Social Security Bill

HC Deb 24 February 1981 vol 999 cc759-834

Order for Second Reading read.

4.24 pm

The Secretary of State for Social Services (Mr. Patrick Jenkin)

I beg to move, That the Bill be now read a Second time.

The Bill is somewhat shorter than we had originally intended, for reasons that I shall give later. It implements one of the proposals announced by my right hon. and learned Friend the Chancellor of the Exchequer before Christmas for containing the growth in public spending. We are also taking the opportunity to amend the law in a number of other social security matters that need to be dealt with. I imagine—I think it is a fairly safe prediction—that most of the controversy on the Bill will focus on clause 1.

I should like to start with two propositions with which I hope the Opposition will feel able to agree. The first is that public expenditure must be held to the levels that the nation can afford if we are to have any chance of defeating inflation and of securing economic recovery. Secondly, I hope that the Opposition recognise that economic recovery is essential if we are to provide more resources for the elderly and for those in need.

I should like to think that these propositions are self-evident. They were self-evident to the Opposition when they were in government. They, too, found it necessary to impose restraints on public spending. There is, however, one difference. We have had the courage to deal with the Goverment's current account spending and not just to hack away at capital spending, as the Opposition did when in office.

It is dealing with the current account spending that lies behind clause 1. Because I suspect that it will provide the main casus belli in the Bill, I shall devote the major part of my speech to it. I shall then deal with the other clauses. At the end, I should like to deal with what might be described as the dog that did not bark in the night—in this case, the sick pay scheme whose introduction we have postponed until the next Session.

As the hon. Member for Birmingham, Perry Barr (Mr. Rooker) well knows and as his hon. Friend the Member for Renfrewshire, West (Mr. Buchan) has no doubt discovered, social security legislation tends to be very complex, even at times opaque. Clause 1 is no exception. I should like, therefore, to do my best to explain it to the House. Put briefly, the intention of the clause is twofold. First, it aims to give effect to the proposal of which my right hon. and learned Friend the Chancellor of the Exchequer gave notice to the House on 24 November last year, namely, to ensure that the Government's intentions on pension uprating are implemented, including keeping the value of the retirement pension and other social security benefits in line with the rise in prices in accordance with the pledges that we gave at the election.

As the House knows, the increase in benefits which took place in the week beginning 24 November last year of 16½ per cent. for pensions and most other long-term benefits turned out to be one percentage point more than the increase in prices that had taken place since the 1979 uprating. In view of the extreme pressure on public spending, the Government have taken the view that, desirable as they are, the nation cannot at present afford increases in the real value of social security benefits. It was therefore decided to take account of this 1 per cent. excess when making the uprating next November. Since existing legislation obliges the Government to look at each year separately, it would oblige the Government to carry forward the 1 per cent. excess when fixing the 1981 pension increase. But, alas, we cannot afford to carry it forward. So we are asking Parliament to amend the law. Secondly, the clause modifies the procedure whereby pension increases are announced in order to get over a difficulty that can arise and which might have arisen last year, although, in the event, it did not. As the law stands, the time at which the Secretary of State has to form his estimate of the likely increase in prices between the last uprating and the next is the time at which he lays the order providing for the uprating. It is not, as has sometimes been supposed, the date on which the uprating is first announced, usually the day following the Chancellor's Budget Statement.

As the law stands, that announcement has no legal effect at all. It follows, therefore, that if the price forecast at the time of the Budget is found, later in the year and before the order is laid, to be wrong, then the order has to be based not on the forecast, as originally announced, but on the later, more up-to-date forecasts. I have to tell the House that such a change could give rise to severe operational difficulties. It is these that the Government are anxious to avoid.

Clause 1(1) provides that, in future, the Secretary of State must make a statement specifying the date of the uprating, the percentage by which benefits would have to be increased in order to restore their value, and the actual increases which he proposes to provide for in the uprating order. Then in due course he must lay an order providing for those increases. In other words, he would not be obliged, if there is some delay in laying the order, to make a fresh estimate of the likely movement of prices.

Those are the two changes embodied in clause 1. Before dealing with them in more detail, I remind the House that Britain is not the only country that is having to face difficult decisions in order to contain the cost of paying social security benefits. Both in Europe and in America, Governments facing the commitments which they or their predecessors gave in happier times have had to acknowledge that those commitments cannot be sustained in the wake of the massive increase in oil prices which has hit all our economies hard.

Germany has modified the benefit increases that would otherwise have had to be made in 1979, 1980 and 1981. Italy has changed the basis for indexing pensions. The Netherlands has resorted to staging benefit increases which would otherwise have been awarded at the earlier date and its Government are currently engaged in an intensive study of the costs of social security programmes. Denmark is considering proposals to change the automatic linking of benefit increases with the retail price index. Belgium has made changes in its system with a view to containing the costs. In America, Congress is studying ways of scaling back future social security benefits because large deficits in the relevant funds are anticipated over the years ahead. I am not sure why the hon. Member for Birkenhead (Mr. Field) is laughing, because that was done before the Presidential elections; it was done before President Reagan came to office.

Mr. Frank Field (Birkenhead)

I was laughing about the relevance of the long list of countries.

Mr. Jenkin

The relevance of the list, as I am sure the hon. Gentleman is perfectly well able to understand, is that virtually every country that has faced the massive increase in world oil prices and the recession that has thereby been caused has been faced with the necessity of dealing with the rising cost of social security payments. The point I am making is that this country does not stand alone. We, too, are facing exactly the same problems and we, too, are having to deal with them.

Nations which in the 1960s and early 1970s saw their way, no doubt with the best of intentions, to guaranteeing regular increases not only in the money value but in the real value of social security benefits have had to face the reality that in a world dominated by OPEC such hopes cannot be realised. So it is in this country. We cannot insulate ourselves from what is happening elsewhere. The House will remember that the social security programme has increased as a proportion of total public expenditure from 17 per cent. to 27 per cent. over the last 10 years.

Mr. David Ennals (Norwich, North)

May I ask what proportion of that increase is due to the present high level of unemployment?

Mr. Jenkin

I was talking about the period between 1970 and 1980. It is obviously a proportion, but it is a small proportion. The biggest share of the increase has been the rising numbers of retirement pensioners and the real increases in the value of benefits. Therefore, the Government have had no alternative but to make economies. Accordingly, as the House knows, we have already legislated to break the link with earnings, to scale down or even abolish other benefits, and to postpone improvements in benefits on which we had earlier set our hearts.

Through it all we have given, and will maintain for the period of this Parliament, one firm clear guarantee. It is that pensions and those other long-term benefits which are uprated in line with pensions will maintain their value over the years. Although inflation is tumbling rapidly, it is still high enough to cause great anxiety to elderly people and needy families who depend on pensions and other social security benefits. It is for this reason that the Government have felt it right, despite all our difficulties, to stick to this firm commitment.

Of course, as I have said before and repeat today, the Government are firmly committed to ensuring that when once again we see the prosperity of the nation rising we shall ensure that pensioners share fully in that prosperity. Meanwhile, we cannot afford benefit increases which run ahead of rises in the cost of living. That goes beyond both the commitment we have given and the nation's ability to pay for it. When I announced last year's increase of 16½ per cent., a good many people poured scorn on that forecast. One of the then Opposition Front Bench spokesmen, the right hon. Member for Brent, East (Mr. Freeson), went so far as to suggest that I had been ordered by the Chancellor of the Exchequer virtually to mislead the House. I am sure that the right hon. Gentleman and his hon. Friends who are on the Front Bench today will, like the rest of the House, be pleased that our forecast has been more than vindicated.

The increase in prices over the 54-week period between the November 1979 and the November 1980 uprating was not the estimated 16½ per cent., but 15½ per cent. Accordingly, pensioners gained a real increase in the value of their pensions—a real increase which was not intended and which we cannot afford to carry forward to future years.

Mr. Reg Race (Wood Green)

What about the 54 weeks?

Mr. Jenkin

That included the 54 weeks. I want to make it clear to the hon. Gentleman that the undertaking was given right from the start that it would be 54 weeks. The 15½ per cent. covers the 54 weeks. Our pledge stands: it is that pensions will remain in line with prices over the years. To give effect to that pledge and no more than that pledge—

Mr. Norman Buchan (Refrewshire, West)

It was at the very least.

Mr. Jenkin

The hon. Gentleman is quite right, at the very least, but the point I am making is that at present we cannot afford to do more, as we did last year.

To give effect to the pledge, the power is being taken in this Bill to adjust next November's uprating to recover the excess and to maintain the pension in line with prices. Given the huge cost of the social security budget, it may not surprise the House to learn that making this adjustment to the benefits covered by the Bill will save around £170 million of public expenditure in a full year, plus a further £30 million on other benefits which follow suit, plus about £25 million on public service pensions, which we are treating in exactly the same way. About £225 million will thus be saved by this measure—£225 million which we cannot afford to spend.

Mr. Clement Freud (Isle of Ely)

The Secretary of State has promised to retain the ratio. Will he peg the length of the year as well, or are we likely to get a 56-week year next year?

Mr. Jenkin

The hon. Gentleman knows, because he studies these matters very carefully, that the change in the law in the Social Security (No. 2) Act 1980 provided that the uprating had to happen before the end of November. It has gone to the last week in November. Of course, I cannot anticipate any other changes that the House may approve in future.

Dr. Brian Mawhinney (Peterborough)

Certainly we on this side would support my right hon. Friend in what he says about keeping pensions in line with inflation. May I ask about a specific point? In a good year when the Government decide to give perhaps 2 or 3 per cent. more to pensioners, is there anything in this Bill which would stop the Government in the succeeding year, if the economy turned very bad, using that 2 or 3 per cent. to offset it? In other words, if there is an overpayment as a deliberate decision of the Government, and not what happened last year, is that then sacrosanct for future years?

Mr. Jenkin

It is a question of intention. If a decision has been made intentionally, as my hon. Friend suggested, because we can afford it, as Governments of both parties have done over many years in the past, to increase pensions by more than prices and so to have a real increase in the standard of living of pensioners, I would regard it as exceedingly unlikely that any Government would want subsequently to claw that back. This provision applies only to the 1980–81 uprating because last year's uprating was unintentionally 1 per cent. higher than the House had meant it to be. I think the answer is that there is nothing in this Bill which would give power to do anything like that on any future occasion.

Mr. Andrew F. Bennett (Stockport, North)

The right hon. Gentleman is saying that, because there was an overestimate last year, there has to be a clawback. Will he give an undertaking now that if there is an underestimate this year it will be made good as quickly?

Mr. Jenkin

I was unwise to give way to the hon. Gentleman. He anticipated my next point.

I was about to pose the question what happens if next November it turns out that the increase to be announced at the time of the Budget falls short of the rate of inflation. The answer has already been given by my right hon. Friend the Prime Minister in the clearest possible terms: compensating pensioners fully for price increases over the lifetime of a Parliament means making good any such shortfall should it occur. The reference is in Official Report, 25 November 1980, Vol. 994, c. 488. The Government stand firmly by that pledge, which I repeat today.

Mr. Andrew F. Bennett

Why not put it in the Bill?

Mr. Jenkin

That is a matter which no doubt can be explored in Committee.

The clause also applies to those short-term benefits which were increased last November by 11 ½ per cent. The House will remember that an abatement of 5 per cent. was made pending those benefits coming into taxation. In the event, the 5 per cent. abatement turned out to be only 4 per cent., and accordingly clause 1 has the effect of restoring the abatement next November to the full 5 per cent. that was intended.

The recovery of the 1 per cent. excess is the only adjustment which we propose to make to short-term benefits. In other words, the Government do not intend to use the power in the Social Security (No. 2) Act 1980 to make a further abatement in these short-term benefits in 1981. I hope that my hon. Friends will welcome that.

The House will also remember that I have given a clear undertaking, subject to economic circumstances, that when invalidity benefit is brought into taxation its value will be restored to the level which it would have reached had it remained in line with long-term benefits. I repeat that undertaking today. I anticipate that my right hon. and learned Friend the Chancellor of the Exchequer may have something to say in his Budget Statement about the timing of the taxation of these benefits.

On the procedural change which I outlined a few minutes ago, perhaps all I need say is this. Until the point fell to be examined in detail last year, it had been assumed on both sides of the House that, provided the uprating order accorded with the announcements made at the time of the Budget, that was sufficient to satisfy the legal requirements. Last year, given the uncertainties about the price forecast and the long gap between the Budget and the laying of the order, it emerged, contrary to the view that had been expressed on both sides in Committee on the No. 2 Bill, that a fresh forecast was necessary. Accordingly, as I said at the time, I made a fresh forecast and confirmed the 16½ per cent. figure. But I must tell the House that Ministers looked over the brink at what would have happened had I been obliged in July to revise any forecast made at the time of the Budget. It was not an attractive prospect.

Although pensions and other benefits paid through my Department's computers can be increased swiftly and efficiently, the consequential supplementary benefit changes have to be made manually in over 500 local offices throughout the country. It is this procedure that takes the time and accordingly, to make sure that benefits can be paid by the due date, the process has to start around May. Successive Governments have recognised that this may mean anticipating the uprating order, but the House has never taken exception to that. But if, as last year, the order has to be delayed until July it means that a great deal of the work has already been done on the basis of the Budget forecast by the time the order is laid and debated.

Mr. Ennals

I agree with the Secretary of State that to make a new assessment as late as July, or even perhaps as late as the end of May, would mean that the administrative problems would be either too great or very expensive, so I am not pressing the right hon. Gentleman on that. But this year the Budget is earlier than it has been in any year that I can recall. The date of the Budget, 10 March, is eight months before the date of the payment. Surely, if the circumstances changed, the right hon. Gentleman would be able to make a new and more realistic assessment in May.

Mr. Jenkin

I do not want to anticipate what my right hon. and learned Friend the Chancellor may say in his Budget Statement. Indeed, the choice of the date, though of course approved by the Cabinet, was for him. I understand the point which the right hon. Gentleman makes, but we must have regard to the need to get the most efficient form of administration of these benefits and to have certainty. The Chancellor needs to know for the purposes of public expenditure what will be the cost in cash terms of the benefits that will be paid in November. From the point of view of the planning of public expenditure, there is obvious advantage in knowing that at the time of the Budget and being able to announce the figures then.

The right hon. Gentleman is wrong in suggesting that the Budget this year is the earliest in living memory. It was exactly the same in 1966 in the time of the Government of whom he was a member, but perhaps that was the period when the right hon. Gentleman was not in the House.

Mr. Ennals

I was.

Mr. Jenkin

If the forecast had to be made again, the work would have to start over again, and the consequences would be that the new higher rates could not be paid for everyone in time.

It seems to the Government that the most important thing is that the pensioners and beneficiaries get their increases from the due date. It is for that reason that we are proposing that the definitive date for the forecast should be the date of the Budget announcement and not the date on which the order is laid. Given the commitment—this is the important point—to correct any underpayment in the following year, this seems to me to be the most sensible course, and I hope it has the House's approval.

Mr. Buchan

As there will be a delay of six, seven or eight months, which will produce a larger shortfall, surely the Secretary of State should fulfil the pledge made by the Prime Minister by meeting that shortfall in the Bill.

Mr. Jenkin

The hon. Gentleman's hypothesis is that between 10 March and a date in May there would be a sufficiently greater certainty about the November to November price forecast to warrant making a new forecast. In recent years—our only guide—it has been exceedingly unlikely that a forecast made in May would have any greater prospect of complete accuracy than would a forecast made in March. Therefore, the point made by the hon. Gentleman would not appeal to the Government.

Clause 2 enables the Secretary of State for Employment to alter by order the calculation of maternity pay. At present, the amount of maternity pay is nine-tenths of normal pay minus the flat rate maternity allowance. The one-tenth deduction is intended to represent the earnings-related supplement to maternity allowance so that a woman in receipt of the allowance and in receipt of maternity pay will be getting roughly the equivalent of normal pay. This will not be possible once ERS is phased out, so the clause gives the Secretary of State for Employment the power to remove by order the requirement for the one-tenth deduction. It is, therefore, a clause that helps working mothers, and I hope that it will be welcomed.

The Government have not yet decided when the order should be introduced. That will be a matter for my right hon. Friend the Secretary of State for Employment, but I understand that he proposes to use the enabling power to amend the calculation of maternity pay once public expenditure constraints make this possible. The change would increase public expenditure by about £6 million in a full year.

Clause 3, with schedule 1, increases the maximum fines and maximum periods of imprisonment which may be imposed for offences under the Family Income Supplements Act 1970, the Social Security Act 1975, the Child Benefit Act 1975 and the Supplementary Benefit Act 1976.

I make it clear that these changes are not being made as part of the Government's current campaign against social security fraud. The press reports which suggested the contrary were wrong. The reason for the change is to integrate social security penalties more fully with the general criminal law.

The present penalties for social security offences were, in most cases, in force before the Criminal Law Act 1977. They do not, therefore, meet the Home Secretary's objective of having all maximum fines for summary offences related to the four-point scale laid down in that Act—£50, £200, £500 and £1,000. What we have tried to do in this clause is to relate each specific penalty to the appropriate point on the standard four-point scale in the Criminal Law Act.

The main offence that we are dealing with is the making of false statements in order to claim benefit. The present £400 limit on financial penalties for this offence has applied since July 1973 for contributory benefit, and since March 1977 for supplementary benefit. If these fines had been increased in line with prices, the maximum penalty would be over £1,100 in the case of the first of those categories, and over £600 for the second. We believe that in both cases, therefore, the £1,000 maximum fine is about the right level in the current circumstances; given this figure, the Home Office regards the six months maximum period of imprisonment as appropriate. I repeat that these administrative changes are not part of our campaign against fraud. They are simply keeping penalties under this legislation in line with the general law.

Clause 4 makes a minor technical amendment to the law on payments of supplementary benefit for up to 15 days following their return to work which are made to people who have been involved in a trade dispute. The clause does not represent any change in the policy which has been followed by successive Governments. We are simply removing a technical obstacle which could prevent the application of that policy in certain circumstances.

Payments of supplementary benefit made, after the return to work, to people who have been involved in a trade dispute have been subject to recovery for many years. The old legislation referred to the recovery of money paid as a result of "awards made" during the 15-day period. We propose amending the law so that all payments received in respect of the 15 days can be recovered whenever the award is made. This means that we can deal with awards made outside the 15-day period, for example, on appeal or after a review.

Clause 5 amends the Social Security Act 1975 so that for certain cases we can relax the rule that there should be at least four consecutive days of incapacity in order to constitute a period of interruption of employment. This is a relieving provision and is designed to help kidney patients on dialysis.

Until September 1980, incapacity benefits could be paid if there were at least two days of interruption of employment within a period of six consecutive days. However, section 3 of the Social Security (No. 2) Act 1980 amended this rule which now requires that there should be at least four consecutive days of incapacity before any benefit can be paid.

After the Social Security (No. 2) Act 1980 was passed but before section 3 had been brought into effect, it was recognised that the amendment would have an unintended effect on some renal dialysis patients whose dialysis causes them to be incapable of work for two or three days each week. Accordingly, we announced that we would make an extra-statutory concession pending legislation to put matters right. This clause will give the Secretary of State power to make regulations to modify the four consecutive days rule, and it is intended to use this power to cover cases where incapacity is due to renal dialysis. The power could also be used in respect of other categories with a regular pattern of two or three days' incapacity each week, if such cases were identified. We reckon that about 2,000 people should be covered by this relieving provision, which will cost a little less than £1 million a year.

Clause 6 enables us to amend the Pensions Appeal Tribunal Act 1943 by Order in Council. This gives statutory effect to what is at present done on an informal basis. It enables members of former Indian and Burmese armed forces and their widows to have the same statutory right of appeal as members of the British Armed Forces and their widows against decisions on entitlement or assessment of pension.

Clause 7 removes the duty placed on the Secretary of State to prepare and lay before Parliament an annual report on war pensions. I make it absolutely clear that this in no way affects anyone's entitlement, or signifies any downgrading of war pensions. The Government attach high importance to war pensions. The clause is simply a step to cut bureaucracy and save staff.

In 1979, the practice of providing a main departmental annual report was discontinued on the grounds of economy. It is felt that the continued publication of a separate report on war pensions can no longer be justified, particularly in view of the severe constraints on the number of staff in my Department.

Of course, information about war pensions will continue to be available in the annual digest of social security statistics. We will naturally continue, as we have always done, to provide information on war pensions to war pensions committees and to the ex-Service organisations, as and when requested, provided that this can be done without disproportionate cost.

I should refer to a couple of matters in the schedules. Paragraph 1 of schedule 2 removes the duty of the Occupational Pensions Board to submit an annual report to the Secretary of State. Paragraph 2 provides that proposals for regulations relating to industrial injuries benefit need no longer be referred to the Industrial Injuries Advisory Council when the council agrees that it does not need to see them.

The House will have noted that the Bill is a fairly short one—which I am sure will mean that we shall have an equally short though constructive Committee stage! The House will know that the Bill is shorter than we had originally envisaged because it does not include the clauses which would have been necessary to give effect to the Government's proposals about eight weeks' statutory sick pay. The reason is that we have decided to postpone that legislation to the next Session of Parliament. When I say "postpone", I mean precisely that.

We remain convinced that there are very substantial advantages in placing the responsibility for the first eight weeks of sickness on a person's employer and avoiding the duplication which arises from the overlap of employers' sick pay with national insurance sick pay. The change is essential if we are to achieve the purpose which is supported on both sides of the House of bringing the short-term benefits within taxation. It will also have the effect of saving some £400 million of public: spending matched by compensating adjustments to recompense employers for the extra burden they will be taking on.

The reason why we decided to postpone the legislation was that it will give us more time to work on new proposals, which emerged at a very late stage in our consultations, to match that compensation more closely to actual sickess records likely to be experienced by different categories of employers. We are thereby demonstrating that we want to make every effort to help employers at what we know is an extremely difficult time for them and to bring forward the best possible scheme.

Our original proposals for compensation by means of a flat-rate reduction in the rate of employers' national insurance contribution made no differentiation over sickness records and for that reason ran into much criticism. Conversely, the CBI's alternative proposal for 100 per cent, reimbursement of the sickness payments made by employers was unacceptable to the Government because the checking and verification procedures that would have been necessary to satisfy, for instance, the Public Accounts Committee, would swallow up virtually all the staff savings at which we are aiming. Earlier this month, however, a modified proposal emerged which would go a long way to meet the CBI's case. But I took the view that it required a great deal more study and refinement before it could be brought before the House. It is for this reason, and this reason only, that the proposal is not in this Bill but will form part of a Bill to be introduced early next Session.

Without the sick pay scheme, no one could reasonably claim that this Bill is either an historic or a radical piece of legislation.

Mr. Ennals

I am grateful to the right hon. Gentleman for giving way again. This is a short Bill. I warmly welcome the fact that the clause is not included. I understand the reasons that he has given. The Select Committee on Social Services studied this question carefully. Why, within two hours of the publication of its report, did the Secretary of State make off-the-cuff, peremptory and rude comments about its proposals? He implied that those recommendations would still be carried into the Bill. However, within a week they had been withdrawn. Will the right hon. Gentleman explain what happened?

Mr. Jenkin

I have told the right hon. Gentleman what happened. No doubt we shall be able to answer the Select Committee's report. I question the value of a Select Committee purporting to study a complicated proposal and hearing virtually no evidence upon it from anyone. No doubt the right hon. Gentleman has considerable influence. I ask him whether that is the best way for a Select Committee to spend its time. I do not think that the House had that in mind when it set up the Select Committees to consider these matters.

The answer is simple. Between receiving the report and making my comments, an alternative proposal came forward which appears to have considerable attractions and which will go some way towards meeting the criticisms that have been properly made about the system of compensation We are talking only of the system of compensating employers. We are not proposing other changes. We should like to have legislated on the proposal, as it seemed to have considerable merits, but I was not prepared to bring what might have been only a half-cooked proposal to the House until we had had an opportunity to study it and, to use a slang expression, get the bugs out of it. That shows our flexibility.

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

Will the Government publish the proposal?

Mr. Jenkin

That is a matter that we have under consideration.

Mr. Rooker

How can the Government consult on the proposal if they do not publish it?

Mr. Jenkin

We shall clearly want to consider it. However, I wish to make clear that we have a viable proposal that we can put before the House. Naturally, we shall want to take opinions on it.

