REDUCTION AND ABOLITION OF EARNINGS RELATED SUPPLEMENT AND ADDITION

HC Deb 21 May 1980 vol 985 cc587-625

Mr. Rooker

I beg to move amendment No. 16, in page 4, line 24, leave out Clause 4.

Some of my hon. Friends hope to speak to amendment No. 17 as well, which deletes clause 5. If it is convenient to the House I shall move amendment No. 16 and discuss with it amendment No. 17: page 4, line 37, leave out clause 5.

Amendment No. 16 deals with clause 4 which is entitled "Reduction and abolition of earnings-related supplement and addition." This is not an abatement or an adjustment—it is the abolition of a national insurance benefit. The long title of the Bill abolishes certain benefits. We have been trying to encourage the media to pay attention to the abolition of benefits in the Bill, but so far we have not succeeded. We are discussing here the total abolition of a benefit, and cuts in national insurance benefits which amount to £562 million—£360 million of which will result from clause 4 in a full year.

The clause means the total abolition of the earnings-related supplement to unemployment benefit, sickness benefit, injury benefit, maternity allowance and widows' allowance—five national insurance benefits, all of which attract earnings-related supplement provided that the contribution condition is met.

The Government are abolishing this benefit willy-nilly without any manifesto commitment to do so. They claim that they will save £360 million, but the net saving is nearer £285 million because £75 million will be used to pay supplementary benefit. By abolishing this benefit, the Government will push several thousand people on to means-tested benefits and they will have to spend £75 million extra on supplementary benefits. That goes against the grain for this Government. Those on supplementary benefits have been at the butt end of some of the attacks made by the Minister of State and now the Government are about to increase the numbers of people who will be on the receiving end of his remarks.

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Two of these benefits—the maternity allowance and the widows' allowance—are unique in that they apply to women only. The Government will cut £50 million by abolishing the earnings-related supplement for those women who are in receipt of the maternity allowance and the widows' allowance. Both these benefits have actually been paid for by national insurance contributions. In fact, contributions are being made this year and when those people come to collect their benefits in 1982 they will find that they have been abolished. The Secretary of State will no doubt say that this is a "pay as you go" system, and that the contribution year is not really linked to the time the person has to claim. But that will not wash with those people who suddenly discover that they have paid their national insurance contribution in 1980–81 but cannot collect the earnings-related supplement in 1982. They have been short-changed and robbed by this Government.

So far I have not received a single representation from any widows' organisation in the country about the Government taking £15 million from widows. I cannot believe that these organisations would have been silent if a Labour Government had made such a proposal. When we were in office, they kicked at the doors of Ministers claiming that we were not doing enough for them. Now £15 million is being taken deliberately from the widows. Among those widows are women whose husbands were killed at work. That is where the earnings-related supplement comes into play. That the Government should have come forward with such a proposal belies belief. The Secretary of State must be pretty ashamed of this clause.

We spent a long time in Committee discussing what the Secretary of State said in his statement on 27 March. We all have copies of Hansard and we can look at what he said. What I am about to say casts no reflection on the Hansard reporters because the Secretary of State did not utter the words that I am about to put into his mouth from the Dispatch Box. In the brief that I received from the Child Poverty Action Group there was a quotation attributed to the Secretary of State on 27 March referring to the abolition of earnings-related supplement. He said: Nevertheless earnings-related supplement does add to income out of work, and therefore, at the margin, does not encourage the return to work. I could not find any speech that the right hon. Gentleman made that day apart from a press conference and his speech in this House. I did not hear the right hon. Gentleman say those words, although at one time I believed that I had. We discovered in Committee that that sentence was in the right hon. Gentleman's draft statement. He told us that at length in Committee. One of my hon. Friends drew attention to the fact that the sentence was in the press notice. The right hon. Gentleman agreed but pointed out that the press notice had written on it "Check against delivery".

Mr. Patrick Jenkin

The matter was raised in Committee, but I did not say

that. As the hon. Gentleman knows, that phrase did not appear on the statement given to the press. However, that does not alter the fact that the previous words that the hon. Gentleman quoted were never said by me.

Mr. Rooker

The Secretary of State made the point in Committee that press releases usually contain that caveat. That is normal on press releases. One of my hon. Friends had the original DHSS press release in Committee. It was not a photocopy. The caveat was not on that.

The Secretary of State made it clear that he had chosen not to say those words. By implication it was clear that he was frightened to say those words in this Chamber. They imply that the removal of earnings-related supplement would drive the sick and disabled back to work when they are not fit.

I accept that the Secretary of State did not say those words for the reasons he gave. He told us that we must judge only what he said to the House. However, I picked up a copy of his statement from the Vote Office on 27 March. That sentence appears in it. I checked again today. If an hon. Member asks in the Vote Office for a copy of the statement that the Secretary of State made on 27 March with regard to the November 1980 uprating, he will be given the statement containing that sentence. That sentence does not appear in Hansard, but it is in the statement that the Secretary of State had in front of him that day. We should like to know why the right hon. Gentleman omitted those words.

Mr. Patrick Jenkin rose ——

Mr. Rooker

I am not giving way. The right hon. Gentleman can make his own speech.

Mr. Jenkin rose——

Hon. Members

Give way.

Mr. Rooker

No. The guillotine was imposed by the Government to curtail our debate. The right hon. Gentleman will have an opportunity to speak.

Mr. Jenkin

This is a debate in the House of Commons.

Mr. Rooker

The House of Commons is here to enable hon. Members to debate.

The statement containing that sentence is still in the Vote Office. I expect the Secretary of State will have an explanation, which he can make in his own speech. I have had enough of the right hon. Gentleman's claptrap. The Government have curtailed the debate. We are under a severe guillotine.

The Secretary of State did not have the courage to utter those words, but in that sentence he or onez of his advisers was implying that the sick or disabled in receipt of earnings-related supplement could be encouraged to return to work before they were fit and able by removing the benefit. That is scandalous. It is a fundamental attack on the Welfare State. The Secretary of State should hang his head in shame over clause 4. The Government have no mandate for it.

People have not yet become aware of the robbery contained in the clause. In the tax year that we have just started people are paying national insurance contributions that include entitlement to earnings-related supplement from January 1982. In 1982 the sick, disabled and widows whose husbands are killed at work and who are entitled to earnings-related supplement will find that the benefit has been abolished. Conservative Members have said in Committee that people should not be encouraged to believe that national insurance is a proper insurance scheme. They said that they must rid people of the illusion that they are entitled to benefit if they have paid their contribution. They were supported in that by the Minister.

Under clause 1, benefits will not be raised in line with inflation, or uprated. They will be cut. This clause is nothing short of robbery. I ask those in another place to do a useful job and stop 22 million people being robbed. If the House of Lords did that, I should not retract what I have said, but it would demonstrate that it was defending the underdog and was not the Government's lacky, as are Conservative Back Benchers in this House. If an insurance company took similar action there would be a major uproar and we should have retrospective legislation to protect their clients once they had paid their contribution.

This clause contains the meat of the Government's cuts. It is a cut of £360 million out of £560 million in the national insurance system. It is 360 times the amount that the Government will get by cutting the benefits to strikers' families in clause 6. That is the scale of clause 4. I hope for once that the media, including "Today in Parliament", will start describing the Bill as an instrument to cut contributory national insurance benefits affecting 22 million people.

Mr. Richard Needham (Chippenham)

I hope that in the few words that I shall say I can give clause 4 deeper consideration than the hon. Member for Birmingham, Perry Barr (Mr. Rooker). The hon. Gentleman could perhaps have applied his mind to the financial savings implicit in the Bill and looked carefully at the figures proposed by the Government. My right hon. Friend must be sick and tired of going through the figures with me, but I should like to take him again through the financial implications. The House deserves to have them fully explained.

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The Bill implies that the saving will be £360 million in 1982–83 cash prices. This is based on making up the figures, mentioned by my right hon. Friend, both in Committee and in a written answer, of £185 million for sickness benefit, £15 million for injury benefit, £35 million for maternity allowance, £110 million for unemployment benefit and £15 million for widows' allowances. The problem is that the £110 million unemployment benefit in 1982–83 compares with a figure of £96 million for 1979–80 given in a written answer to the hon. Member for Barking (Miss Richardson). According to the White Paper on public expenditure, the number of unemployed in 1982–83 is likely to be 200,000 more than in 1979–80. If £96 million was the correct figure for 1979–80, how can £110 million be the correct figure for 1982–83?

So my right hon. Friend has revised the figure to show that the savings are not £360 million but £378 million—the difference between the figures of £110 million and £96 million, upgraded by his Department. Against this must be put the £75 million estimated as a saving on supplementary benefit. If the hon. Member for Perry Barr looked at the figures he would realise that this is at current prices. One cannot deduct £75 million from £360 million and compare like with like. To compare like with like, one has to take figures in comparable years. That means adding 18 per cent. to the £75 million and raising it to £89 million. The total saving, in fact, is £378 million less £89 million.

