§ The Secretary of State for Social Services (Mr. Norman Fowler)
I will, with permission, Mr. Speaker, make a statement required by the Social Security Act 1975 about the annual uprating of social security benefits which will come into operation in the week beginning 22 November. For the convenience of the House, a detailed schedule of the new rates of benefits, which forms part of this statement, has been placed in the Vote Office and will be included in the Official Report.
The new rates reflect the estimate that the general level of prices will increase by 9 per cent. between November 1981 and November 1982. Benefits generally will be uprated in line with that forecast, and in addition the 2 per cent. shortfall at the 1981 uprating will be made good—not only for pensions and other related long-term benefits, as we had already promised, but for all other weekly benefits. This gives a total increase for most benefits of 11 per cent.
Turning first to the uprating of national insurance benefits, the standard rate of basic retirement pension for a single person will go up by £3.25 a week from £29.60 to £32.85. The rate for a married couple will go up by £5.20 from £47.35 to £52.55. The standard rate of sickness benefit and unemployment benefit will go up by £2.50 for a single person from £22.50 to £25.00, and by £4.05 from £36.40 to £40.45 for a married couple.
The same percentage increase of 11 per cent. will apply to the earnings-related additional component to national insurance pensions; to pensions payable under the old graduated pension scheme; to those who receive guaranteed minimum pensions from contracted-out occupational pension schemes; and to public service pensions. It will also apply to all other weekly national insurance benefits, including industrial injuries benefits, and to war pensions.
Child benefit will also be increased, by over 11 per cent., from £5.25 to £5.85, an increase of 60p per qualifying child. One-parent benefit will go up by the same percentage from £3.30 a week to £3.65. So a one-parent family with two children not in receipt of any other social security benefits will find the amount paid for the children rising from £13.80 a week to £15.35.
After taking the increases in child benefit into account, as has been the practice in previous years, the dependency additions for children paid with short-term national insurance benefits will be 30p a child compared with 80p at present. The child dependency additions payable with retirement, widow's or invalidity pensions will increase from £7.70 a child to £7.95.
Family income supplement is payable to people in work where the family's gross income, apart from child benefit and one-parent benefit, falls short of a prescribed level. The prescribed level of income for family income supplement will go up by £8.50 to £82.50 weekly for one-child families, and the additional amount for each further child will be raised from £8 to £9 a week. The maximum payment for a one-child family will rise from £18.50 to £21 a week, and the addition for each further child will go up by 50p to £2. This means that the increases will be particularly helpful to larger families with the lowest incomes.
851 I turn now to supplementary benefit. As the House will be aware from the proceedings last week in the Committee stage of the Social Security and Housing Benefits Bill, we propose to increase the scale rates of supplementary benefit from next November in line with the forecast increases in the general level of prices, after excluding housing costs. This is because both under the present scheme, and when housing benefit is introduced, the housing costs of supplementary benefit claimants are met separately. Supplementary benefit is different in this respect from all other benefits. The treatment of housing costs distinguishes those costs from all other day-to-day living expenses that are covered by the supplementary benefit scale rate.
The Government's approach recognises this, and, in effect, avoids double counting, while maintaining full price protection for all claimants. In addition, as with other benefits, we shall be making good the 2 per cent. shortfall. The effect of this will be that the increase in the scale rates will be 10.5 per cent, but housing costs will, of course, be paid on top of that.
The ordinary supplementary benefit scale rate will, therefore, rise from £23.25 to £25.70 for a single householder and from £37.75 to £41.70 for a married couple. The long-term scale rate will rise from £29.60 to £32.70 for a single householder and from £47.35 to £52.30 for a couple. The scale rates for children will rise from £7.90 to £8.75 for children aged 10 and under, and from £11.90 to £13.15 for children aged 11 to 15.
There has been a great deal of concern about the effects of the capital limit for supplementary benefit. This is the limit on the amount of capital a person can have and still get supplementary benefit. It has been argued that the current limit of £2,000 set in November 1980 is now too low. The Government recognise the force of the argument and propose to raise the limit by 25 per cent. to £2,500. This will fully restore the value the limit held when it was introduced.
We also propose a further small but worthwhile improvement in the supplementary benefit scheme. We are increasing the amount of occasional payments by way of a gift, for example at Christmas or for a birthday, which can be disregarded. At present, any excess over £20 is deducted from benefit. We propose to increase the amount that can be totally disregarded to £100.
Supplementary benefit heating additions are now paid to over 2 million families. In 1980 we boosted them with a record increase. The 1981 uprating turned out to be more than enough fully to protect this increase against rising fuel costs. For 1982 we propose to increase the heating additions from this higher base in line with the expected rise in fuel prices between November 1981 and November 1982. The standard amount will rise from £1.65 to £1.90 a week, and the higher rate from £4.05 to £4.65.
As the Chancellor of the Exchequer announced yesterday, mobility allowance will no longer be subject to tax. I am sure the whole House will welcome that change, which will benefit some 40,000 recipients who have other taxable income. In addition, the rate of mobility allowance will be increased in November from £16.50 to £18.30. This means that since coming to office we have increased the rate of mobility allowance by 83 per cent. These measures will help even more disabled people to take advantage of the motability scheme for leasing or buying cars on advantageous terms.
852 I have also decided to make an improvement in the rules affecting invalid care allowance. The weekly amount which can be earned by someone who is looking after a severely disabled person will be increased from £6 to £12. The disregard has been £6 since the benefit was introduced in 1976 and the increase will restore its original value.