Without the sick pay scheme, the Bill is not by any standards a major or historic piece of legislation, but it contains a number of necessary and useful measures. It is a realistic Bill which recognises our economic position. As such, I commend it to the House.

5.2 pm

Mr. Norman Buchan (Renfrewshire, West)

The Secretary of State started by enunciating two propositions which he seemed to consider every sane man would support. The first was that we must cut back public expenditure on welfare and that it must be held to what we can afford. The second was that economic resources must increase before we can give more help to the elderly and needy. We reject both propositions. We cannot accept the proposition that when the country is in economic difficulties the poor, sick and elderly must pay the highest price. We cannot wait for economic expansion. We must preserve the standard of life of the needy even when there is an economic decline.

The right hon. Gentleman casually introduced the concept that the uprating of pensions will be in line with the increase in prices. Hitherto, the Government have stated that pensions will be at least in line with prices. By omitting the words "at least" he has altered the concept. We therefore cannot accept the very thin pledge given by the Prime Minister. It took the concerted effort of every single Cabinet wet to hold her to that pledge.

Although it is a short Bill, it is nasty and brutal. I understand what the Government are attempting in clause 2 concerning maternity pay. But there is a great deal of anxiety, not least in the Equal Opportunities Commission, about the proposal to alter the fraction of nine-tenths to ten-tenths in order to compensate for earnings-related supplement. The Bill leaves the right hon. Gentleman free to vary the proportion in either direction. We have had far too much experience of the Government in the past two years to take the matter on trust. We shall be probing it in Committee.

Clause 4 may be technical, and we can discuss it in Committee. With regard to clause 5, the right hon. Gentleman claimed merit for rectifying the error concerning people requiring dialysis. However, in the previous social security legislation we had tabled amendments aimed at rectifying the problem and they were guillotined. The matter shows how errors can creep into such Bills. May we be assured that amendments on this Bill will not be guillotined?

Mr. Patrick Jenkin

If the hon. Gentleman can assure me that he and his hon. Friends will not waste so much time on this Bill, no doubt we can come to a sensible arrangement. He cannot have it all one way.

Mr. Buchan

I give the right hon. Gentleman that assurance. We shall waste no time. We have too much to say about the Bill to waste time.

I accept what the right hon. Gentleman says about clause 7, which deals with war pensions. We shall not go to the stake about the matter. However, the Government preach the need for a more open society and for rolling back the frontiers of the State but they are wiping out a report on one aspect of war pensions. That is nonsense. We warmly welcome the inclusion of the Burmese and Indian armies, The matter has been in our waking thoughts for some time. However, I point out that the matter was already being dealt with in practice.

Clauses 1 and 3 are the heart of the Bill and they add the venom that we have come to expect from this Government in Social Security matters. It is not the Bill that we expected. The right hon. Gentleman tells us that new proposals suddenly came forward which altered the Bill in relation to the eight weeks' sick pay. It was originally to be a Bill to roll back the boundaries of the State. However, the real reason for the change is not that the Government had a sudden illumination. The CBI told the Government to drop the proposal. Sir Terence Beckett barked, as did the Engineering Employers Federation, and the Government dropped the idea. We hope that the proposal is dropped for all time.

A lesson can be learnt from this and from last week's events. When the miners or the CBI speak, the Government relent and fall back. They take their revenge by clobbering the weak, the elderly and disabled while capitulating to the strong. What a contribution to the Year of Disabled People! We have had three pieces of social security legislation in two years. Each has cut back, absolutely and relatively to the remainder of society, the living standards of pensioners. What a record.

I quote again what the right hon. Gentleman said to the Conservative Party Conference in 1980: We believe that it is the duty of the strong to help the weak". That is a joke. That is why we seek to help the most vulnerable in our society. Those words are not just pious platitudes: look at the record. By God, what a record it is over these past two years.

The right hon. Gentleman tells us that if economic conditions improve, the uprating will remain at least in line with prices. We must consider that more closely. The Prime Minister pledged to uprate pensions at least in line with prices and said that any shortfall would be recovered in relation to the life of a Parliament. The pledge has now been diminished to keeping the level of pensions only to the level of prices. No pledge is given about further uprating pensions, even if economic conditions improve.

In bringing in the Bill, the Government have underlined the fact that no pensioner will now be better off under this Government because the "at least" or the minimum—"in line with"—has now become an "at most". That is what the Government are saying, and that is what the Bill does. It says that if pensions are accidentally given a lift, they will be cut back, so that no pensioner will ever be better off.

Can we even trust the "in line" pledge? That pledge was given in a television interview with Brian Walden. Brian Walden said to the Prime Minister: You're obviously looking at indexation in general… However, I do take it, do I not, that you are not looking at and that you won't be looking at, the indexation of old age pensions…? The Prime Minister said: No I'm absolutely pledged on that.… I pledged at the election to our old people that their state National Insurance pensions would keep pace with rising prices, and we honoured that this last time… I'm pledged on that, and a pledge must last. That was on 6 January last year. What happened as the year unfolded? We were told in The Guardian of 14 November last year: The most surprising result of yesterday's Cabinet meeting, was the victory of an alliance of senior ministers over the Prime Minister and the Chancellor, Sir Geoffrey Howe, in defence of pensions. With Mrs. Thatcher's implicit support, Sir Geoffrey is understood to have been seeking a massive saving in public expenditure by increasing pensions substantially less than the increase in prices. So she was prepared to break her pledge then. Four days later on 19 November, after quoting the Prime Minister's words: I'm absolutely pledged on that … and a pledge must last", The Guardian continued: If, as is reported, Mrs. Thatcher went puce when that quotation was read out at the last Cabinet meeting, it is hardly surprising. Ministers were being asked to make an across-the-board cut to the social security budget. We are told that when her own quotation on pensions in relation to prices was thrown back at her the Prime Minister went puce—hardly a colour that one would expect Saatchi and Saatchi to recommend. However, that seems to be the reason for the present 1 per cent. cut. The Prime Minister lost her battle in the Cabinet to renege on her pledge and to make an assault on pensions, so we are left with this little, mean, vicious, paltry 1 per cent. cut. That is the reason.

Mr. Ennals

Does my hon. Friend recall that it was also leaked at that time from this most leaky of all Cabinets that not only was the Prime Minister determined that this should be done but that one of her allies was the Secretary of State himself?

Mr. Buchan

I do not recall that, but I recall that there is a very interesting play at the National Theatre now, "Man and Superman", which I had hoped to see but for this damned Bill. There is a scene in which Jack Tanner encounters a brigand in Spain. The brigand says, "I am a brigand—I rob the rich." I suspect that the Secretary of State would have replied "I am the Secretary of State for Social Security—I rob the poor."

What is the effect of the three pieces of social security legislation which are the background to this? In a reply on 3 February, the Minister of State gave the figures for what pensions should have been if the link with earnings had not been broken. Single old-age pensioners and other pensioners at present receive £27.50 per week. The Minister of State said that if the Government had not broken the previous Government's pledge on linking pensions with earnings the figure would have been £28.05. That is before considering the 1 per cent. In other words, as a result of breaking that pledge, every old-age pensioner in the country is 90p per week worse off. A specific cut of almost £1 per week has been made in their pension at the present time. A married couple now receives £43.45 per week. If the Government had not cut the link with earnings it would be £44.85—a cut of £1.40. That is more than £72 per year, before we even consider the 1 per cent.

The invalidity pension situation is even more cruel. A 5 per cent, cut has already been made, long before the taxation change that the Government give as their excuse. That means that in this, the International Year of Disabled People, every single invalidity pensioner is suffering a cut of £2 per week in the pension that he would have received. The result of that single action by the Government last November is a cut of £106 per year. A married couple loses £169 per year—a cut of over £3 per week for the neediest of the needy, the long-term disabled. That is the background. Incidentally, the shortfall that the Government boasted about making up was subsumed by the breaking of the earnings-related link. Even without the 1 per cent cut, these pensioners are left with an existing shortfall on the previous position.

Mr. Andrew Bowden (Brighton, Kemptown)

The hon. Gentleman will be aware that, to say the least of it, I am not happy with the Bill. But perhaps he would cast his mind back to November 1976 and November 1978. He will recall that at that time the Labour Government broke the terms—if not the letter, certainly the spirit—of the Social Security Act 1975, by failing to increase pensions in line with earnings. In November 1976, the increase in pensions was 15 per cent., while earnings increased by 19.4 per cent. In November 1978, the increase in pensions was 11. 4 per cent., while earnings increased by 13.3 per cent. Is he not therefore being a little hypocritical in his attack on the Government for breaking the earnings link?

Mr. Buchan

On the latter point, in 1978 the promise was made to deal with that. I do not have the figures with me, but I remember that in 1975 a legal action was fought about that issue. But we are dealing here with a Government who have been boasting of their pledges to the pensioners. I am confronting them with that. If the hon. Gentleman rejects what was done by the Labour Government in 1975 and 1976, I would expect him to support us in the Division tonight for that very reason.

What was the argument for the 1 per cent.? We had that terrible statement from the Chancellor that there had been a 1 per cent, over-provision. But, as there is still a shortfall, and there was a shortfall then which had never been made up, we deny even that justification. There was no statutory obligation to make up the shortfall. The right hon. Gentleman was right in asserting that. But neither is there any statutory requirement to claw back anything of this kind. That is what we find sickening in the genesis of the Bill. The shortfall was not made up. Indeed, even leaving in the 1 per cent, that the Government propose to claw back, while it is a matter of just a few coppers, there is nevertheless still a shortfall. If the Minister wishes to be honourable, he should be increasing the amount instead of cutting it by 1 per cent.

Mr. Patrick Jenkin

The hon. Gentleman persists in misunderstanding the position. I may be doing him an injustice, but he has not stated the position correctly. When the present Government announced the pension uprating for November 1979, there was a prices forecast of 17½ per cent. It would have been entirely in accordance with our undertakings if we had increased pensions by that amount. As it happened, we had also given an undertaking that we would make up the shortfall on the previous Government's November 1978 uprating. That added a further 1.9 per cent., and we honoured that undertaking. As a result, the 1979 uprating was nearly 19½ percent. The hon. Gentleman is therefore quite wrong in relation to the pledge that we gave. We have fully maintained pensions in line with prices. That was the commitment that we gave, and it has been honoured in full in the Bill.

Mr. Buchan

The right hon. Gentleman is still of the order of 15p short. Another point also arises, which is that at the time of that increase, and when 19.2 per cent, is compared with 19.5 per cent., the earnings-related rule remained.

In reply to the hon Member for Fareham (Mr. Lloyd), who asked: whether the Government proposed to make good the shortfall in the November 1979 uprating … arising from the under-estimate of the rise in earnings in the year to November 1979". the right hon. Gentleman said: No. There is no legal obligation to make up this shortfall which, it is estimated, would cost £195 million in a full year. We fully complied with the statutory requirements when uprating retirement pensions and other long-term benefits in November 1979."—[Official Report, 25 January 1980, Vol. 977, C. 417-8.] He did, but he did not make up the total shortfall.

Mr. Ennals rose—

Hon. Members: Not again.

Mr. Ennals

I am sorry, but the Secretary of State has just intervened in order to get something on the record. The hon. Member for Brighton, Kemptown (Mr. Bowden) rightly said that when we were in government we made an estimate of what the pension would be in relation to earnings. However, he forgot, or did not care to mention, the fact that in terms of prices and real benefit, pensioners got a 3 per cent, increase at that uprating, That was a real increase, which we know this Government have determined that pensioners will never get during their period of office.

Mr. Buchan

I am grateful for that information.

By their method of introducing this 1 per cent, cut, the Government have done something else. They have written the cut permanently into the future on a cumulative basis. At the moment, it seems that, by this aspect alone, a single pensioner will lose about 27p a week, or £14 a year, and a married couple 41p a week or £41.30 a year.

That may be coppers to people such as the hon. Member for Grantham (Mr. Hogg) who dine at the Athenaeum, but it is not coppers to the old age pensioners.

Mr. Douglas Hogg (Grantham)

Or to me.

Mr. Buchan

In that case, it is time that the hon. Gentleman joined us in the Lobby. It might be helpful if the hon. Gentleman began to put his vote where his grunt is.

The significance of this is even greater. The reality with which we are faced is not the question of coppers or the question of the 1 per cent, cutback. The Government do not understand that old-age pensioners are angered by the meanness and viciousness of their act as well as the Government's declaration—this is what disturbs them profoundly—that they will never become better off in relation to price increases as long as the Bill goes through and as long as this policy remains.

I am pretty sure that every pensioner in the country, and there are millions of them, will watch tonight's Division Lists carefully.

Mr. Patrick Jenkin

I hope that it has not escaped the hon. Gentleman's notice that the provision in clause 1, so far as it relates to the uprating, applies to the November 1981 uprating only. That is all that is in the Bill. Therefore, some of his more extravagant statements are without foundation.

Mr. Buchan

The Government do not understand what they are doing. Of course that is all that the Bill refers to. Of course the right hon. Gentleman has not written this permanent, static, frozen situation into the Bill. However, as a result of overestimating inflation and accidentally giving 1 per cent, too much, they have promptly introduced a Bill to claw it back. It is that action, not the wording of the Bill, which spells out to pensioners their future under this Government.

The Bill says as clearly as it possibly can that if by accident pensioners happen to get a few more coppers in their pockets, the Government will claw it back. That is a damn sight more serious than the wording of the clause, which we shall be looking at closely in Committee.

Another aspect of the Bill to which we must pay some attention is clause 3. The right hon. Gentleman made great play of the fact that this was merely coming into line with the provisions of the Criminal Justice Act. He said that it was nothing to do with the fraud campaign which the Government are presently undertaking. I think that he protests too much. The public and the press at large have taken this measure to be related to that campaign, and I take it to be related to it. This has occurred at a time when the Home Secretary is preaching the necessity for shorter sentences. According to The Guardian, he has said: It is, I think, common ground that a continued increase in the prison population could not be sustained. So, on present trends, I should be obliged to consider what legislative measures could be taken. Therefore, at a time when the Home Secretary is talking about the need to take legislative measures to cut back on the length of sentencing, the Secretary of State for Social Services comes forward with a Bill to deal with social security offences which doubles the prison sentence. That is in line with the drive against scroungers which so obsesses the Government—this Friedman-Sproat syndrome from which they suffer.

The Government see this as a cost-effective exercise. No doubt fines will be a helpful way of achieving that. What do they seek from the increase in fines and longer sentences as a result of their present policy and the drive against social security fraud? It now takes the form of investigation and interview, to the great distaste of those who have to apply it. However, behind the question "Do you think you are entitled to this?" is the prospect of even more severe punishment if a person goes ahead with the claim.

The right hon. Gentleman talked about the increase in the fine to £1,000 in relation to a false statement. But we are here dealing with the unsophisticated along with the guilty which the Government's terror methods of investigation may discover, and I fear that there may be 10 others who will withdraw their claims even though they deserve to get them. That is the gravamen of the charge. That is why we oppose clause 3.

Those who work in the Department are getting sick at the drive against fraud and scroungers at a time when gigantic problems face the 2½ million unemployed and others in the country.

According to The Times: The failures of the Department of Health and Social Services in paying child benefit to needy families is strongly criticised today … Of 10 cases investigated last year the Ombudsman found black spots in which industrial disputes and computer and communication difficulties caused delay in families receiving child benefits, in some cases for many months". There is a problem within the Department. Instead of the Government being obsessed with looking for the odd scrounger, they should be dealing with other questions. I leave aside the comparison between the Government's obsession with scroungers and their lacklustre response to tax evasion and tax avoidance, which is now running at between £3 billion and £4 billion a year.

As someone said, the trouble with tax evasion is that it removes money from the honest to the dishonest, and tax avoidance removes money from the unsophisticated to the sophisticated. That is exactly what the Government are doing in relation to social security. They are letting the Rossminsters and the Vesteys get away with it, yet they are pursuing the poor unfortunate who may cheat. We are all against fraud, but it is those who are not guilty who will end up being terrorised. Therefore, we reject the measure.

Instead of this sort of nonsense the Government should devote their attention to uptake. No benefit has an uptake of more than 80 per cent. Some benefits, such as child benefit, have only a 60 per cent, uptake.

Mr. Patrick Jenkin rose—

Mr. Buchan

I should have said the single-parent child allowance. Conservative Members know what I am talking about.

Mr. Douglas Hogg

No we do not.

Mr. Buchan

When a local authority tries to do something, it gets clobbered and is accused of having tried a political gimmick. For example, an analysis has been made of Strathclyde's effort to increase uptake. A sample of 500 cases was made. Between September and December 1979 about 47,000 payments; were recorded. In the corresponding period in 1980, which included the period of the campaign, about 87,000 awards were made. Even allowing for a general increase in claims as a result of unemployment, Strathcylde made about 30,000 more payments were made in Strathclyde.

Having examined the 500 cases, it was estimated that single payments generated by the Strathclyde campaign amounted to as much as £2.85 million. That money went to those in need. Indeed, they should have received it as of right. We should like more activity in that direction and a little less obsession with and criticism of local authorities such as Strathclyde.

The Bill reflects what, I think, David Donnison described as the "new brutalism" of the Tory Party. It will be fought both in the Chamber and in the Lobby tonight. In addition, it will be fought in Committee. It will also be fought in a more important place, namely, in the country. There are 9 million pensioners who have served their country well. Let us get rid of the Sproat syndrome about those who receive pensions. The Government have inflicted yet another direct cut in their provision. I hope that pensioners will look diligently at tonight's Division Lists. Many Tories will have to defend this mean and vicious cut in the elections.

Mr. Douglas Hogg

No problem.

Mr. Buchan

We shall see. The country should bear in mind the still more vicious cuts—1 per cent.—that have been made in invalidity benefit. Britain's only memory of the International Year of Disabled People will be one of shame.

5.32 pm

Mr. Paul Dean (Somerset, North)

No one can take any pleasure in the main clauses of the Bill. Indeed, nobody would wish to take the action proposed unless there were impelling economic reasons for it. One must judge this Bill, not in isolation—as the hon. Member for Renfrewshire, West (Mr. Buchan) attempted to do—but in the broad context of the economic situation and of what is happening to other sections of our community.

It was extraordinary that the hon. Member for Renfrewshire, West, who spoke with the authority of an Opposition Front Bench spokesman, should say that he refused, to pay regard to economic realities. That is why the Labour Government could not fulfil their pledges on uprating pensions in relation to earnings. They had to be taken to court by pensioners' organisations, which strongly felt that they had been cheated by the Labour Administration, who refused, as the hon. Gentleman has done, to face economic realities.

What are the Government asking of pensioners? They are asking them to make a sacrifice in 1981. In 1980, the pledge to protect pensions from prices was fulfilled, plus 1 per cent. In 1981, the Government ask that there should be price protection minus 1 per cent. However, there is a firm commitment to pensioners and to others on long-term benefits to compensate fully for price increases that occur during the lifetime of a Parliament. I was glad to hear my right hon. Friend the Secretary of State repeat that solemn pledge this afternoon

That pledge has been more than fulfilled. Let us take the upratings that have taken place so far. I refer to the upratings for 1979 and 1980, and to that forshadowed for 1981. There has been an increase in real value. Pensions have been more than protected from prices. There has been a modest increase, but at least it is an increase. Instead of grubbing around in newspaper reports, rumours and counter-rumours, the hon. Gentleman should look at the facts. The facts are that this Government's pledge has been more than fulfilled. The commitment remains.

As my right hon. Friend knows, I am not so happy about invalidity benefit, which is also a long-term benefit. I welcome the pledge, repeated by my right hon. Friend, that in due course it will be put back in line with retirement pensions. I hope that "in due course" means this year, not next year. If it is impossible to achieve that this year, I hope that my right hon. Friend will at least consider the invalidity "trap". I hope that he will consider allowing one year of invalidity benefit to count towards the longer-term rate of supplementary benefit. That would give considerable additional assistance to the poorer members of our community who are on invalidity benefit.

I have stated the record on the broad position of pensioners. However, the position of pensioners must be compared with the position of other sections of the community. I refer particularly to salary and wage earners. After all, they are the sons and daughters, grandsons and granddaughters of pensioners. Recent figures show that increases in earnings in the private sector are often in single figures and substantially below the current rate of inflation. Many people in the private sector will not receive pay increases this year unless they have been earned through productivity. They wish to preserve their jobs.

Equally, the Government are rightly making a big effort to contain pay increases in the public sector. Many earners will accept a reduction in the real value of their earnings this year. Pensioners will realise the relevance of that when they compare their pension lot with the earnings lot of their children and grandchildren. It is another comparison that one has to make in judging the validity or otherwise of the Bill.

There is a further comparison, and that is with public sector pensions, which are affected to some degree by the 1 per cent, clawback that will apply to public pensioners, as to other pensioners. But, apart from that, the index linking of public sector pensions continues unchanged, and I suggest strongly to the Government that in the context of the Bill this simply is not fair and should not continue for very much longer. If national insurance pensioners are being asked in the Bill to make sacrifices, and if earners are being asked to make sacrifices, public sector pensioners should be asked to do likewise. I believe that if a proposal were put to them in this way they would be prepared to respond.

I am not asking for the abolition of the index linking of public sector pensions. I am saying that, in order to maintain the principle of index linking, we must modify and limit its operation in practice, in the light of present economic circumstances and the sacrifices that are being made by other sections of the community.

Index linking—or price protection—is a desirable goal and I very much hope that we shall be able to continue to maintain it. We have it in the basic pension, and I am very glad that we have. It applies now to the vast majority of the community. It is only right that we should do our utmost to maintain that principle, for a variety of very good reasons.

First, if Parliament does not protect pensioners, who will? If pensioners had to compete, in a free-for-all for scarce resources, with the tremendous industrial muscle power of trade unions in our country today, what hope would pensioners have of getting a fair share of the resources of the community? They would have none whatever. It is only Parliament, therefore, which can protect pensioners and try to ensure that there is a reasonably fair balance of the distribution of resources between the retired members of our community and the earning members of our community.

There is a second reason why I believe that we should retain the index linking principle for public sector pensions, and that is the commitment that was made in the 1971 Act, and on which pensioners quite rightly rely.

A third point is that, when the subject is discussed, it is very often thought of in terms of top civil servants who were earning large salaries and who therefore have large pensions. But, as the House knows very well, the vast majority of public sector pensioners are on modest pensions. They are the postman, the fireman, the nurse, the doctor, the Service man, all of whom are relying on the uprating of comparatively modest pensions in order to try to preserve their standard of living.

I hope, therefore, that the principle can be maintained. There are good reasons for doing so. But we have to face the fact that there are now, as it were, three nations of pensioners, over and above those who receive the basic pension. There are the public sector pensioners, who have an absolute guarantee of index linking of their pensions, with no limit of any kind.

In the second category we have occupational pensioners in private occupational schemes, who probably in many cases have some increase in their pension written into the rules of the scheme—probably a fairly modest increase. In the schemes with which I am familiar, it is perhaps 3 per cent, or 5 per cent, at the most. There may be a little more given on an ad hoc basis over and above that, but such schemes are certainly not able to provide the types of increases that are available from the public sector pension funds. So here is a second category of poorer pensioners.

But there is a third category—the large number of people in our community for whom there is no increase of any kind provided. I am thinking of pensioners with annuities through insurance companies. In many cases there is no increase available for them. I am thinking also of those who have worked abroad and have retired to this country, who are not eligible for any kind of pension and are relying now on their savings, taxed as they are through the investment income surcharge and the like. I am thinking of the self-employed.

It is hardly surprising, therefore, that resentment has built up against the privileged position of the public sector pensioners. It is hardly surprising that it should have built up in any event, but with the high levels of inflation that we have suffered over a good many years, it was almost inevitable. When we consider the contrasts between the series of pay policies and pay restrictions that we have had under successive Governments—but with no restrictions on the public sector pensions—it is understandable that resentment should have built up.

What should be done about it? This is not the occasion on which to go into details on that point, but there are two things which should be done, and done quickly. First, for the existing public sector pensions there should be some form of ceiling or cut-off point on the increases which are available to them. There should still be an annual increase but there should be some limit to it. The increases should not be as open-ended as they are now.