The White Paper uses the sum of £130 million. That is based on 1979 prices. One has to take the £360 million, which should be £378 million, and knock off the £75 million, which should be £89 million. That produces a figure of about £275 million. If one knocks off the increase in supplementary benefit of £75 million, the figure comes down to £200 million. If one adds the effects of the cost to employers of the scheme for paying for short-term sickness, estimated at a further £65 million, one ends up with a total saving, give or take a few million among friends, of £130 million. If, at the end of the day, the figure really is £130 million, how much of this amount will be a true saving? It will not be a saving on the PSBR. The PSBR will have to increase by the amount of additional supplementary benefit paid to those who would otherwise have been entitled to earnings-related supplement. I should like to know how that figure is arrived at, and whether it is likely to stay at that level if more people claim entitlement.

The figure of £96 million given to the hon. Member for Barking has now been revised downwards to £88 million. Is it not possible that the figure of £128 million might also be revised downwards? These figures come about because the Government Actuary determines what will be the levels of contribution to the national insurance fund. As the hon. member for Birkenhead (Mr. Field) pointed out, in an interjection on Second Reading, for there to be a reduction in public expenditure, there has to be a reduction in the terms of the settlements and not a reduction in the terms of the contributions. If there is a reduction on both sides, the books will balance. But the Financial Secretary to the Treasury said, in the debate on 31 March, on the Budget resolutions: Title to earnings-related supplement is determined by the benefits paid in the previous year. It is a pay-as-you-go system rather than an insurance system. The right hon. Gentleman is aware of that. There will be no contributions for earnings related supplement paid in the preceding year."—[Official Report, 31 March 1980; Vol. 982, col. 162.] If that is the case, the contributions are likely to be taken into account, as my right hon. Friend said on another occasion, in working out what will be the actual contributions against the settlements. My right hon. Friend went on to say that he accepted that. But the problem is that this is such a tiny percentage of the total of £15 billion that it is difficult to ask the Government Actuary how he will make sure that the figure comes out right. In the past the Government Actuary has got it wrong. Because he bases the contributions on what the Government tell him will be the rate of wage settlements, the amount that the Government Actuary has had in surplus has been consistently greater than he anticipated. My right hon. Friend made this point in Committee. It is worth looking at the table showing how the Government Actuary costed the contributions for 1980. He states: average earnings in the period from September 1979 to March 1980 will be 7 per cent. higher than in the period April to August 1979 and the average in the tax year 1980–81 will be !4 per cent. higher than in 1979–80. I do not wish to be pessimistic. I would have thought that 14 per cent. is likely to be on the low side of what would actually happen. If it comes out higher and wage settlements are higher, the amount of money taken through national insurance contributions will be higher and the surplus on the funds will therefore be higher.

The Government Actuary, working out the settlements from the fund, was instructed to assume that the amount of price increases would be 14 per cent. but the actual amount of benefit that will be settled will be 16½ per cent. on long-term supplementary benefit and 11½ per cent. on short-term supplementary benefit. If the contributions are reduced on the one side and the abolition of the earnings-related supplement means that settlements go down, there will be no saving on public expenditure. There will only be an increase in the PSBR due to greater supplementary benefit payments. If, on the other hand, the Government Actuary gets the figures slightly wrong, as he has done previously, there will be no saving either because the contributions will stay the same. I suggest to my right hon. Friend that the money that will go into the fund will be so enormous and the savings on ERS so small that it will be a drop in the ocean. The actual figures that he says will be saved will be mirages rather than reality.

I am concerned that the scheme for earnings-related supplements, although it may not be the best way of helping mobility, should assist unemployed people at a time when their living standards fall dramatically. The amount of money that they pay towards this earnings-related scheme amounts to perhaps a quarter of 1 per cent. of their income. If this is true, it is a tiny percentage for them to pay to get support to help them to meet an enormous drop in living standards when times get difficult and they lose their jobs.

My right hon. Friend says that only between 10 per cent. and 15 per cent. of unemployed take earnings related supplement. That is true. A large number of unemployed have been unemployed for longer than one year and therefore have no entitlement, but 43 per cent. of those claiming unemployment benefit receive earnings-related supplement. That is a hefty percentage.

This may not be the best scheme in terms of mobility, but when unemployment is rising it is surely worth trying to find ways of helping people back into jobs and over the drop in living standards. It cannot be right that when pensioners are protected and supplementary benefits rise in line with prices the only sufferers should be those who are becoming unemployed, particularly at a time when the Government's economic policy is destined to ensure that we have a shake-out in old and dying industries. Those people must be protected and helped.

If the £130 million that we are talking about can be used with creativity and flair—it equals the amounts spent on the youth opportunities programme and the job release scheme put together—it could go a long way towards helping people to find new jobs, which would reduce Government spending on unemployment benefit and supplementary benefit.

Mr. Field

The House is indebted to the hon. Gentleman for raising the issue, because no one noticed the adjustment that the Government were up to until the hon. Gentleman pointed it out on Second Reading. As he has probably done more research than anyone else on the national insurance fund and the Government Actuary, could he help us on one point? He seems to be suggesting that however the Government present the figures and the arguments they are after making a substantial saving.

I, and perhaps many of my hon. Friends, did not realise until today that if the Government are successful in that move it will lead to an increase in the public sector borrowing requirement. I am most interested to know how the Government will get their hands on the £360 million that was detailed in the financial memorandum when the Bill was published.

Has the hon. Gentleman's research led him to anticipate the moves that the Government may make? Do they have power to instruct the Government Actuary not to take account of the abolition of benefits, or does the hon. Gentleman think that they may make the saving by reducing their contribution to the national insurance fund?

Mr. Needham

The Government Actuary is instructed by the Secretary of State and therefore it is up to my right hon. Friend to tell the Government Actuary how to come to his figures. On 31 March my hon. Friend the Financial Secretary to the Treasury said that contributions would be reduced during the year to take that into account. That is why it is difficult to see how the Government will make the savings.

The Government's answer may be that the amount involved is such a tiny percentage of the fund that it might happen anyway, because the Government Actuary is asked to take into account wage increases of 14 per cent. for 1980–81, when they may be considerably higher. The take will therefore be that much greater.

We are uncertain about where the savings will be made and how much they will be. Indeed, it is possible that they will not take place at all. When unemployment is rising by so much, it would be of enormous assistance, even if the earnings-related supplement is not the best way of helping the unemployed, to use at least part of the money for retraining and increased mobility. When the unemployment problem is becoming more relentless and more difficult to solve, that would be a better way to proceed.

I understand my right hon. Friend's difficulties. If he says that we have to find savings in public expenditure from somewhere, I suggest that we should link the price of beer and tobacco with inflation, or shade the tax thresholds. Perhaps we should not have taken action on stamp duty on houses costing less than £20,000.

With the uncertain statistics and the increase facing us on unemployment, it would surely be better to use the money to help people to find other jobs and to reduce the problem. Otherwise, in a year or two, the Government will regret what they have done. I must tell my right hon. Friend, therefore, that I cannot support clause 4 in its present form.

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Mr. Charles R. Morris (Manchester, Openshaw)

I trust that the hon. Member for Chippenham (Mr. Needham) will forgive me if I do not follow his onslaught on the Government Actuary. However, I certainly applaud the hon. Gentleman's healthy scepticism of Government statisticians in general.

The procedures of the House are designed to ensure that legislation is fully debated, that contentious issues are identified and that the Government are provided with the opportunity of justifying and explaining their policies. For some inexplicable reason, that does not seem to have happened, to any great effect, on the proposals in clause 5 to restrict access to unemployment benefit by occupational pensioners in receipt of a weekly pension of £35 or more.

Hon. Members who search the Hansard reports of the Second Reading debate and the Committee stage will be left with the inevitable conclusion that there has been almost a conspiracy of silence among Ministers on the proposal in clause 5 to restrict access to unemployment benefit by those in receipt of occupational pensions.

Ministers have demonstrated what I can only describe as uncharacteristic reluctance to say anything at all on the subject. The Secretary of State and other Ministers have refused to meet objectors to the proposal. There has been no discussion between Ministers and groups representing occupational pensioners, who see their right of access to unemployment benefit being restricted. Politically speaking, one can understand why Ministers have demonstrated such reluctance to meet those who are understandably concerned about the proposal.

Mr. Patrick Jenkin

I had a longish meeting this morning with representatives of the Civil Service unions and we went into the argument with great care.

Mr. Morris

I am delighted that the right hon. Gentleman has at least met representatives of one group of pensioners. I hope that he will now find time to meet the Council of Post Office Unions, which is equally concerned.

The Government's proposal envisages that whereas at the moment occupational pensioners in retirement can receive unemployment earnings-related benefit, for a period of six months, in future, any pensioner who receives an occupational pension of £35 a week or more will have his entitlement to unemployment benefit restricted, with a £1 reduction for every £1 of pension over £35 a week

I am concerned about Post Office workers on low occupational pensions. The mass of Post Office workers are obliged to retire at the age of 60 and many receive extremely modest occupational pensions of £40 to £45 a week. Under this proposal, this group of people has been singled out to be denied, pound for pound, everything they receive over £35 a week.

