Social Security

HC Deb 31 July 1981 vol 9 cc1349-74 9.35 am

The Minister for Social Security (Mr. Hugh Rossi)

I beg to move, That the draft Social Security Benefits Up-rating Order 1981, which was laid before this House on 3rd July, be approved. I think that it will be for the convenience of the House if we consider with this order the other five affirmative motions on the Order Paper, which include three instruments concerned with uprating, the order which provides for this year's Christmas bonus, and the regulations which extend the long-term rate of supplementary benefit to men over the age of 60 who have been unemployed for a year or more.

First, I should like to make the point that very large sums of money are involved in social security. This year's expenditure is running at over £27,000 million a year. The uprating instruments between them raise expenditure on social security benefits by over £2,000 million in a full year. Half of that goes on increased retirement pension, which goes up for a single person from £27.15 to £29.60, and for a married couple from £43.45 to £47.35.

Benefits specifically provided for sickness or disability are increased by over £250 million a year. For example, the higher rate of attendance allowance goes up from £21.65 to £23.65. Mobility allowance is being increased from £14.50 to £16.50 a week—an increase of nearly 14 per cent. It is particularly appropriate in this International Year of Disabled People that we can give this extra help to people with severe mobility problems. This means that a severely disabled person who gets maximum invalidity benefit, including invalidity allowance which we are restoring to the full normal level, plus higher rate attendance allowance and mobility allowance, gets £80.56 a week.

Despite stringent constraints on public expenditure, it is estimated that by the end of the financial year 1981–82 social security spending on cash benefits for the disabled and the long-term sick will have grown in real terms by almost 8 per cent. over the previous two years. This year it is estimated that the expenditure will be over £2 billion. Thus the main thrust of extra expenditure covered by these orders and regulations is in the direction of elderly people and those who are sick and disabled. However, substantial sums of extra money are also being found for families with children, widows, and unemployed people.

Under section 1 of the Social Security Act 1981 the Social Security uprating regulations must increase the rates of benefit to the sums that my right hon. Friend announced in his uprating statement at the time of the Budget. As the House will recall, the main increases are based on the forecast of the Chancellor of the Exchequer of a 10 per cent. increase in prices between November 1980 and November 1981. I am, of course, aware of the suggestions in some quarters that, in view of the movement of prices between November and now, the 10 per cent. forecast may turn out to be an under-estimate. Whilst readily acknowledging that economic forecasting is an inexact science, I must make two main points. First, as experience last year showed very clearly, the rate of inflation in the early part of a year is not necessarily a reliable guide to what will happen later in the year. This time last year Labour right hon. and hon. Gentlemen were predicting a 20 per cent. inflation rate against our earlier forecast of 16½ per cent. In the event, prices moved only 15½ per cent. over the year.

Mr. David Ennals (Norwich, North)

I was not one of those who prophesied a 20 per cent. inflation rate or anything of that nature. However, I asked the Secretary of State in a parliamentary question last week whether he was satisfied that the estimate of a 10 per cent. inflation rate, November on November, was right, and his reply was one word—"Yes". Why is the Minister, only a week after I asked that question, throwing doubts on the "Yes" that we were given last week?

Mr. Rossi

There are no doubts. The answer is exactly the same. Yes, we are satisfied with the forecast. At the same time, we recognise that it is an inexact science. There is no conflict or contradiction in that.

Mr. Robin F. Cook (Edinburgh, Central)

I am sure that the Minister does not wish to suggest that only Opposition Members said that the rate of inflation might exceed 10 per cent. The great majority of economic forecasts, not drawn up by members of the Labour Party or its sympathisers, predict that the rate of inflation between now and November will exceed the 10 per cent. predicted by the Treasury. The Treasury estimate is the lowest of any forecast produced by any independent organisation during the past two months. Most forecasts predict between 11 and 13 per cent. Should that come about, will the Minister assure us that he will uprate pensions and other benefits by the appropriate amounts?

Mr. Rossi

This time last year there were many predictions that the rate of inflation would be higher than it was. This year, there is a repeat of that attitude. I recognise that Opposition Members latch on to that because it helps them to have that sort of statement, which they support readily. There remains the pledge given by my right hon. Friend the Prime Minister that pensions will be protected in the lifetime of this Parliament against rises in prices. We stand by that pledge. If we find that we are wrong in our forecasting and that the rate of inflation is higher than expected, we shall eventually bring the benefits into line.

Mr. Andrew F. Bennett (Stockport, North)

Will the Minister confirm that he is talking about not only pensions but the whole range of benefits, both long and short term? Will he guarantee that if there is a shortfall he will make it up for all benefits?

Mr. Rossi

I cannot give that guarantee, as the hon. Gentleman well knows. The matter is clearly on the record. He knows what has been said by my right hon. Friend.

Mr. Clement Freud (Isle of Ely)

What is the maximum time span between the identification of an increase in the RPI and the date on which the pensioners will be given such an increase?

Mr. Rossi

The making good will have to take place in next year's uprating if it is found that the calculation has been wrong. We deal with the period from November to November. Therefore, any change will date from next November.

Mr. Freud

Will it be backdated?

Mr. Rossi

It will be done in exactly the same way as it was done in 1979. We shall follow the precedent of uprating that the House has always followed.

Mr. Norman Buchan (Renfrewshire, West)

The Minister said that any restoration of the shortfall would be made in next year's uprating. Will he add to that pledge by saying that it will cover all benefits and not simply long-term benefits?

Mr. Rossi

I have already made the position perfectly clear. I cannot give that assurance. If the economy improves substantially in the way that we hope, we shall review the position and see what we can do. I can do no more than repeat precisely the pledge given by my right hon. Friend. I cannot go beyond that at this stage of the game. Opoosition Members understand that perfectly well.

In the event that the 10 per cent. forecast should prove to be too low, the Government will take appropriate action to honour the pledge, which my right hon. Friend the Prime Minister has made clear on several occasions, to price-protect pensions and other long-term benefits over the life of this Parliament. That means making good any shortfall for those beneficiaries at the next uprating.

The Supplementary Benefit Uprating Regulations 1981 provide for the supplementary benefit scale rates to be increased on the same basis as that applying to the contributory benefits. For example, the supplementary allowance for a single person living alone is going up from £21.30 to £23.25 a week. The long-term scale rates are, of course, aligned with the main retirement pension rates. Subsidiary additions to supplementary benefit will be increased by appropriate amounts, generally in line with the movement of relevant components of the retail price index. Heating allowances will rise by between 18 and 19 per cent. in line with the probable movement of the RPI fuel component, over the 12 months to next November. That should protect the substantial advance made last year when we boosted those additions by considerably more than the rise in fuel prices. These regulations add £230 million a year to public expenditure.

I turn now to the Supplementary Benefit (Requirements and Conditions of Entitlement) Amendment Regulations 1981. Their effect is to extend entitlement to the higher long-term rate of supplementary benefit to unemployed people aged 60 and over who have been on supplementary benefit for a year or more, and decide not to register for work. The House will know that the higher long-term scale rate recognises the fact that, after being on supplementary benefit for some time, claimants can be expected to have additional expenses over and above the normal day-to-day living expenses for which the ordinary scale rates provide. At present, all claimants under retirement age receive the ordinary scale rate for the first year of their claim. After that, all claimants except the unemployed qualify for the higher long-term rate.

It has long been recognised on both sides of the House that there is a case for extending entitlement to the long-term rates to the long-term unemployed in general. The Government have accepted, in principle, the case for that change, but the cost of a general extension of entitlement—well over £100 million at current benefit rates—would be greater than we could afford at present. These proposals, however, represent progress in the right direction. In particular, they offer the older claimants who qualify for the long-term rate the opportunity to withdraw from the job market and, in effect, retire early, It is men in that age group who find it especially difficult to get a new job, and there are many who will welcome the change.