My second suggestion concerns those who are working in the public service at the moment and either contributing directly through pensions or through a reduction in their pay. There are strong arguments—some of which appear in the Scott report—for saying that they should pay a larger contribution than they are paying at the moment.

There is a good precedent in the measure introduced by my right hon. Friend a little while ago, increasing the percentage of contributions in order to pay for the higher level of pensions. In that measure, my right hon. Friend deliberately put a bigger proportionate increase on the employee than on the employer.

It is essential, in the context of a Bill of this kind, that sacrifices are shared. Pensioners and others on social security benefits are being asked to make sacrifices. Both groups are being told that this is necessary in order to restore the economic health of our nation. Public sector pensioners and contributors should also be asked to make sacrifices. I believe that, if asked to do so, they would respond.

We cannot be expected to go on supporting Bills such as the one that we are considering unless the Government take early action to modify the index linking of public sector pensions. I hope, therefore, that before the Bill is passed we shall have a statement that will help to put the whole matter into its correct context. It is on that basis, and with the hope of an assurance of that kind, that I shall be prepared to support my right hon. Friend if we have a Division tonight.

5.49 pm

Mr. Clement Freud (Isle of Ely)

I have listened with care to the speech of the hon. Member for Somerset, North (Mr. Dean), and I shall oppose the Bill, if only for the reason that he gave, namely, that this is a departure from indexation to be paid for by people who can least afford it and those who have least clout when it comes to presenting their case.

I agree with the hon. Gentleman that if there is to be a departure from indexation this is the wrong sector of the community to clobber. My right hon. and hon. Friends will oppose the measure because it is a mean little Bill. We would have opposed it very much more vigorously had it been the ugly Bill which many of us thought it would be, and which the Secretary of State now announces will probably come to us next year—

Mr. Race

Or another one next year.

Mr. Freud

—which involves initial sickness benefits to be paid for by employers. I failed to follow the argument that this would be to the general benefit of mankind and would also save the Government £400 million. When the Secretary of State argues the Bill next year, perhaps he will be able to convince us of the logic of that and to lay at rest the fear on both sides of the House for those who are not in perfect health. It must be crucial for a good employer, before he takes on new labour, especially in a small business, to check on the health of a prospective employee; if not, he might have to pay more for the man's sickness benefit than he is able to afford.

When it comes to benefits, it seems that Government guess at inflation. When they get it wrong to the detriment of pensioners, it is just one of those things. When inflation goes wrong to the detriment of the Treasury, a little enabling bill is brought out so that the pensioners pay back the money. I shall be interested to see who votes in which Lobby tonight, for any Member who believes in the dignity of pensioners cannot be in favour of this mean and niggardly measure. The Government will say that 1 per cent, is a small sum, that it is the pensioners' contribution to recession, just as the closing of special schools for the handicapped is the Government's contribution to the International Year of Disabled People.

If the Government intend to claw back when they overestimate, may we, at least, have a firm commitment that they will compensate if they err in the other direction?

Mr. Douglas Hogg

Will the hon Gentleman give way?

Mr. Freud

I shall not give way. In 1978 we had such a commitment, there was a shortfall, and nothing was done.

Mr. Douglas Hogg

Why not?

Mr. Freud

The hon. Member for Grantham (Mr. Hogg) who was asleep and is now apparently no longer so, must learn to listen rather than to interrupt from a sedentary position.

Mr. Race

The hon. Member for Grantham (Mr. Hogg) was asleep because he has had a good lunch.

Mr. Douglas Hogg rose—

Mr. Deputy Speaker(Mr. Bryant Godman Irvine)

Order. The hon. Member for Grantham (Mr. Hogg) must learn to control himself and hope to catch the eye of the Chair.

Mr. Douglas Hogg

I apologise, Mr. Deputy Speaker.

Mr. Freud

Thank you, Mr. Deputy Speaker. I shall not take up the time of the House in discussing clauses 2, 4, 5, 6 and 7. I think that the whole House will welcome clause 5, especially the constituents of all hon. Members who are on kidney dialysis machines, who will be pleased with what has been done. I shall concentrate on clause 3.

The Bill considerably increases the fines and punishment aspects, when it might be argued that our prisons are already overfilled. In fact, one would have thought that there was a general need to go in the other direction. I accept that this is not a specific witch hunt but a way of bringing punishment into line. For some reason the Department of Health and Social Security is stepping up its campaign against those who make fraudulent claims, and I want to point out how astonishingly cost-uneffective such a persecution is. We know that 1,000 people are employed to save an estimated £50 million and it is significant to remember that the £50 million that might be saved by those 1,000 people is about the sum of money of which the pensioners will be deprived as a result of the 1 per cent, clawback.

Tax evasion—I do not want to be inflationary about the sum—costs us so very much more money—£2,000 million is a conservative figure. The whole country will note that the Government are far more intent on stopping the little people making small fiddles. I see that the Minister of State is shaking his head. Let him tell the House why 1,000 people are employed to recoup £50 million, when tax evasion is in excess of £2 billion and fewer officers are employed to stop that?

The Minister for Social Security (Mr. Hugh Rossi)

The hon. Gentleman will recall that we went over this ground during the debate on poverty. I made it clear then that the Government are as much concerned about those who are illegally evading tax as they are about those who are seeking to obtain from the State benefits to which they are not entitled. The Inland Revenue has the staff to do its work. We have found it necessary to increase the staff of this Department to do this work properly.

Mr. Freud

I am amazed that the Inland Revenue should have the staff to do its work when the Government accept that there is a £2 billion tax evasion.

I want to bring to the Minister's attention the new rules that have been given by his Department to the social security offices. It is fascinating to note that each investigator puts at the bottom of the subject's form the amount saved by his or her detective work. Thus the amount becomes the important factor, not the immorality or the illegality of the offence. In most proper businesses, even in the police force, it is sufficient to do a certain amount of work to satisfy one's employer. But in the DHSS the only criterion seems to be how many people one can catch and for how much. Anyone who read the excellent article in New Society written by Peter Moore on 22 January under the heading Scroungermania again at the DHSS". will note from the informed leaks of that correspondent that what is being done now is that many of those out of work are being frightened by threats of prosecution into not claiming the benefits to which they are entitled. I support the argument of the hon. Member for Renfrewshire, West (Mr. Buchan), who said that if the Government were really concerned they would employ not an extra 1,000 people to stop possible abuses, but a few hundred to make sure that the available benefits were taken up.

We have reached a bizarre state of affairs. Under the new regulation, special case officers will probably visit claimants who have applied for more than one lump sum payment within a year Part of an officer's task will be to help claimants to manage better. If they succeed in that aim, some claimants may not then seek lump sums. Their reward will be a visit from the fraud officer wondering how they are managing. I hope that the Minister will look again, with new eyes, at those directives.

If a social security officer is engaged in assessing whether people are entitled to a grant, he must be considered to have done a decent day's work, whether or not he has caught someone breaking the law. If all that is being carried out in a spirit of helpfulness—as the Department maintains—surely there must not be a reward on the basis of how much the officers prevented the Department from paying to claimants.

I shall say no more because my right hon. Friend and hon. Friends and I shall oppose the Bill in the Lobby, in the way that we have permanently opposed mean measures designed to disadvantage people who can least afford it.

6.1 pm

Mr. Andrew Bowden (Brighton, Kemptown)

I do not believe that the House can consider the Bill in isolation when looking at the interests and rights of pensioners. I know that many hold the view that no Government have given a fair deal to the retired. I do not in any way question the integrity or compassion of the Secretary of State, who is doing a difficult job under extremely trying financial conditions. But there is no justification for clause 1. It is an unfair and mean little Bill. For that reason, I shall go into the Opposition Lobby tonight and vote against it. I shall vote against it with no more pleasure—because I shall be voting against my party—than when I voted against the breaking of the link between pensions and earnings.

The hon. Member for Renfrewshire, West (Mr. Buchan) challenged me on those two points. I am glad to put them on the record for him, although I think that they are known by many Members. The hon. Gentleman made a great deal of political capital out of the matter. It was tempting for him to do so, and Oppositions have a responsibility to oppose. But the hon. Gentleman has underestimated the pensioners of Britain. They are not easily fooled. They will remember clearly the Social Security Act 1975, which introduced the direct link between pensions and earnings. Even if the exact letter of the law in maintaining the payments in relation to earnings could not be enforced, certainly the spirit of the Act was clear. With a great deal of hullabaloo, the Socialist Government of the day sold the Act throughout the country as a great step forward for pensioners, who would in future receive their pension increases based either on prices or on earnings, whichever provided the greater advantage to the 9.6 million retired in Britain.

But what actually happened? In the year ending November 1976 pensions were increased by 15 per cent., while earnings rose by 19.4 per cent. That was the first break of the link. During the earlier part of the debate the right hon. Member for Norwich, North (Mr. Ennals), a former Secretary of State—I am sorry that he is not in his place—attempted to defend that position by saying that the link had been maintained in relation to prices. Obviously, he has forgotten that in 1976 prices rose by more than 15 per cent. In that year, the Labour Government failed to honour the Act not only in relation to earnings but in relation to prices. In November 1978 pensions were increased by 11.4 per cent., while earnings rose by 13.3 per cent. Once again, the terms and the spirit of the 1975 Act had been broken.

To add insult to injury, the then Labour Government failed to pay a Christmas bonus in either 1975 or 1976. They reinstituted it only as the general election drew near. What a difference it would make to the pensioners of Britain today if the base rate had been altered in relation to the promises made and to the 1975 Act. I doubt whether this debate would have been necessary in the same terms. The Opposition, when in government, miserably failed the pensioners. They have betrayed them time and time again. That will not be easily forgotten.

I turn to the Bill itself. It has been made clear, quite rightly, from the Tory Benches and by the speeches of Conservative Ministers, that we shall maintain the value of the pension in line with prices. The Secretary of State this afternoon used words to the effect that we cannot afford increases greater than the rise in prices. During the debates on previous social security Bills, when we discussed likely rates of inflation, I was wrong—and delighted to be so—because I did not think that the inflation rate would be as low as it has been during this last year, especially in view of the Chancellor's announcement when he presented his Budget. I fully accept that we cannot afford increases greater than the rise in prices, with the exception of one major point. It is on that point that I rest my case against clause 1. I do not believe that the retail price index truly reflects pensioners' living costs. I do not believe that last year's increase covered the actual living costs of pensioners. On that basis, there is no case for reducing the base rate.

Mr. Douglas Hogg

That is an interesting suggestion, which merits amplification. Will my hon. Friend say what are the major elements in the spending of pensioners that are not included in the retail price index?

Mr. Bowden

The principal element is housing. I shall go one step further, and ask my hon. Friend to obtain a copy of the latest issue of the family expenditure survey. For a household of one retired pensioner, the survey shows that he spends 69.6 per cent, of his income on food, fuel and housing, compared with a single householder below retirement age, who spends only 43.5 per cent, of his income on those items.

The survey indicates clearly to me that the RPI does not honestly and truly reflect the cost of living for our retired people. Further information is obtainable from the latest edition of the survey that indicates that a retired pensioner living on his own spends 13.8 per cent, of his income on fuel and heating whereas a single person below retirement age spends only 5.6 per cent, of his income on those items. I hope that my case becomes clearer—namely, that the RPI should not be the basis upon which pensioners' needs are calculated and upon which their cost of living is assessed. It is not an accurate or fair basis.

The House knows that heating is the major item of expenditure for pensioners. Our retired need a higher temperature for their physical well-being and comfort. As almost every medical opinion will echo, it is vital that they maintain that higher temperature. It is inevitable, without going into the whys and the wherefores, that fuel prices will increase substantially this year. Gas prices will rise by 25 per cent, while electricity charges will rise by 11.4 per cent. As I have said, the RPI is not a fair basis on which to calculate pensioners' costs, especially in the coming year when I fear that the cost of all types of heating will be a real burden on our retired people.

Mr. Race

One of the flaws in the hon. Gentleman's argument is that the special retail price index that has been constructed for a two-person pensioner household increased between the third quarter of 1979 and the third quarter of 1980 by slightly less than the growth in the retail price index. Given the way in which pensioners' budgets are expressed in the family expenditure survey and given the large percentages that they spend on food, housing and fuel, is there not a strong case for saying that the two-person pensioner household index should be reconstructed to give proper weighting to the factors that clearly should be recognised and of which the Government should take account?

Mr. Bowden

I understand the strength of the hon. Gentleman's argument. It demonstrates that the family expenditure survey is a more accurate means of assessing the true cost of pensions, whether they be single pensioners or married pensioners. The survey should be used as a basis for considering pensioners' living costs.

The present heating allowance for pensioners has a fairly limited range but gives substantial help to those on supplementary benefit. It is the best ever heating allowance introduced by any Government. The electricity discount that was introduced by the previous Labour Government was a farce and of little use to anyone. On average it was worth less than 35p per week. It was most unfair as it did not include needy pensioners who were using gas, paraffin or other means of heating.

I plead with my hon. Friends to consider carefully initiating a review of the problem of heating for the retired with a view to ascertaining whether we can evolve in the next year or so a truly comprehensive heating allowance scheme that will ensure that pensioners receiving the minimum income receive benefits from the scheme.

There are about 9.6 million pensioners in Britain. About 2 million of them are in receipt of supplementary benefit. Another 500,000 could claim supplementary benefit but for various reasons do not. A further 3 million pensioners are in receipt of a rent or rate rebate of some sort. That is a group that is living on minimal incomes and in many instances those within it will be facing serious difficulties with their heating bills before the end of the year.

It has been the proclaimed aim of all Governments and of all compassionate hon. Members—I believe that that means all hon. Members—over the years to reduce the number of those on supplementary benefit. We must continue to work towards realising that aim.

Mr. Douglas Hogg

I hope that this is a convenient moment to revert to what my hon. Friend was saying previously in his interesting speech when he suggested that the RPI is not the appropriate test for determining increases in the cost of living. He suggested that the family expenditure survey would be a better test for pensioners. If that test had been applied, would it have become apparent that the increasing costs for pensioners had been greater or less than the increase in the RPI during 1978–79 or 1979–80, or would the figures have been very much the same?

Mr. Bowden

My hon. Friend has bowled a fast ball at me in statistical terms. The indications in the survey, which have clear implications, are that pensioners spend a disproportionate percentage of their income on food, fuel and housing. It is one that is out of all proportion to the percentages of income spent by others in other categories.

Mr. Race rose—

Mr. Bowden

No. I shall not give way to the hon. Gentleman again. I do not want unfairly to take up too much of the time of the House. The hon. Gentleman has had one bite at the cherry.

On the basis of percentages it is reasonable to draw the conclusion that pensioners would have been better off—I am not saying that they would have been dramatically better off—if the survey had been used as the basis for calculating their costs rather than the RPI.

The House has a special responsibility to the present generation of pensioners. Happily and rightly, the legislation now on the statute book will ensure that the pensioner of tomorrow is looked after very much better than the pensionerof today. Many of today's pensioners have had the purchasing value of their savings destroyed. The national insurance pension has always been on a low base. It is not a living pension. Most of today's pensioners suffered the hardships of two World Wars and many did not have the chance to prepare for their retirement. The nation owes them a great debt, and to our shame that debt has not yet been honoured.

6.20 pm

Mr. Andrew F. Bennett (Stockport, North)

I congratulate the hon. Member for Brighton, Kemptown (Mr. Bowden) on having voted against his Government on the last occasion and having indicated that he intends to vote against them again tonight. What is significant is how many of his colleagues he can persuade to do likewise. I fear that they will be few. As one who voted against my Government on perhaps too many occasions, I know that it is easy to do so when one knows that one's colleagues will carry one through and that the result will not be affected. It is much harder when the likelihood is that the policy will be changed or the Government defeated. Nevertheless, I congratulate the hon. Member and hope that he will persuade many of his colleagues to vote against this measure.

I believe that this is a mean and squalid Bill and contains very few saving features. The easiest way for me to find out how my constituents feel is to talk to them in my advice bureau, to knock on doors or to read my correspondence. If Ministers spent more time talking to the poor and disadvantaged in their constituencies, they would realise just how mean the measure is.

I shall quote a short portion of a letter written to me by a constituent who was worried about a school uniform for her son. She says: It is like living in a cage. I have no freedom, no choices. Each day, each week, each year the cage seems to get a little smaller. I can't remember when I last had a real choice. Everything we do is decided by our poverty. She goes on to say that it would make a tremendous difference if she received £15 from the local authority for a clothing grant. The Minister is robbing—perhaps mugging would be a better word—60p a week from people such as my constituent, who has been on sickness or invalidity benefit for the past 20 years because of her own and her husband's ill health. That represents £31.20 a year—twice as much as she feels it is worth writing to a Member of Parliament about to try to get extra benefit to ensure that her child can have a school uniform.

It appears that the Minister has little or no insight into poverty. He does not seem to realise that the situation is getting steadily worse for many people. Let us consider the unemployed. We tend to think of the large numbers of unemployed people but not to relate the figures to what they mean to our individual constituents. Many of my constituents have always been on the fringe of unemployment. They work for a few weeks, and are then out of work for a few weeks. The present high unemployment level makes the difference between getting a few weeks' work and never getting work. It makes a tremendous difference to their level of income. Poverty goes on and on, and is never relieved by the opportunity to earn extra money.

In my advice bureau last Saturday a constituent complained that prices at jumble sales were going up because more people were going to jumble sales as a result of the present economic climate. People running the jumble sales found that they could increase the prices. I do not know how justified that complaint is, but it was put to me in fairly bitter terms.

There is the further matter of help from relatives. Several of my constituents recently pointed out that they were in receipt of supplementary benefit, and one thing that helped was to be able to ask their mother or father to buy items of clothing for their children, or perhaps feed them at weekends. However, that help has now disappeared because the mother or father is now redundant and no longer able to support another member of the family.

The wives of the invalids and disabled people are finding it increasingly difficult to get jobs because of the general employment situation. The hon. Member for Kemptown spoke about the expenditure pattern of pensioners, but there was one aspect that he did not mention. One of the major problems for pensioners is that they have to shop at the corner shop, the nearest point to where they live, because they do not have the mobility to go further afield. They cannot go to a supermarket, and there is a tremendous difference between the prices there and those that they pay at the corner shop, which has a declining clientele and has to keep prices up to cover costs.

Mr. Bowden

Does the hon. Gentleman agree that in many cases, though not all, corner shops and small shops provide an important local service, not only because they save fares but because they are often more co-operative in helping the elderly? That is certainly true in my own constituency, where the pensioner, particularly the single pensioner living alone, can have exactly what he wants—perhaps two eggs, or a very small piece of cheese or butter. That is a great help to pensioners.

Mr. Bennett

I accept that. Many small corner shops provide a valuable social service to the elderly in the way that the hon. Gentleman suggests, and also to people on low incomes, because they give them "tick" and tide them over in other ways. But, unfortunately and increasingly, the small corner shop has only the elderly and those on low incomes as its clientele, because other people are able to go to supermarkets. The prices charged in the corner shops have to cover all the overheads. The figures contained in the various statistical surveys of prices take into account average prices, rather than prices that operate in the corner shop—which is where the elderly and people on low incomes have to make their purchases, so again they are at a disadvantage.

In the explanatory and financial memorandum to the Bill we are told how much the Government will save as a result of the implications of the measure for pensions and the unemployed but we are given no figure for supplementary benefit. It should be made clear that, because of the linkage between the legislation, and because of what the Minister has said, there will be an effect on supplementary benefit rates. The safety net will be that much lower this year.

We are getting back to a situation in which, instead of having a long-term benefit laid down by an Act of Parliament, which people can read, we are thinking of a figure. That was the way in which pensions were put up during the 1950s and 1960s as a kind of option. There was a political rat-race. As elections approached pensioners did well, and as elections passed they did badly. The linkage introduced by the Labour Government sought to remove that political snowball, yet here the Government are bringing us back to the old situation.

The Government are saying that pensioners and the unemployed must make sacrifices. I have asked the Government repeatedly to tell us what sacrifices people on the same income as Ministers and Members of Parliament are making, but I have had no answer. The Government know full well that people on those levels of income have not been asked to make sacrifices. Their tax burden has not been increased. In fact, the burden has been reduced for them. I do not know how Ministers and Conservative Members can say that pensioners and the unemployed are to make sacrifices, without telling us what sacrifices they are prepared to make.

Have pensioners not made enough sacrifices? Many of them suffered a loss of income during the First World War. For many of them, their childhood was marred by the sacrifices that had to be made at that time. Most of them made sacrifices during the Second World War. In fact, most pensioners have had a lifetime of being asked by successive Governments to make sacrifices. Is it not now time that Ministers and people on similar incomes made sacrifices, rather than again asking pensioners to do so?

What about the unemployed? They are supposed to be making a sacrifice to get the economy right—a shake-out of jobs. Is that not enough of a sacrifice without asking them to make further sacrifices in the form of lost benefits?

Then there is the linkage with other pensioners. I cannot argue the poverty case for retired teachers or people in the Army or other Service jobs, but the Government should spell out to them that under this measure their pensions will be reduced by 1 per cent., just as will those of other pensioners. I wonder what consultation has taken place with their trade unions about the change in pension conditions. The Government must explain why such groups must make sacrifices and not others.

I turn to the clause dealing with maternity benefits. The Minister gave an explanation that sounded all right, but many of my hon. Friends read the small print and talk to people who are cynical about the clause. They believe that, although it can be used in the way explained by the Minister, it can also be used in other ways. I hope that the Minister will give a guarantee that the maternity benefit provisions will be used only to increase the amount of money involved, not to reduce it. I hope that he will accept amendments to ensure that no future Minister can twist the provisions. Too often have we experienced legislation, passed on the basis of the Minister's intention, being used in a different way two or three years later by another Minister.

I turn to the clause that deals with fines. It seems to me that the Minister is the fraud, if then; is a fraud. He is trying to convince the House—

Mr. Speaker

Order. I am afraid that the hon. Gentleman has gone beyond parliamentary language. Nobody in this House is a fraud, and that is official.

Mr. Bennett

I apologise, Mr. Speaker. I do not want to offend against the House, althouth I believe that many of my constituents would feel that what I said was—

Mr. Speaker

Order. The hon. Gentleman must find some other way of expressing his feelings. He must use parliamentary language.

Mr. Bennett

I accept that I should withdraw the word "fraud" in relation to the Minister. I am sure that most of my constituents would be happy if I simply pointed out that he is a Tory Minister.

Mr. Speaker

Order. The hon. Gentleman will withdraw the remark or resume his seat.

Mr. Bennett

I withdraw the inference that the Minister is a fraud. In attacking the people who he thinks are defrauding the service he is grossly unfair. My experience is that, increasingly, constituents are pressed by the fraud squad to admit that they are in the wrong. They are told that if they admit that, everything will be made easier. They are told that if they do not admit it fines will be imposed; that they will be punished and deprived of benefit. Anything that increases the fines will make life much worse for such constituents. Many of my constituents have, on occasions, been subjected to pressure by the investigators. Any increase in fines will make their lives that much harder.

Mr. Rossi

That is the first time that the hon. Gentleman has made that allegation. He has not written to me about it. If he writes to me with the names and addresses of the individuals who have made such complaints to him, I shall have the complaints investigated. It is wrong to make allegations in general terms against officials who are not here to defend themselves, and who cannot defend themselves.

Mr. Bennett

I am not making any specific allegations in relation to Stockport. I know the great difficulties of being fair either to the officials or to my constituents. People who investigate talk to the constituents. The difficulty is to prove allegations in either direction. One has to be fair to the investigating officer and fair to the constituents. On many occasions people put different interpretations on the same conversation. I should be the first to write to the Minister and make a specific allegation about an individual officer, but I am not making such an allegation. I am saying that constituents feel that that is what is happening to them. They are reluctant to be specific and I do not blame them for that.

What I have described happens. If the Minister can give an assurance that not one of his fraud investigators has made a suggestion about penalties, I shall be pleased to hear it. I am sure that he cannot make such a categoric statement in the House. He cannot deny that some of his fraud abuse officers draw the penalties to the attention of my constituents.

The Minister said that the penalties had nothing to do with the fraud and abuse campaign. The Minister is being disengenuous. Perhaps he can tell us how many maximum fines have been imposed in the last 12 months. I suspect that few have been imposed. How many repayment and maximum fine orders have been made in the last 12 months, and how many have been carried out? I suspect that few have been effectively carried out. The people involved are characterised by their inability to pay anything. They are being hounded for money from all directions. That is one pressure that leads them to mislead and claim benefit to which they are not entitled.