Mr. Ken Eastham (Manchester, Blackley)

Would not my right hon. Friend agree that on occasions low-paid workers accept low pay in the belief that an occupational pension is a fringe benefit to which they will be entitled in due course and that they are now to be denied that benefit?

Mr. Morris

My hon. Friend is absolutely right and I was impressed by his contribution on this subject in Committee. This proposal by the Government is discriminatory and divisive. It is discriminatory because of the Government's refusal to lower the retiring age for men—the State retiring age—and therefore access to the State retirement pension. That means that this proposal affects men only. It does not affect women because women have access to the State retirement pension at 60.

It is divisive because the proposal will bear heavily on those on incomes that are less than the national average and it will turn people against making provision for retirement through occupational pension schemes.

The Secretary of State should appreciate that the proposal is a breach of the national insurance principle. I believe that it heralds the introduction of means testing for access to unemployment benefit.

I made a brief reference to the reluctance of Ministers to meet groups who are concerned about this proposal and I was encouraged to hear the Secretary of State say just now that he has met the Civil Service unions. I can understand the reluctance of Ministers to say anything on this subject. However, they should answer these criticisms.

The Secretary of State has not always been reluctant to talk on this particular issue. I quote from a letter of the Secretary-General of the Council of Post Office Unions to the Secretary of State. He said: I write about the Social Security No. (2) Bill, clause 5. I think I need hardly remind you of the issues involved, as you gave the Council and other interested parties much appreciated assistance when the issue was last raised in 1976 (your letter to me of the 3rd December 1976 refers). What did the Secretary of State say in that letter of 3 December 1976 to the Secretary-General of the Council of Post Office Unions which encouraged the coun-cil to believe that the Secretary of State—he was spokesman for the Opposition on social security matters at the time—would agree with them in their opposition to the proposals which were then before the House? The Secretary of State should be forthcoming with the House. What did he say to the Secretary-General of the Council of Post Office Unions at that time which led him to believe that the Secretary of State was with the council? The letter continues: You will recall, I am sure, that the matter had been raised before (in 1966, by the National Insurance Advisory Committee) and that in subsequent consideration in 1971 the House expressed its disquiet I recall that Sir Brandon Rhys Williams characterised the proposal as a form of double taxation on people with occupational pension schemes. Our view, as in the past, is that if occupational pensioners are looking for work, then they should be entitled to benefit in precisely the same way as other contributors."—[Official Report, Standing Committee B, 8 May 1980; c. 932.] Is there any Member of this House who would disagree with that line of thought?

People have many reservations at present about the attitude of the public at large to the established political order of this country. I honestly believe that nothing is more conducive to or engenders more cynicism and frustration than politicians saying one thing at one moment and doing the opposite when they have the power and the authority to do that which they had indicated previously could not be done.

This issue has been before the House on three previous occasions and has been rejected on those occasions. I believe that the House rejected this policy on those previous occasions in fairness and on principle. I believe that the House should reject it on this occasion.

Dr. Brians Mawhinney (Peterborough)

I suspect that there is a temptation for those of us who are new to the House to believe that our wisdom is greater than the accumulated wisdom of the years in this House. Therefore, I took time to go back to the introduction of the earnings-related supplement in 1966. I wished to read the arguments that were advanced at that time in support of this measure. I quote the introductory speech on Second Reading by the then Minister, Miss Herbison, who spoke of: the important part which earnings-related unemployment benefit can play in promoting the mobility of labour which is very much needed to meet economic and technological change. The provision of the Bill for earnings-related unemployment benefit is complementary to the Redundancy Payments Act. Both of them are to be seen in the setting of the economic needs of this country. Before this Bill was introduced into the House that was still perceived to be the justification for the earnings-related supplement. In that Second Reading debate in 1966 Conservative Members indicated that they accepted the principle of the Bill and that they would help to get it on to the statute book as quickly as possible. I quote the Minister again, speaking on Third Reading. She said: I thank hon. Members on both sides of the House for ensuring that we got it as quickly as possible."—[Official Report, 17 February 1966; Vol. 724, c. 1627.] In other words both sides of this House agreed on the need for this measure, on the principle that was embodied in the measure, and the importance of it. It was important inasmuch as the measure was rushed through prior to an impending election

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There has been no discussion in this Chamber since then about the importance of the earnings-related supplement. I had the Library do some research for me. I understand that, other than for adjustments, the matter has not been debated on the Floor of this Chamber since its introduction. That seems to be some sort of a record and an indication of bipartisan support for the measure.

I say that by way of introduction because it sets the context for the Budget Statement by my right hon. and learned Friend the Chancellor of the Exchequer on 26 March this year in which he said: The ERS scheme itself has been diminishing in worth and effectiveness over recent years. Redundancy payments are now more generous and the development of the employers' sick pay scheme means that ERS is much less needed than formerly. Of the unemployed, only about 10 per cent. to 15 per cent. are in receipt of ERS at any one time. All in all, the Government would find it difficult to justify its retention."—[Official Report, 26 March 1980; Vol. 980, c. 1461.] My right hon. and learned Friend, in support of the argument for abolition, said that the numbers using the scheme were small—10 per cent. to 15 per cent. The latest figures which I have—the Government may have more recent figures—are for May 1979. In that month, 176,000 people were in receipt of earnings-related supplement. The judgment whether that is an important number must be seen against the statement by the Minister who introduced the scheme in 1966. On that occasion—7 February 1966, c. 40—she told the House that about 110,000 people would be eligible for earnings-related supplement.

The then Conservative Opposition queried that figure and suggested that it might be closer to 180,000. Be that as it may, the numbers it was envisaged would benefit from this scheme when it was introduced with bipartisan support were fewer than the numbers in receipt of benefit under this scheme in May 1979. Therefore, from my point of view, it seems hard to understand why the Government want to advance the numbers argument to justify the abolition of the scheme as the numbers today seem, if anything, to be greater than they were When they constituted a pressing need for the introduction of the scheme in 1966.

Right hon. and hon. Members will have noticed that in his Budget Statement my right hon. and learned Friend said that it was about 10 per cent. to 15 per cent… . at any one time."—[Official Report, 26 March 1980: Vol. 980, c. 1461.] But he did not tell us the rate of turnover of ERS beneficiaries. Therefore, we have no means of knowing how many people per year are in receipt of earnings-related supplement. If we assume a turnover time of six months, we are talking about 350,000 people. If we are talking about a turnover time of three months, we are up to 750,000 people per year in receipt of ERS.

Mr. Needham

I asked the Minister for these figures. The number of those who received earnings-related supplement in the last year available was 1 million. That obviously included sickness benefits as well.

Dr. Mawhinney

Whatever that proves, it proves that the numbers are considerable. They are between 500,000 and 1 million people a year. That is important, because starting at 110,000 we have now reached between 500,000 and 1 million people a year. Yet the argument advanced is that we should discontinue the scheme because the numbers involved are not significant.

Mr. Rooker

I have the figures before me. I extracted them from a parliamentary answer. It may be of help to the House to have these figures. They are a little difficult to follow. On sickness benefit there were 291,000 on a day—I stress "on a day"—and on injury benefit there were 27,000 on a day when the numbers were last counted. On maternity benefit there was 198,000 women per annum. On unemployment benefit, there were 204,000 on a day. Finally, on widows' allowance there were 46,000 per annum. The two benefits affecting women are given as annual totals. The others have a turnover, so the sum is probably in excess of 1 million.

Dr. Mawhinney

The House has already heard the figures advanced by the hon. Gentleman. We are talking about significant numbers of people. That is my point.

We must ask ourselves whether the need for earnings-related supplement has diminished since it was introduced in 1966. On Second Reading it appeared that the measure was introduced for three reasons. Hon. Members on both sides of the House would agree that those reasons are as valid today as they were in 1966. It is unquestionably difficult for people to cope with a big decrease in income once they lose their jobs. The earnings-related supplement was designed to take the catastrophic edge off unemployment. That is at least as true today as it was in 1966. Taking the size of a mortgage as only one example, there is a catastrophic effect of a sudden decrease in income related to unemployment. For that reason, the timing of the abolition of earnings-related supplement is especially bad, bearing in mind the substantial increase in unemployment which, for whatever reasons, hon. Members on both sides expect to take place in the coming months. We are not here to debate the reasons this evening.

It was said that the earnings-related supplement would promote the mobility of labour. That is an important matter in this day and age. It lies at the heart of one of the main aspects of Government policy. The Conservative Government were elected because of the desire to see people moved out of unproductive jobs to productive jobs and to ensure increased mobility of labour. That was one of the planks on which we fought and won the general election. That being a main plank of our policy, I find it difficult to understand how we can introduce a measure which flies in the face of it.

We are talking about reasonably significant amounts of money. On the basis of 1978–79 earnings, the average earnings-related supplement was £14.49 per week. Although we shall debate the size of the decreases under the other clauses, this is by far the biggest decrease proposed in the income of our citizens. The sum of £14.49 will make a considerable difference to most families facing unemployment as they seek new jobs, perhaps elsewhere in the country.