In detail, the regulations provide that when an unemployed man aged 60 or over has completed a year on supplementary benefit, including any periods in work which are included in the reckoning under the linking rules, he may cease to register and make himself available for work. He will then be entitled to the long-term rate. The qualifying period may begin on or after his fifty-ninth birthday. For the purpose of the regulations, a man would be able to count spells on supplementary benefit during which he was required to register for work towards entitlement to the long-term rate. The proposals permit those who wish to register for work to do so, and they will continue to receive the ordinary rate.

The proposed changes will take effect from 23 November next. We estimate that they will cost about £6 million in the part financial year until April 1982, and about £21 million in the full year 1982–83. At a time when our resources are severely limited we have decided to give priority to the problem of the older long-term unemployed whose chances of finding a job are not good at a time when unemployment is increasing. The measure follows the existing trend towards earlier retirement and will spare those who take the opportunity it offers the disheartening task of looking for a new job.

During the first 18 months, the regulations will put cash in the pockets of an estimated 45,000 people. The changes will mean up to £9.60 per week more for a married couple, and up to £6.35 more for a single person. Those are substantial increases and demonstrate the Government's continuing commitment to helping the most vulnerable in our society. I hope, therefore, that the House will endorse those measures which give positive help to that group of unemployed people.

I should like now to refer briefly to the Child Benefit (Up-rating) Regulations. Again the increases are as my right hon. Friend announced at the time of the Budget. Child benefit will go up by 50p, from £4.75 to £5.25, per child per week and one-parent benefit by 30p, from £3.00 to £3.30, per family per week. These increases will cost £280 million net in a full year and bring the annual total expenditure on child benefit to nearly £3,500 million. They fully protect the November 1980 value of the benefits and fulfil the commitment that my right hon. Friend gave to the House last year that, subject to economic and other circumstances, the Government would maintain the real value of child benefit. One-parent benefit has in fact increased by 65 per cent. since we came to office—well ahead of inflation.

Mr. Freud

The Minister will realise that his right hon. and learned Friend the Secretary of State for Education and Science spends much of his time saying that the school rolls will come down from 9 million to 6 million by the end of the decade. Did the hon. Gentleman take into account the declining number of children when he computed the extra amount that child benefit will cost?

Mr. Rossi

These matters are all taken into account. We shall be enabled to increase the benefits as the number of recipients decreases. That is obvious.

Mr. Freud

That will lead to huge increases.

Mr. Rossi

That may he so. As the hon. Gentleman knows, we make our calculations on an annual basis.

I turn to the Family Income Supplements (Computation) Regulations. Their terms are, I believe, quite straightforward and their effect is to raise the prescribed levels of income for FIS by £7 to £74 weekly for one-child families and to raise the additional amount for each further child to £8 a week. The maximum amount for one-child families will go up to £18.50 weekly, and this will be increased by £1.50 for each further child. Following the increases in real value last year, these levels will maintain the crucial role of FIS as a benefit designed specifically to support low-income families in work. I should perhaps emphasise that for these families the increases in FIS will be on top of the increases in child benefit and one-parent benefit because, as the House knows, these benefits are not taken into account in assessing income for FIS purposes.

Mr. Robin Maxwell-Hyslop (Tiverton)

Will my hon. Friend make a real effort in departmental publicity to break through the barrier of knowledge whereby a large proportion of the self-employed who are entitled to FIS do not know that it applies to them? Departmental advertisements on television as well as in the press generally omit to mention that fact. Will my hon. Friend make a real effort to bring it home to the self-employed who are entitled to FIS?

Mr. Rossi

We are aware of that problem. The take-up of FIS has been disappointing and we are seeking to improve it. The new leaflets that we are publishing will make a specific reference to the self-employed.

Finally, I come to the order which provides for the payment of this year's Christmas bonus to pensioners and others. As in previous years, the bonus will be £10—not as much as we might wish perhaps, but nevertheless an addition to the regular benefits which, as recent research by the Office of Population, Censuses and Surveys has shown, is much appreciated by those who receive it.

Naturally there is a wish to do more to help the less fortunate members of our society, but these instruments provide evidence of the Government's determination to protect the interests of those most in need at a very difficult time. Within the limits of available resources, this is the most we can do.

I commend the instruments to the House.

9.54 am

Mr. Norman Buchan (Renfrewshire, West)

I am pleased that we are able to have the debate today and to take the instruments together. I am pleased also about the fact that the Secretary of State is in the Chamber. These days we are always in doubt about whom we might see on the Government Front Bench. We are glad that the right hon. Gentleman is with us.

I listened carefully to the Minister for Social Security. It was hardly surprising that he boasted about the amount that is being spent on certain public services. That cannot be surprising during a period in which we are increasing the number of those becoming unemployed every month. If the Government want to deal with public expenditure, the first and most essential step will be to close the hole in the bucket that is represented by the increasing rate of unemployment.

The background to the instruments is formed by four Bills introduced by the Government over the past two years, every one of which has slashed the living standards of the poorest members of our society. This is the first Government to exacerbate an economic crisis by their own actions and attempt to bail themselves out at the expense of the poor, the sick and the aged.

It is ironic that in a year during which particular attention is to be given to the problems of the disabled we should have a series of uprating orders which do not recognise the depth of the problem, which show no generosity and which are characterised by the peculiar meanness of the Government's action in introducing a 1 per cent. cut in benefits. In a week in which there has been a good deal of national happiness over the Royal wedding, it is symbolic that the one group which has been unable to share in the rejoicing is that which is formed by those who will suffer the mean cuts of 5 per cent. here and 1 per cent. there in what would have been the proper uprating.

A reasonable gesture by the Government this week would have been to introduce an emergency order, which we would have accepted, to restore the mean and miserable 1 per cent. cut that they have placed on supplementary benefits and pensions. They have got away with the cuts because of their peculiar success in developing two myths. The first is the "scrounger" myth, which has been shown to be nonsensical. When there are no jobs, people become unemployed. When there are jobs, unemployment decreases. The "scrounger" myth was always a myth. Secondly, the Government have introduced the myth that Britain is a country of high taxation and high public expenditure. It is not. In those respects, Britain is one of the worst countries in the Western world.

The Government's four Bills have led to an increase in expenditure for those who contribute and a cut for those, who are recipients. There is a 5 per cent. cut in invalidity benefit and a 5 per cent. cut in unemployment benefit. The effect of these cumulative cuts is serious even without considering the 1 per cent. cut. The ending of the link between pensions and increases in earnings has meant that every old-age pensioner is worse off by about £1 a week while every married couple is worse off by about £1.40 a week. The effect on invalidity benefit has been even worse. Every invalidity pensioner is suffering a cut of about £2 a week in pension even before we deal with the 1 per cent. cut in the pension uprating. The Government's action in removing the earnings-related concept means a cut for a married couple on invalidity benefit of about £169 a year. Let us have no more nonsense from the Government about the amount that is being spent on our social services and social welfare.

The instruments are virtually based on the 1 per cent. cut, which the Government claim was necessary because of an over-provision of 1 per cent. in pensions and benefits last year. That is nonsense. There was no over-provision for the previous two years. We reject the truth of the Government's claim. Secondly, we reject their analysis of the inflation rate. I heard the Minister's comments about unnamed forecasters predicting a rate of inflation of 20 per cent., which proved to be wrong. However, there is a pretty solid list of forecasters who say that the Government's estimate of a 10 per cent. rate of inflation is wrong. The London Business School says that it will be 10.6 per cent. The St. James's group says that it will be 11.7 per cent. On 27 April The Guardian estimated that in the first half of the year it would be 13 per cent., that it would remain at 13 per cent. for the second half of the year and that it would be 12.8 per cent. for the first half of 1982. Chase Econometrics estimates a 13.9 per cent. increase by the end of the year. So it continues. Virtually no forecaster accepts the figure of 10 per cent.