The Minister suggested that inflation was part of the reason for the increased penalty. I accept that there has been some inflation, but that does not explain the increase in the length of prison sentences. The Minister said that the fine was to rise in line with inflation and that, because a larger sum of money was involved, the length of prison sentences would have to be increased.

The Minister cannot have it both ways. He cannot claim that there has been inflation of time as well as of money. If he is merely restoring the value of the fine to take inflation into account, he should leave prison sentences as they are. If he does not, he must admit that he is increasing the so-called deterrent effect by increasing the period of imprisonment. He is going against the Government's strategy, which is to reduce the prison population.

The evidence is that the impact of a prison sentence takes place in the first five or six days in prison. I appeal to the Minister to think seriously about reducing the prison element in the legislation. If he does not he will frighten people who should be helped, but he will make no impact on the hard-faced criminals—the few who try to defraud the system.

I welcome the other minor clauses. However, they do not outweigh the major defects in the legislation. I hope that it will be opposed in the House and in Committee. I hope that pensioners will remember the Bill as another mean and squalid measure under which the Tory Government robbed pensioners, the unemployed and the disabled of another 50p a week.

6.38 pm

Mr. Keith Best (Anglesey)

I speak in the knowledge that the statutory duty to increase pensions in line with inflation was introduced by section 39 of the Social Security Act 1973. I welcome that, and I welcome the present Secretary of State's continuing commitment to ensure that pensioners will not suffer a diminution in their income from pensions as result of the increase in prices.

I shall first explain what I welcome about the Bill, and then express a few doubts about it. I welcome the decision not to repeat the cut in the real benefit of national insurance benefits, which the Government are entitled to do under section 1 of the Social Security (No. 2) Act 1980. I also welcome the fact that the reduction of 1 per cent. will be for this year only. Many hon. Members on the Conservative Benches, as well as those on the Opposition Benches, will watch carefully next year to see whether this sort of legislation is repeated. When one looks at the matter—

Mr. Buchan

It will, unfortunately, be repeated next year, in the sense that it will be cumulative. The Government propose a theoretical figure based on last year's increase. Any percentage increase in the future will permanently contain that diminution.

Mr. Best

I take the hon. Gentleman's point—

Mr. Rossi

I am grateful to my hon. Friend for giving way. The hon. Member for Renfrewshire, West (Mr. Buchan) is wrong. It will not be cumulative. At the end of the two-year period it will balance out precisely.

Mr. Buchan

We shall wait and see.

Mr. Best

I am grateful to my hon. Friend for intervening in an intervention.

Mr. Speaker

Order. The hon. Gentleman said a few words between the interventions. Otherwise, his ministerial colleague would have been out of order. The hon. Gentleman had uttered some words.

Mr. Best

I am grateful to my hon. Friend for his intervention. I think that my safest course would probably be to sit down and allow the two Front Benches to continue the argument. I did, however, intend eventually to deal with that matter. I shall be interested to see whether the sort of enabling legislation now going through the House will be repeated. I view with interest the point that was made about the effect of this proposal, although I am inclined more to the view of my hon. Friend the Minister for Social Security than to that of the hon. Member for Renfrewshire, West (Mr. Buchan).

The Government's case must be regarded as unassailable in pure economic terms and in the light of the overall financial situation of the country. I am alarmed, however, by the principle that is introduced in this legislation. I welcomed the statement by my right hon. Friend in the debate on 13 June 1979, when he said: The guarantee that really matters is the guarantee against rising prices. I shall therefore be introducing legislation shortly to amend the provision relating to the uprating of benefits, so as to provide that pensions and long-term benefits, as well as short-term benefits, should be increased at least in line with the movement of prices. All hon. Members welcomed that statement. My right hon. Friend went on to say: I should like to make it clear, however, that it remains the Government's firm intention that pensioners and other long-term beneficiaries can confidently look forward to sharing in the increased standards of living of the country as a whole. That has always been the intention of Conservative Governments. It remains the intention of the present Government."—[Official Report, 13 June 1979; Vol. 968, c. 439.] Given that commitment for pensioners to share in the increase in the standard of living in the country, I fear that, mutatis mutandis, pensioners cannot escape suffering when living standards take a downturn. To preserve the position of pensioners we must ensure that they do not suffer disproportionately compared with other interest groups in society. What troubles me about the Bill is that, although my right hon. Friend's statement is statistically correct and that pensioners will not lose out overall because of the gratuitous increase of 1 per cent. last year, which is being reduced by 1 per cent. this year, one cannot look at the matter in statistical terms. That 1 per cent. increase achieved last year, however gratuitous, has been spent. It is small change for pensioners in the coming year if they are to be told "Aren't you lucky to have received an extra increase last year, but this year that has to be taken into account" when the money has already been spent.

Unfortunately, pensioners, like, I suspect, many hon. Members, do not have the benefit of being able to look into a crystal ball and project exactly what will happen to prices. Indeed, it has been found that even the Treasury itself is not able to predict them. If that were not the case, we should not be here discussing the Bill.

I noted with interest the intervention by my hon. Friend the Member for Peterborough (Dr. Mawhinney) while my right hon. Friend was speaking. My hon. Friend asked whether, if there were a deliberate increase of 2 or 3 per cent. in pensions, this would be made an excuse for a diminution of 2 or 3 per cent. in a subsequent year. I hope very much that my hon. Friend the Minister for Social Security will address his mind to that matter, I take on board my right hon. Friend's remark that if it had been the deliberate policy of the Government to increase pensions by an extra 2 or 3 per cent. it would be churlish—I do not think that those were his exact words—to take it away again in a subsequent year. I should, however, like to know what happens if the Treasury forecast is out by more than 1 per cent. in subsequent years. I recognise that the legislation deals with a limited period. It is, however, important for us to address our minds to this matter. A fundamental principle, apart from anything else, is going forward in the Bill. We are not dealing merely with the time limit on its effect. I hope that we shall have a clear statement from the Government on what the situation would be if the matters that I have advanced came to pass.

Mr. Race

Will the hon. Gentleman accept that, as he put it, pensioners have had a gratuitous increase of 1 per cent., which the Government say they should not have received, but that the reduced rate of benefit that will apply from November 1981, reflecting the 1 per cent. reduction in the Bill, will be the base-line for the calculation of benefit in future years? The cut in benefits is, therefore, to be projected on an open-ended basis for ever.

Mr. Best

I think that my hon. Friend the Minister is indicating that he intends to deal with that point. I hope that he will clarify it, because that seems to be the position as I read the Bill. I hope that my hon. Friend will clarify the position in a manner that is acceptable both to the hon. Gentleman and to myself. It would be intolerable if it were to become the baseline. We are talking about a 1 per cent. reduction now. What would be the case if what I have mentioned came to pass and the figure was more than 1 per cent? The diminution would be that much greater and that much more serious for the pensioners.

The effect of this legislation will be that over a period of a year a single pensioner will lose £15.60, and a couple £26. One has to look at this matter in the light of the background of recent Social Security Acts. The first of last year which ended the link with earnings, has already meant a loss of about 65p for a single pensioner and £1.05 for a couple. For a widowed mother, with two children, the loss has been £2.65. The combined effect of the two Social Security Acts on invalidity pension has been a loss of £1.80 for a single person and £2.90 for a couple. In the November 1980 uprating the real value of the invalidity pension was cut by 90p for a single person and by £1.45 for a couple. I do not wish to belabour the House with statistics. It is important, however, to look at the actual amounts of money involved, because this is how it will affect the recipients of the pensions.

It is regrettable that the Government have refused to give a commitment to make good the cuts in the real value of benefits once they are brought within tax, except in the case of invalidity pension, where I understand the commitment is subject to economic circumstances. It was generally acknowledged by many people that when certain benefits were reduced, as they were with a view to being brought ultimately within the tax net, it was only right that when they did come within the tax net they should then be increased, otherwise they would come into the net at a reduced level. I cannot believe that that was the intention of the Government. I hope that there will be some clarification of that.

I should like to take on board briefly some of the points made by my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden). Like him, I have been concerned about the difference in the matters that have been taken into account for the index for pensioners. In a parliamentary question on 14 February last year I asked my right hon. Friend the Secretary of State for Employment whether he would publish the difference in the price index for one-person and two-person pensioner households, compared with the retail price index. The figures that I was given for the last quarter of 1979, taking January 1974 as 100, were 239.8 for the one-person pensioner household and 238.5 for the two-person pensioner household. The general index of retail prices, excluding housing—my right hon. Friend has already mentioned that housing is not taken into account—was 239.8, so there was not much difference.

If one takes a single quarter, the last quarter of 1979, there would not seem to be a significant difference. Before my hon. Friend leaps to his feet and seeks to intervene, I think that what he would say in answer is, "Yes, but if one looks at that historically there is quite a significant difference in the long-term shortfall that is occurring". If he were to say that in an intervention, I should take his point.

The Treasury's economic progress report of February 1978 emphasised the greater relevance of food and fuel in the pensioner's budget, and that is something that we all recognise. Pensioners are affected far more than others are by increases in food prices and in the cost of fuel. I like to think that as a result of successful Government policy the retail price index is decreasing. Indeed, the food price increase has been lower than the retail price index, but again the point made by my hon. Friend the Member for Kemptown is perfectly valid, that, unfortunately, that is not the case with fuel. This will have a significant effect on pensioners.

I have always deemed it somewhat strange that it should be regarded as a retail price index. It is nothing of the sort. It is a consumer price index, because it takes into account matters that are not retailed in the normal run of events as we understand things. The index covers such things as rent, rates, transport and other services, which certainly would not come within most people's definition of a retail price index. I ask my hon. Friend to give me a commitment that the Government will not tamper with the retail price index. We have heard rumours of something of this nature. I hope that he will be able to give a commitment that nothing will be done to the retail price index that will indicate a lower increase than there would otherwise be.

My preference would be for a new low-income family index. This would be a major step forward. It is something that has been advocated by the Low Pay Unit. If we were able to institute a new low-income family index, everybody would be in a much better position to put their hands on their hearts and say that the increases that will be determined by the House will be akin to the real problems faced by pensioners and other groups. All hon. Members want to see pensioners being given a fair deal.

I have restricted my remarks entirely to pensioners, although the Bill covers other interest groups as well. If we could achieve what I have suggested, fairness would be much more manifest than it is at present.

6.55 pm

Mr. Reg Race (Wood Green)

The first point I want to make is that I hope we shall have no repetition in Parliament of the events of last year when the Government introduced a Social Security Bill and then, after the Budget, were forced to introduce a second Social Security Bill. No doubt the hope that we shall not be in that position again will be reflected on both sides of the House. I hope that the Minister of State and the Under-Secretary, who are nodding vigorously at this point, know what is in the mind of the Chancellor of the Exchequer. We hope that no further cuts in benefit will take place as a consequence of the Budget and so necessitate further legislation.

I want to draw the attention of my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) to the Social Security (No. 2) Act 1980. Great play has been made by the Secretary of State of the fact that the Government were not in business to use section 1 of that Act to cut benefits by up to 5 per cent. this year. Just for the record, it would be possible to use the Social Security (No. 2) Act 1980 to cut benefits in 1982 as well if they laid the order for doing so before the end of the tax year beginning on 6 April 1981. If they laid the order before 5 April 1982 they could, under the terms of that Act, reduce benefits by up to 5 per cent. in November 1982. Therefore, that may indeed be a remote possibility. I am sure that the Chancellor of the Exchequer when he comes to look at the public sector borrowing requirement in the next financial year but one will be apprised of that situation. I hope we have seen the back of that obnoxious piece of legislation, but for the record I wanted to draw it to the attention of the House.

The Government have laid great emphasis on the fact that their policy is to emphasise the importance of the rates of benefits and the rights which accrue to people under social security legislation passed by the House as distinct from any discretion which may have been exercised previously by local social security offices. That is an important policy. Therefore, it is all the more surprising and staggering that here we have a Government who on two successive occasions in two successive years have introduced specific legislation to cut the rates of benefit that would otherwise have been increased in line with previous legislation.

It is the policy of the Government to emphasise the importance of the rates of benefit. Yet last year we had the Social Security (No. 2) Act section 1 of which gave power to the Secretary of State to reduce benefits by up to 5 per cent. in two years. Now we have this Bill which allows the Secretary of State to cut the pension rate, supplementary benefit, unemployment benefit and invalidity benefit by 1 per cent. in the coming November. It is extraordinary that a Government so committed to accelerating the rate of benefit should introduce draconian measures of this kind to cut the rate of benefit.

In support of that part of the Government's policy that emphasises the necessity of having a proper rate of benefit I want to quote from the survey conducted by the Child Poverty Action Group and the Family Service Unit which examined the rates of benefit paid. It said: The problems the families faced were made worse by the sheer drudgery and monotony of such restricted standards of living; they were compounded by the misery of being hungry, of being cold, of continually worrying about stretching the money through the week and about the health and well-being of their children. More than anything else, it was for their children that the parents were anxious. The strain and worry was itself a cause of ill-health and guilt, and such burdens were intensified by the much felt disapproval of the rest of the community; the feeling of humiliation at having to claim supplementary benefit; of being labelled and made to feel like a scrounger. Clause 3 refers to people who are alleged to be scrounging under the social security system. But that quotation from the report clearly shows the extent to which the basic rates of benefit are inadequate and make people feel inadequate. That feeling is not solely restricted to the Child Poverty Action Group.

The Minister for Social Security represents a constituency which is in the same borough as mine. I refer him to a letter which I have recently received from the Wood Green Old People's Welfare Committee. It is addressed to "Dr. Gerard Vaughan". I have no doubt that the Minister has now seen it. It is dated 12 February and states: My Committee were very surprised and deeply concerned at the announcement that next year's old age pension increase would be cut by 1 per cent. This will mean 27p less per week for a single person and 43p less for a married couple. Our concern is all the greater when we know from personal experience the great difficulty old people have in keeping their accommodation adequately heated. The cost of fuel goes up continuously, and yet you are proposing to cut the pension by 1 per cent. This seems to me to be extraordinarily callous, and shows an unwarranted indifference to the welfare of pensioners. At the present moment we are having old age pensioners coming into the office in very great distress over trying to meet high heating bills. It is literally a question of having to choose between sufficient suitable nourishment, or running the risk of hypothermia. This is not, in my opinion, the way in which any Government should treat those in need, such as the pensioner, at the end of the 20th century. That letter is signed by Mr. Vic Tary, whom, I am sure the Minister will recognise as being a Conservative councillor of the London borough of Haringey and who happens to be the chairman of the Wood Green Old People's Welfare Committee. There we have a leading member of the Conservative Party in Haringey attacking the Minister of State and the Government over the Government's callous and indifferent policy in reducing the pension increase by 1 per cent. I hope that the Minister for Social Security will note the criticisms from his part of the world of the Government's policy under the Bill.

The argument advanced by the Secretary of State earlier in the debate about the character of the Government's problems over social security needs further analysis. He was arguing that, because there is a slump, we need to cut back on the social security budget. This is a trap of the Government's own making. If the Government pursue a policy which increases unemployment to 2½ million registered and possibly 3 million including the unregistered, the Government and the taxpayers have to fork out substantial amounts of money to keep people idle.

The House of Commons Library produced an excellent brief on the cost of unemployment. That was before the Government increased employees' national insurance rates. That brief argued that for every 100,000 people on the dole for a year the cost to the taxpayers was £440 million. After the increase in national insurance contributions for the employee that figure was increased to £480 million.

If the House of Commons Library is to be believed, the total cost of unemployment on the social security budget to the taxpayer and the Government is about £12,000 million a year. Not all of that falls on the Vote for the Department of Health and Social Security, but a great deal does. If the Government are looking for ways of cutting the social security budget, they need do no more than to pursue policies that will reduce the number of unemployed and stop the rise in unemployment figures which we have heard about today.

The losses which have been incurred over previous years by pensioners and other social security beneficiaries under the Conservative Government will be carried forward into the future, and it is right for me to get on record the amount which the Government are swindling from pensioners and people on supplementary and invalidity benefits.

The pensioners in particular will be badly affected. A single pensioner will lose £15.60 a year, a pensioner couple will lose £26 a year. A couple on invalidity benefit will lose £20.80 a year. A couple drawing unemployment or sickness benefit, the rates being the same, will lose £18.20 and a couple with two children will lose £23.40. These are substantial reductions in the total amount of benefit which will be payable to the poorest people in society who literally cannot afford to be swindled of any part of their benefit.

The point I made in an intervention during the speech of the hon. Member for Anglesey (Mr. Best) is important in this regard. The cuts in benefit under the Bill will compound what happened under the No. 2 Act last year. Last November, for an invalidity pensioner, for example, the benefit went up by 11 per cent.—that is less than the inflation rate. The Government are now saying that even though they paid the invalidity pensioner less than the rate of inflation they will still take away 1 per cent. They will still give him 10 per cent. arising from the November 1980 settlement, and that will be the base line from which future levels of benefit will be calculated—unless the Minister says something different tonight.

That carries forward the principle of the Bill into future years with no prospect of alteration. That attack on the permanent living standards of pensioners, invalidity beneficiaries and those on supplementary and sickness benefit is an attack which the House should not tolerate. It should throw out the Bill.

The hon. Member for Brighton, Kemptown (Mr. Bowden) in a courageous speech said that he would not vote for the Government tonight. He referred to the retail price index, the way it was constructed and its reliability in reflecting the actual living costs of pensioners and their families. The proportion of the total earnings of pensioners spent on food, housing and fuel has been rising over the years. The principal reason for that is that the real cost of fuel has risen substantially since 1973. Whatever Governments may do about increasing council rents by £3.25, as they are being increased this year, the proportion of pensioners' income spent on fuel has been rising over the past five or six years. Therefore, the hon. Gentleman is right in saying that the family expenditure survey is a more reliable method of dealing with these questions than is the retail price index or the special pensioner price index that has been constructed by the Government. I hope that the Government will take note of that, and that they will review the weightings given to fuel, housing and food in the pensioners' index, as a consequence of the latest information from the family expenditure survey.

The cut in pension which has been made is a cut in a pension which is already far too low. It is a cut in a pension which is uprated only once every 12 months, and not every six months as it should be. The cut is being made when the Government have stopped many people claiming exceptional needs payments, and when the Government are emphasising the rate of benefit and the rights that accrue to people rather than discretion from local offices. The Government are saying that legislation is required to recover overpayments of pension and social security benefits. However, there is no proposal in the Bill—and there have been no proposals in any Government measure—to give back amounts of underpayment which are covered by a statute.

We are seeing an attempt by a Government to impose substantial sacrifices on the most needy sections of the population. The Secretary of State said that the savings to the Exchequer would be about £225 million in a full financial year. Those savings are relatively trivial, both in terms of the total cost of the social security budget and in terms of public expenditure as a whole. If the Government are looking for methods of cutting public expenditure they should choose the option of reducing unemployment and they should carry forward an economic policy to allow them to do so. If they are carrying out a straight financial exercise, they should also consider other methods which they could introduce to raise this amount of money or to prevent pensioners from feeling the axe of the Government.

I have three specific proposals which no doubt have been ruled out of court by the Government. The first is to remove the ceiling on employees' national insurance contributions, which would make the richer sections of society pay a higher proportion of the national insurance contributions. The second is to abolish the indexation of the higher rate bands of tax, which was carried through by the Government last year in the Finance Act and which will cost the Exchequer substantial sums of money. The Government have never made a proposal to stop the indexation of the higher rate bands of tax for the rich, but there has been a proposal which was carried through in the Finance Act 1979—but there are proposals every time we listen to social security debates—to cut the real levels of benefits of pensioners and those on supplementary benefit.

My third suggestion is this. If the Government want to recoup this relatively trivial amount of money, they could remove the ability of higher rate bands of taxpayers to covenant funds to their children and thereby gain personal tax allowances which they can offset against their tax liability. That is costing the Exchequer hundreds of millions of pounds a year. That measure was introduced by the Government in the Finance Act 1980.

I therefore argue that the measure is a squalid one. It is mean and will affect the lives of many pensioners, people on supplementary benefit and the unemployed. The Bill is a disgrace to the Government. I hope that many Conservative Members will take the lead of the hon. Member for Kemptown and follow us into the Lobby against it. I hope that the Government will think again about their policies before the Bill goes into Committee.

The Secretary of State said that pensioners and people on benefit could not expect to receive increases in pensions or benefits greater than the increase in prices. He said that there was no prospect of the community being willing or able to fund increases of benefits in real terms, at a time of economic difficulty and recession. When my hon. Friend the Member for Renfrewshire, West attacked that proposition, he was laughed at by Conservative Members. That is an indication of the extent to which some Conservative Members are prepared to see the attack of pensioners and others receiving benefits while protecting the people whom they feel they are here to represent; the wealthy and the rich. I am sure that those comments will be noted up and down the country, because there is one certainty in this life and that is that the pensioners' organisations take careful note of who votes which way on such Bills. I am sure that they will note carefully which Conservative Members follow us into the Division Lobby tonight against the Bill.

7.17 pm

Mr. Douglas Hogg (Grantham)

The language used by Labour Members has done their cause and their argument no service whatsoever. I have listened to much of the debate. I have been surprised by the violence of the language that has been used by the three or four Opposition Members who have spoken. I note that they were speaking to an audience on the Opposition Benches of three or four. The violence used in those speeches shows a complete disregard of reality.

The hon. Member for Renfrewshire, West (Mr. Buchan) talked of a paltry, mean and shabby Bill. That is complete nonsense. The hon. Member for Wood Green (Mr. Race), who has mercifully just sat down, accused the Conservative Party, of which I am proud to be a member, of representing the rich and the wealthy. I happen to be a member of a truly national party. We represent the interests of the entire community. That is the unique characteristic of the Conservative Party. It always has been and it always will be. If I did not believe that, I would not be a member of the Conservative Party. If it ever ceased to be a party of the entire nation, I would leave it. However, that time will never arise. I anticipate being a member of the Conservative Party until I die. That cannot be said of the hon. Member for Wood Green, nor can it be said of his hon. Friends.

One of the characteristics of the Opposition today is that they are not a national party. They do not represent the interests of the entire community. On the contrary, their party represents the narrow interests of a small minority. If I had to define that small minority, I would say that for the most part it was the trade union barons, although not the membership—

Mr. Stan Thorne (Preston, South)

On a point of order, Mr. Deputy Speaker—[Interruption.]

Mr. Hogg

—and furthermore the Marxists who dominate associations such as are represented by the hon. Member for Preston, South (Mr. Thorne).

Mr. Thorne

Can you indicate, Mr. Deputy Speaker, to which part of the Bill the hon. Gentleman's speech is relevant?

Mr. Deputy Speaker (Mr. Bernard Weatherill)

I was beginning to wonder whether the hon. Member for Grantham (Mr. Hogg) was rehearsing another speech, but I believe he is leading into the preamble to what he intends to say about the Bill.

Mr. Hogg

You are so tactful, Mr. Deputy Speaker, as always. What I was saying was but a preamble to the substantive part of my speech.

Mr. Tristan Garel-Jones (Watford)

The long title.

Mr. Hogg

The long title of a very short Bill.

I approach the Bill with a degree of caution. Like many of my hon. Friends, I am determined that the basic pension should be linked to increases in the cost of living. It is highly desirable that those on the basic State pension should know where they stand. They have a right to be protected against increases in the cost of living and they must regard that as being a right that will be defended. I agree with what my hon. Friend the Member for Somerset, North (Mr. Dean) said. He made an important point that the House should bear in mind. If Parliament does not protect the welfare of the basic pensioner, no one else will. In the great scramble for resources, the pensioner will be left at the bottom of the queue. Therefore, Parliament has a special duty to ensure that the standard of living of the basic pensioner is protected.

Had the Secretary of State said "Look, Mr. Speaker"—because he is always a most courteous man—"I should like to sever the connection between the basic pension and increases in the cost of living", I should not have been able to support him. That proposition, broadly stated, would be unacceptable. In fact, he suggested no such thing. He broadly said that the Conservative Party—Her Majesty's Government—has given a commitment and the commitment is that during the lifetime of the Parliament the real standard of living of the pensioner will be protected.