There may well be a negative aspect to this proposal. Again, we are trying to encourage people to move out of unproductive jobs. The prospect of a large decrease in income, not cushioned by earnings-related supplement, may mean that many people will remain in unproductive jobs who otherwise could have been enticed to change their employment into a more profitable area. In other words, the whole thrust of the clause seems to be exactly opposite to the Government's declared intention. I accept the cost argument. It was dealt with effectively by my hon. Friend the Member for Chippenham (Mr. Needham). His figure agrees with the White Paper figure but it is not that which, understandably, was used by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). It is £130 million. That is a tiny percentage of the national insurance fund's expenditure—about 1 per cent. of it. For individuals it represents a good and effective insurance against unemployment.

What disturbs me about the facts to which my hon. Friend the Member for Chippenham referred is that the £130 million is not a reliable figure. It falls within the accepted statistical error of the Government Actuary.

I have taught statistics at university level—

Mr. Skinner

Like Harold Wilson.

Dr. Mawhinney

That is one of the few things that I have in common with the right hon. Member for Huyton (Sir H. Wilson). We would not dream of making decisions—nor would I dream of teaching my students to make decisions, particularly in the medical sphere—on the basis of the type of statistical error which is involved in this computation. The Government might choose to say that the economic argument is defensible. The scientific argument is certainly indefensible.

My right hon. Friend the Financial Secretary to the Treasury, when winding up the debate on 31 March said: the supplement is only about 1 per cent. of the total amount of national insurance benefits paid. So it will make an insignificant difference to the level of contributions to the national insurance fund which the Government settle on. That will be determined by the larger benefits, such as pensions. Because of the rising number of pensioners relative to the working population, the likelihood is that contributions will rise. It is a much larger factor in the equation than the relatively small effect of the abolition of the earnings-related supplement."—[Official Report, 31 March 1980; Vol. 982, c. 162.] It seems that it is permissible to turn the argument round and say that if the contribution for earnings-related supplement is such a negligible part of the contribution to the national insurance fund, and if the Government insist on trying to save £130 million—we have already discussed whether that is ephemeral or substantive—and the cost of doing that is so small in relation to the national insurance contribution, then it is obvious that we could increase the national insurance contribution marginally. In that way the earnings-related supplement is protected.

My right hon. Friends will continue to say that public expenditure must be decreased. I accept that without reservation. In the last 12 months I have voted for that and I shall continue to do so. However, it appears necessary to have a degree of selectivity when we reduce public expenditure. It is not sustainable to argue that public expenditure must always be saved across the board, irrespective of the implications. Government policy has other strands. The argument is that £130 million must be found out of the social security budget. I have already made one suggestion about how that could be done.

8.45 pm

The social security budget is, in one sense, an arbitrary beast. It has been carved out of the Budget. If it is thought difficult to save £130 million out the social security budget, it is certainly not difficult to save it out of the Budget. For example, in a full year the savings envisaged in the Budget from alcohol, tobacco and betting are £503 million. It would have been quite possible for that extra money to have been found from those.

It may be argued that the time is never right to cut benefits. As I said on Second Reading—and my right hon. Friend the Minister agreed—there is nothing in the Bill that makes my heart leap with joy. The cut envisaged in the clause is the largest of any of the cuts. It is different because it goes to the heart of not only the provision of social security benefits, but of the whole economic philosophy of the Government. It will alienate a large body of moderate working opinion, whose support we have been seeking through the implementation of other policies. It will militate against our policies to seek the redistribution of employment. It is of a dubious nature as far as public spending is concerned.

The clause deals with additions as well as the earnings-related supplement. I wish that those were not necessary, but, given the economic necessity behind the Bill, I could not oppose them in the Lobby. The earnings-related supplement lies at the heart of the argument about the country's economic health. If we get that right, all the other decreases in the Bill can be reversed. In my judgment, the abolition of ERS will reduce the prospect of quicker economic recovery, and such a recovery is the best way to restore the cuts in the Bill. I shall not vote for the amendment. I implore my right hon. Friend to reconsider the clause. Depending on what he says, I may not be able to oppose the amendment.

Mr. Skinner

It is refreshing to take part in a debate at a time when the hon. Member for Peterborough (Dr. Mawhinney) has made a speech in which he almost announced that he might abstain. The hon. Member for Chippenham (Mr. Needham) introduced a number of statistics, and indicated that he might abstain also. It is a day when the Government are talking not about doing a U-turn on wages but about beginning to turn the corner. I welcome the possible abstentions. I think that the hon. Members are very wise. They summed up the position fairly accurately.

One of the main planks of Tory Party policy was to say "We will drive those scroungers out of our midst and get not only the white-collar workers but the blue-collar workers on our side". There is some evidence to show that because of a certain lack of ability in the previous Labour Government there was undoubtedly some support in that area. The attack upon the earnings-related payments falls into the category that has been spelt out by the Secretary of State's horrible friends.

There is no doubt that the measure was first introduced in the halcyon days prior to the 1966 victory. It is no wonder that the Tory Party supported it at that time. The right hon. Member for Sidcup (Mr. Heath) was grovelling for all the votes that he could find. At that time, shortly before the March 1966 election, it was a positive and welcome measure for many working-class people.

One of the problems that we have faced for decades is the great divide between blue-collar and white-collar workers. Earnings-related supplement was part of the attempt to bridge the gap. Why was it that half of the coalfields were out on the "Day of Action"? Those who ask that question need look no further than clauses 4 and 5. Some of us in the House and others outside explained their effect to miners. They are men who have to suffer injuries and sickness to a greater extent than Members of Parliament.

We can usually get into this place if we have influenza or many other types of disease, and if we cannot the money is in the tin for us. However, for miners, engineers and many who work in the blue-collar trades there is the economic necessity of having to get to work. The introduction of the earnings-related supplement helped them to stay off work a little longer—perhaps to seek another job or to convalesce to a greater extent than would otherwise have been possible.

I do not know whether I want Conservative Members to shoot this fox. I do in my heart, of course, but the occupants of the Government Front Bench are hell-bent on suicide. They actually believe that by cutting public expenditure across the board it will bring some wonderful results. There is always a time lag between cutting public expenditure and the change of attitude of the public. There was only a 6 per cent. swing in the local elections, but it will grow to 16 per cent. and 26 per cent. by the time that measures such as those contained in the Bill come to the knowledge of the people.

Nearly every colliery in the country was told about clause 5 in the few days prior to the "Day of Action". Mine-workers understood only too well the vindictive and revengeful attitude of the Government against the miners. They are seeking to take away about £12 million to £15 million from miners who have retired early. I remember that when Conservative Members were in opposition they applauded measures to introduce the early retirement scheme to give those who had been down in the bowels of the earth for 40 or 50 years a chance to get up in the daylight a little earlier.

They suggest that the National Coal Board will be able to find the £15 million, but the board does not have any money. The Tories have told us for years that nationalised industries do not have any money. They say that it all belongs to someone else. The wealth creators are the miners in the pits. It is the taxpayer who has to foot the bill on occasions. When they say that they will get rid of £15 million, they are proposing to shift it out of one pocket and to put it in the other.

What is the attitude of the press to a measure of this sort? We have a Tory rebellion—perhaps it will be minute—on our hands. The Government are taking from the poor to give to the rich. Where are the Tory Sun, the Tory Daily Express, the Tory Daily Star and all the other recognised Tory newspapers? Where are they, to comment upon this lousy and vindictive piece of legislation that the Tories have introduced?

Another group that will not be very happy about these measures consists of small employers. They are not happy about having to bridge the gap. There are those in my constituency—I had it in mind to mention the constituent who sent me £50 during the general election campaign—who will be incensed at the way in which the Government are getting, as they put it, out of the small employer's hair. They are getting out all right, but they are saying in the next breath, and in a different tone, "You will have to foot the bill. The workers and the trade unions will demand that." The small employers will be tremendously concerned about the effect of the Bill. That is another reason why some Conservative Members have strong reservations about it.

The Government always say that there is plenty of money in the country. However, in the next breath they say "There is no money and we cannot continue to do all these things. We must cut somewhere." The fact is that there is plenty of money. There is a bonanza around the corner. Of course, most of it belongs to the oil companies. It goes across to America and all over the world, but there is still about £15,000 million left with which we can play.

There is plenty of money to look after earnings-related schemes and to ensure that the miners' voluntary retirement scheme is kept intact and improved upon. There is plenty of money to ensure that hordes of blue-collar workers can retire at 60 or younger. During this period when, as a result of technology, more and more people will be thrown on the scrap-heap, why should there not be occupational pension schemes? Why should there not be a greater rapport between people who work with their hands and those who supposedly work with their brains?

There is plenty of money in the country. There was plenty of money when Princess Anne wanted the gutters on her house mended. I am told that she has applied for another grant. There is plenty of money in the country. There was plenty of money when the house was bought for her. There was plenty of money when Mr. Blunt was sent to examine the house. The Queen asked the taxpayer to buy her daughter a wonderful house, and she sent Mr. Blunt to look over it to see that it was all right. He forgot to look at the gutters. There was a lot wrong with the house, and that is why the taxpayer had to find extra thousands of pounds.

