idea for my right hon. Friend and the Cabinet to announce a year in advance their intentions about child benefit, so that people with children will know whether they have an interest in keeping down the rate of inflation or helping it to continue on its present course?

§ Mr. Jenkin
That is an ingenious suggestion. Factors governing decisions on increases in the rate of child benefit are considered regularly by the Government, but we have no proposals to change the statutory obligations.

§ Mr. Stoddart
Is the Secretary of State aware that the child benefit is already way behind the increase in the cost of living? Is he aware also that families with children are the poorest in our community? Far from announcing an increase a year in advance, the Secretary of State should announce an increase immediately.

§ Mr. Jenkin
That depends on the point from which we take the base rate. If we start from the last year when there was a mixture of child tax allowances and family allowances, on reasonable assumptions, by next October the great majority of families with children will be better off than if they had remained on child tax allowances and family allowances, adjusted for increases in the cost of living. That is a fact. In addition, the Government have taken particular care to increase the amount and entitlement of family income supplement, which is designed particularly to help those families on very low incomes—families about whom the hon. Gentleman is concerned.

§ Sir Brandon Rhys Williams
Does my right hon. Friend agree that when increases in prices place pressure on family budgets it is better for the economy to relieve that pressure by increases in child benefit than by blanket increases in wages that are bound to be inflationary?

§ Mr. Jenkin
I am sure that my hon. Friend is right, but we would need a fairly cast-iron guarantee that if the level of child benefit were increased to achieve the objective that he is seeking, that would be matched by a corresponding reluctance on the part of trade unions and those for whom they bargain to press for higher wages—for which they would press in any event.

§ Mr. Freeson
As a result of the failure of the Government to uprate child benefit in April, there has already been a loss on each child benefit of £1.35 in relation to the rate of inflation. What do the Government intend to do to restore the real value of child benefit, which since April 1979 has dropped to such a degree, and is continuing to drop as the rate of inflation increases?

§ Mr. Jenkin
As the right hon. Gentleman knows, it makes sense in every way to announce increases in the rate of child benefit at the same time as tax changes are announced in the Budget, and for the increases to take effect at the normal uprating date, so that they can be moved in parallel with the corresponding adjustments in the social security and national insurance child dependency additions. That is the sensible and logical way to proceed. This year the increase in child benefit on an annual basis was the same in percentage terms as the increase in personal allowances for income tax. On an annual basis, they moved in parallel.