We know that by reason of an error in assessment last year the real value of the pension increased by 1 per cent. Had we been living in more prosperous times, we should have been delighted to pass on and ignore that fact; but we are not living in prosperous times. On the contrary, we are living in times of severe recession and high unemployment. People in the private sector are accepting settlements well below 10 per cent. and, for that matter, people in the public sector will have to accept settlements of about 10 per cent. That is the context in which the debate is being held.

Mr. Ennals

Is the hon. Gentleman really assuming that pensioners, as a result of receiving only 1 per cent. above the RPI, have saved an extra few coppers a week and now have sufficient money saved to enable them to live through a year in which they will not be compensated for inflation?

Mr. Hogg

That was a silly intervention. I assume nothing so silly. It is characteristic of the right hon. Member for Norwich, North (Mr. Ennals) to make such an intervention.

We are living in times that are not prosperous. Pensioners appreciate that as well as the next man. We are not requiring of a basic pensioner anything more than he would willingly be prepared to offer in a situation of dire distress, which is what the country is facing. The vast majority of pensioners recognise that fact. I have not had a great number of letters saying that that is wrong or immoral. My experience, which is just as great as that of the right hon. Member for Norwich, North, is that pensioners are prepared to play their part in saving the country as well as any other member of society.

The hon. Member for Wood Green showed an extraordinary and typical approach to public expenditure. He said that £225 million was peanuts. It may be for him, but it is not for the country. It is not peanuts if it is an additional burden on the public sector borrowing requirement or if it has to be financed by taxation. It is a very substantial sum. I hope that it is not supposed that we are talking about a mere bagatelle. We are not.

Mr. Race

The hon. Gentleman is completely misinformed when he alleges that I said that the sum was peanuts. I said that it was relatively trivial. My point was that in terms of public and social security expenditure it is a small amount, which is what his right hon. Friend said. If the right hon. Gentleman wants to find savings in social security spending, he should put pressure on the Government to impose an economic policy that will reduce unemployment and the necessity to pay people unemployment benefit.

Mr. Hogg

The hon. Gentleman should not waste the time of the House by trying to draw a distinction between the words "peanuts" and "trivial". It is to trifle with the House to say that there is a meaningful or useful distinction between them. There is not. The more that I listen to the contributions—if that is what they are—of Opposition Members, the more any doubt I had about the Bill are dispelled.

My doubts were also dispelled by two facts that became apparent during the speech of my right hon. Friend the Secretary of State. First—and the House must grasp this basic proposition—the Bill applies for one year and one year only. We are talking about a clawback of 1 per cent. which is restricted to the year 1981–82. To listen to Opposition Members, one would suppose that we were undermining and subverting all the. legislation in this area, which is simply not true.

The second point that considerably calmed my anxiety was the assurance given by my right hon. Friend the Secretary of State to the effect that, if by evil chance pensioners received an underpayment in relation to the cost of living within the lifetime of this Parliament, they would be compensated. That assurance was also given by my right hon. Friend the Prime Minister. I am pleased to accept those assurances, believing that they will be implemented.

I should like to comment on two points. First, my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) made a helpful comment. He raised an interesting proposition that needs further clarification. He basically said that the retail price index is not a fair guide to the increases in costs that pensioners face. He went on to say that the family expenditure survey would be a fairer guide. To be fair to the hon. Member for Wood Green, he supported that interesting proposition. However, I hope that my hon. Friend the Member for Kemptown will not consider me discourteous if I say that, when I asked whether pensioners would have done better in 1978 and 1979 had the family expenditure survey been used as the base, he was unable to answer. I do not blame him. I merely say that the proposition needs further clarification.

If the retail price index proves to be an unsound basis for assessing the increase in cost to pensioners, there may be some room for changing the base on which those increases in cost are calculated. I do not believe that there is anything in the Bill, or in that part of the Bill which amends the Social Security Act 1975, which requires the Government to base their judgment of the increases in cost of living on the RPI.

The Under-Secretary of State for Health and Social Security (Mrs. Lynda Chalker) indicated dissent.

Mr. Hogg

My hon. Friend shakes her head. She is more knowledgeable than I am in this matter, and I accept her view. But if that is right, we should consider whether the indicators are the correct ones. If my hon. Friend the Member for Kemptown is right, we should perhaps consider changing the basis upon which these calculations are made.

My hon. Friend the Member for Somerset, North commented at some length on the indexation of public sector pensions and made a number of valuable points in that connection. He said, quite rightly, that there was nothing wrong with the concept of indexation. But he also said that it was wrong in principle that one part of the community should have the protection of indexation, while the other part of the community, namely, those in the private sector, does not. My hon. Friend has pointed a finger in a most important direction. He made two particular suggestions: first, those who benefit from indexation in the public sector should make a greater contribution to their pension funding; secondly, there should be a cut-off point, either in percentage terms or in terms of cash sum, for those in receipt of public sector pensions.

I venture to make a third suggestion. Perhaps we should also insist that the Government bring forward index-linked bonds to which the private sector may gear pension policies. That would be one way at least of ensuring equity in this matter.

I wish to make a final point, which again refers back to something raised by my hon. Friend the Member for Somerset, North. It relates to invalidity benefits, which are, or course, affected by the Bill. I have become conscious of the way in which the therapeutic earnings limit is applied, quite lawfully, to reduce the benefit paid to those in receipt of invalidity benefit who are at work. A degree of resentment is felt by those in receipt of invalidity benefit that the therapeutic earnings limit is not equated with the provision of pensions. In other words, they should be able to earn considerably more from part-time work without their invalidity benefit being abated. That would be a considerable step forward, and it would remove many of those in receipt of invalidity benefit from the financial difficulties in which they presently find themselves.

I approached the Bill with a degree of caution. I believe that this was felt by most of my hon. Friends who are anxious to preserve the link between increases in the cost of living and the level of the basic pension. We approached the Bill with caution. I think that most of us, however—and myself most certainly—with the exception of my hon. Friend the Member for Kemptown, are now satisfied that the Bill can properly be supported.

The Bill can be supported essentially for two reasons. First, it applies only for one year and it adjusts the situation up to the present time. Under this Government, pensioners have seen a real increase in the value of their pensions. Secondly, my right hon. Friend the Secretary of State has echoed the assurance given by my right hon. Friend the Prime Minister that if during the lifetime of this Parliament there is an underpayment it will be taken care of by subsequent uprating.

Despite my anxieties on this matter, therefore, I shall support the Bill. Indeed, I even hope that my hon. Friend the Member for Kemptown will do likewise.

7.35 pm

Dr. Oonagh McDonald (Thurrock)

It is difficult to know how to follow a speech like that of the hon. Member for Grantham (Mr. Hogg), save in one respect. The hon. Gentleman made the point, as did other Conservative Members, including the Secretary of State, that this reduction in pensions and other benefits in the uprating in November is due entirely to the present economic situation, because resources are not available to allow pensioners and others to have the additional 1 per cent. If one goes back to the beginning of the Conservative Government's period of office, however, it is clear that the Government have quite cynically switched resources from the poorer members of the community, such as pensioners and those in receipt of supplementary and national insurance benefits of all kinds, to the better-off. As a result of the decisions made in the first Conservative Budget in June 1979, the Government have suffered, and will continue to suffer during the next financial year, considerable losses in revenue. Had no change been made in the standard rate of income tax, had no adjustment been made in the higher rate taxation bands, and had no allowance been made for indexing those, resources would have been available to distribute in pensions and benefits in line with the rate of inflation during the pension year beginning November 1981. The revenue lost to the Government, year upon year, as a result of that first Budget is immense. By the end of the financial year 1981–82, the loss through the change in the standard rate of income tax alone will amount to approximately £6,400 million. The amount lost each year by the adjustment in the higher rate band is about £300 million.

Those changes, resulting from the first Budget and taking effect in each financial year since then, have benefited only the better off in the community. They have benefited the rich. The ordinary taxpayer benefited little from the reduction in the standard rate of income tax, and certainly not from the adjustment in the higher rate bands. Had those changes not been made in the first Budget and continued in succeeding Finance Acts, pensioners and those in receipt of national insurance and supplementary benefits would not be suffering as they are suffering now, and will continue to suffer, by the reduction in the amounts to be received from November 1981 onwards.

The amounts have already been detailed by my hon. Friends. The loss of £26 per year to a pensioner couple may not seem very much, but when one considers the pattern of expenditure for such a couple one realises that the losses suffered are considerable. The hon. Member for Brighton, Kemptown (Mr. Bowden) rightly made that point, and it was reinforced by other hon. Members on both sides of the House. Indeed, the same point would apply to those on invalidity, unemployment or sickness benefit and to those on widowed mothers' and children's allowances. The pattern of expenditure is the same. Most of their income goes on food, heating and housing. The impact of changes in expenditure on rent and heating for pensioner couples and for others is immense.

I illustrate that by quoting letters that I have received from pensioners. I find that pensioners in my constituency now write to me quite spontaneously to complain about the impact of various aspects of Government policy on their lives.

The letters that I have received illustrate in a concrete way the general point made by the hon. Member for Kemptown. I cite one letter in particular: When we moved into this all-electric fiat seven years ago we were able to pay our way without any worries, but now we have to watch every penny we spend. When the bills began to get bigger a couple of years ago we decided to economise. First we got rid of the electric cooker, then the fire in the sitting room, the fan heater in the kitchen, the water heating system is only put on when we need it for bathing purposes. We use the vacuum cleaner once a week, and the washing machine once a fortnight. Our television is only on for a short time in the evening but with all these savings we are still finding it difficult to pay our bills. In October last year we received a bill … which was exactly £10 more than the same quarter the previous year and again this January we had a bill for £24 and the same thing happened again. The fixed charge has gone up to over £5 and for this we get nothing to warm our flat. We have to rely on two storage heaters. Altogether, those pensioners pay £3 a week for their heating as part of their rent throughout each week of the winter months, from October to April. That illustrates exactly the point that has been made. It reveals the difficulties that pensioners are experiencing in paying their heating bills in spite of making massive and unpleasant economies such as this pensioner couple have to make.

I cite another letter from a couple who have suffered loss. They said: We used to get a grant of £5 towards our heating bill, also a grant towards the electric bill if it was over £20. Both of these have been taken away, plus the loss of the two week's benefit increase last November. Their gas bill for central heating has increased from £16 to £45 and their electricity bill for lighting and cooking from £16 to £22. In addition, the standing charges have sharply increased. They find those prices difficult to cope with on the small pensions that they are receiving. The loss of £26 a year from November next will, after all, amount to the loss of ability to pay some of the heating bills which they describe.

Conservative Members have argued that pensioners are willing to make these sacrifices for the sake of the nation. However, a quotation from another letter that I have received from a pensioner expresses the feelings of pensoners very well. She says: I think the present Government are doing all they can to rid the country of its old folk, the folk who fought and won the war. My husband was in it from the first day to the last". Quite honestly, that is a truer expression of the feeling of many pensioners than the suggestion made by some Conservative Members that pensioners are only too willing to sacrifice by accepting a cut in the basic pension.

Although a cut is proposed from November onwards, pensioners and others have also suffered losses in terms of the amounts that they would otherwise have received had the link between pensions and earnings not been broken and had the 5 per cent. cut in some benefits not taken place.

Much of the debate, understandably and rightly, has concentrated on the plight of the retirement pensioner, but other groups also suffer as a result of this cut, and they will suffer considerably. Indeed, they have already suffered a great deal. Those groups contain some of the most vulnerable members of our community. I am talking of the children of those who are in receipt of unemployment or sickness benefit and of those in receipt of the widowed mothers' allowance or invalidity benefit. Those children have suffered a serious cut already in terms of the family's loss of income, for instead of calculating the uprating on the basis of total child support, including child benefit received by a national insurance beneficiary—as has been done previously—the DHSS has now based it on the child addition actually paid with the national insurance benefit.

That has meant increases in the total grant received for each child of only 5 per cent. in the case of short-term benefits, and 10 per cent. in the case of long-term benefits. In both cases those increases are well below the level of inflation. As a result, the value of child support, including child benefit, for example, for a widow, in receipt of the widowed mothers' allowance, fell from 47.6 to 45 per cent. of the adult rate. A similar fall is reported for those on short-term national insurance benefits.

Not only are the Government determined to take it out on pensioners; they are determined to take it out on those who, through no fault of their own, are suffering as a result of their parents being unemployed, sick or invalids. There can be no justification for a cut of that kind when one bears in mind that it has been made against a background of a switch of resources from the public sector through benefits to a restricted private sector, namely, those who are already in receipt of high incomes, earned or unearned. There can be no justification for such meanness in a further phase of the Government's social security legislation.

I turn now to quite a different aspect of the Bill, namely, the clause relating to maternity pay. We are told that it gives the Government the right to pay out maternity allowance at 100 per cent., rather than nine-tenths. The Secretary of State suggested that this change would be made when economic circumstances permit. One must express two anxieties in that regard. First, the Government's general attitude towards mothers in employment has already been shown to be unsympathetic, to say the least. It is now more difficult to get maternity leave than it was in the past, and women in this country are placed at a disadvantage compared with women in other countries of the EEC.

The Government's attitude towards women having children and then returning to work has, therefore, already been expressed in legislation which has worked against them. They have shown themselves to be unsympathetic and harsh. They have worsened the position of such women. What reason can there be to expect that the Government will make the necessary change and introduce the increase in maternity pay which it is suggested they will do as a result of this change in legislation?

Secondly, when economic circumstances permit, the cost of increasing maternity pay to 100 per cent. of normal weekly pay will be about £6 million. Whatever may be said about £200 million, it would be proper to describe £6 million as peanuts in terms of Government expenditure. There is, therefore, no reason why the Government should wait for a miraculous change in economic circumstances. They should make this change in order to aid women in receipt of maternity pay, often at a time when a family is vulnerable. There should be no pause. In Committee the Government should introduce not just the enabling legislation but guarantee that such a change will be brought about immediately. I hope that when the Minister replies to the debate we shall receive that sort of guarantee.

The Bill offers very little hope, yet again, to those who have the lowest incomes in our society. They already have to scrabble to try to pay their heating bills. They already resort to jumble sales for their clothes. They already find difficulty in meeting increasing food bills and rents. The Government have quite coldly, cynically and selfishly decided that they will spend the resources available through tax allowances to benefit the rich at the expense of many poor people in our society.

7.50 pm

Mr. Tristan Garel-Jones (Watford)

I do not propose to detain the House for long. However I associate myself with the remarks made by my hon. Friend the Member for Grantham (Mr. Hogg) when he said that he conceived of the Conservative Party as a national party that was not based on any class or sector of the community. He said that that was why he belonged to the Conservative Party and that that was why he expected to live and die as a member of it. When he made those remarks he was interrupted from a sendentary position by the hon. Member for Wood Green (Mr. Race). It was not inappropriate that the hon. Gentleman should intervene, because he arrived in this House with a reputation that many hon. Members would not wish to share. When my hon. Friend the Member for Grantham—

Mr. Rooker

What does the hon. Gentleman mean?

Mr. Garel-Jones

I shall make myself clear to the hon. Member for Birmingham, Perry Barr (Mr. Rooker). When my hon. Friend made those remarks, I hoped that if he should fall ill, and if his time to die should come—which I hope will not be for many years—the hon. Member for Wood Green and his friends were not in charge of the hospital that my hon. Friend was taken to. I hope that what the hon. Member for Wood Green regarded as humanity and sensitivity—

Mr. Deputy Speaker

Order. I hope that this is not another long preamble.

Mr. Garel-Jones

I take that point very much to heart, Mr. Deputy Speaker. I shall move away from my introductory remarks to the main thrust of my speech.

The first thing that strikes me about the Bill, is that it does not contain a provision that many of us had expected it to contain, namely, a provision for shifting the first eight weeks of income during sickness on to the employer.

Mr. Robert Kilroy-Silk (Ormskirk)

The Government have chickened out.

Mr. Garel-Jones

The Opposition must make up their minds. Do they want the Government to be flexible and to listen to points of view or not? Strong representations were made to the Government. For that reason the Government have decided not to include the provision for the time being. The hon. Member for Ormskirk (Mr. Kilroy-Silk) may call that chickening out, but it is the kind of flexible, pragmatic approach that we expect from a Conservative Government.

I strongly associate myself with my hon. Friend the Member for Grantham, who said that it was important that the value of pensions was protected by Parliament. If Parliament is not prepared to protect the value of pensions, no one else will do so. There are many conflicting forces working within society that would undermine the value—

Mr. Kilroy-Silk

I am interested in the hon. Gentleman's remarks that this House legislated to protect the real value of pensions. The hon. Gentleman must remember that the Labour Government did precisely that, by legislating to ensure that pensions increased by either the rate of inflation, or earnings—whichever was the higher. That link has been broken by a Government that the hon. Gentleman supports. Why was the hon. Gentleman not in his place then? Why did he not speak and—more importantly—vote against the destruction of that link? Why is he giving us his nice rhetoric now?

Mr. Garel-Jones

I am sure that the whole House will welcome the hon. Member for Ormskirk on his fleeting visit to the Chamber. The hon. Member for Thurrock (Dr. McDonald)—

Mr. Kilroy-Silk

Answer the question.

Mr. Garel-Jones

I shall answer the question. The hon. Member for Thurrock spent the earlier part of her speech outlining what would have happened to pensioners if the Labour Government had not been defeated and if the provisions that they had in hand had been fulfilled. Within a few weeks of the last General Election the right hon. Member for Heywood and Royton (Mr. Barnett)—who was a little closer to the centre of financial affairs than the hon. Member for Thurrock or the hon. Member for Ormskirk—made it clear to the nation that any future plans that the Labour Government might have had were pie in the sky. Pensioners will be cautious before they place any reliance on Labour Members.

Mr. Ennals

The hon. Gentleman must accept that when the Labour Government were in power pensions increased by over 20 per cent. That was real money. Therefore, the hon. Gentleman cannot get away with what he is saying.

Mr. Garel-Jones

I am arguing that pensioners would be justified if they were to treat with caution speculation about what might have happened if the Labour Party had won the last General Election. I accept that during the period of the Labour Government there was an improvement in the living standards of pensioners. The living standards of pensioners have not only been protected by this Government but—even in these difficult times—have been marginally improved.

It is vital for Parliament to uphold the value of pensions. The hon. Member for Thurrock read us a number of letters from constituents of hers who are in some difficulty. I have received similar letters, but I have also received letters of strong support from pensioners. We must get out of the habit of regarding pensioners as small children rather than adult citizens who can make the same judgments and who live in the same world as the rest of us. Pensioners are quite aware of the difficulties that the nation faces. If not happy, many of them are at least willing to accept that they have a role to play.

The Bill's central provision—which as my hon. Friend the Member for Grantham pointed out, makes us cautious—claws back one percentage point. The Government overestimated. Hon. Members from all parties would agree that pensions are never high enough. One would always like to do more. As my hon. Friend said, there is not a party in the House that would not, if it were in government, wish to tell pensioners that it had over-estimated and that it was happy to allow a 1 per cent. run-on. The Government would have wished to do that if it were possible. I draw some comfort from the fact that my right hon. Friend has reinforced a statement made by the Prime Minister to the effect that just as the Bill claws back money this year, any overestimation in the Government's calculations—

Mr. Kilroy-Silk

My colleagues and I are amused to see a Tory wet trying to defend the indefensible, namely the Government's record. We are interested to see how much the hon. Gentleman is wriggling. He is not saying what he really believes. Like my hon. Friends and me, he is distressed and annoyed at the way in which the Government are stealing money from pensioners. If he had the courage of his convictions he would be voting against it. We shall be interested also to see how other so-called wets will respond in that respect.

Mr. Garel-Jones

It is interesting to see the hon. Gentleman trying to find inside the Conservative Party the sorts of divisions—of which we are all becoming a little tired—which exist now in the Labour Party. We all wait for the moment when the Labour Party will finally settle down into one, two or even three different opposition parties, so that we know where we stand. The hon. Gentleman will seek in vain for such divisions inside the Conservative Party. We are a national party, as my hon. Friend the Member for Grantham said. We are not based on any class or section, and we never shall be. If that is the level of the intervention that the hon. Gentleman, in his fleeting visit to the Chamber, proposes to make, I shall be doing the House a service if I decline to allow him to intervene any further.

Any Government would have wished to be able to say to the pensioners that they would be happy to pass the overestimate on to them. But we now have at least an absolute guarantee that, if there is any underestimate in the calculation, it will be made up to pensioners.

In 1979, the value of the pension increased by 2 per cent. over prices, so even in these difficult times we have still managed to keep the pensioner just ahead of the level of prices. Of course, we do not think that we have done enough, and wish to do more. [Interruption.] But one of the things that Conservative Members will continually resent is the contention of the likes of the hon. Member for Keighley (Mr. Cryer) that he has any justification to claim for his party—which contains in it hon. Members such as the hon. Member for Wood Green—some sort of monopoly over compassion. We shall not have it, we do not accept it, and, for that reason, albeit with caution, we shall be supporting the Bill tonight.

8.2 pm

Mr. Stan Thorne (Preston, South)

It is not my intention to follow the hon. Members for Grantham (Mr. Hogg) and for Watford (Mr. Garel-Jones) into a discourse about the present problems of the Labour Party. It is touching to hear their concern about the Labour Party. I am not unaware of the fact that they are hopeful that even more serious problems will face us. But through you, Mr. Deputy Speaker, I should like to assure them that we shall overcome our minor difficulties, and that it will not be very long before the Labour Party is as thrustful in terms of the Government's activities as it has been in the past.

I have had many letters on the subjects covered by the Bill from constituents and from various organisations. It has already been said that we are dealing with a Bill which has a one-year effect. Apparently, it is said with the view that we should look upon it a little more kindly in consequence. But it is necessary for us to ask what the Bill seeks to do and what its effects will be.

It has been suggested—the hon. Members for Watford and for Grantham made the point—that we would very much like to improve the lot of the pensioners and those on fixed low incomes if we could afford it. In other words, those of us who remember the 1930s are hearing yet again from a Conservative Government about jam tomorrow—not jam today but jam tomorrow.

Obviously it is not relevant, in a debate of this description, to incur your wrath, Mr. Deputy Speaker, by talking about defence expenditure. Nevertheless, it is appropriate, in my view, to suggest that we are squandering a tremendous amount of money—money that we cannot afford—on weapons of destruction, while ignoring people who have extremely pressing priorities.

It is in that context that we question—and are entitled to question—the veneer of compassion which Conservative Members assume in circumstances such as we face in regard to the Bill. Labour Members are under no illusions as to what confronts us in measures of this description. There is no evidence that retirement pensioners, invalidity pensioners, the unemployed and the sick are enjoying even a reasonable standard of living, never mind a high standard of living. On the contrary, the majority of them live what can only be described as a hand-to-mouth existence.

There are parts of Preston in which people in multistorey flats are living on the sort of income that we are talking about, with supplementary benefits. Some of them are mothers with children—mothers who have had marital difficulties. They have a major problem in paying for elementary requirements such as heating and lighting. Their electricity bills, because of the nature of the construction of multi-storey flats, are tremendous. Indeed, "exorbitant" would be a better word to describe them. Inevitably they run into debt. The DHSS is then appealed to in order to ensure regular weekly contributions to the electricity board in respect of such arrears, and inevitably that reduces the income in real terms of the family concerned. Many of the people with whom we are concerned in the Bill are already facing very considerable hardship.

Reference has already been made by previous speakers to the two Social Security Acts of 1980. They caused immense hardship to pensioners and to widowed mothers. I should like to give two examples of the effect of those Acts. In one case there was a loss of £4.90 invalidity pension to a couple with two children. Where there was unemployment and sickness, a couple with two children have lost £2.40. The loss of benefits arising from the Government's failure to uprate benefits in 1980 has meant a greater loss to recipients than the amount that is to be clawed back under the Bill.

We have to be thankful that we have in our society such organisations as the Child Poverty Action Group, without which some of the material that is relevant to our debate today would not have been disseminated. We certainly cannot rely on the DHSS to make the. sort of examination of the question that is warranted when we are considering a Bill of this kind.

The disparity between the income of those in work and that of the disabled, the sick or the unemployed has worsened. Retirement pensions for a couple were 41.5 per cent. of average net income in 1979. In 1977 the figure was 43.9 per cent. In two years, therefore, there has been a drop of 2.4 per cent. in the retirement pension in relation to average net income.