There is plenty of money in the country. There was plenty of money to pay the transfer fee for Ian MacGregor.

There was plenty of money for the Prime Minister when she moved into Downing Street, after she made that so-called passionate plea about St. Francis of Assisi. Her tone was different when she went inside. It was no longer soft and dulcet. She picked up the telephone and said "Shift that Rover that Mr. Callaghan has been using from the back yard. I want two Daimlers." She wanted two Daimlers—one for herself and one for her husband.

This tawdry Government are beset by their pay problems, and they are wondering whether they can still take on the trade unions. They used the press last week and during the weeks before. Now they want some sort of compliance from the trade unions in order to try to solve their problems. But Labour Members are not here to solve their problems.

The Secretary of State is introducing a measure that he will not easily forget. He once told people to clean their teeth in the dark. That lasted for a while, but it did not mean very much. These measures are vindictive. People will respond" and the so-called workers that the Government thought had moved to their side for ever during the election campaign are quickly returning to their natural fold.

Mr. Patrick Jenkin

I hope I shall be able to make myself heard above the echoes of the hon. Member for Bolsover (Mr. Skinner).

In your wisdom, Mr. Speaker—or in the wisdom of one of the previous occupants of the Chair—it was decided to take two amendments together, so we have been discussing clauses 4 and 5. The bulk of the debate has centred on clause 4. I shall, therefore, touch briefly on clause 5 first. I shall deal with the points that were made principally by the right hon. Member for Manchester, Openshaw (Mr. Morris), who put the case fairly for retaining the entitlement to unemployment benefit for people over 60 who have retired on occupational pensions. Unwittingly, he was not helped by his hon. Friend the Member for Manchester, Blackley (Mr. Eastham), who intervened during his speech and referred to this entitlement as a fringe benefit.

Mr. Eastham indicated dissent.

Mr. Rooker

No, the pension.

Mr. Jenkin

If the hon. Gentleman did not mean that, I withdraw my remark. I misunderstood him.

This is the fourth time that successive Governments have sought to bring this measure before the House. On previous occasions the House has not felt it to be right.

The hon. Member for Bolsover de scribed this in very strong language, as vicious, vindictive and all the rest. The measure that we are bringing in is exactly the same as the measure brought in——

Mr. Skinner

I voted against it then.

9 pm

Mr. Jenkin

That does not warrant the strength of language that the hon. Gentleman used. There is a question of a balance of justice as against the need to attain savings. The fact is that successive Governments have felt it right to bring before the House the proposition that those who have retired at the age at which they expected to retire—60— and have retired on a significant occupational pension cannot really be regarded as any longer in the work environment and ought, therefore, not to be entitled to unemployment benefit.

The argument of many of us who have opposed this before—and, as I have already said in the House, I opposed it before—was that the right way to deal with this is by the proper enforcement of the availability for work rule. Successive Governments have said that it cannot be done that way. One cannot apply the availability for work rule in the great majority of cases to which the clause would apply.

I have looked at this argument again very carefully and I have been given, no doubt, exactly the same advice as was given to the right hon. Member for Norwich, North (Mr. Ennals)—that it cannot be done because large numbers of those who have retired in these circumstances are living in places where there just is not work available to offer them. If one cannot offer it to a man, one cannot decide that he has refused it and so disentitle him to benefit. Yet surveys have shown that up to 55 per cent. of those who are drawing unemployment benefit in these circumstances are not really looking for work.

When a Government are being forced to make savings, as we are, in the social security budget, as I explained in an earlier debate, and when we are endeavouring to protect pensioners—[Interruption.] The hon. Member for Swindon (Mr. Stoddart) was not present during the earlier debate. I spelt out how inescapable, but how unpalatable, it is, that a Government have to come forward with measures of this sort.

Mr. Orme

Does the right hon. Gentleman agree that the miners' early retirement scheme was not in operation at the time about which he is talking? Therefore, there are special circumstances affecting early retirement. These affect Post Office workers, miners and other manual workers who were not under consideration when we were discussing this matter previously.

Mr. Jenkin

I understand that. Therefore, that is a particular condition to which the clause applies which did not apply previously. But that is not a reason for not bringing forward the clause, because in relation to the substantial savings which clause 5 produces, the marginal amounts involved in the case of the two schemes run by the National Coal Board—the miners' early retirement scheme and the redundancy payments scheme—are very much smaller.

There is no way in which the coal industry can be protected from the effects of the benefit reductions. The terms of the two schemes mean that the miner is automatically protected during the period for which he has a guarantee of a proportion of his previous earnings, except to the extent that taxable NCB payments would replace the non-taxable unemployment benefit. But when taxation of unemployment benefit comes into force in 1982, the advantages for the mineworkers in the provision of taking unemployment benefit into account would in any case disappear. From 1982 the scheme provisions would therefore probably have to be completely changed, removing the assumption that unemployment benefit will be claimed, and the effect of clauses 1 and 4 is limited to the period between now and then.

As to the application of clause 5 to the miners' schemes, the proposal is that it would be on the basis that the clause will apply to payments made to mine-workers under the early retirement scheme because they are retired and what they have is a pension, but the clause would not be applied to payments made under the redundancy payments scheme.

As there is a power to make regulations, we shall give effect to that. Those who are affected by the redundancy payments scheme will have been affected on a basis other than that of retirement. They would have been expected to have had work. Therefore the clause will not apply to them. The question of financing the burden that would fall on the National Coal Board is one that concerns my right hon. Friend the Secretary of State for Energy.

Mr. J. D. Concannon (Mansfield)

If I had caught Mr. Speaker's eye during this short debate, I would have made a speech on this point. The Secretary of State is putting the onus on the National Coal Board. He must realise that the Coal Industry Bill is before the House. That Bill will change the basis of the grants that the National Coal Board receives. The National Coal Board will therefore be unable to find such a considerable amount of money. In the coalfields, this Bill is known as "Prentice's revenge." There will be one heck of a furore when the mineworkers realise how this provision and that of the early retirement scheme will affect them. The Secretary of State should get his finger out and consider the effects on the National Coal Board.

Mr. Jenkin

I have given a broad indication that the Government do not intend to apply the scheme to the mine-workers' redundancy payments scheme. Mineworkers are no different from other retirement pensioners who retire at 60. It would be difficult to argue that there is a privileged group of citizens to whom the law should not apply.

I have already pointed out that we do not intend to apply clause 5 to the redundancy payments scheme. As regards the argument made by the right hon. Member for Openshaw, successive Governments have felt that it was time that the entitlement condition for unemployment benefit should be changed. The House should grasp that nettle and make that change. I have discussed this issue with representatives of the retired and I have found that they do not give high priority to the retention of the entitlement in comparison with other claims, which they felt should be given higher priority.

Turning to earnings-related supplement, I shall give a brief answer to the point raised by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). He devoted his argument to a non-sentence that I did not utter. He hardly made any points about the merits of the case. Indeed, the argument was made by my hon. Friends the Members for Chippenham (Mr. Needham) and for Peterborough (Dr. Mawhinney). The hon. Member for Perry Barr asked why the statement had not been made in the House. The answer is that I crossed it out before I got up to make my statement.

Mr. Rooker

Why?

Mr. Jenkin

I did not think that it was an appropriate sentence to put in the statement. Most people would consider that Hansard—not some press release—contained an accurate statement of what I said. I am grateful to my hon. Friend the Member for Chippenham. He has takes a great deal of trouble to reconcile the figures that appear in the explanatory and financial memorandum to the Bill with the figure in the White Paper on public expenditure in respect of what we expect to achieve by making such savings. There are two differences. First, the figures in the Bill are based on current prices, whereas those in the White Paper are based on 1979 survey prices. Secondly, the White Paper takes account of the employers' statutory sick pay scheme on the assumption that the Government have included this proposal in their public expenditure projections. The Bill cannot do that, because it is not yet law. It is subject only to consultation.

In the explanatory and financial memorandum the earnings-related supplement savings are given as £360 million. On the basis of the Government Actuary's revisions it would appear that that figure should be a little higher, perhaps reaching £378 million or more. There is a supplementary benefit offset of £75 million in the explanatory and financial memorandum. Again, that figure may be higher, at about £89 million or £90 million. That would give a balance figure of about £288 million. If that amount is converted into 1979 survey prices, and if allowance is made for the switch to employers' statutory sick pay, one gets a figure of about £135 million. The latest estimates by the Government Actuary suggest that the figure may be more than that, at about £145 million. That is a substantial sum that is needed to contribute to the overall savings that the Government must have.

My hon. Friend the Member for Chippenham went on to ask how the Government would get their hands on the savings. The hon. Member for Birkenhead (Mr. Field) asked whether it would be done by reducing the Treasury supplement of 18 per cent.—or the Exchequer contribution, as it is often called in the vernacular. The answer is "No". It is not intended to do that. No legislation has been introduced and that is not currently in mind. I must emphasise to the House that it is really quite impossible at this stage, in the first half of 1980, to forecast with any precision the overall effect on the contributions, on the size of the surplus and on the balance of the fund as a result of the changes in clause 4 of the Bill. However, one can say with total certainty that if the Bill goes through and the saving is made, there will be a reduction in public spending of between £135 million and £145 million. That is important as part of the Government's overall strategy to reduce the burden of public expenditure.