There are problems, because the RPI is not always the most efficient guide. We all accept that. Above all, the Government, particularly the Prime Minister and the Financial Secretary, accept that. They said that we were wrong to base forecasts on the retail price index and that there should be a better index. The Financial Secretary said: We were determined to construct a thoroughly sound and statistically robust index. Do the Government remember that? It was called the Taxes and Prices Index. What happened to that? We do not hear much about it now. They said that they needed an index that would include tax and national insurance contributions as well as prices. They said that they had to have a measure of inflation that would measure the increase in gross income needed to maintain, in real terms, take-home pay.

The TPI was produced with a great flourish of trumpets, but we do not hear much about it now. The Financial Secretary said that the index would be thoroughly sound and statistically robust. The very index that the Government introduced and used shows an inflationary level not of 10 per cent. but of 14.9 per cent. That is almost 50 per cent. Higher—49 per cent. to be precise—than the Government's estimate of 10 per cent. Therefore, the Government's estimate is nonsense. We reject both the concept of the cut and the basis for it. Even if we were to consider an inflation rate of 12 per cent.—which is within the assumed balance of error—the figures would remain serious. If inflation were only 12 per cent., a couple on retirement pension would lose 90p. Every child of a disabled person would lose 15p on child benefit. An unemployed couple would lose 65p. That would be the result of a rate of inflation of 12 per cent. and does not even take into account the TPI forecast of 14.9 per cent. An RPI of 12 per cent. is within the Government's margin of error.

The Government might have considered the change in the value of the pound. A drop of about 8 per cent. across the exchanges must mean a 2 or 3 per cent. increase in the level of inflation by the end of the year. The Government have no case. During the recent disturbances the Government emphasised the importance of parental responsibility and the need to develop social structures by developing support for the family. Why have they been so mean in relation to children? The relativities between support for adults—whether single or married—and support for adults with children have decreased drastically. For example, support for a two-child family on unemployment or sickness benefit has already fallen from 38.1 per cent. of the adult couple rate to 33.2 per cent. in 1981. In two years, there has been that drastic and adverse shift in the relativity of support for families with children.

Child benefit has increased by 50p to £5.25. However, that is the figure at which the Government should have started to increase the benefit. It had already fallen behind the rate of inflation and had, therefore, dropped in real value. Total child support for an unemployed family or for a family on sickness benefit is worth only 5p for each child. The regulations alter for the worse child support and the relative rates for families with children. Do the Government consider the present level of child support to be adequate? We find it difficult to believe that they do. Will they, as a matter of urgency, commit themselves to restoring child benefit to its proper level?

There is an increasing number of unemployed and, therefore, an increasing number of children of unemployed families. Over 2,600,000 people—the figure is probably nearer 3 million—are unemployed. In the past year, 1 million people have become unemployed. Nevertheless, there has been a 5 per cent. cut in benefit. The taxation of unemployment benefit will mean an increase of 3,500 in the number of civil servants involved. There has been no restoration of the 5 per cent. cut, despite the pledge. It was to be a 5 per cent. cut in lieu of taxation. Taxation was included in the last Budget, but there has been no restoration of the 5 per cent. cut. There has not even been any restoration of earnings-related supplement. I take it that that is a permanent factor in our lives and means a drop of between £11 and £9 for those involved. Earnings-related supplement represents one of the most drastic cuts—

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

That has nothing to do with these instruments.

Mr. Buchan

It has a great deal to do with them. If the Government intend to slash the incomes of those on sickness benefit by £12.50 and of those on unemployment benefit by £11.10, and if they intend to slash industrial injury benefits by £13, such a decision is relevant to the level of uprating. If the unemployed face such a slash, there should have been a restoration of it in the uprating instruments. The matter is extremely relevant to them.

The Minister said that he accepted that there should be a shift as regards the unemployed. The Government always qualify such proposals by saying that they will take action when they have the money. We repudiate that approach. In a period of technological change, when there are 3 million unemployed and demographic changes in relation to the elderly, we cannot accept a social philosophy that says that the Government will make a shift as soon as resources allow. One of the points about economic planning is that decisions about the old, the sick, and the unemployed must be made in association with primary economic decisions and not left to sup up the little bit of cream left.

I turn to the long-term unemployed. The proposals for them are unsatisfactory. Do the Government have any intention of introducing long-term benefits for the unemployed? The Minister claims that he recognises that there is an argument for extending long-term rates to the unemployed, but that the change would cost more than £100 million at current benefit rates. He says that the Government cannot contemplate that until they have got the economy right.

The Government have exacerbated the economic crisis and have thrown 3 million on to the dole, yet they say that the economy can be restored only if they limit improvements for those whom they have made unemployed. But £100 million is a flea-bite compared with the massive tax handouts that have been given to the rich in the past two years. About 37 per cent. of the tax handouts given in the first Budget—£1,500 million—was given to the top 7 per cent. of income earners. Yet the Government say that they cannot extend the long-term rates of supplementary benefit. That means a considerable amount—£9.60—to a married couple. For the Government to say that they will not extend the rates at a cost of £100 million is nonsense.

The Government say that they cannot restore the 5 per cent., because it will cost £50 million. That is also nonsense. If they intend to tax unemployment benefit, they should first restore earnings-related supplement and then restore the 5 per cent. cut. Finally, they could put the unemployed or to the long-term rate.

The instrument which deals with this aspect is a very minor one. It deals with those who are aged between 60 and 64 years. I am not as cynical as The Daily Telegraph which said that it would be seen as an artificial device to keep down the unemployment figures—although it will have that incidental benefit to the Government—and, of course, we do not reject it. We welcome anything that will help some of the poorest people, although we wish to explore the inadequacies.

How many people will benefit? I understand that the Government's estimate is about 45,000, but in December 1980 there were 26,000 unemployed supplementary benefit claimants over 60 who had been in benefit for over a year—only about 14 per cent. of the total. It is, therefore, only scratching the surface. Have the Government got their figures right as to the number of beneficiaries?

Does the Minister accept that he is not, in effect, introducing an early retirement scheme? Had it been a proper early retirement scheme, it might have been more welcome. He is asking people voluntarily to remove themselves from the possibility of employment by coming off the register and being put on supplementary benefit. It is a means-tested benefit. Will the usual rules about supplementary benefit apply? If that is the case, it will be very different from early retirement.

Will the cut-off at £2,000 apply? Included within the £2,000 cut-off—a rule which prevents many families from receiving supplementary benefit—is the factor of surrender values of insurance policies. The vert Government who encourage thrift are forcing people to surrender their policies. Surely that is nonsense.

Mr. Rossi

This is not a job release scheme. The job release scheme is a different scheme, run by the Department of Employment. The scheme to which the hon. Gentleman refers applies to people who have been out of work for at least a year, are over 60, and have decided that their prospects of getting a job at that age are fairly remote. They now have a chance of going on to much higher benefits than those to which they would otherwise be entitled. The hon. Gentleman knows that we are carefully examining the capital cut-off. He has been told so in answer to questions tabled by him.

Mr. Buchan

There are many answers which tell us that X and Y are under consideration, but we do not see any action. That is particularly true of the death grant, with which I shall be dealing shortly. The Minister has confirmed my impression that what is proposed has nothing to do with an early retirement scheme. The Government are simply acknowledging that under their economic policy people over 60 will not be able to get a reasonable job. Shifting them off the register will enable the Government to reduce the unemployment figures. At the same time, it will enable those concerned to receive a long-term supplementary benefit rate. But, while some people will benefit, far from having the advantages of a retirement scheme they will still be subject to the cut-back.

Mr. Andrew F. Bennett

Will my hon. Friend press the Minister to make a clear statement on the question whether people will be able to get on to the long-term rate in the circumstances described?

One of my constituents has been out of work for over 12 months. He is over 60, and his wife is earning about £1 over the short-term rate, so he is unable to draw supplementary benefit and is dependent on his wife's income. As I understand the position, if he applies for supplementary benefit he will not qualify for the short-term rate because of his wife's earnings, and because he cannot qualify for the short-term rate he can never qualify for the long-term rate. Will my hon. Friend, therefore, press the Minister to confirm that under the scheme people will be enabled immediately to receive the long-term rate?