Far from bringing in a Bill to cut pensions and other benefits, we should be considering a Bill to make major increases in virtually all benefits paid by the Department of Health and Social Security. Yet again we have an example of the Government's class approach and it comes out four square in the Bill. In their past activities, both in Budgets and in various other measures, they have taken action through income tax to assist the better-off. Indeed, they have been especially anxious to assist the wealthy, no doubt in return for services rendered to the Tory Party in the past. To bastardise an old song, it's the rich that gets the gravy and the poor that gets the blame.

Having dealt but briefly with benefits that I consider to be too low, and not wishing to repeat comments in speeches made by other hon. Members, I turn to the fraud aspects of the Bill. It is intended to increase prison sentences in certain circumstances from three months to six months. The Home Secretary is anxious to reduce the prison population. The Secretary of State for Social Services is anxious to increase it. The Home Secretary said in a recent statement—I shall not quote him in full—that there is no evidence to suggest that longer sentences deter people from committing offences similar to the one for which they are in custody.

One wonders whether Ministers in the Cabinet communicate with each other, or is the Prime Minister the only person allowed to speak? The mind boggles when one considers that the Home Secretary holds one view, a Secretary of State holds a completely opposite view, and apparently no dialogue takes place. One could appreciate a dialogue taking place if we were dealing with those guilty of tax frauds. But yet again, the class aspects of the Government's approach to Britain emerge. The wealthy are able to employ skilled accountants, lawyers and various other professionals to ensure that their activities remain within the law. One remembers the Vesteys and how the Government have allowed a situation to develop in which that family was involved in the various activities that have been reported in recent months. We have yet to hear what the Government propose to do to change the tax regulations to ensure that there will not be a repetition of that.

The Bill is yet another piece of class legislation such as one expects from a Conservative Government. Fortunately, it will, when understood by the population, contribute to the downfall of the Government—and the sooner the better.

8.14 pm

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

Several Opposition Members have laid stress on their contention that since the Government came to office in 1979 there has been, by implication, a massive switch of resources to the taxpayer, especially the higher rate taxpayer, from beneficiaries. I suggest that perhaps on reflection they will find that more difficult to sustain than has been implicit so far.

Since the Government took office the real level of benefits, other than for a relatively small area where the uprating was 5 per cent. less than for the remainder last year, has shown a clear intention on the part of the Government to maintain the purchasing power of benefits. It is a matter of some pride that the Government can claim, during a period of considerable financial stringency, that they have achieved that.

I have listened to Opposition Members talk about the lack of need to reduce taxation, as the Government did on taking office. I contend, because it is clearly easy to forget, that when the Government took office there was massive frustration and disincentive among middle management. Unless and until one was able to reduce the income tax burden on them, there was no hope of producing the wealth, or even beginning to produce the wealth, from which real increases in social benefits would flow.

Mr. Buchan

I am trying to be helpful to the hon. Member. He clearly does not understand what his own Government have done. He has said that a relatively small number of people have had a small amount, 5 per cent. in uprating, taken from them. It in fact concerns a large number of people. It covers every short-term benefit, the unemployed and the sick. The invalidity benefit is being cut. In some cases that means a £3 a week cut for those on long-term disablement benefit.

Mr. McCrindle

That does not alter the point that I was stressing. The Government have been successful, other than in that one area to which the hon. Member for Renfrewshire, West (Mr. Buchan) refers, in maintaining the purchasing power of benefits. If he is underlining the numbers involved in that area of less than full uprating, I must bring to his attention the fact that the numbers involved in those areas that have been fully uprated are considerably greater. They include especially the retirement pensioners, with whom a large part of the Bill is concerned.

I do not find it difficult to defend the basic approach contained in this legislation. I do not accept, and I doubt whether many pensioners would contend, that they are able to contract out of the financial difficulties in which the country finds itself. If that is so, I do not think that people will easily cast aside the fact that clause 1(3) involves £60 million of expenditure in 1981–82 and no less than £165 million in a full year. I repeat my contention that many receiving benefits understand the difficulties faced by the country and understand that one cannot lightly cast aside a saving of public expenditure of that order.

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

The hon. Member wonders why pensioners should not bear their share of the burden. Surely the reply is that most of the present generation of pensioners contributed to the years of growth in the economy. The pension has never been on the right basis since 1948, when it was fixed on the 1946 level. It has always been behind. Why should the pensioners who contributed in years of growth not now expect to benefit from their contributions and from the years of growth? Why should pensioners, the people at the bottom of the pile, bear the burden of the country's recession? That is absolute nonsense.

Mr. McCrindle

Those same pensioners suffer most from inflation. If there is a necessity to reduce Government expenditure in an attempt to reduce the rate of inflation, I genuinely believe that ultimately the pensioners will be far greater beneficiaries than if they obtained this relatively modest additional increase that will continue to twist the inflationary spiral.

I say without hesitation that I do not believe that there is any breach of faith through introducing the Bill, as has been contended by Opposition Members. If they care to consider actions taken by the Government, they will find that the two upratings last year and this year put the pensioners marginally ahead—although not by as much as any of us would wish. However, they are marginally ahead. The Government have been at pains to stress that the Bill is a once-only measure. There is no question of the derating of 1 per cent. being continued in future years. The Bill is introduced on the basis of this year only. It relates simply to the fact that in assessing the rate of inflation in April last year the Government were pessimistic. They did much better in reducing inflation than we had expected. We are entitled to take into account the fact that pensions were increased by 1 per cent. more than was justified by the rate of inflation.

If I have a concern about the Bill, it is that it underlines how easy it is either to overshoot or undershoot a target in terms of inflation. If we are not to have a Bill every year which takes account of either an overshoot or an undershoot of 1 per cent., there must be some way to reduce the interval between the time that the expected increase is announced and the time that it is paid. It is by no means the first time that I have raised that point in the House. In self-defence, may I say that I have raised it under Governments of both political complexions. I cannot accept that, in the day of the computer, we are unable to shorten the period between the announcement of the anticipated uprating and the payment of it.

From what the Secretary of State said, I understand that there are no particular problems about computerising the retirement pension increase. It is only uprating of supplementary benefits that has to be done manually. That job can be undertaken only over a considerable period. In these days of the computer, and when many of our fellow EEC members in Western Europe are able to pay the increase in benefits after a much shorter interval, the matter needs serious attention. I last raised the matter a few months ago when the Secretary of State undertook to investigate whether some greater progress could be made. I appeal to the Minister who is to reply to consider the matter again. It would make the Government's task easier in many ways while, at the same time, making it much less probable that there will be either the overshoot or the undershoot that we are discussing tonight. It is little short of a scandal that, after so many years, we are still unable to complete upratings more quickly. I must press the Government to make progress along the lines about which other countries can boast.

Very little has been said about the fraud provisions. I am a little concerned that we shall gloss over the Bill's proposals without the debate that such an important subject is due. One hon. Member mentioned the Child Poverty Action Group. I want to add my tribute to that body for providing hon. Members on both sides of the House with valuable information when a debate on social security takes place. I hope that that body will forgive me if I take it slightly to task. In the paper that was sent to some hon. Members before the debate, the society glosses over the whole question of social security fraud as though it were of no importance. I appreciate that the subject can be exaggerated. I have never been one of those who feel that all we have to do is to clamp down on fraud in the social security system for all our problems to be over. But nor do I believe that, as representatives of the taxpayers, it is correct to gloss over a problem of considerable complexity. I welcome the fact that the Bill contains an updated provison for social security fraud.

Many Opposition Members have suggested that, whereas the Conservative Party turns its attention to fraud in the social security system, it turns a blind eye to fraud in the taxation system. That is not true. There is a perfectly legitimate area of tax avoidance. However, the tax evasion which Opposition Members imply takes place is illegal, and is pursued as such. A legal dictum, which I regret I cannot quote precisely, states that not only is it correct that a person should avoid tax to the maximum extent legally possible but that it is a citizen's duty to do so. If that is taken as the up-to-date dictum on these matters, it is acceptable to say that legitimate tax avoidance should be proceeded with, but that tax evasion is, and always has been, a crime.

Mr. Bob Cryer (Keighley)

The hon. Gentleman is pursuing the question of tax evasion and social security fiddling with much enthusiasm. Does his zeal extend to agreeing that there should be a debate and investigation in the House of the Rossminster scandal, where the amount of tax evasion/avoidance effected was probably more than six times the amount of fiddling done through social security? Two Ministers presently holding office were legal advisers to that firm. Does the hon. Gentleman think that that sets a good example? Is he determined to get to the bottom of that?

Mr. Deputy Speaker

I should prefer the hon. Member for Brentwood and Ongar (Mr. McCrindle) not to pursue the Rossminster case. It has nothing to do with the Bill. I think that he was going rather wide of the Bill before the intervention of the hon. Member for Keighley (Mr. Cryer).

Mr. McCrindle

I accept your guidance, Mr. Deputy Speaker. I apologise if I went wide of the Bill. It is not right to suggest that the Government, by means of the Bill, are interested in pursuing social security frauds but are not interested in pursuing tax evasion. That is what I wanted to put to the House.

It has been considered appropriate to refer to an issue which is not contained within the Bill but which was widely expected to be within it, namely, sickness pay and passing over responsibility for the first eight weeks of sickness pay to the employer. There has been some goading of my hon. Friends because the proposal has been dropped. I welcome the fact that it has been found possible to drop the scheme from the Bill for the time being. However, it is something that should not be postponed indefinitely. The scheme was proposed because we felt it wise to adopt a provision whereby there could be taxation of sickness benefit and where the employer could take over responsibility hitherto held by the State.

Surely there is nothing wrong in that. However, the scheme was received in such an adverse way by representatives of employers, large and small, that the Government were right to take it away to reconsider it. I hope that my right hon. and hon. Friends on the Government Front Bench will accept that at least one of their supporters thinks that such a scheme is the right road on which to travel and that we should improve it and subsequently reintroduce it.

Mr. Paul Hawkins (Norfolk, South-West)

Is it not a fact that such a scheme would mean the saving of many civil servants?

Mr. McCrindle

That is right. Public expenditure savings and saving in the number of civil servants are two of the scheme's attractions. If I were to seek to give advice to my right hon. and hon. Friends on the Government Front Bench, I should say that if a scheme has to be produced that meets the objections of the employers and thereby saves rather less public money and rather fewer civil servants, it will still be worth while to persevere with it. I hope that such a sceme will be introduced later in the Parliament.

The Opposition are making much of one aspect of the Bill that I find defensible and acceptable. I know from the time that I have been in the House that compassion for the retired is not restricted to the Labour Benches. I am convinced that one of the greatest contributions that we can make to retired people is to control inflation, and that is being achieved by any standard.

8.33 pm

Mr. John Maxton (Glasgow, Cathcart)

The hon. Member for Brentwood and Ongar (Mr. McCrindle), along with other Conservative Members, has expressed the remarkable view that poor old-age pensioners must bear the same burden in solving the country's economic problems as everybody else by taking a 1 per cent. cut in the increase in the old-age pension this year. I do not want to dwell on that issue as it has been dealt with adequately by my hon. Friends. However, I emphasise that the rate of inflation for the old-age pension, as for the other poorer members of our society, is always higher than the general rate of inflation. I think that the hon. Member for Anglesey (Mr. Best) was advancing very much that argument.

Old-age pensioners probably spend over 75 per cent. of their income on housing, heating, lighting and food. Nearly all of them in the rented sector, both private and public, will be facing rent increases that will be much higher than the rate of inflation. Conservative Members may say that there are rent rebate schemes and other such schemes, but the evidence in Scotland suggests that rent rebate schemes and other ways of helping old-age pensioners and others to pay their rents have the lowest take-up of all social security benefits. There are many who do not know that they can get help with their rents, and therefore, do not take up the various schemes that are available.

Mr. Cryer

Will my hon. Friend elaborate in a sentence or two about the party that Disraeli called the party of organised hypocrisy? There are Members of Parliament, many of them with directorships and parliamentary adviserships that probably double their salaries to bring them to £20,000 to £30,000 a year, who have the gall to say that pensioners must bear the brunt of their enonomic policies by knocking them back by 1 per cent.

Mr. Maxton

I take my hon. Friend's point. When people on my income—and I have no income other than my salary as a Member of Parliament—are faced with inflation, we can make choices. We can decide whether to have a new car this year or next year, whether to replace our colour television, whether to buy the music centre this year or next year. But old-age pensioners do not have that choice, because they do not have the income on which to sustain it.

The hon. Member for Anglesey mentioned heating costs. These, too, have risen much faster than the average rate of inflation. Food may not be increasing faster in general terms, but old-age pensioners and the poor in our society cannot buy their food at the lowest possible prices as can people on our income and on incomes above the average. They have to shop at the small corner shop. They do not have freezers in which to store food that has been bought cheaply. Many of them do not even have fridges. They buy on a daily basis at the highest possible prices at the corner shop. Inflation in food prices at the corner shop is higher than at supermarkets and elsewhere. Therefore, the idea that keeping pensions even up to the rate of inflation solves the problems of the old is incorrect. Certainly, to cut pensions by 1 per cent. is mean and despicable.

Mr. Stallard

Will my hon. Friend accept that it is a little unfair to discuss inflation in connection with pensioners when we all know that the pensioners' rate of inflation is a differential rate? It cannot be the same, nor can it be discussed in the same terms, as inflation for the rest of the community. Because of their limited budgets on fuel, food and housing, inflation for them is much higher than normal.

Mr. Maxton

That was the point that I was trying to make. The rate of inflation for the old and the poor is much higher than it is for the rest of the community. Therefore a 1 per cent. cut is a most despicable act.

I turn to clause 3, which deals with fraud. I shall not just consider it in relation to the part of schedule 1 which deals with the new penalties, but I shall link it to the fact that the Government have increased the number of social security investigators, thus seeking to make it easier to discover fraud. I say to the hon. Member for Brentwood and Ongar that it is good for the Government to tackle tax fraud, but that although the number of fraud investigators has been increased there has been a decrease in the number of Inland Revenue investigators. The Government appear to be taking that type of fraud less seriously than DHSS frauds. We, like the Government, do not want fraud.

We have to link with this the new regulations that the Government have issued to the DHSS about how fraud should be investigated and the way in which the investigators should tackle it. When we link those regulations with the new penalties proposed in the Bill we can see the Government's real intention. They are trying to frighten people from claiming benefits. The people involved are often not well acquainted with the law and they cannot afford highly paid accountants to get round the tax laws. We are dealing with people who find it difficult to deal with legal matters or people in authority. The Government are attempting to frighten people from claiming benefit.

Mr. Patrick Jenkin

I am sure that the hon. Gentleman is not seeking to mislead the House, but I can assure him that there have been no new regulations on the subject.

Mr. Maxton

I find that quite astonishing. I have seen press accounts of the new regulations, or memoranda—I accept that different terminology might be involved.

Mr. Buchan

The Department published in June 1980 a document dealing with amendments to the guidelines. Is the right hon. Gentleman saying that somebody invented that publication, or does he agree that the amendment was published? Is it not a fact that the amendment, from which I have quoted in the past, is new in the understanding of virtually every Department of Health and Social Security officer? Is the Secretary of State saying that only the practice has altered, or is my hon. Friend correct that the guidelines have been amended?

Mr. Maxton

If I am not careful I shall be sitting down more than speaking. My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) has made the point. I have seen copies of the amendments. An experiment took place in Manchester and it is to be extended to the rest of the country.

Mr. Cryer

This is a serious development. With a chubby little smirk on his face the Secretary of State has said that there are no new regulations. He is issuing instructions and avoiding democratic discussion in the House. He is trampling on our rights, trying to go round to the back door and introduce measures by undemocratic means.

Mr. Maxton

The Secretary of State's intervention was astonishing. There is no question but that there are regulations or amendments, whatever the Secretary of State chooses to call them. In Glasgow, social security investigators are operating under new conditions. I hope that the Secretary of State will publish the changes so that the House can debate them.

Mr. Patrick Jenkin

The hon. Gentleman has invited me to intervene again. When I said that there were no new regulations I meant precisely that. There has been no change in the law through delegated legislation. We have assessed the experiment which was conducted in Manchester at the suggestion of the right hon. Member for Norwich, North (Mr. Ennals). I pay tribute to him, because the system has proved effective. We are extending it to the rest of the country. It is an administrative system for the more effective checking of fraud. I hope that it has the support of the hon. Member for Glasgow, Cathcart (Mr. Maxton).

Mr. Maxton

It certainly does not have my support. I do not care whether it was introduced by my right hon. Friend the Member for Norwich, North (Mr. Ennals). Some parts of the system are despicable.

The Government are attempting to frighten people into not taking up benefits. The Government should be trying to persuade people to take up the benefits to which they are entitled. Before the last social security measure came into force last November the Strathclyde region attempted to encourage people to take up benefits to which they were entitled. That scheme was attacked as a political exercise by one of the Secretary of State's former junior colleagues. Yet the evidence suggests that it was a. worthwhile scheme.

The Strathclyde social services department has analysed what took place. I accept the problems involved in taking samples. The department took a sample involving 500 postcards which it distributed. Out of the 500 claims made, 391, or 78.2 per cent., were awarded cash benefits. They received benefits that they would not have received had they not made the claim which was suggested to them. A total of 378, or 75 per cent., were awarded exceptional needs payments, now called single payments. A total of 62 were awarded weekly increases in benefit either on top of existing payments or as new claims for supplementary benefit.

Overall, in Strathclyde, from September to December 1979, a total of 47,952 payments were recorded while the corresponding figure for the same period in 1980, with this scheme in operation, was 87,894, an increase of 83.3 per cent. in the number of those making claims for social security benefit. The average exceptional needs payment under these claims was £84.15, a high figure. The average weekly increase of benefit was £5.06, again a large figure. This proves that, far from the country losing money through fraud, there are thousands, and probably millions, of people who are living at a lower level than necessary because they are not aware of the benefits that they should be getting. I accept that there is fraud. We want to see it tackled. Hon. Members on the Opposition Benches only wish that the Government's enthusiasm to tackle fraud was as great in the tax area as in the social security area.

The Government should be concentrating their efforts on ensuring that everyone gets the benefits to which he is entitled. They should not be attacking, through this sort of legislation, the poorest and the weakest in our society.

8.46 pm

Mr. Paul Hawkins (Norfolk, South-West)

I shall not detain the House for long. I wish to congratulate my hon. Friend the Member for Grantham (Mr. Hogg) on his eloquent speech. I agree with him that we are the only national party that exists. We look after all sections of our country. We must be fair to all of them. I represent many sections, but hon. Members may be surprised to know that the largest section of my constituency consists of pensioners. The pensioners are not fools. They realise that the Labour Party put this country into a position in which we have to cut back on many desirable aims that both sides of the House would like to see achieved. The extravagance, the overpayment and the giving in to many unions in 1974 was the beginning of the immense inflation into which the previous Government led the country. It has taken years of fight to bring inflation down. Inflation is the major factor that pensioners fear.

I agreed also with my hon. Friend the Member for Somerset, North (Mr. Dean) when he said that, if one section is asked for sacrifices, all sections have to be asked for sacrifices in the sphere covered by the Bill. I feel, like my hon. Friend, that those with inflation-proof pensions cannot be left as they are. Either their increases must be slowed down, or they must pay more for the benefits that they receive. This is a matter that is always raised at meetings in my constituency—the unfairness of inflationproof pensions for large sections of the community when other people seemed to be asked to make sacrifices.

One part of the Bill that was not covered in the early speeches but has since been referred to is that dealing with penalties. I have never believed that there have been wholesale frauds over benefits, as some people have said, but pensioners often know something about their neighbours that other people do not. They know when someone has another job and is drawing benefit to which he is not entitled, and they feel very aggrieved. It is right that we should tighten up on this matter, so that more money is available for those who are in real need. I cannot see anything wrong with the increase in penalties provided for in the Bill.

This may not come within the sphere of this Department, but for the sake of those: with whom we are dealing in the Bill the Government must bring urgent pressure to bear on nationalised industries to cut their costs. It is here that inflation is continuing, while in other sectors it is going down. Like other hon. Members, I hear every day about heating costs—gas, coal and electricity. In private enterprise, when shops find it difficult to sell things, they cut their prices. Would to God that the National Coal Board would think of reducing its prices for the large stocks of coal that it has on hand. The coal need not be given away free, as it is to miners, but there could be reduced prices for pensioners and others who are in receipt of social security benefits. That is something that the Government should consider.

Another matter that the Government might consider is the method of paying for water. Everyone brings this to my attention. It is iniquitous that a couple of pensioners living in a reasonable sized house have to pay for water according to the rateable value of their house. We have to find another method of paying for water. Everyone would be agreeable to paying for the amount of water consumed. It is wrong when a man and woman living in a large house and using only a small quantity of water have to pay more than is paid by a family of six living in a smaller house and using much more water.

The same sacrifices must be made all round. I support the Bill, but we must reduce the burden on pensioners. The best way to do that is to get down the prices charged by some nationalised industries.

8.55 pm

Mr. David Ennals (Norwich, North)

I found it difficult to understand what the hon. Member for Norfolk, South-West (Mr. Hawkins) wanted to say. He thought that there was something wrong about inflation-proof pensions, yet that was the commitment that was given by his Government before they came into power. The commitment, given by the Prime Minister and repeated by the Secretary of State, was that the Government intended to ensure that pensions kept pace with rising costs.

Many of the hon. Gentleman's hon. Friends congratulated the Secretary of State on having given an assurance that, whatever miserable provisions he was making in the Bill, by the end of the Government's period in office pensioners would be protected against inflation. I fear that the hon. Member for Norfolk, South-West wishes to go further down the route of clobbering the poor and elderly than does the Secretary of State.

The hon. Member for Norfolk, South-West made some pertinent comments about the costs that pensioners have to face, particularly fuel costs. He will know, because there are many pensioners in his constituency, as there are in mine, that many of them deeply resent the way in which the Government have unnecessarily forced up fuel prices, particularly for gas and electricity, to enable the undertakings concerned to make a profit. The hon. Gentleman should criticise bis Government on that score as well.

I agree with the hon. Gentleman that no one wants the social security system to be undermined by fraud or abuse. The Secretary of State was right in saying that when I was in his post I sought to satisfy the taxpayers as well as those who received benefit that the question of fraud was being properly dealt with. Since the Secretary of State came to power the number of people dealing with fraud has been increased by 1,000, and he has put out new instructions, with the result that many people who might have claimed benefit have not done so because they might be thought to be claiming it fraudulently.

The emphasis on fraud and abuse by the Government, and particularly by the right hon. Member for Daventry (Mr. Prentice) when he was Minister for Social Security, is a disgrace, and I very much welcome the initiative taken by Strathclyde in drawing to the attention of the public their entitlements. I cannot understand why Ministers criticise Strathclyde for doing that, because, as was pointed out by my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton), there was a big response from the public.

This is the third of a series of miserable Social Security Bills that the Secretary of State has brought before Parliament. The first Bill took away the rights that Parliament had given to pensioners to have their pension assessed either in relation to earnings or in relation to prices, whichever was best for the pensioner. The Government decided that that was too generous, that pensioners were getting too much, that they should not share in rising living standards, and that rising standards should be for those still in work, not for pensioners. That was a despicable Act, and I am sure that many Conservative Members regret going into the Division Lobby under a three-line Whip to vote for that piece of legislation. Those hon. Members may have felt just as unhappy about the second Bill, which produced a 5 per cent. cutback for those on short-term benefits, the growing army of the unemployed, the sick, the disabled and some widows. That perhaps was even worse than the first Bill.

This Bill is smaller, but it shows as much meanness as did the other two. The Government are saying that the elderly were overpaid and that they were overcompensated for inflation. They are saying that they had some extra coppers to which they were not entitled and that therefore the Government will ensure that next year their pension does not keep pace with inflation and that the standards of living of the elderly will be lowered, in order to do what? What is the Government's motive in bringing in the Bill? It is that they believe that, in their battle to get the economy out of the mess which they have got it into, those at the bottom of the scale, rather than those at the top, should pay the bills.