It is impossible to say what the effect of this will be on the contributions because there are so many assumptions that must be made. The Government Actuary makes his estimates on the basis of assumptions about the rate of unemployment, the numbers of unemployed, the numbers of sick and so on. All these factors are fed into his calculations so that he can work out the necessary contributions to meet the outgo. But there still remains the decision that the Government must make on whether the balance in the fund is appropriate as a working balance to support the outgo.

We must remember that we are talking about the difference between two fairly large aggregates—currently about £15 billion and by 1982, when this finally takes effect, it might be as much as £20 billion. Against that, the variations of the Bill can be said to be within the margins of error. The savings are not uncertain. The savings are needed and they will be made. However, one cannot say whether this will be automatically reflected in a reduction of contributions, or whether it will be necessary to increase the size of the balance.

Mr. Peter Bottomley

Surely the argument works both ways. Clearly, if there is a reduction in Government spending it is quantifiable at around £130 million. In the same way, the reduction in national insurance contributions is also quantifiable. If the two balance, there will be no net effect on the public sector borrowing requirement. The PSBR, which is a burden on public expenditure, is balanced by an increase in Government revenue.

Mr. Jenkin

My hon. Friend is right in putting it in those strictly mathematical terms. But I am trying to point out that as of today—21 May 1980—I cannot now advise the House that there would necessarily be a reduction in the contributions which would match this. I understand the points that have been made, but the balance of the fund—the working balance—has fallen in recent years from about four months' outgo to rather less than three months' outgo. It is certainly an argument, with the uncertainties of the years ahead, that the Government may consider it right to restore that balance to four months' outgo, in which case one could not expect to see a reduction in the contributions to match it.

Mr. Field

Why does the Secretary of State keep telling the House that he does not know what is happening on the contribution side? The right hon. Gentleman knows as well as any other hon. Member that the contribution year is different from the benefit year. We are already in the contribution year for the first year in which his Department is running down benefits. The Government have already decided not to change the contribution. There is a saving in public expenditure by keeping up the level of contributions but disengaging benefits. However, that then pushes people on to supplementary benefit, which, as the hon. Member for Chippenham pointed out, will increase the public sector borrowing requirement.

9.15 pm

Mr. Jenkin

I understand that argument, but the additional increase in supplementary benefit is part of the calculation that has arrived at the net saving of £130 million. The hon. Gentleman has a great understanding of these matters, but he has uncharacteristically fallen into the error of confusing how benefits are paid for with measuring the entitlement of the individual. The benefits are paid on a pay-as-you-go basis. [Interruption.] This year's contributions are paying for this year's benefits. That is the basis on which successive Governments have run the national insurance fund. The question of entitlement to benefit—[Interruption.]

I must ask for protection, Mr. Speaker. The hon. Member for Birkenhead is continually speaking from a seated position.

Entitlement to benefit is based on the the individual's contribution record in a previous period. However, it is wrong to imagine that the contributions that the individual paid in that period are paying for the benefits that he may be entitled to in a later period. It is merely a method of measuring entitlement and determining whether an individual is entitled. It is not a means of paying for benefits. The benefits are paid for by the contributions in those years.

My right hon. and learned Friend the Chancellor of the Exchequer announced the change in his Budget Statement before the beginning of the financial year. Everyone is paying contributions this year in the knowledge that those contributions will not entitle them to earnings-related benefit from January 1982.

My hon. Friend the Member for Peterborough advanced the powerful argument that this is still an important benefit. I do not say that it is insignificant. However, over the past 10 years it has been allowed to fall by almost 50 per cent. Successive Governments have felt that earnings-related supplement is less important in the scheme of things than the other benefits paid out of the national insurance fund. For a man on average earnings, in September 1971 earnings-related benefit averaged £22.95 at today's prices. By next November the figure will be £12.69. If that is expressed as the percentage of the benefit for a single man, it has fallen from 112 per cent. to 61.5 per cent. If it is expressed as a percentage of net earnings for a single man, it has fallen from 30.5 per cent., to 16.9 per cent. That is what my right hon. and learned Friend the Chancellor was referring to. Over the years successive Governments—the Conservative Government under my right hon. Friend the Member for Sidcup (Mr. Heath) and the Labour Government in the five years from 1974—felt that it was not a benefit that needed to keep pace. It has become less important.

Therefore when one is looking for savings in the social security budget, and is determined to protect pensioners against rising prices, maintain the safety net for the supplementary benefit, do what one can for needy families in work through family income supplement, protect the mobility allowance and so on, one seeks benefits enjoyed by those who are, perhaps, not so badly off.

Mr. Stephen Dorrell (Loughborough)

I take the point that my right hon. Friend makes. Will he also take on board the fact that earlier this evening the House passed a clause that imposes a 5 per cent. abatement on unemployment benefit? The combined effect of this clause and the one that we have passed is that for a small group of arbitrarily chosen unemployed people and people on sickness benefit the cut in benefit is not 5 per cent, but, in some cases, can be up to 20 per cent.

Mr. Jenkin

My hon. Friend may be right. I do not have that figure in mind. There are two factors that I must mention. Since the earnings-related supplement was introduced, there has been a great extension of employers' sick pay schemes. A Green Paper on statutory sick pay estimates that 80 per cent. or more of employees are now covered by some form of employers' sick pay scheme. It is possibly for that reason that successive Government's have felt it right not to maintain the value.

Secondly, there has been considerable extension of redundancy agreements going beyond the statutory minimum. They are now widespread and generous in the public sector. They are increasingly widespread in the private sector. The question of mobility and technological change was raised by my hon. Friend the Member for Peterborough. It is more attractive to individuals that they should receive a lump sum on redundancy than have the prospect of an earnings-related benefit so long ago as they are out of work. That is what unions are prepared to bargain for. That is what is progressively happening.

In these circumstances, the Government have concluded that as savings have to be found—it is inescapable that we make some savings in the social security budget—this is a benefit that can be more easily dropped than many others. I ask the House to reject the amendment moved by the hon. Member for Perry Bar and to support the clause.

Mr. Orme

The House will consider the Secretary of State's reply on the amendments dealing with clauses 4 and 5 as entirely unsatisfactory. The right hon. Gentleman has not had one supporter in favour of what the Government are doing. He did not address himself to the point on clause 5 about the miners and the postal workers. My right hon. Friends for Mansfield (Mr. Concannon) and for Manchester, Openshaw (Mr. Morris) and my hon. Friend the Member for Bolsover (Mr. Skinner) made the point that the early retirement scheme was designed to assist people, not least in heavy manufacturing work.

The right hon. Gentleman may regret saying that the miners are not a special case. The Labour Government decided that the miners were a special case and that they had a special call upon early retirement. The right hon. Gentleman cannot brush the proposal aside. He should inform the House that the Department of Energy or his own Department will take the weight off the National Coal Board. The new borrowing powers in the Coal Industry Bill will not allow the board to offset an amount of £15 or £20 million. A pertinent case has been made by my right hon. and hon. Friends. There will be no opportunity, because of the guillotine, to vote on both clauses. But the vote, so far as the Opposition are concerned, when it occurs, in five or six minutes' time will be against both clauses 4 and 5.

I turn to the question of the earnings-related benefit. The hon. Member for Chippenham (Mr. Needham) gave details of the financial implications and the reduced amount of savings that the Government will achieve through abolition of the earnings-related benefit. The hon. Gentleman also said that there would be a reduction in national insurance contributions, which would balance the savings on the public sector borrowing requirement.

However, the Financial Secretary to the Treasury did not deny my claim in the House a few weeks ago that, for several reasons, there would be no reductions in national insurance contributions, even though the benefit is to be abated and later abolished. That is robbery. If any insurance company operated on that basis, some people would go to prison. The Secretary of State cannot get away from the fact that there is bound to be an overlap between contributions one year and the removal of the benefit the following year.

Mr. Field

Does my right hon. Friend share my alarm that the Secretary of State should mislead the House by saying that this year's contributions are for this year's benefits? The basis of the scheme is that this year's contributions are for benefits next year, and many people who are paying benefits this year will be denied benefit under the Government's proposals.

Mr. Orme

My hon. Friend is right. The Secretary of State has not addressed himself to that point. Millions of people believe, rightly in my view, that, having contributed to the scheme since 1966, they should receive the benefit when they need it.

The abatement and subsequent abolition of the benefit will mean that people will have contributed to the benefit in one financial year and will not receive it or part of it in the next financial year. That is robbery.

Mrs. Chalker

It is not.

Mr. Orme

The Under-Secretary shakes her head. We have had no evidence that the Government's proposal is not robbery.

Mrs. Chalker

When will the right hon. Gentleman stop misleading the country? We all know that the contribution year is the preceding tax year. The right hon. Gentleman should not mislead people into believing that they are entitled to benefits which they were not entitled to under any previous Government unless they had paid contributions in the previous tax year.