Mr. Buchan

My hon. Friend has mentioned one of the precise examples that we have in mind. The first point is that the people concerned are subject to the usual cut-off. Secondly, they are subject to other disqualifications. It would be useful to have an answer to my hon. Friend's question, especially as some people have seen the provision as representing a form of early retirement. I have had letters to that effect after a broadcast that I made on the subject. People have written to me saying "Why are you complaining? I have been looking forward to early retirement." The truth is that this is not early retirement, and many people who should get the benefit will be disqualified because it will be subject to the usual conditions.

The scheme, therefore, is means-tested. It is not a proper early retirement scheme. It is discriminatory. Women are totally disqualified from applying for it, because there is no equivalent scheme for women between 55 and 60. Will the Minister comment on that aspect. There is also the question of the crediting of contributions, Will contributions continue to be credited, or will people be in danger of losing them?

The death grant, in relation to its earlier value, would be worth about £180 today. The Government have continually promised to review it but have not done so. When will it be reviewed?

I turn now to the question of the Christmas bonus. There have been arguments about it, and on one occasion the Labour Government decided to ban it for a year. Fortunately, they recovered their senses. The high-principled Minister thought that it was better to have a sensible and fair pensions policy, but people like to have the Christmas bonus. Bearing inflation in mind, the comparative figure for this Christmas would be £34.20. Have the Government any intention of being more generous, in view of inflation?

How soon are we likely to get an answer from the Government concerning the £2,000 cut-off? The delay has been far too long. There has been roughly a 50 per cent. increase in inflation since the cut-off was first introduced. The figure should be nearer £3,000 today. What do the Government think about it? Will the Government discuss the matter with the insurance companies, which are extremely worried about the effect of the cut-off in relation to the surrender value of insurance policies?

Inadequate as these uprating orders are, we accept them. We do not look a gift horse in the mouth, however small a Shetland pony it may be. Although the benefits may be inadequate, the position is even worse if people do not get them. This week the Labour Party is launching a campaign to encourage people to apply for their rights and benefits. That should not be the task of the Labour Party. The Government should be developing a campaign to ensure that people get their rights.

When the Strathclyde authority began its campaign, it was accused of political gimmickry, but the campaign was successful. I am pleased that the Government have now seen the error of their ways and are welcoming the campaign. I hope that all local authorities, Labour and Conservative alike, will be pleased with the response from the Under-Secretary of State.

As the Government are now to ask their officers to co-operate in a campaign to ensure an improvement in the totally inadequate level of take-up of benefits, will they go a little further and put their money where their mouth is? Will they at the same time increase the rate support grant or any other kind of direct grant to local authorities to help to finance the scheme? If they are not prepared to do the work on it, at least they should finance those who are prepared to do it.

That is not the first action that we have had to take. I make only a brief reference to the matter. The civil servants' strike is over, and I hope that the Government recognise that the first priority is to catch up on delayed benefits, rather than deal with the revenue side. Their intransigent and troglodyte attitude was what caused the strike to go on for so long. The civil servants behaved responsibly throughout and kept the payment of benefits going as far as was humanly possible. They behaved with enormous restraint. It is now up to the Government to heal what wounds there may be and rapidly to get the system working again, especially for new beneficiaries. We shall do all that we can to help.

10.20 am

Sir Brandon Rhys Williams (Kensington)

I hope that the House will consider this an appropriate occasion not only to look at the details of the announcements about upratings but also to ask fundamental questions about policy and to try to discern where the Welfare State is heading in the longer term.

It is useful to ask from time to time who is paying what to whom and why. We need to be clear, when we are dealing with minute questions of cash allowances for particular categories of people, just how much we rely on the idea of personal responsibility and how much we accept the obligations for mutual support within our society.

We are at a period of transition. If we look back into history the only unit that believed it necessary to share responsibility with the individual was the family; but even in medieval times the village or the manor accepted responsibility for social support. In the nineteenth century, we see the development of support systems founded on the county, and at the beginning of the twentieth century the introduction of national insurance, with the breakthrough to the concept that the whole nation had to take responsibility for those in need. We are now beginning to see a widening of the area over which we believe that we have responsibilities for each other to include the European Economic Community and even the entire world.

It is important that the House should clarify its ideas on the extent to which we can look, for instance, to the regional or social funds of the European Community, and whether there are possibilities of further development in relation to our European partners. I welcome the Brandt report and the acceptance in this country, which is extremely widespread and sincere, of the feeling that the wealthier nations, among which we still count ourselves, have a responsibility to share our goods with people in less fortunate positions. However, I do not believe that we shall live to see a world social security system, although it is worth contemplating the way in which the European Community is beginning to accept international responsibilities and to act upon them.

I should like to mention something of a landmark in Community thinking, which was the little-noticed MacDougall report published a few years ago, in which it was suggested that the European Community should take responsibility for unemployment benefit. That was a wise choice as the first move towards a federal social security system, because it recognised the fact that in the EEC changes are taking place that place too much strain on individual national economies if they are to equalise the entitlement of European citizens.

We in this country, perhaps because we were the first major industrial country in Western Europe, seem to be the most seriously affected in the latter part of the twentieth century, as our major wealth-creating industries decline. Countries such as the Federal Republic of Germany, which industrialised much later than ourselves, are now enjoying a much higher standard of living. However, there is in West Germany a sense of obligation to the less wealthy countries of Western and, indeed, Eastern Europe. We need to examine those feelings and possibly to give them institutional effect in the not-too-distant future.

Something that is inevitable, although it may not happen at once, is the development of a single currency area in Western Europe. When we have that, it will immediately become possible to make realistic comparisons between what pensioners get in Germany or France, what support they give to the disabled in Italy or Denmark or how a one-parent family is treated in Naples or Toxteth. When people begin to make those comparisons, particularly with the ease of travel and the growing together of the European Community, I believe that my right hon. and hon. Friends will find themselves under pressure to explain why it is that in Britain the social services are organised perhaps differently from the way in which they are organised in France, Denmark and so on.

Those comparisons are healthy. It is important that we should see haw other people with problems similar to our own and with an industrial background not so different are accepting mutual responsibilities and to what extent they reject them.

There are very interesting currents in the thinking of the Latin countries, for instance, about family support and the responsibilities of parents that we might learn from if we studied them. We can look throughout the different national social systems of Western Europe and find constant challenges to one's thinking that are fruitful, interesting and stimulating.

I should like to come to the question of what to pay. The debate has already brought up the question of uprating to cope with the depreciation of the national or, one might say, the ethnic paper currency that we are still using. The cost-of-living index has become accepted as the normal method of uprating, and I should like to question that. I am not sure whether my right hon. Friends in the Treasury are being wise in going to the public now to borrow money on an index related to the cost of living. I am all in favour of indexed borrowing, because it seems to me much nearer to truth than continuing to use the money illusion built into the collapsing paper currency.

However, I do not believe that the cost of living index is the wise one to use, because it is outside the control of the taxpayer. If there were to be a revolution in the Middle East or some other world crisis, it could have a big effect on trade and prices, it would affect this country perhaps more than most, and it would be beyond the power of the British taxpayer to influence the way in which the cost of living was changed by those events. We have seen all too much of that with the rise in oil prices, and who knows what the future may hold.

We need to look for other indices than the cost of living index, and increasingly I feel that we have to find an index related to the taxpayers' capacity to pay. We are already seeing regrettable pressure for the de-indexation of public service pensions, because the taxpayer is beginning to resent the burden that indexation to the cost of living is placing upon him in relation to the people in retirement who have served the nation. I am not attracted to that movement towards de-indexation, but we have to notice that it is a real force.

If we allow ourselves to become wholly and automatically committed to the retail price index in our upratings of social security benefits, I am afraid that we shall also see pressure from the taxpayers—who are the majority—against the various minorities who are dependent on the good will of the taxpayers for their standard of living.