One should ask any Minister or any Member of Parliament, on the salaries that we have, what sacrifices we have made. Have we had 1 or 5 per cent. cut? We have not. It is despicable of the Government and the Secretary of State to say that we must be fair all round—to the rich and the poor, to the sick and the elderly—and then decide to clobber those who are least able to help themselves. The Government have not clobbered the rich. They are proud that they have reduced the level of taxation for high earners and for surtax payers, but they have decided that the people who will pay the bills should be those who can least afford it.

Mr. Patrick Jenkin

The right hon. Gentleman is being a little unfair to his colleagues, who last year accepted a pay increase that was below the pay factor that was being applied to many other people. I remind the House that Cabinet Ministers accepted a pay increase that was substantially below that. Therefore, the pay has not kept pace with prices. The right hon. Gentleman is perhaps being a little unfair in not taking account of that.

Mr. Ennals

The right hon. Gentleman knows that while Cabinet Ministers, other Ministers and hon. Members did not take the figure that was awarded to them by the Review Body on Top Salaries, they did better than merely keeping pace with inflation. The right hon. Gentleman is ensuring that, because pensioners received just 1 per cent. above the inflation rate, next year they will get 1 per cent. below the inflation rate. How miserable and mean can any Government be to the 9 million pensioners and others on sickness and long-term benefit, and so on?

The Government claim that pensioners have been overcompensated, but they have already been clobbered, not only by the legislation to which I have referred, but by the loss of two weeks' pay, to which they were entitled, by having a 54-week year. As other hon. Members have said, they have been clobbered by the inflation rate for the limited things that they can purchase, which has risen by more than the rate for the rest of the population.

We know that we do not need a new special index. We already have the pensioners' retail price index, which is at a higher level than is the retail price index for the rest of the population. Therefore, the Government have decided to punish the pensioners and push them further into poverty.

I wonder whether the Secretary of State and those who support him know what poverty means. I wonder whether they know what it means to have to budget every penny on the sort of pensions that we are now discussing. What sort of conversations do they have with their constituents? One Conservative Member said that he had not received any letters about this matter and that no one had been to see him at his advice bureau. He must live in a strange constituency, because I have had plenty of letters about this matter. Many people have been to my advice bureau and told me how difficult it is already, let alone with this new piece of legislation, which will ensure that after April next year they will not even have a pension to keep pace with inflation.

Sir Frederick Burden (Gillingham)

The right hon. Gentleman seems to forget that in 1975–76 his party—and I believe that he was then the Minister—was unable or unwilling to give old-age pensioners their Christmas bonus.

Mr. Ennals

I was not Secretary of State at that time. We reintroduced the Christmas bonus, paid it year after year and gave a guarantee that it would continue. The bonus last Christmas was paid for by pensioners receiving the increase to which they were entitled two weeks late.

The Secretary of State was proud of the Government's ability to estimate. The Select Committee on Social Services was critical of the assumptions on unemployment in the public expenditure White Paper, which suggested that in 1982–83 1.8 million people would be unemployed. We considered that a gross underestimate and thought that the figure was more likely to be 2.5 million. The Government Actuary eventually accepted the view of the Select Committee. The Secretary of State is having to pay from his budget for the dramatic increase in unemployment of 1 million, and is therefore forced to find other little groups to clobber. He has already clobbered the unemployed. It is disgraceful. That is the main reason why the Government have introduced the Bill.

Clause 7 deals with a modest little matter concerning war pensions. I declare an interest as a war pensioner. It states: The Secretary of State shall cease to be under a duty to prepare, and lay before Parliament, an annual report in relation to war pensions. The Secretary of State gave no explanation of why he should not report to the House on how he has fulfilled his responsibilities to those who suffered in one war or another. If he were to report to the House, the war pensioner organisations would be able to analyse the report and determine whether the Government had properly fulfilled their responsibilities to those who fought and who lost limbs or were injured. Widows who may have lost their husbands may also have been interested. With all their concern for increasing defence expenditure, it is surprising that Conservative Members have not picked on that clause, which takes away that modest little responsibility. How much money will be saved by relieving the Secretary of State of the responsibility to report to the House?

The number of war pensioners is steadily diminishing through death. Unless we have another war—I hope that we never shall—that number will continue to decrease. But the fact that the numbers are smaller does not mean that this country owes any the less to those who served and suffered in one war or another.

Mr. Patrick Jenkin

The difference between the right hon. Gentleman and myself is this. We have paid pensions to the pre-1950 war widows and we are getting rid of a bureaucratic report. He preferred to keep the report and not pay the pensions.

Mr. Ennals

It is not that at all. I thought that the right hon. Gentleman was about to answer my question about whether he had consulted the war pensioner organisations, but he decided to stray off into some other subject. I must say that when I was Secretary of State the amount of consultation that I had with war pensioners, the good relationship that we had with them and the good deal that we gave to them were warmly appreciated. If the right hon. Gentleman has any doubt about that, let him get in touch with BLESMA and ask whether the people there feel that the Labour Government stood by their obligations to war pensioners.

Mr. Hawkins

As another war pensioner, I, too, must declare an interest. I simply wish to say—and I hope that the right hon. Gentleman will take this aright—that the Secretary of State and his Ministers take a great deal of interest in war pensioners and have always done so. I have attended meetings at which my right hon. Friend has met war pensioners, and I can assure the right hon. Gentleman that we would rather have the payment for widows than a report.

Mr. Ennals

The hon. Gentleman has done a little better than his right hon. Friend in justifying the Secretary of State's decision not to report to the House on how he fulfils his responsibility under the 1960 Act. Ever since that time, successive Secretaries of State have reported to the House on how they have fulfilled those responsibilities. However, that is not the most important part of the Bill.

The most important part of the Bill is what the Government are determined to do to the 9 million pensioners and others. If the Minister's postbag has not been filled with complaints and protests, it is because most of those people do not know and could hardly believe that any Government would act as despicably and as meanly as the Government intend to do.

9.13 pm

Mr. J. F. Pawsey (Rugby)

I wish to speak, if there is time, to clauses 1, 3 and 6. Before doing so, however, may I refer to the speech of the hon. Member for Glasgow, Cathcart (Mr. Maxton). Almost everything that the hon. Gentleman said underlined the need for the control of inflation. As he rightly pointed out over and over again, there is a clear need to protect the pensioners, because it is the pensioners' hard-earned savings which have been continually eroded. He also referred to people being frightened to claim their benefits. With every respect-I know that he is a responsible Member—when the hon. Gentleman has the opportunity to consider what he said he may feel that he was less than just. The Department has spent substantial sums on providing adequate literature and publicity to ensure that people do know what is due to them, because all hon. Members feel that advantage should be taken of the legislation that is passed here.

I should also like to comment on the speech of my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins). I particularly took on board his reference to cheap coal. Perhaps the Minister will find an opportunity to comment on that in due course. I also took note of my hon. Friend's reference to water rates. I entirely share his views about the iniquitous system which currently exists. I believe that water has the worst reputation since Pontius Pilate washed his hands in it.

I turn now to clause 1, which I describe as the pension clause. The increase was fixed at 16½ per cent. Thanks to the policies of my right hon. Friends, however, the rate of inflation turned out to be 15½ per cent.—hence the reduction of 1 per cent. That cannot be described in any terms as breaking faith; and benefits remain linked overall to the cost of living.

Like every other hon. Member, I sympathise with the elderly. They should receive the best possible deal, if only because we in this House will one day be elderly. However, note must be taken of the economic situation, because pensioners do not live in any form of vacuum. That is something which they found out for themselves during the period of the Labour Government. During that time, those living on fixed incomes saw those eroded at a most tremendous rate. We can all remember that at that time inflation was running at 27½ per cent., and wage settlements were at between 25 and 30 per cent. It was during that period that pensioners really saw their living standards grossly eroded.

This Government have provided pensioners with the two largest increases ever, and that in two successive years. It has been clearly demonstrated by Government that the Conservative Party is a caring and compassionate party. However, let me concede that no party has a monopoly of care or compassion, and I know that those beliefs are shared equally by all hon. Members.

My second point relates to clause 3, which seeks to increase the maximum fines and terms of imprisonment for certain social security offences. In no way do I believe that that constitutes a witch hunt. All that it seeks to do is, if the law is broken, those who break it will pay the penalty.

Much concern has been expressed about frauds. We know that those who cheat, in the long run cheat the elderly and the sick. It is right that fraud be discouraged. Those who break the law should realise and recognise the risk that they run.

I had intended to refer to clause 6, but I note the time and your signal, Mr. Depty Speaker, and I do not wish to trespass on the time allocated to the two Front Bench spokesmen. I shall therefore reluctantly end on that note.

9.17 pm

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

I am glad that the hon. Member for Rugby (Mr. Pawsey) has got that defence of this iniquitous proposal off his chest.

Like most other Bills in this issue, this one is a further job application for the job of the Chancellor of the Exchequer from the present Secretary of State. That is clearly what it is. The Bill has been introduced in such a rush that the right hon. Gentleman's name is not even on the back. A separate amendment sheet has been issued because the name of the Secretary of State for Social Services has been omitted. There are probably other defects in the Bill which we shall explore at length in Committee, because we must get it right. The Undersecretary laughs, but when the Social Security (No. 2) Bill went through Committee it was clearly defective in at least one major aspect which is now being put right in this Bill. Had there been enough time to discuss that measure, we might have avoided putting the 2,000 people who receive dialysis treatment in the position in which they were placed following the passing of that legislation.

Many Conservative Members have accused my hon. Friends of using violent language—at least that is what the hon. Member for Watford (Mr. Garel-Jones) said. However, the language used by Ministers to argue this case is beyond belief. We go back to the Chancellor himself, who on 24 November last rushed to the House of Commons to introduce a mini-Budget. He said at that time that there had been an increase in the real value of benefits and added: Subject to the necessary legislation, this over-provision at present estimated at one percentage point, will be deducted from the 1981 uprating".—[Official Report, 24 November 1980, Vol. 994, c. 314.] Many hon. Members have said that they have received sackloads of correspondence. I admit that I have not. The Bill has been rushed through the House. This is about the first day on which Second Reading could have taken place. Yet another Social Security Bill has been introduced on a Friday, when many hon. Members are in their constituencies. We have not seen the comment that we would have expected from our vigilant press. The BBC has not carried out any interviews as it did last year, when it misinterpreted the Social Security (No. 2) Bill. Surprisingly, it has not even touched on the fraud clause.

Let us look at what the Chancellor of the Exchequer has said about "over-provision". What are we talking about? We have been told that as a result of the Bill, and of the 1 per cent. saving, there will be gross savings of £229 million. As a result of the Bill, £28 million will be saved from retirement pensions and £28 million from supplementary benefit. Despite what the Secretary of State has said about war pensions, they are being cut by £4 million. Public sector pensions are being cut to the tune of about £26.5 million. Former police officers and fire officers will have £2 million cut from their pensions. Former members of the Armed Services will lose £5 million and £3.5 million will be saved by local authorities.

Therefore, according to the parliamentary answers that I received from the DHSS last night—and which were conveniently brought over to the House at a time that prevented them from appearing in today's Hansard—there is a grand total of £229 million of savings. Let us see how that total breaks down. Some hon. Members have said that pence do not really matter. How do I explain to my constituents, to the 9 million pensioners and to the 650,000 beneficiaries of invalidity payments what the Chancellor of the Exchequer means? Does the right hon. and learned Gentleman mean that they were going to be given more than the proper amount. Do the Government mean that a widow's pension is 25p more than it should be? When it comes to the retirement pension, is 25p more than the proper amount? Is that what the Chancellor of the Exchequer is saying? Is that the reason for the Bill?

How do I tell the single pensioner that he is getting an excessive amount of pension because of that 15p? How do I tell a married couple that they are receiving 40p more than the proper amount? Should I tell those on sickness, unemployment and maternity benefits that they are receiving 20p a week more than the proper amount? By defnition, "superabundance" means an addition over what is regarded as proper in the ordinary sense. The Chancellor of the Exchequer is saying that those categories of our fellow citizens have been over-provided for.

The Secretary of State is always quick to defend widows. He claimed that the Labour Government did not do enough. As I said, he is always quick to complain. Should I tell widows—whose allowances are being cut by 35p a week—that they have a superabundance of 35p? Is that what the Chancellor of the Exchequer meant when he said that there had been an over-provision? In Committee, perhaps we shall be able to change the Bill's provisions on invalidity benefit. Am I to tell the 650,000 people on invalidity benefit, of whom 400,000 have incomes that are below the tax threshold—and whose benefits increased last November by 11.5 per cent., which is 4 per cent. less than the cost of living—that they have been gorged, over-filled, and choked up? According to the right hon. and learned Gentleman, their benefits are being cut, because of overprovision. According to him, they are receiving 25p a week more than they should be receiving. Is that what we are to tell them?

Do we tell those of our fellow citizens who receive industrial injury benefit that they have received an overprovision, excess or superabundance of 20p a week? According to the Chancellor's speech last November, they have been crammed to over-fulfilment.

I am trying to find out what the Chancellor means when he tells 11 million of our fellow citizens that there has been an over-provision. He is saying that they are getting too much, that they do not deserve what they are presently getting and what this House voted for last year.

Do we tell those of our fellow citizens who are receiving 100 per cent. disablement benefit that they are pampered and over-indulged because they are getting 40p a week more than the Government say they should be receiving because of the Chancellor's over-provision?

Do we tell those who receive attendance allowance— [Interruption]. We have got to get these figures in perspective. That is what we have been told all day. We have been told that there is a slight over-provision, an excessive payment, and that the Government have to cut the benefits by 1 per cent. in real terms.

It is not just a question of the retirement pension. Half of the money saved is from the retirement pension, but a considerable number of other people are also affected. Do we tell those of our fellow citizens who are getting attendance allowance that there has been a miscalculation and that there must be a rounding up? The cut in the higher and the lower rate is 15p. According to other definitions of over-provision that I have looked at, they are carrying an oppressive burden. We are burdening the people who are getting attendance allowance by 15p a week, and the Government are determined to take it back from them during the passage of the Bill.

Do we tell the adult dependants of people on category A retirement pension that they have been over-provided for by 15p a week? Do we tell the child dependants of people on unemployment benefit, sickness benefit and invalidity benefit that they have been over-provided for by 5p a week, and that the Government intend to take it back, according to the answers that I received last night? That is 5p a week too much on a child dependant allowance for those on maternity allowance or industrial injury benefit, which is only £1.25 a week to start with.

The rounding up of social security benefits is done to the nearest 5p. Down to that minimum rounding up figure, the Government have gone to the smallest possible benefit that they could find. They are determined to take the 5p off those child dependants, notwithstanding the fact that the Government have fiddled the way in which they calculated it last year because of the method by which they took child benefit into account.

I shall not go through the whole list, because time does not permit. We shall be able to do that in Committee, because we want to explore the Government's real intentions with regard to the hundreds of thousands—millions, if we count retirement pensioners—of our fellow citizens, and how they are affected by the Bill.

We want to know, for example, why the Government could not be more forthcoming, more honest and less penny-pinching. Why could not they say "We have made an over-provision of 1 per cent. Your benefit is excessive, but we shall let it go this year as it is only 1 per cent." I do not know what the Government would have done if the over-provision had been ½ per cent. or ¾ per cent. Would they have brought this Bill before the House?

This is not the Bill that we were expecting, as the Secretary of State made clear in his opening remarks, but it leads one to believe that the Government are already thinking in terms of 1984. The mere mention of the year 1984 seems to send shivers up the spine of Conservative Members, as though they think that something untoward will happen in that year. It may be the year of the general election. But certainly the "Ministry of Truth" is here in Britain in 1981, because the Government have introduced a Bill to calculate benefits based on theoretical values which have no basis in the laws that have been passed. The Government talk about treating an order, a regulation, as if the figures in it did not mean what they said, and other figures were alleged to be there. There are provisions in the Bill that state: This section shall have effect … as if— as if something happened that did not happen when we passed the original legislation. What is that but cooking the books? That is the only explanation for putting legislation before the House containing such words. For the Government to claim that this is a small or trifling matter, and that we have to claw back the money is dishonest, to say the least.

One of my hon. Friends was in difficulty with you earlier in the clay, Mr. Deputy Speaker. I do not wish to transgress, but the charge made by Opposition Members that the Government are cooking the books is not in any way unparliamentary in terms of what the Bill entails. They are definitely cooking the books about the people that I have quoted and their benefits.

The hon. Member for Brentwood and Ongar (Mr. McCrindle) referred to clause 3 relating to the penalties for fraud. He is not here now, and I shall not attack him. He said that the Child Poverty Action Group's briefing sent to hon. Members did not mention clause 3. The brief contains six pages, out of 14, which relate to clause 3. Thus, the Child Poverty Action Group has paid attention to it. Perhaps the brief has not said the sort of things that the hon. Member for Brentwood and Ongar might have wished it to say.

Anyone who read The Guardian this morning will have read the story on the front page about Mr. Raymond White, who lives in Manchester. In desperation last Friday he turned to his local Department of Health and Social Security office because he was out of work and wanted advice. Yesterday, in Birmingham, having been transported from Manchester to Birmingham, he was released by the court. The official in the DHSS at Manchester did a double take and nipped out of sight behind a partition. Minutes later, Mr. White found himself apprehended by a police officer armed with a warrant for the arrest of a Mr. Raymond White, aged 40.

The police had a photograph that did not look like Mr. White. However, he was taken to Birmingham where the wife of the man required to be in court said "That is not my husband". Our Mr. White is a bachelor. He has never been married. Anyone who thinks that there is no fear is mistaken. There is a reign of terror in the DHSS. One only has to read the last bit of the story. The court was told by Mr. Ronald Drake for the DHSS that officials had made the mistake of confusing two men with similar names and dates of birth. The article states: Mr. White was told that it was unlikely that costs would be paid by the DHSS and he got home to Manchester yesterday only after the police had given him £7 for his train fare. Even after that experience, the DHSS would not get that man, who went to the office for help, back home. What is the explanation for that?

Given the comments that have been made about the Government's campaign to crack down on fraud, the fact that they are increasing and doubling prison penalties in flat contradiction of what the Home Secretary wants to do in his penal policies, and the fact that the Inland Revenue has lost 6,000 staff who deal with the tax forms of millions living in this country, I thought that the Government would leave the law alone. We want some good answers from the Government about why the financal penalties and the prison sentences should be increased.

In a debate a few weeks ago, the Minister said that it was not the Department's policy to continue to prosecute to the extent that it had done previously. If that is so, what evidence is there that we have reached the upper limits of penalties? What evidence shows that we need to double the highest prison sentences and to increase the rate of fines? In law, there is already provision for people to pay back the amount of any fraud of which they have been found guilty, irrespective of the fine. That is not always the case for many other citizens.

There are double standards in prosecution policy. Prosecution depends on who one is, what one's job is, whether one's face fits, whether one ends up in court, or whether the matter is dealt with behind closed doors and one pays back an amount of money the details of which are never known outside. Double standards operate, and the more the House and hon. Members illuminate that fact the better.

On a day that could be described without contradiction as one of happiness for the heir to the Throne, the Government, as an act of amnesty, should cease their vendetta against the pensioners, the sick and the disabled, and withdraw the Bill. Because they have not done so in deference to that happy event, I ask my hon. Friends to vote against the Bill.

9.35 pm

The Minister for Social Security (Mr. Hugh Rossi)

I shall not be led astray by such humbug and seek to answer the complete and utter nonsense with which the hon. Member for Birmingham, Perry Barr (Mr. Rooker) has entertained the House. When opening the debate my right hon. Friend forecast that the majority of our discussion would revolve around clause 1. He has been proved right. In anticipation, my right hon. Friend spent a great deal of time explaining the reason for clause 1, especially the need for the 1 per cent. clawback. There is no need for me to detain the House by covering that ground again.

I want to deal with some of the specific questions raised during the debate. My hon. Friend the Member for Anglesey (Mr. Best) asked what the position would be in future years if the rate of inflation was again overestimated and, consequently, an overpayment made in pensions. I draw the attention of the House to the fact that the clawback provided for in clause 1(3) is for a specified amount, namely, 1 per cent. and for one year only. The clause was drawn deliberately to show that it was not our wish to seek a general power to clawback in perpetuity. We do so reluctantly this year because of the prevailing economic position, which has already been explained by my right hon. Friend. We trust that it will not be necessary to return to the House with another Bill. We are deliberately placing ourselves in the position of having to return to the House if that is ever necessary. That is something that we should not do lightly. The indication of our intention is clearly shown in the way that we have drawn the Bill

Mr. Buchan

This is the second time today that we have heard that this proposal stops here. It does not stop here. It continues. The Bill provides that the base for calculation will be reduced by 1 per cent. from last year's figure. We have, therefore, lowered the base on which every percentage increase in perpetuity will be based. I wish that the Minister would not mislead the House or himself—whichever it may be.

Mr. Rossi

All I have said, in answer to a specific question, is that if it was our intention to ask the House for a right to have a clawback in perpetuity—the exercise of that power year after year—we should have included such a provision in the Bill. We have not done so. The hon. Gentleman's other point has already been explained in an intervention from the Dispatch Box, namely, that this is a balancing factor covering a period of two years. At the end of that period the pensioners will be in the same position as though there had been a correct estimate of the rate of inflation in the first place—[HON. MEMBERS: "Not under the Bill."] That is the effect of the Bill. No doubt we shall have an adequate opportunity to discuss the matter in Committee, That is the position, whether or not Opposition Members understand it clearly. I shall try to explain it in words of one syllable in Committee.

The hon. Member for Isle of Ely (Mr. Freud) asked what would be the position if the reverse were true, namely, if inflation was underestimated and the pensions lower than they should be. He asked for a commitment that such a shortfall would be made good. The hon. Member for Stockport, North (Mr. Bennett) made a similar point. I assure the House that the power to make good such a shortfall already exists by virtue of section 125 of the 1975 Act. My right hon. Friend the Prime Minister has given an undertaking that any such shortfalls in pensions during the life of this Parliament will be made good.

My hon. Friend the Member for Somerset, North (Mr. Dean) raised three distinct issues. First, he referred to the invalidity trap—namely, the situation whereby a person under pensionable age whose invalidity benefit is slightly above his supplementary benefit requirements may not qualify for supplementary benefit. If he is in that situation, he can never qualify for assessment on the long-term scale unless his circumstances change. That is because he has never been receiving the supplementary benefit rate at the ordinary rate for the necessary qualifying period. This a problem. There are about 100,000 in that position.

The solution to the problem would be to give invalidity beneficiaries the right to the long-term supplementary benefit rate after a year's receipt of sickness and invalidity benefit instead of one year's receipt of supplementary benefit at the ordinary rate. This would cost about £15 million at current benefit rates. There would be some additional administrative costs. The Government are sympathetic to the plight of those caught in the invalidity trap, but their view is that there are more pressing claims for the limited resources available in the present economic situation. However, it is an issue that we have in mind.

My hon. Friend will know that the issue has been raised and dealt with in respect of 16 and 17-year-olds who receive the non-contributory invalidity pension. They have been allowed to qualify for the long-term rate of supplementary benefit after one year in receipt of this benefit instead of one year in receipt of supplementary benefit.

Mr. Paul Dean

I am somewhat disappointed by my hon. Friend's answer. I realise the implications of the figures. May I encourage him on the path of virtue? I suggest that what the Government did last year for the 16 and 17-year-olds is equally impelling for the old and disabled, especially in the International Year of Disabled People. Will the Government keep an open mind on this issue?

Mr. Rossi

My hon. Friend can always entice me along the path of virtue. This is a matter that we want to deal with as soon as we are able to do so, the economic situation permitting.

My hon. Friend memtioned the 5 per cent. abatement on invalidity benefit and asked that when the benefit is brought into tax the abatement might be made good. My right hon. Friend dealt with that when he opened the debate. He said that my right and learned Friend the Chancellor of the Exchequer will have something to say in his Budget Statement about the likely timing of changes that are necessary to bring these benefits into tax. He may have something to say about other aspects.

Mr. Allen McKay (Penistone)

There was an abatement of 5 per cent. last year and I assume that there will be an abatement of 5 per cent. this year. Does that include the 1 per cent., thus making 6 per cent.?

Mr. Rossi

There was a 5 per cent. abatement last year, but there will be no such abatement in the coming year. There is power to introduce a 5 per cent. abatement in the third year, but that will require an affirmative resolution. The issue would have to be debated in full if the Government were minded next year to bring in a 5 per cent. abatement. At present there is no such intention.