Mr. Orme

The hon. Lady has not addressed herself to the point that, in part, people pay this year for the following year. It is no good talking about previous Governments. They did not abate or contemplate abolishing the benefit. I hope that an incoming Labour Government will replace the benefit.

Mr. Skinner

Not "hope". We will do it.

Mr. Orme

No doubt my hon. Friend the Member for Bolsover will play a major part at the Labour Party conference to see that that commitment goes into our manifesto.

It is often not understood that the earnings-related benefit is not only for those who are unemployed. It extends into maternity benefit and benefits for the sick, widows and the disabled. Many categories are covered. Millions are eligible for the benefit and they have had just cause to welcome it. It was created in 1966 to cushion those in an unfortunate situation—for a short time only it is hoped—and to lift them above the poverty level. The measure affords them the freedom of movement to look for employment and the maternity allowance affords some recompense and help with the family budget.

This Government are removing a basic benefit. We deplore that. I think that the Secretary of State has not answered the case and I hope that his right hon.

Division No. 3221	AYES	[9.30 pm
Abse, Leo	English, Michael	Litherland, Robert
Adams, Allen	Ennals, Rt Hon David	Lofthouse, Geoffrey
Allaun, Frank	Evans, loan (Aberdare)	Lyon, Alexander (York)
Alton, David	Ewing, Harry	Lyons, Edward (Bradford West)
Anderson, Donald	Faulds, Andrew	Mabon, Rt Hon Dr J. Dickson
Archer, Rt Hon Peter	Field, Frank	McCartney, Hugh
Ashley, Rt Hon Jack	Fitch, Alan	McCusker, H.
Ashton, Joe	Fitt, Gerard	McDonald, Dr Oonagh
Atkinson, Norman (H'gey, Tott'ham)	Flannery, Martin	McElhone, Frank
Bagler, Gordon A. T.	Fletcher, Ted (Darlington)	McGuire, Michael (Ince)
Barnett, Guy (Greenwich)	Foot, Rt Hon Michael	McKay, Allen (Penistone)
Barnett, Rt Hon Joel (Heywood)	Ford, Ben	McKelvey, William
Beith, A. J.	Forrester, John	MacKenzie, Rt Hon Gregor
Benn, Rt Hon Anthony Wedgwood	Fraser, John (Lambeth, Norwood)	Maclennan, Robert
Bennett, Andrew (Stockport N)	Freeson, Rt Hon Reginald	McNamara, Kevin
Booth, Rt Hon Albert	Freud, Clement	McWilliam, John
Bottomley, Rt Hon Arthur (M'brough)	Garrett, John (Norwich S)	Magee, Bryan
Bradford, Rev. R.	Garrett, W. E. (Wallsend)	Marks, Kenneth
Bradley, Tom	George, Bruce	Marshall, David (Gl'sgow, Shettles'n)
Bray, Dr Jeremy	Ginsburg, David	Marshall, Dr Edmund (Goole)
Brown, Hugh D. (Provan)	Grant, George (Morpeth)	Marshall, Jim (Leicester South)
Brown, Ronald W. (Hackney S)	Grant, John (Islington C)	Mason, Rt Hon Roy
Brown, Ron (Edinburgh, Leith)	Hamilton, James (Bothwell)	Maxton, John
Buchan, Norman	Hamilton, W. W. (Central Fife)	Maynard, Miss Joan
Callaghan, Jim (Middleton & P)	Hardy, Peter	Meacher, Michael
Campbell, Ian	Harrison, Rt Hon Walter	Hellish, Rt Hon Robert
Campbell-Savours, Dale	Hart, Rt Hon Dame Judith	Millan, Rt Hon Bruce
Canavan, Dennis	Hattersley, Rt Hon Roy	Miller, Dr M. S. (East Kilbride)
Cant, R. B.	Haynes, Frank	Mitchell, Austin (Grimsby)
Carmichael, Neil	Heffer, Eric S.	Molyneaux, James
Carter-Jones, Lewis	Hicks, Robert	Morris, Rt Hon Alfred (Wythenshawe)
Cartwright, John	Hogg, Norman (E Dunbartonshire)	Morris, Rt Hon Charles (Openshaw)
Clark, Dr David (South Shields)	Holland, Siuart (L'beth, Vauxhall)	Morton, George
Cocks, Rt Hon Michael (Bristol S)	Home Robertson, John	Moyle, Rt Hon Roland
Cohen, Stanley	Homewood, William	Newens, Stanley
Coleman, Donald	Hooley, Frank	Oakes, Rt Hon Gordon
Concannon, Rt Hon J. D.	Horam, John	Ogden, Eric
Conlan, Bernard	Howell, Rt Hon Denis (B'ham, Sm H)	O'Halloran, Michael
Cook, Robin F.	Howells, Geraint	O'Neill, Martin
Cowans, Harry	Huckfleld, Les	Orme, Rt Hon Stanley
Craigen, J. M. (Glasgow, Maryhill)	Hudson, Davies, Gwilym Ednyted	Owen, Rt Hon Dr David
Cryer, Bob	Hughes, Mark (Durham)	Palmer, Arthur
Cunliffe, Lawrence	Hughes, Robert (Aberdeen North)	Park, George
Cunningham, George (Islington S)	Hughes, Roy (Newport)	Pendry, Tom
Dalyell, Tam	Janner, Hon Greville	Penhallgon, David
Davidson, Arthur	Jay, Rt Hon Douglas	Powell, Rt Hon J. Enoch (S Down)
Davles, Rt Hon Denzil (Llanelli)	John, Brynmor	Powell, Raymond (Ogmore)
Davles, Ifor (Gower)	Johnson, James (Hull West)	Prescott, John
Davis, Clinton (Hackney Centra!)	Johnson, Walter (Derby South)	Price, Christopher (Lewisham West)
Davis, Terry (B'rm'ham, Stechford)	Johnston, Russell (Inverness)	Race, Reg
Deakins, Eric	Jones, Rt Hon Alec (Rhondda)	Radice, Giles
Dean, Joseph (Leeds West)	Jones, Barry (East Flint)	Richardson, Jo
Dempsey, James	Jones, Dan (Burnley)	Roberts, Albert (Normanton)
Dewar, Donald	Kaufman, Rt Hon Gerald	Roberts, Allan (Bootle)
Dobson, Frank	Kilfedder, James A.	Roberts, Ernest (Hackney North)
Dormand, Jack	Kllroy-Silk, Robert	Roberts, Gwilym (Cannock)
Douglas, Dick	Knox, David	Robertson, George
Douglas-Mann, Bruce	Lambie, David	Rodgers, Rt Hon William
Dubs, Alfred	Lamborn, Harry	Rooker, J. W.
Duffy, A. E. P.	Lamond, James	Ross, Stephen (Isle of Wight)
Dunn, James A. (Liverpool, Kirkdale)	Leadbitter, Ted	Ross, Wm. (Londonderry)
Dunnett, Jack	Leighton, Ronald	Rowlands, Ted
Dunwoody, Mrs Gwyneth	Lestor, Miss Joan (Eton & Slough)	Ryman, John
Eastham, Ken	Lewis, Arthur (Newham North Weat)	Sandelson, Neville
Ellis, Raymond (NE Derbyshire)	Lewis, Ron (Carlisle)	Sever, John

and hon. Friends will vote with us against the measure.

It being half-past Nine o'clock, Mr. Speaker proceeded, pursuant to the Order [6 May] and the Resolution this day, to put forthwith the Question already prososed from the Chair.

Question put, That the amendment be made:—

The House divided: Ayes 242, Noes 287.

Sheerman, Barry	Straw, Jack	Whitlock, William
Sheldon, Rt Hon Robert (A'ton-u-L)	Summerskill, Hon Dr Shirley	Wigley, Dafydd
Short, Mrs Renée	Taylor, Mrs Ann (Bolton West)	Williams, Rt Hon Alan (Swansea W)
Silkin, Rt Hon John (Dept ford)	Thomas, Dafydd (Merioneth)	Williams, Sir Thomas (Warrington)
Silkln, Rt Hon S. C. (Dulwich)	Thomas, Jeffrey (Abertillery)	Wilson, Gordon (Dundee East)
Silverman, Julius	Thomas, Dr Roger (Carmarthen)	Wilson, Rt Hon Sir Harold (Huyton)
Skinner, Dennis	Torney, Tom	Wilson, William (Coventry SE)
Smith, Rt Hon J. (North Lanarkshire)	Urwin, Rt Hon Tom	Winnick, David
Snape, Peter	Varley, Rt Hon Eric G.	Woodall, Alec
Soley, Clive	Wainwright, Edwin (Dearne Valley)	Woolmer, Kenneth
Spearing, Nigel	Walnwright, Richard (Colne Valley)	Wrigglesworlh, Ian
Spriggs, Leslie	Watkins, David	Wright, Sheila
Stallard, A. W.	Weetch, Ken	Young, David (Bolton East)
Steel, Rt Hon David	Wellbeloved, James
Stewart, Rt Hon Donald (W Isles)	Welsh, Michael	TELLERS FOR THE AYES:
Stcddart, David	White, Frank R. (Bury & Radcliffe)	Mr. Ted Graham and
Strang, Gavin	Whitehead, Phillip	Mr. James Tinn.