The retail price index looks so simple and natural, but it is goblin fruit. Those who eat it sicken and die. We must think more clearly about what we are capable of offering to people in retirement, unemployment and other categories of need and whether we should not adopt the gross national product as the index. When things are going badly for the economy, as they are at present, such a change would be to the disadvantage of the recipients of benefit. Nevertheless, pensioners should be able to feel that they are travelling up and down on the waves in the same ship as the rest of society, that in bad times and in good they participate with the rest of society in the development of the economy.

I know that my speeches are often more acceptable to the Opposition than to my own party, but that is just a personal embarrassment and one has to soldier on. On this, however, I feel that at least for the time being my remarks are perhaps not so acceptable to the Opposition because by recommending that the Government get off the hook of linkage to the retail price index I am advocating something which, at present, would be to the disadvantage of the recipients of social security. If we have any optimism for the future, however, we must hope that we shall get out of the recession and return to greater prosperity and industrial success. If that happens, we should have made a commitment which would carry the various minority groups upwards with the tax-paying majority.

Mr. Ennals

I have been following the hon. Gentleman's remarks with interest. Does he support the Government's new taxes and prices index which takes account of taxation? Would it relieve his embarrassment to say that he supports that as perhaps a fairer index?

Sir Brandon Rhys Williams

No, that would introduce a further artificial element, in that taxation varies from Budget to Budget, and indeed more often than that. One cannot allow the calculations of our obligations to one another to be influenced merely by the rate of value added tax on television sets and matters of that kind. We introduce increasingly artificial considerations if we include matters of that kind which are entirely dependent on the judgment of Chancellors of the Exchequer from time to time.

Mr. Buchan

That index was introduced to deal with problems of this kind, so that aspects such as value added tax could be included. There was nothing arbitrary about it. It provided that Government decisions on taxation should be included, just as other aspects are included in the RPI. Has the hon. Gentleman seen the level of the TPI and the robust statistical analysis that it is supposed to provide? What is his comment on its relevance? As both invalidity and unemployment benefits are moving into taxation in any case, it seems peculiarly appropriate.

Sir Brandon Rhys Williams

The hon. Gentleman tempts me to speak until lunch time and beyond, but I must resist the temptation. As the hon. Gentleman knows, I have at various times attempted to write down clearly what I believe should be done about the reform of taxation and social security.

I certainly would not use the taxes and prices index to calculate our obligation to minority groups in our society, because I wish above all to escape from artificiality and to refound the Welfare State on concepts which are transparently honest and related to moral considerations that we all accept. I do not like to see artificial arrangements and an edging away from commitments in successive upratings which seem unrelated to any fundamental concept of what we are about.

I turn to the question of those to whom these payments are made. We must ask ourselves whether we consider that the taxpayer's obligation to the minority groups is founded on those people's need, on their record of contributions or on their citizenship. We must clarify our thinking on that choice. If we relate the obligation to a calculation of their need, we accept the two nations principle—we make a distinction between those in need and those who bear the responsibility for helping them. There are two categories of people—the haves and the have-nots. I believe that that is fundamentally unsatisfactory. It is deeply shocking to me that at any one time more than 5 million people in this country are dependent upon proof of need to establish their entitlement.

The contributions principle is far better than that and certainly has a place. Nevertheless, we must realise that it produces a graduated society in which some people have a far greater claim than others at the end of their working lives. I think that that is realistic. It echoes the situation that one naturally finds in which people either have saved for themselves or, on the other hand, have chosen not to save but to diminish their entitlement to spending power at the end of their working lives. It is something which must remain. Nevertheless, it is contrary to the concepts of equality which underlie the idea of citizenship benefits.

I believe that in this country and elsewhere there will be an irresistible drive towards basing entitlement on citizenship, just as there was an irresistible drive which ultimately had to be accepted towards universal suffrage. Sometimes I think that even now the House has not fully accepted the implications of universal suffrage. Indeed, many people have to be reminded that it was achieved in this country only in 1928. Certainly our female voters have still not mobilised their strength, as can be seen on all sides in the way in which the Welfare State is organised.

In trying to recognise particular claims even on the basis of citizenship, we are bound to acknowledge that there are certain priority categories among the minority groups, such as the disabled, the over-eighties, the long-term unemployed and one-parent families. No doubt every hon. Member could add more categories from his own list of problem groups or minorities to whom we feel a special obligation.

I hope that the idea of special obligation will not have to be linked to case work on the scale of 5 million people on supplementary benefit. Even within the life-time of this Government, I should like to see a major onslaught on the monumental pile of case work involved in the administration of the supplementary benefits system. I do not criticise those who find it an almost impossible burden to distinguish between those in real need and those who are making a case but are not so wholly dependent on society as they might wish to claim. We are asking the administrators and officers of our social security system to carry out an impossible task in trying fairly and honestly to administer a category of need comprising 5 million people.

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

I am trying to follow what the hon. Member is not so much saying as implying. He refers continually to the 5 million people in need. He referred earlier to the haves and the have-nots. I may have misunderstood, but he seems to be categorising the entire 5 million as people who take from the State. He must know from the research that he has sponsored and had published that some of the people in receipt of supplementary benefit pay income tax as a result of the crazy system in this country. One cannot simply compartmentalise those 5 million people as he seeks to do.

Sir Brandon Rhys Williams

I accept that. The total of 5 million probably includes 500,000 genuinely special cases whose individual circumstances need to be investigated with compassion and comprehension. The other 4½ million, however, might well be reached by an automatic system. When we begin to talk about an automatic system, hon. Members will find that it is not practical to raise the tax threshold and to devise a system whereby those entitled to benefit for one reason or another receive their benefit completely net of taxation. If we are to have one nation in benefit, we must have one nation in contribution too. I tried to make that point at Question Time yesterday when a question was put down about the retirement of women aged 60 and their tax and benefit balance. It would be better if everyone drew his benefit on a citizenship basis and if everyone paid tax. It is not only the drive towards equality but the need for an administrative reform which will make matters easier to comprehend and to handle with the machinery which is available to us now.

I now wish to talk about movements in the rates because I have some questions to ask which my hon. Friend the Under-Secretary of State might care to consider, if she cannot reply to them today, although I would be pleased if she could. They are serious considerations for which her Department should have the answers.

I have been looking at the various increases in child benefit over a certain period. The figures relate to the span of time between November 1978 and the proposed rates for November 1981. As far as we are able to estimate, the retail price index, if we are using that as our guide, will have increased by 45 per cent. Child benefit will have increased by 44 per cent. I am sorry that the margin is 1 per cent. against the children, but perhaps taking into account round figures or ease of administration we can move on from that point without delay.

I shall now look at child benefit in short-term national insurance benefit entitlement. By my calculations, the increase has been only 24 per cent. against the retail price index rise of 45 per cent. The difference is so large that it has to reflect a policy decision. However, by my calculations, long-term national insurance child benefit has risen 38 per cent. That is about halfway between the real change in prices and the amount by which the short-term benefits for children have increased. Once again, that cannot be chance. I discern a deliberate departmental policy which should be spelt out and made explicit.

When we come to supplementary benefit, we find an extraordinary pattern which makes me wonder whether my calculations are wrong. However, I do not believe that they are. For the under-fives during the same period of November 1978 to November 1981, the increase in the rates has been 79 per cent. I would be the first among hon. Members to welcome that and to acknowledge that the rate of support for young children was inadequate even as recently as 1978. If my right hon. and hon. Friends have been deliberately seeking to acknowledge that fact, let them say so and let us all understand what is happening.

Between the ages of 5 and 10, there is a smaller increase of 49 per cent., which is a little more than the movement in prices . That might be accounted for by a preference for helping the very young children; yet one finds the anomaly that for those aged between 11 and 12 the rates appear to have risen by 81 per cent., which is more than any other increase. I cannot decide what it is about the 11 to 12 age group which has given rise to such a large increase, so much more than the increase for the 5 to 10-year-olds. For the 13 to 15-year-olds we come back to the 49 per cent. which applied to the 5 to 10-year-olds. If my figures are wrong, I hope that my hon. Friend will tell me. However, if they are right, may we have a clear explanation of the Department's policy?