My hon. Friend the Member for Somerset, North referred to public sector pensions. He said that those in the public sector should be prepared to make a sacrifice equal to that made by the rest of the community. The 1 per cent. clawback affects public sector pensions in the same way as the ordinary State pension. My hon. Friend asked about the Scott report and the indexing of public sector pensions. The Scott report does not give an easy answer to the problem of occupational pensions in either the public or the private sector. The Government need time to examine the proposals in the report and to consider public reactions before deciding what future arrangements are to be made.

Abolition of inflation-proof public sector pensions may seem an easy answer, but there are objections. The Government, as employers, would have to tear up obligations accepted in good faith and taken as conditions of service by an enormous range of employees, not necessarily those on higher salaries. However, Scott says that there might be a case for putting some limit on the amount of protection that can be guaranteed when economic developments are severely unfavourable and, consequently, intolerable disparities begin to appear. The treatment of existing and future pensioners might need to be considered separately. We are, of course, considering those matters.

I turn to the speech of my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden), who spoke with deep feeling and sincerity. I regret that he does not feel able to join us in the Lobby tonight. However, I respect his position. He is convinced that he cannot support any legislation in which the retail price index remains the basis for determining increases in pensions. He said that he would prefer a special index based on housing, fuel and food. He said that such an index would be far better, because the items have been shown in the family expenditure survey as being those upon which pensioners spend most of their income. I hope that I have put his case correctly.

Of course, the idea has some attraction, but I draw my hon. Friend's attention to several factors. First, my right hon. Friend the Secretary of State is not required to have any particular index in mind in exercising his duties under section 125 of the 1975 Act. He is simply required to decide whether pensions have retained their value. That is the only duty that is imposed upon him. In practice, of course, Secretaries of State in successive Governments have looked at the retail price index as a useful historical base. But it is only part of the calculation, because as well as looking at a historic position, the Secretary of State has to forecast the future trends in the cost of living. He has to take into account whether any exceptional increases are expected and, if they can be quantified, they are taken into account. For example, the expected increases in gas prices will be taken into account when making the forecast up to November next. That has nothing to do with the retail price index, so it alone is not the determining factor in considering the extent by which the value of pensions should be increased.

It has to be said in defence of the retail price index that the weighting of individual components of the index is based on actual household expenditure. There is no guarantee that a separate poverty tax would give pensioners a better deal. Let us take one element—the price of food—which has risen less in terms of inflation than have many other prices in the retail price index. There is also the cost of housing, of which great play was made. The effect of public sector rents and rent control in the private sector has kept rents well below increases in the level of inflation. If one based the pension on such items the pensioners would possibly do far worse than by relying upon the whole range of prices in the retail price index.

My hon. Friend the Member for Kempton also referred to fuel. A number of hon. Members referred to the plight of pensioners and others on low incomes in meeting increased fuel bills. Hon. Members are less than fair if they do not acknowledge that the heating addition package produced by my right hon. Friend in November is the most generous produced by any Government. There was an increase of 47 per cent. in the value of the heating addition against a 28 per cent,. increase in fuel prices between November 1979 and November 1980. Over 2 million people, 1½ million of whom are pensioners, now receive that extra help. The Government have taken fully into account the impact of increases in fuel prices on the poorer people in our community.

Mr. Bowden

My hon. Friend will recall that I paid special tribute to the Government for introducing that scheme for pensioners in receipt of supplementary benefit. I must also express my concern for the 3 million pensioners who are in receipt of some form of rent or rate rebate but who are not eligible for the money. The present scheme is much better than that introduced by the last Government. It is the best scheme so far. However, it is only a step forward. We must try to include people in receipt of rent and rate rebates as soon as possible.

Mr. Rossi

The choice between rate or rent rebate and supplementary benefit creates a dilemma in the minds of many people. It is difficult to decide which benefit suits best. It is a difficult decison. This is another matter which the Government must examine and are examining. One cannot anticipate at this stage the future pattern in relation to that issue which my hon. Friend was right to draw to our attention.

My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) raised the hoary chestnut of the length of time between the declaration of an increase in the pension and the actual payment—the gap between the Budget and the November payment. That problem has exercised all Governments and nobody has found the administrative solution. A logistic problem is involved in all the paperwork, the calculations, the printing of pension books and distributing them to the people whow will receive the higher payment.

The biggest problem is caused by the supplementary benefits having to be calculated individually. The time that that takes causes a delay. The problem has troubled previous Administrations but noboby has found the answer.

A number of hon. Members, particularly Opposition Members, have made a great song and dance about the increase in the penalties for fraud.

Mr. Rooker

About the maximum penalties.

Mr. Rossi

I am glad that the hon. Member made that interjection because it was not clear that some of his hon. Friend's were speaking of maximum penalties. I stress that the Bill contains maximum penalties that need not be imposed by magistrates. In the exercise of their discretion magistrates will weigh up the seriousness or otherwise of the offence when the accused is before them. They will take into account the circumstances which induced the person to commit the offence. The magistrates will then arrive at a penalty which they believe to be right and fitting in all the circumstances.

There is no requirement upon any magistrate to impose the penalty at all. The position, as explained by my right hon. Friend at the outset, is to update the penalties for these offences and bring them into line with the general level of penalties for equivalent offences under the criminal law. It is that, and no more. This is not new. Governments periodically uprate penalties for offences. In this area it was done in 1946, again in 1973 and again by the Labour Government in 1976. Now we are reviewing the matter once more. There is nothing sinister in that.

Opposition Members who may be unduly disturbed about the matter should examine the penalties in the Criminal Law Act 1977. They can then draw a conclusion about whether the Government are being unreasonable in suggesting a penalty of £1,000 for an act of fraud. Are the Opposition aware that under the Control of Pollution Act, the burning of insulation from a cable attracts a fine of £1,000? We are saying a penalty of up to £1,000. We are talking of a similar penalty for fraud. Are the Opposition aware that one can attract a penalty of up to £1,000 for breaking up a public meeting? If not, Opposition Members should make themselves aware of this provision. It is a matter to which they may have to refer many times in the future if one is any judge of the manner in which the Labour Party is conducting its affairs in public.

A lot of nonsense has been spoken by Opposition Members—

Mr. Buchan

The hon. Gentleman still has not understood the point. His argument is that it is only a coincidence that this has happened in relation to an intensive campaign of fraud investigation, the kernel of which is not prosecution, which has been specifically downgraded, but the interviewing, fear and threats. The point about sentences is not the deterrence in their use but the deterrent effect on innocent people making claims.

Mr. Rossi

As it is public knowledge that we use the law and prosecution only under the law in the most severe and gravest cases, it should not be a question of intimidation at all. It is only those who have committed the severest offences who need beware of the additional penalties that may be imposed on them under the proposed legislation. I would say to the hon. Gentleman, as I did on the last occasion we were debating this matter, that the innocent need have no fear. Only the guilty need have fear. We must have a lot of guilty men on the Opposition Benches.

Mr. Rooker

What about Mr. White?

Mr. Rossi

The case of Mr. White, which is clearly a case of mistaken identity, is being investigated at the moment by my right hon. Friend, who will take the necessary action once he has got to the bottom of the whole incident.

It is old legal maxim that those who go to equity must do so with clean hands. The Opposition have made accusations against us, but they have not come to the House with clean hands. Their record on the uprating of pensions has been demonstrated by my right hon. and hon. Friends to be disgraceful. It has fallen far short of what this Government have done for the pensioners.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 304, Noes 249.

Division No. 81]	[10.00 pm
AYES
Adley, Robert	Carlisle, Kenneth (Lincoln)
Aitken, Jonathan	Carlisle, Rt Hon M. (R'c'n)
Alexander, Richard	Chalker, Mrs. Lynda
Amery, Rt Hon Julian	Channon, Rt. Hon. Paul
Ancram, Michael	Chapman, Sydney
Arnold, Tom	Churchill, W.S.
Atkins, Rt Hon H.(S'thorne)	Clark, Sir W. (Croydon S)
Atkins, Robert (Preston N)	Clarke, Kenneth (Rushcliffe)
Atkinson, David (B'm'th,E)	Clegg, Sir Walter
Baker, Nicholas (N Dorset)	Colvin, Michael
Banks, Robert	Cope, John
Beaumont-Dark, Anthony	Cormack, Patrick
Bell, Sir Ronald	Corrie, John
Bendall, Vivian	Costain, Sir Albert
Benyon, Thomas (A'don)	Cranborne, Viscount
Benyon, W. (Buckingham)	Crouch, David
Best, Keith	Dean, Paul (North Somerset)
Bevan, David Gilroy	Dickens, Geoffrey
Biffen, Rt Hon John	Dorrell, Stephen
Biggs-Davison, John	Douglas-Hamilton, Lord J.
Blackburn, John	Dover, Denshore
Blaker, Peter	du Cann, Rt Hon Edward
Bonsor, Sir Nicholas	Dunn, Robert (Dartford)
Boscawen, Hon Robert	Durant, Tony
Bottomley, Peter (W'wich W)	Dykes, Hugh
Boyson, Dr Rhodes	Eden, Rt Hon Sir John
Braine, Sir Bernard	Eggar, Tim
Bright, Graham	Elliott, Sir William
Brinton, Tim	Emery, Peter
Brittan, Leon	Eyre, Reginald
Brooke, Hon Peter	Fairbairn, Nicholas
Brotherton, Michael	Fairgrieve, Russell
Brown,M.(BriggandScun)	Faith, Mrs Sheila
Browne,John(Winchester)	Farr, John
Bruce-Gardyne, John	Fell, Anthony
Bryan, Sir Paul	Fenner, Mrs Peggy
Buchanan-Smith, Alick	Finsberg, Geoffrey
Buck, Antony	Fisher, Sir Nigel
Budgen, Nick	Fletcher, A. (Ed'nb'gh N)
Bulmer, Esmond	Fletcher-Cooke, Sir Charles
Burden, Sir Frederick	Fookes, Miss Janet
Butcher, John	Forman, Nigel
Carlisle, John (Luton West)	Fowler, Rt Hon Norman

Fox, Marcus	McNair-Wilson, P. (New F'st)
Fraser, Rt Hon Sir Hugh	Major, John
Fraser, Peter (South Angus)	Marland, Paul
Fry, Peter	Marlow, Tony
Galbraith, Hon T. G. D.	Marshall Michael (Arundel)
Gardiner, George (Reigate)	Mates, Michael
Gardner, Edward (S Fylde)	Mather, Carol
Garel-Jones, Tristan	Maude, Rt Hon Sir Angus
Gilmour, Rt Hon Sir Ian	Mawby, Ray
Glyn, Dr Alan	Mawhinney, Dr Brian
Goodlad, Alastair	Maxwell-Hyslop, Robin
Gorst, John	Mayhew, Patrick
Gow, Ian	Mellor, David
Gower, Sir Raymond	Meyer, Sir Anthony
Gray, Hamish	Miller, Hal(B'grove)
Greenway, Harry	Mills, lain (Meriden)
Griffiths, E. (B'ySt.Edm'ds)	Mills, Peter (West Devon)
Griffiths, Peter Portsm'thN)	Miscampbell, Norman
Grist, Ian	Mitchell, David (Basingstoke)
Grylls, Michael	Moate, Roger
Gummer, John Selwyn	Monro, Hector
Hamilton, Hon A.	Montgomery, Fergus
Hamilton, Michael(Salisbury)	Moore, John
Hampson, Dr Keith	Morgan, Geraint
Hannam, John	Morris, M. (N'hampton S)
Haselhurst, Alan	Morrison, Hon C. (Devizes)
Hastings, Stephen	Morrison, Hon P. (Chester)
Havers, Rt Hon Sir Michael	Mudd, David
Hawkins, Paul	Murphy, Christopher
Hawksley, Warren	Myles, David
Hayhoe, Barney	Neale, Gerrard
Heath, Rt Hon Edward	Needham, Richard
Heddle, John	Nelson, Anthony
Henderson, Barry	Neubert, Michael
Heseltine, Rt Hon Michael	Newton, Tony
Hicks, Robert	Nott, Rt Hon John
Higgins, Rt Hon Terence L.	Oppenheim, Rt Hon Mrs S.
Hill, James	Page, John (Harrow, West)
Hogg, Hon Douglas (Gr'th'm)	Page, Rt Hon Sir G. (Crosby)
Holland, Philip(Carlton)	Page, Richard (SW Herts)
Hooson, Tom	Parkinson, Cecil
Hordern, Peter	Parris, Matthew
Howe, Rt Hon Sir Geoffrey	Patten, Christopher(Bath)
Howell, Rt Hon D.(G'ldf'd)	Patten, John (Oxford)
Howell, Ralph (N Norfolk)	Pattie, Geoffrey
Hunt, David (Wirral)	Pawsey, James
Hunt, John (Ravensbourne)	Percival, Sirlan
Hurd, Hon Douglas	Peyton, Rt Hon John
Irving, Charles (Cheltenham)	Pollock, Alexander
Jenkin, Rt Hon Patrick	Porter, Barry
Johnson Smith, Geoffrey	Prentice, Rt Hon Reg
Jopling, Rt Hon Michael	Price, Sir David(Eastleigh)
Joseph, Rt Hon Sir Keith	Prior, Rt Hon James
Kaberry, Sir Donald	Proctor, K. Harvey
Kellett-Bowman, Mrs Elaine	Pym, Rt Hon Francis
Kershaw, Anthony	Raison, Timothy
King, Rt Hon Tom	Rathbone, Tim
Kitson, Sir Timothy	Rees, Peter (Dover and Deal)
Knox, David	Rees-Davies, W. R.
Lamont, Norman	Renton, Tim
Lang, Ian	Rhodes James, Robert
Langford-Holt, SirJohn	Rhys Williams, Sir Brandon
Latham, Michael	Ridsdale,Julian
Lawrence, Ivan	Rifkind, Malcolm
Lawson, Rt Hon Nigel	Rippon, Rt Hon Geoffrey
Lee, John	Roberts, M. (Cardiff NW)
Lennox-Boyd, Hon Mark	Roberts, Wyn(Conway)
Lester Jim (Beeston)	Rossi, Hugh
Lewis, Kenneth(Rutland)	Rost, Peter
Lloyd, Ian (Havant &W'loo)	Royle, Sir Anthony
Lloyd, Peter (Fareham)	Sainsbury, Hon Timothy
Loveridge, John	St. John-Stevas, Rt Hon N.
Luce, Richard	Scott, Nicholas
Lyell, Nicholas	Shaw, Giles (Pudsey)
McCrindle, Robert	Shaw, Michael(Scarborough)
Macfarlane, Neil	Shelton, William(Streatham)
MacGregor, John	Shepherd, Colin (Hereford)
MacKay, John (Argyll)	Shepherd, Richard
Macmillan, Rt Hon M.	Shersby, Michael
McNair-Wilson, M.(N'bury)	Silvester, Fred

Sims, Roger	van Straubenzee, W. R.
Skeet, T. H. H.	Vaughan, Dr Gerard
Smith, Dudley	Viggers, Peter
Speed, Keith	Waddington, David
Speller, Tony	Wakeham, John
Spence, John	Walker, Rt Hon P.(W'cester)
Spicer, Michael (S Worcs)	Walker, B. (Perth)
Sproat, lain	Walker-Smith, Rt Hon Sir D.
Squire, Robin	Wall, Patrick
Stainton, Keith	Waller, Gary
Stanbrook, lvor	Walters, Dennis
Stanley, John	Ward, John
Steen, Anthony	Warren, Kenneth
Stevens, Martin	Watson, John
Stewart, Ian (Hitchin)	Wells John(Maidstone)
Stewart.A.(E Renfrewshire)	Wells, Bowen
Stokes, John	Wheeler, John
Stradling Thomas, J.	Whitelaw, Rt Hon William
Tapsell, Peter	Whitney, Raymond
Taylor, Robert (Croydon NW)	Wickenden, Keith
Taylor, Teddy (S'end E)	Wiggin,Jerry
Tebbit, Norman	Wilkinson, John
Temple-Morris, Peter	Williams, D.(Montgomery)
Thatcher, Rt Hon Mrs M.	Winterton, Nicholas
Thomas, Rt Hon Peter	Wolfson, Mark
Thompson, Donald	Young, Sir George (Acton)
Thorne, Neil (llfordSouth)	Younger, Rt Hon George
Thornton, Malcolm
Townend John(Bridlington)	Tellers for the Ayes:
Trippier, David	Mr. Spencer Le Marchant and
Trotter, Neville	Mr. Anthony Berry
NOES
Abse, Leo	Cunningham, Dr J.(W'h'n)
Allaun, Frank	Dalyell, Tam
Alton, David	Davidson, Arthur
Anderson, Donald	Davies, Rt Hon Denzil (L'lli)
Archer, Rt Hon Peter	Davies, Ifor (Gower)
Armstrong, Rt Hon Ernest	Davis, Clinton (Hackney C)
Ashley, Rt Hon Jack	Davis, T. (B'ham, Stechf'd)
Ashton, Joe	Deakins, Eric
Atkinson, M.(H'gey,)	Dean, Joseph (Leeds West)
Bagier, Gordon A.T.	Dewar, Donald
Barnett,Guy (Greenwich)	Dixon, Donald
Barnett, Rt Hon Joel (H'wd)	Dobson, Frank
Berth, A. J.	Dormand, Jack
Benn, Rt Hon A. Wedgwood	Douglas, Dick
Bennett, Andrew (St'kp'tN)	Douglas-Mann, Bruce
Bidwell, Sydney	Dubs, Alfred
Booth, Rt Hon Albert	Duffy, A. E. P.
Boothroyd, Miss Betty	Dunn, James A.
Bowden, Andrew	Dunnett, Jack
Bradley, Tom	Dunwoody, Hon Mrs G.
Bray, Dr Jeremy	Eadie, Alex
Brown, Hugh D. (Provan)	Eastham, Ken
Brown, R. C. (N'castle W)	Ellis, R. (NE D'bysh're)
Brown,Ron (E'burgh,Leith)	English, Michael
Brown, Ronald W.(H'ckn'y S)	Ennals, Rt Hon David
Buchan, Norman	Evans, loan (Aberdare)
Callaghan, Rt Hon J.	Evans, John (Newton)
Callaghan,Jim (Midd't'n&P)	Ewing, Harry
Campbell, Ian	Field, Frank
Campbell-Savours, Dale	Fitch, Alan
Canavan, Dennis	Flannery, Martin
Cant, R. B.	Fletcher, Raymond(llkeston)
Carmichael, Neil	Fletcher,Ted (Darlington)
Carter-Jones, Lewis	Foot, Rt Hon Michael
Cartwright, John	Ford, Ben
Clark, Dr David (S Shields)	Forrester, John
Cocks, Rt Hon M. (B'stol S)	Foster, Derek
Cohen, Stanley	Foulkes, George
Coleman, Donald	Fraser, J.(Lamb'th,N'w'd)
Concannon, Rt Hon J. D.	Freeson, Rt hon Reginald
Conlan, Bernard	Freud, Clement
Cook, Robin F.	Garrett, John (Norwich S)
Cowans, Harry	Gilbert, Rt Hon Dr John
Craigen, J. M.	Ginsburg, David
Cryer, Bob	Gourlay, Harry
Cunliffe, Lawrence	Graham, Ted
Cunningham, G.(lslington S)	Grant, George(Morpeth)

Grant, John (Islington C)	Pendry, Tom
Hamilton, James(Bothwell)	Penhaligon, David
Hamilton, W. W. (C'tral Fife)	Powell, Raymond(Ogmore)
Hardy, Peter	Prescott, John
Harrison, Rt Hon Walter	Race, Reg
Hart, Rt Hon Dame Judith	Radice, Giles
Haynes, Frank	Rees, Rt Hon M (Leeds S)
Healey, Rt Hon Denis	Richardson, Jo
Heffer, Eric S,	Roberts, Albert (Normanton)
Hogg, N.(E Dunb't'nshire)	Roberts, Allan (Bootle)
Holland,S. (L'b'th,Vauxh'll)	Roberts, Ernest (Hackney N)
Home Robertson, John	Roberts, Gwilym(Cannock)
Home wood, William	Robertson, George
Hooley, Frank	Robinson. G. (Coventry NW)
Horam, John	Rodgers, Rt Hon William
Howell, Rt Hon D.	Rooker, J. W.
Howells, Geraint	Roper, John
Huckfield, Les	Ross, Ernest (Dundee West)
Hudson Davies, Gwilym E.	Ross, Stephen (Isle of Wight)
Hughes, Robert (Aberdeen N)	Rowlands, Ted
Hughes, Roy (Newport)	Ryman, John
Janner, Hon Greville	Sandelson, Neville
Jay, Rt Hon Douglas	Sever, John
John, Brynmor	Sheerman, Barry
Johnson, James(Hull West)	Sheldon, Rt Hon R.
Johnson, Walter (Derby S)	Shore, Rt Hon Peter
Johnston,Russell(Inverness)	Short, Mrs Renée
Jones, Barry (East Flint)	Silkin, Rt Hon J. (Deptford)
Jones, Dan (Burnley)	Silkin, Rt Hon S. C. (Dulwich)
Kaufman, Rt Hon Gerald	Silverman, Julius
Kerr, Russell	Skinner, Dennis
Kilfedder, James A.	Smith, Cyril (Rochdale)
Kilroy-Silk, Robert	Smith, Rt Hon J. (N Lanark)
Lambie, David	Snape, Peter
Lamborn, Harry	Soley, Clive
Lamond, James	Spearing, Nigel
Lestor, Miss Joan	Spriggs, Leslie
Lewis, Ron (Carlisle)	Stallard, A. W.
Litherland, Robert	Steel, Rt Hon David
Lofthouse, Geoffrey	Stewart, Rt Hon D. (W Isles)
Lyon, Alexander(York)	Stoddart, David
Lyons, Edward (Bradf'd W)	Stott, Roger
Mabon, Rt Hon Dr J. Dickson	Straw, Jack
McCartney, Hugh	Summerskill, Hon Dr Shirley
McDonald, DrOonagh	Taylor, Mrs Ann (Bolton W)
McElhone, Frank	Thomas, Dafydd(Merioneth)
McKelvey, William	Thomas,Jeffrey(Abertillery)
MacKenzie, Rt Hon Gregor	Thomas, Mike (Newcastle E)
Maclennan, Robert	Thomas, Dr R. (Carmarthen)
McMahon, Andrew	Thorne, Stan (Preston South)
McNamara, Kevin	Tilley, John
McTaggart, Robert	Tinn, James
McWilliam, John	Torney, Tom
Magee, Bryan	Urwin, Rt Hon Tom
Marshall,D (G'gowS'ton)	Varley, Rt Hon Eric G.
Marshall, Dr Edmund (Goole)	Wainwright, E (Dearne V)
Martin, M (G'gowS'burn)	Walker, Rt Hon H. (D'caster)
Mason, Rt Hon Roy	Watkins, David
Maxton, John	Weetch, Ken
Maynard, Miss Joan	Wellbeloved, James
Meacher, Michael	Welsh, Michael
Mellish, Rt Hon Robert	White, Frank R.
Mikardo, lan	White, J.(G'gowPollok)
Millan, Rt Hon Bruce	Whitehead, Phillip
Mitchell, Austin(Grimsby)	Whitlock, William
Mitchell, R.C. (Soton ltchen)	Wigley, Dafydd
Morris, Rt Hon C.(O'shaw)	Willey, Rt Hon Frederick
Morris, Rt Hon J. (Aberavon)	Williams, Rt Hon A.(S'sea W)
Morton, George	Wilson, Gordon (Dundee E)
Moyle, Rt Hon Roland	Wilson, Rt Hon Sir H.(H'ton)
Newens, Stanley	Wilson, William (C'try SE)
Oakes, Rt Hon Gordon	Woodall, Alec
O'Halloran, Michael	Woolmer, Kenneth
O'Neill, Martin	Wrigglesworth, lan
Orme, Rt Hon Stanley	Young, David(Bolton E)
Owen, Rt Hon Dr David
Palmer, Arthur	Tellers for the Noes:
Park, George	Mr. Allen McKay and
Parker, John	Mr. Ron Leighton.
Parry, Robert

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).