NOES
Adley, Robert	du Cann, Rt Hon Edward	Joseph, Rt Hon Sir Keith
Aitken, Jonathan	Dunn, Robert (Dartford)	Kimball, Marcus
Alexander, Richard	Durant, Tony	Knight, Mrs. Jill
Allson, Michael	Eden, Rt Hon Sir John	Lamont, Norman
Amery, Rt Hon Julian	Edwards, Rt Hon N. (Pembroke)	Lang, Ian
Ancram, Michael	Eggar, Timothy	Langford-Holt, Sir John
Arnold, Tom	Elliott, Sir William	Latham, Michael
Aspinwall, Jack	Fairgrieve, Russell	Lawrence, Ivan
Atkins, Robert (Preston North)	Faith, Mrs Sheila	Lawson, Nigel
Atkinson, David (B'mouth, East)	Farr, John	Lee, John
Baker, Nicholas (North Dorset)	Fell, Anthony	Lennox-Boyd, Hon Mark
Banks, Robert	Fenner, Mrs Peggy	Lester, Jim (Beeston)
Beaumont-Dark, Anthony	Finsberg, Geoffrey	Lewis, Kenneth (Rutland)
Call, Sir Ronald	Fisher, Sir Nigel	Lloyd, Ian (Havant 4 Waterloo)
Bendall, Vivian	Fletcher, Alexander (Edinburgh N)	Lloyd, Peter (Fareham)
Bennett, Sir Frederic (Torbay)	Fletcher-Cook, Charles	Loveridge, John
Benyon, Thomas (Abingdon)	Fookes, Miss Janet	Luce, Richard
Benyon, W. (Buckingham)	Forman, Nigel	Lyell, Nicholas
Best, Kelth	Fowler, Rt Hon Norman	McCrindle, Robert
Bevan, David Gilroy	Fox, Marcus	Macfarlane, Neil
Biffen, Rt Hon John	Fraser, Rt Hon H. (Stafford S St)	MacGregor, John
Biggs-Davlson, John	Fraser, Peter (South Angus)	MacKay, John (Argyll)
Blackburn, John	Fry, Peter	Macmillan, Rt Hon M. (Farnham)
Blaker, Peter	Gardiner, George (Reigate)	McNair-Wilson, Michael (Newbury)
Body, Richard	Gardner, Edward (South Fylde)	McNair-Wilson, Patrick (New Forest)
Bonsor, Sir Nicholas	Garel-Jones, Tristan	McQuarrie, Albert
Bowden, Andrew	Glyn, Dr. Alan	Madal, David
Boyson, Dr Rhodes	Goodhew, Victor	Major, John
Braine, Sir Bernard	Goodlad, Alastair	Marland, Paul
Bright, Graham	Gorst, John	Marlow, Tony
Brinton, Tim	Gow, Ian	Marshall, Michael (Arundel)
Brocklebank-Fowler, Christopher	Gower, Sir Raymond	Marten, Neil (Banbury)
Brooke, Hon Peter	Grant, Anthony (Harrow C)	Mates, Michael
Brotherton, Michael	Gray, Hamish	Mather, Carol
Brown, Michael (Brigg & Sc'thorpe)	Greenway, Harry	Maude, Rt Hon Angus
Browne, John (Winchester)	Grieve, Percy	Mawby, Ray
Bruce-Gardyne, John	Griffiths, Peter (Portsmouth N)	Mayhew, Patrick
Bryan, Sir Paul	Grist, Ian	Mellor, David
Buck, Antony	Grylls, Michael	Meyer, Sir Anthony
Budgen, Nick	Gummer, John Selwyn	Miller, Hal (Bromsgrove & Redditch)
Buller, Esmond	Hamilton, Hon Archie (Eps'm£Ew'll)	Mills, lain (Meriden)
Burden, F. A.	Hamilton, Michael (Salisbury)	Miscampbell, Norman
Butcher, John	Hampson, Dr Keith	Mitchell, David (Basingstoke)
Buller, Hon Adam	Hannam, John	Moate, Roger
Cadbury, Jocelyn	Haselhurst, Alan	Monro, Hector
Carlisle, John (Luton West)	Hastings, Stephen	Montgomery, Fergus
Carlisle, Rt Hon Mark (Runcorn)	Havers, Rt Hon Sir Michael	Moore, John
Chalker. Mrs. Lynda	Hawksley, Warren	Morgan, Geraint
Channon, Paul	Hcdclle, John	Morris, Michael (Northampton, Sth)
Chapman, Sydney	Henderson, Barry	Morrison, Hon Charles (Devizes)
Churchill, W. S.	Heseltine, Rt Hon Michael	Morrison, Hon Peter (City of Chester)
Clark, Hon Alan (Plymouth, Sutton)	Higgins, Rt Hon Terence L.	Mudd, David
Clark, Sir William (Croydon South)	Hogg, Hon Douglas (Grantham)	Murphy, Christopher
Clarke, Kenneth (Rushcliffe)	Holland, Philip (Carlton)	Myles, David
Clegg, Sir Walter	Hooson, Tom	Nelson, Anthony
Colvin, Michael	Hofdern, Peter	Neubert, Michael
Cope, John	Howe, Rt Hon Sir Geoffrey	Newton, Tony
Cormack, Patrlok	Howell, Ralph (North Norfolk)	Nott, Rt Hon John
Corrie, John	Hunt, David (Wirral)	Onslow, Craniey
Costain, A. P.	Hunt, John (Ravensbourne)	Osborn, John
Critchley, Julian	Hurd, Hon Douglas	Page, John (Harrow, West)
Crouch, David	Irving, Charles (Cheltenham)	Page, Rt Hon Sir R. Graham
Dickens, Geoffrey	Jenkin, Rt Hon Patrick	Page, Richard (SW Hertfordshire)
Douglas-Hamilton, Lord James	Johnson Smith, Geoffrey	Parris, Matthew
Dover, Denshore	Jopling, Rt Hon Michael	Patten, Christopher (Bath)

Patten, John (Oxford)	Shepherd, Colin (Hereford)	Townsend, Cyril D. (Bexleyheath)
Pattle, Geoffrey	Shepherd, Richard (Aldridge-Br'hills)	Trotter, Neville
Pawsey, James	Shersby, Michael	van Straubenzee, W. R.
Percival, Sir Ian	Silvester, Fred	Vaughan, Dr Gerard
Pink, R. Bonner	Sims, Roger	Viggers, Peter
Pollock, Alexander	Skeet, T. H. H.	Waddington, David
Porter, George	Smith, Dudley (War. and Leam'ton)	Wakeham, John
Prentice, Rt Hon Reg	Speed, Keith	Waldegrave, Hon William
Price, David (Eastleigh)	Speller, Tony	Walker, Rt Hon Peter (Worcester)
Prior, Rt Hon James	Spence, John	Walker, Bill (Perth £ E Perthshire)
Proctor, K. Harvey	Spicer, Jim (West Dorset)	Walker-Smith, Rt Hon Sir Derek
Pym, Rt Hon Francis	Spicer, Michael (S Worcestershire)	Waller, Gary
Raison, Timothy	Sproat, lain	Walters, Dennis
Rathbone, Tim	Squire, Robin	Ward, John
Rees, Peter (Dover and Deal)	Stainton, Keith	Warren, Kenneth
Rees-Davies, W. R.	Stanbrook, Ivor	Watson, John
Ronton, Tim	Stanley, John	Wells, John (Maidstone)
Rhodes James, Robert	Steen, Anthony	Wells, Bowen (Hert'rd £ Stev'nage)
Rhys Williams, Sir Brandon	Stevens, Martin	Wheeler, John
Ridley, Hon Nicholas	Stewart, Ian (Hitchin)	Whitney, Raymond
Ridsdale, Julian	Stewart, John (East Renfrewshire)	Wickenden, Keith
Rifkind, Malcolm	Stokes, John	Wiggin, Jerry
Rippon, Rt Hon Geoffrey	Stradling Thomas, J.	Wilkinson, John
Roberts, Michael (Cardiff NW)	Tapsell, Peter	Williams, Delwyn (Montgomery)
Roberts, Wyn (Conway)	Taylor, Robert (Croydon NW)	Winterton, Nicholas
Rossi, Hugh	Taylor, Teddy (Southend East)	Wolfson, Mark
Rost, Peter	Tebbit, Norman	Young, Sir George (Acton)
Royle, Sir Anthony	Temple-Morris, Peter	Younger, Rt Hon George
Sainsbury, Hon Timothy	Thomas, Rt Hon Peter (Hendon S)
St. John-Stevas, Rt Hon Norman	Thorne, Neil (Ilford South)	TELLERS FOR THE NOES:
Scott, Nicholas	Thornton, Malcolm	Mr. Spencer Le Marchant and
Shelton, William (Streatham)	Townend, John (Bridlington)	Mr. Anthony Berry.

Question accordingly negatived.