Pursuing child benefit into family income supplement and looking at the same period from November 1978 to November 1981, we find that the increase in the prescribed amount is 61 per cent. and that the prescribed amount for each child has risen by 100 per cent. That difference requires explanation. The maximum rate payable appears to have risen by 76 per cent., but for each additional child by 50 per cent. The family income supplement does not apply to more than a relatively small number of families when one thinks of the nation as a whole, yet it is an important element in our family support programme. I have always regretted it because I do not like the discrimination which is built into the system.

I did not vote against the introduction of family income supplement, as one cannot vote against the introduction of a benefit which undoubtedly will do good. However, we must not sweep it under the carpet but should look at the way in which the family income supplement is being administered and know plainly what lies behind the Department's calculations.

The prescribed amount for a two-child family is still less than two-thirds of average male manual earnings. The family income supplement is therefore to a great extent a one-parent family benefit because so many one-parent families are headed by the mother rather than the father. Female earnings in this country are still much lower than those for men. It is therefore where the mother is responsible for the children that family income supplement is particularly applicable. I shall pursue those calculations a little further because they are interesting and could give rise to policy changes if we understand precisely what is behind the Department's thinking. The calculation of the basic amount and of the addition for each additional child repays study.

In 1975 the amount allowed for each additional child was 50p. Now it is £1.50. If we deduct the amount for each additional child from the maximum specified for a one-child family, we come back to a core of support which is payable irrespective of the children in the unit which is being supported. It must relate to some other concept of the need of the low-income family. In 1975 that core was £6.50. I derive that figure from taking the 50p allowance for one child from the maximum of £7 so that we come back to £6.50. Now the figure, worked out on a comparable basis, is £17. What does that core cover, and why is it what it is?

I do not believe, from the research which I have done and which has been carried out on my behalf, that since the introduction of family income supplement there has ever been an explanation of the way in which those figures are arrived at. The principle which the Government seem to be following is to increase benefits related to need and to reduce the flat-rate citizenship benefits. Is that simply a response to economic exigencies, or is it a fundamental shift in policy? If it is a fundamental shift in policy in the thinking of the Department, and in particular in the thinking of the leaders of my own party, one must remind them once again that such a move has an inevitable effect on the incentive to work.

The diminishing incentive to work has been talked about many times, yet it is still a most important factor in the way in which our society is organised. We are increasing our reliance on individual case work instead of welcoming the influx of electronic data processing and the new aids to administration which should be benefiting Government, but, sadly that is still not being done.

My last question to my right hon. and hon. Friends is: what has become of the tax credit scheme? I felt that that was something which had been adopted and which would make quiet progress, but it seems to have been put more or less into suspense. We should examine the Department's policy on tax credit, and also that of the Treasury; but it seems that we are making quiet progress towards the introduction of a citizenship benefit, or minimum income guarantee, or a tax credit scheme, whatever one likes to call it. The essential first step was taken when we amalgamated the family allowances and the child tax allowances into child beneft. There were many hesitations and stops on the way, but we did it. We can all be proud of that.

Mr. Ennals

We did it.

Sir Brandon Rhys Williams

Only by the skin of the teeth of those in the Labour Party who felt a moral obligation to the children and were prepared to tight to overcome the opposition of the trade unions.

However, let us look forward to the next move that the Department seems to be taking, that is, to introduce a new universal housing benefit. I spoke about the core of support for the household which can be detected within the family income supplement. It is worth drawing attention once again to the fact that the national insurance system also has an inner household benefit.

Strangely enough, the support for the unemployed seems to be diverging from that for those who are entitled through invailidity. Without going over the calculations that I have often made in speeches on this subject in the past, it appears that the core of support for the family which is included in the allowances for invalidity is now £11.35 a week but for the unemployed it is only £8.60 per week. I should have thought that the household needs of the unemployed were not likely to be less than those of people on invalidity allowance. We must know how the Department's thinking about a housing allowance, is evolving.

A rudimentary household cost allowance is latent in the national insurance system, but: we have to dig for it to find it. Why do we not glory in the fact and publish it when the next uprating takes place? Why do we not state that there is a household allowance? Then we could put the allowance for the individual, 'whether male or female, on to a unisex basis of equality which is in line with modern thinking. If we were to set out the figures as I suggest we would begin to introduce an element of transparency into the way that the national insurance system is organised.

Recognising that there are local variations in household needs, it is correct that they should be passed on to local government, as is evidently the intention of my right hon. and hon. Friends. One of the problems which then must be tackled about the administration of social security is the extraordinary anomalies, unfairness and injustice in the rating system, which bears no relationship to any visible principle. The Department will have difficulty in progressing with the introduction of a uniform housing benefit until the Department of the Environment has sorted out its ideas about the reform of the rates.

I hope that we can look to the Department to prepare for major administrative simplifications and economies, and that it is working to end the division in society into the haves and the have-nots. We expect my right hon. Friend the Secretary of State and his very able team of colleagues in the Department to build the concept of one nation in citizenship, one nation in contributions and one nation in benefit.

10.54 am

Mr. David Ennals (Norwich, North)

In his absence I congratulate the Minister of State on having attracted the support on the Front Bench of all ministerial colleagues. I agree that they are assiduous, but I shall not comment on whether they are able. Their presence must have relieved the embarrassment, because without them the Government Benches would have contained only a Whip, a Parliamentary Private Secretary and the hon. Member for Kensington (Sir B. Rhys Williams). Whether the hon. Gentleman spoke in support of the Government is difficult to say, but he has made up for the absence of any other Back Benchers interested in the subject by the wisdom and thoughtfulness of his speech.

I want to concentrate on what I fear will be the implications of the Government's forecast of a 10 per cent. rate of inflation in November, taken with their punitive decision to fix the November uprating at 1 per cent. lower than the expected rate of inflation. At the time of the discussions on the Social Security Act, which authorised the Government to do that, I said that the decision to raise benefits less than the expected rate of inflation was for the elderly, the sick, the disabled, the widows and other deprived groups a crude form of punishment when they are this year receiving an uprating a few pence a week above the Government's estimate of the retail price index last November. It would be bad enough to condemn the frailest in our society to go through a year with cash payments which do not match the price increases in the shops, let alone the costs of gas and electicity which are constantly rising.

What does the Secretary of State think those receiving the 1 per cent. extra last year did with their money? Does he think that they were over-compensated at a time of high inflation? Does he think that every week they were putting aside a few pennies into their piggy-banks because they knew that they were being overpaid and that now they have a little nest egg into which to dig every week to sustain them during a year when inevitably they will be paid—assuming the 10 per cent. to be accurate—lower benefits? The Secretary of State does not know how people who exist on the margins of poverty live.

The decision in this year's Social Security Act showed a great lack of understanding and sympathy for the hardship of millions of people entirely dependent on the State for their weekly income and payments. On 9 June 1981 I wrote to the Secretary of State urging him to provide an uprating at a higher level, not just because of the miserable, penny-pinching, rob-the-poor-to-pay-the-rich decision already taken but because the prospects of inflation falling at the rate that he had prophesied seemed to be extremely unlikely. That was not only my view but the view of all other forecasters. I said in my letter: I plead with you to make a reassessment without any further delay of the expected rate of year on year inflation predicted for next November. Through no fault of the elderly, the unemployed, the sick and all who are dependent on supplementary benefits, trends are now dramatically changing. The prospects that the inflation rate six months from now will be down to 10 per cent. are negligible. This must be clear to you and to the Chancellor. The timing of that appeal made to my successor was crucial. First, the Bill still had not passed through all its stages in Parliament. It had not received the Royal Assent. Therefore, in another place he could have changed the figure that we are approving in the regulations today.

Secondly, there were still five and a half months to go before the date of the uprating. Both he and I know that five months is essential to fulfil all the preparatory work for an uprating. That moment, therefore, was roughly his last chance of making amends to millions of people whom he will now be condemning to receiving an income rising at a lower rate than that of inflation. The Secretary of State replied quickly. He said "No".

I want to make clear why I made the appeal to the Secretary of State. It was becoming increasingly clear that the trend for decreasing inflation, the corner stone of the Government's policies to which everything else has been subjugated, was not going right. They believe that there is no level of unemployment or of a fall in producton so high as to push the containment of inflation into second place in their policy priorities. So far, if we base the rate of inflation on the retail price index, June on June, it now stands at 11.3 per cent. But what are the prospects of its coming down to 10 per cent.?

In my letter to the Secretary of State, I said: Latest official figures show that the price of industry's raw materials went up sharply in both April and May. Over the past six months raw material costs have been going up at an annual rate of 23½ per cent. The situation will undoubtedly get worse as the effect of the latest fall in the value of the pound takes place. The value of the pound has decreased further since I wrote that letter.

I continued: The underlying pace of inflation in raw material costs has in fact been rising sharply since September. As you and I both know from our experience in Government, increases in raw material prices work their way through to retail prices in about nine months. I concluded: In no way can the rate of inflation now fulfil your prophecy of standing at 10 per cent. in November. All the signs today are that my fears seven weeks ago are likely to be realised. On 12 June The Daily Telegraph said: The year on year rate of inflation is now likely to edge upwards again in the last three months of this year to 12 or 13 per cent. That is also the view of the economic commentators of the Financial Times, The Guardian and The Times itself. In today's Financial Times, an article by the economics correspondent, Peter Riddell, based on the calculations of a group of leading stockbrokers, states: The 12-month rate of retail price inflation is on average expected to be 11.4 per cent. at the end of this year and 11.3 per cent. by the end of 1982, according to eight leading City stockbrokers. I cannot say that all stockbrokers are always right, but I think that the record of their assumptions is much better than the record of Treasury assumptions, on which I know the Secretary of State based his assessment.

In his reply to my letter, the Secretary of State made an important promise. He said: If, and I underline 'if, the uprating proves to be too low because inflation has continued at a higher rate than had been expected, then the promise of price protection carries with it the promise that the resulting shortfall will be made good next time round. In opening the debate, the Minister of State did not say "next time round". He repeated "within the lifetime of this Parliament." Therefore, my first question in this connection is this: does the Under-Secretary stand by what her boss said—that the resulting shortfall will be made good next time round?

Mrs. Chalker

I think that it would be for the convenience of the House if we cleared up this matter now. What the Secretary of State meant was that the shortfall would be made up in the November following, just as it was in November 1979, making good the shortfall for November 1978.

Mr. Ennuis

I am grateful to the hon. Lady for repeating that pledge. It may be a very costly pledge for the Chancellor of the Exchequer, who is always looking for ways of saving money. I guess that he will be doing so at the time of next year's Budget. Let us suppose that he is faced with a 2 per cent. or 2½ per cent. shortfall. I hope that the Under-Secretary, who was very quick to repeat the assurance, will say roughly how much that would cost and will assure us that the Chancellor has already committed himself to that pledge, which she has repeated today. With the savage cuts in unemployment, sickness and short-term benefits, we must ask ourselves how confident we can be that the Chancellor, at the time of his Budget next year, will provide the necessary funds. He and the Prime Minister seem to take all the decisions, and the Secretary of State just has to comply.

There are one or two other questions. What groups of beneficiaries does this pledge cover? The Minister of State was very vague about that. We must ask, what about the unemployed? Are they to be penalised if their level of benefit is significantly lower than that required to keep pace with the rate of inflation? In Heaven's name, why should they be penalised?

What about the sick and those suffering from industrial injuries? What about the level of supplementary benefits? What about child benefit?

Bearing in mind the 5 per cent. cut that these groups suffered a year ago, how can the Government justify not compensating for the short-term benefits as well as for the long-term benefits? I hope that the Minister will make that clear when she replies, because, if her reply is that it applies only to long-term benefits, that is a shameful treatment of short-term beneficiaries.

Finally, why do the Secretary of State and the Chancellor of the Exchequer seem to have forgotten the Government's new invention, which was referred to by my hon. Friend the Member for Renfrewshire, West (Mr. Buchan)—the taxes and prices index? That stands not, as the retail price index does, at 11.3 per cent. on a year-to-year basis but at 15.7 per cent. If it is the Government's view that that is a fairer index—we must recognise that many of those about whom we are talking pay tax, so the taxes and prices index has some validity—the loss for those who will be getting only a 9 per cent. increase in benefit is very serious.

I do not believe that the people involved, millions and millions who are the weakest in our society, will forgive the Government for the decision that they seem determined to carry through. Even if the Government manage to fulfil their promise over the period of this Parliament, for 9 million pensioners all that they will be doing is ensuring that the level of benefit will not have been eroded by inflation. As I have said, that may be a costly pledge. The beneficiaries will inevitably compare this with the fact that during the period of the previous Labour Government there was a 20 per cent. increase in real terms for pensioners. We know that pensioners will get no teal increase in their standard of living, however long the Government are in power. The question is, how much less will be their benefit, in real terms, than what they were receiving when the Government came to power?

Pensioners are not stupid. On these issues, they and other beneficiaries who watch these matters very carefully because they have to live on just the money that they receive will be asking the Government very critical questions.

11.10 am

Mr. George Foulkes (South Ayrshire)

I welcome this opportunity to have a wide debate on the various upratings being put forward by the Government. My right hon. Friend the Member for Norwich, North (Mr. Ennals) congratulated the Minister of State on the attendance of his ministerial colleagues. There is very little else that he can be congratulated on. I was struck by his lack of understanding of what he was being asked to put forward. He had to be prompted constantly by the Under-Secretary of State, who is known to have a deep and great interest in the subject. More important was his lack of understanding of the problems of the people covered by these orders and regulations.

Like my right hon. Friend the Member for Norwich, North, I have also been struck by the poor attendance on the Government Benches. Apart from those who are present on Government service, the only Conservative Member in his place has been the hon. Member for Kensington (Sir B. Rhys Williams). It is to his credit that the hon. Gentleman is the only hon. Member, albeit in a rather convoluted way, who has expressed some element of support for the Government.

Having served on the Standing Committee stage of the Finance Bill, I am not surprised by the lack of concern among Tories for the people of this country to whom we should be extending great consideration. It was notable throughout many hours of discussion in Committee on the Finance Bill that the Tories sat quietly and played no part in the debates on Government plans to tax the unemployed or to penalise strikers. Indeed, they were seldom present. However, when discussion turned to the position of the friends of the Conservative Party—the bankers, the property companies and the oil companies—all the Conservative Members were present, not merely to support the Government but to ask them to spend even more money on tax concessions for oil companies, property developers and the banks. This shows the priority of Conservative Members. They have a total lack of concern for the poor in society and an overwhelming concern for their paymasters.

It was interesting that, following checks, the discovery was made that most of those hon. Members moving amendments to increase the tax benefits of oil companies and property companies had themselves a direct personal interest in the companies for which they were seeking concessions. That shows the real interest of the Tories in the House.

I wish to concentrate, as secretary and treasurer of the all-party group for pensioners, on the position of pensioners. It is interesting, arising from talks with colleagues who served in the last Parliament, to contrast what happened at that time, when Tory Back Benchers were so active in the group, urging improvements for pensioners, with their lack of activity now and the manner in which they slink away into corners when discussion turns to the pressure that should be brought on the Government, who are failing to help pensioners. The Labour Government achieved a great deal. It is a matter for regret that only one Conservative Member, the hon. Member for Brighton, Kemptown (Mr. Bowden), has had the courage of his convictions and has put into effect in this Parliament what he said in the last Parliament and has voted for a real increase in pensions.

The retail price index is inadequate for a number of reasons. It reflects the increases in prices generally as they affect a whole range of items purchased by the population as a whole. It does not reflect the pattern of spending by the poor and by pensioners. I know that Age Concern and other voluntary bodies have urged the setting up of a pensioners' price index which would adequately reflect the pattern of spending by pensioners and which would concentrate on items which pensioners have to buy such as food, fuel and housing costs. The low income of pensioners means that a larger percentage of their income is spent on those items. The cost of some of these items, particularly fuel, has rocketed recently. These are the items for which pensioners need to be compensated much more.

I wish to draw to the attention of the House the decrease in income of elderly people. Some of the supplementary income on which pensioners have come to rely because of the inadequate basic pension is being eroded. The Labour Government promised that, if re-elected, they would establish a comprehensive heating benefit. Far from introducing a comprehensive heating benefit to cover all types of fuel, the present Government have abolished the electricity discount scheme. That scheme was not perfect; it was a rough and ready answer to the high electricity costs. However, the Labour Party was moving towards the development of a comprehensive heating benefit. No account of that has been taken in the uprating.

I hope that the Under-Secretary of State will refer to her talks with the South of Scotland Electricity Board and will inform hon. Members how successful have been her attempts to persuade the board to get rid of its disgraceful £150 debt limit before power is directly supplied—an imposition that is not implemented by any other electricity board.

Another benefit being eroded by the Government is the travel concession for old people. Cheap travel is important for old people who should be encouraged to be active, to move around and to visit relatives so that they do not become a greater burden on society by having to be admitted to old people's homes and hospitals before it is necessary. If old people keep active, they can maintain their position in society and not become an increasing burden on the Welfare State.

The Labour Government introduced a Green Paper proposing a universal transport concession which would enable people to move around on a much wider and freer basis. The transport concession of one local authority would have been interchangeable with another. There would have been a basic half fare for the elderly throughout the country. This proposal could be supplemented by local authorities introducing their own improved concessions. However, the Government have not only scrapped the proposal for a universal travel concession but have also cut the rate support grant, which means that transport authorities find difficulty in maintaining existing concessions. Even if some of the concessions are maintained at their previous value, this often means a deterioration in services.

Mr. Ennals

Does my hon. Friend also recall the commitment that would have meant free television licences for elderly people who would therefore have been able to watch with greater ease the Royal wedding as well as other television programmes?

Mr. Foulkes

I had intended to mention that matter, but my right hon. Friend has done so quite adequately.

Many representations have been received by pensioners drawing attention to the effect of standing charges. The pensioners complain about having to pay standing charges on various utilities—electricity, gas, telephones and water—before they can receive the service. Once they start paying the charge, understandably it is an increased cost.

I have looked into the position, and I take London as an example because it was given me by a pensioner who wrote to the all-party group. A pensioner in London spends £28 a year on electricity standing charges, £28 on gas, £53 on telephone, and £8 on water, a total of £117. For a single pensioner, that is 8 per cent. of his or her pension going in standing charges before receiving any of the services—going for nothing in real terms.

There have already been substantial increases announced or forecast on all these standing charges, most of them well in excess of the figure taken by the Government for the pension increases. That means that standing charges will come to represent an even bigger percentage of a pensioner's income.

It is difficult to contemplate the abolition of standing charges for pensioners, although it has been pressed on the all-party group by a number of organisations. It is difficult to envisage that, although I hope that at least it will be looked at. But some account should be taken of the disproportionate effect of increases in standing charges on pensioners and low-income families. This is another indication of how the retail price index is an inadequate tool to use for all these upratings for pensioners and low-income families.

I regret to say that home help services are being eroded in many local authority areas, especially Tory-controlled ones, although even Labour-controlled ones find themselves forced by the Government to reduce home help services or to impose charges or to increase charges for such services. This is another increased cost which pensioners have to bear and which should be taken into account in the retail price index.

I understand that free adult education classes, again often a very important source of involvement and activity for the elderly, are being eroded, and changes are being introduced. There are increases in charges on meals on wheels services and lunch clubs. All these affect the income and expenditure of pensioners.

My right hon. Friend the Member for Norwich, North referred just now to television. I am sure that he will agree, having been the Minister responsible, that telephones are often a vital lifeline for old people in times of difficulty and even in normal times are an important source of contact with relatives who, if they live in other parts of the country, often ring up to check that old people are well.

Yet local authorities, which have the power to provide telephone installation costs and to help towards rental costs, find it increasingly difficult, if not impossible, to do so because of the cuts in the rate support grant imposed by the Government.

I hope that I have given some indication of just a few of the ways in which pensioners are being affected adversely and how the uprating is totally inadequate to deal with the extra costs that they have to meet.

I deal now with one uprating which, I regret, is yet again missing from the Government's proposals. I refer, of course, to the uprating of the death grant. The pressure on the Government has been phenomenal, with 1 million people signing a petition asking for an uprating. This national insurance benefit has fallen behind inflation more than any other.

I regret to say that the Prime Minister is quite callous. She could find time to attend all the celebrations which took place this week. I do not criticise her for that. But, if she could find time to do that, surely she could have found time to meet a deputation of representatives of the churches and the voluntary organisations which had organised this petition for an increase in the death grant. She brushed them aside. She would have nothing to do with the petition.

People are desperately concerned about the effect on the elderly of the lack of improvement in the death grant. It has often been said that limited resources should be used to help the living rather than the dead, but that shows a total lack of understanding of what the death grant means. The grant helps the living, and not just the surviving relatives who have to bear the cost of funerals. It helps the old people themselves while they are alive. I know of cases where old people save money to make sure that they are not buried in what they consider to be paupers' graves. To save money, they cut down on food and heating and probably accelerate their own deaths as a result. This is the effect that the Lack of an adequate death grant is having on many old people.

On 24 May this year, at the Royal British Legion conference in Brighton, the Secretary of State was quoted as saying that a promised increase—we had had indications that there would be some increase—was on the way. The right hon. Gentleman said: It is unlikely to have people waving flags. But it will be a marked improvement. Today is 31 July, yet we have no increase. Right hon. and hon. Members are going into the long recess. By the time we come back we shall be approaching winter, and increased numbers of old people are likely to be dying. We know that that happens as winter approaches. Yet we have no indication about an increase in the death grant. It is disgraceful for this Parliament to go into recess with so many promises that something will be done but with no action.

May I ask a question which may float away in the air, as it has done so often? I said the same to my right hon. Friend the Member for Norwich, North when he was Secretary of State. Why is it that we in Britain are unable to uprate pensions and other benefits more frequently than once a year? Earlier this morning we heard about the four-month period necessary to prepare an uprating. However, the hon. Member for Kensington also serves in the European Parliament, and he knows only too well that other member countries of the European Community have biannual upratings, and some are moving towards even more frequent upratings. Italy, for example, which is not more wealthy than the United Kingdom, is able to uprate benefits more frequently. I hope that some effort will be made in this direction. I cannot understand why our bureaucracy is so incapable of achieving that.

Those of us who have a genuine concern for the elderly expected to see some indication of a more positive improvement for the future. It was not really to be expected in the current year, because we have come to accept that the Government use the excuse of the recession which they have created for not increasing the benefits of the poor. In an interview published in the magazine "New Age", which is produced by Age Concern, the Secretary of State repeated what he has often said: We have also indicated that, as and when the economy improves, pensioners will fully share in that improvement. That is the kind of empty statement that we have come to expect from the Government. I hope that the Minister—it is a vain hope, I think—will tell the House what that means for pensioners and when they can expect a real increase from the Conservative Government. Is there any chance of their getting an increase in the lifetime of this Parliament? That is a question which many pensioners are asking.

We hoped that the White Paper "Growing Older" would indicate ways in which the Government saw the services for the elderly improving—whether in terms of income maintenance or some of the other services which I have mentioned. But that White Paper was a disgrace. It was a shocking indictment of the Government that they put out the White Paper because they said that they had an obligation to do so and therefore they published it.

There was nothing in it to give any hope to the pensioners of the future. The only hope that they have is for a change in Government.