A further improvement affects the therapeutic earnings limit, which helps people recovering from illness who want to get back into full-time work. The present earnings limit is £16.50. I intend to raise that by 21 per cent. to £20.
The Christmas bonus of £10 will be paid on the same basis as last year in the week commencing 29 November. I also propose to increase the earnings rule limit for retirement pensioners in November from £52 to £57, the first such increase in three years.
The total cost of the uprating will be close to £3 billion in a full year, of which about £2 billion will fall on the national insurance fund, the balance coming out of the Consolidated Fund. The House has already approved the changes in contribution levels in 1982–83, set out in the Social Security (Contributions) Act 1982, and I shall, as usual, further review contribution rates in the autumn. Any necessary changes will take effect from April 1983.
The proposals mean that annual expenditure on social security benefits will rise to over £30 billion in 1982–83, which represents about 26 per cent. of all public spending. The changes that I have announced mean: full price protection of all weekly benefits; the 2 per cent. shortfall in 1981 made good for all benefits; the supplementar,7 benefit capital limit increased to £2,500; supplementary benefit heating additions protected against rising fuel costs; the retirement pension earnings rule increased for the first time in three years; mobility allowance taken out of tax and fully price protected; a doubling of the earnings disregard for those receiving invalid care allowance ; and an increase of more than 20 per cent. in the therapeutic earnings limit for those receiving incapacity benefits.
The measures will particularly benefit the elderly and disabled people. They will also give valuable extra help to all families with children. They are designed to bring practical help to those who most need it.
§ 4.3 pm
§ Mr. Brynmor John (Pontypridd)
The right hon. Gentleman has made an important statement which we shall want to debate more fully tomorrow. However, I start by welcoming the mobility allowances declaration and the capital increase. I am surprised that the right hon. Gentleman has not introduced a taper on the disregard after £2,500 and that he has not, in the rule changes, met the difficulties that occur over redundancy payments and insurance policies. Those difficulties have led to considerable hardship.
Those who must live on the benefits that he described will not greet the statement with enthusiasm; nor will the House. The statement deserves merely the politeness due to a minimum and uneven performance of the right hon. Gentleman's duty. For example, does he agree that the 1 per cent. increase in national insurance contribution—that most regressive form of taxation—which is payable next month will more than wipe out the income tax gains announced yesterday for single persons earning £120 a week and married couples, with or without children, earning over £180 per week?
Will the Minister tell us exactly how the supplementary benefit rises have been calculated? We know from what 853 he said that they have been calculated using yet another price index—the "Rossi" price index—which does not include housing costs, but, since it was casually and inadequately explained to a rather startled Standing Committee, will he tell us exactly how the housing costs have been removed and give the House his estimate of their expected rise by next November? By how much, therefore, will the base rate for supplementary benefit uprating have been lowered?
Will the right hon. Gentleman consider the greatest crime of the Budget? Does he share with the rest of the House the belief that our financial treatment of children is the greatest cause of poverty to the low-paid and those on social security? If so, how does he justify increasing child benefit by only 60p a week, thereby cutting its real value since 1979 by 40p a week? Does that not represent a fall in child benefit of 6½ per cent. during the Government's reign?
Does the right hon. Gentleman agree that total child support for short-term beneficiaries, such as the unemployed who have children, will have fallen since November 1979 by 23 per cent. while support for longterm beneficiaries, such as widows with children, has fallen by nearly 12 per cent.? Is that not an absolute disgrace?
How does the right hon. Gentleman justify his decision not to make good the 1980 5 per cent. abatement on unemployment benefit? It was supposed to be an interim measure until taxation was introduced, as it will be in July. The House was assured that the abatement would then cease. It will not. Does that not amount to a gross breach of faith, and will the invalidity pensioner eventually be treated in the same shabby way as the recipients of unemployment benefit?
The Government have assumed a 9 per cent. increase in inflation, but is it not right to err on the high side, bearing in mind the bitter experience of the 2 per cent. shortfall and the incompetence of the Chancellor of the Exchequer? Is it not a fact that an underestimate now would not be put right until November 1983 and that in the meantime many helpless people would suffer cruelly?
§ Mr. Fowler
I am grateful for the hon. Gentleman's introductory comments and I shall try to help him on some of the questions that he raised. The first concerned the supplementary benefit capital disregard, how much capital should be exempted, whether a taper should be introduced and whether the cut-off procedure was understood. We have had the matter examined by the supplementary benefit policy inspectorate, which seems emphatically to support our case that there has been no hardship as a result of the changes that we have introduced. I shall make the report available to the right hon. Gentleman so that he can check it.
The hon. Gentleman asked about the effect of the Budget measures. The net result of the Budget, plus the increased national insurance contributions and increased benefits that I propose, is that we are concentrating help on the lowest paid. I shall set out the details.
The hon. Gentleman referred to the housing element. He knows that my hon. Friend the Minister for Social Security has explained that supplementary benefit scale rates cover all the normal living expenses except housing costs. An amount to cover actual housing costs is added 854 to the scale rates and they are met in full. In that respect it is different from all other benefits, and we are proposing a 10½ per cent. scale increase, plus full housing costs.
The cost of the child benefit increase is about £400 million this year. The total cost of the benefit and the one-parent benefit is about £4 billion a year. That shows the Government's commitment to bringing support to children.
The unemployed will obviously be helped by the decision on the shortfall. A heavy cost would be involved in restoring the 5 per cent. unemployment abatement, but clearly we shall continue to keep that under review.
§ Mr. Speaker
Order. There will be plenty of opportunities for these matters to be pursued in the Budget debate. Therefore, I shall limit questions to 15 minutes today.
§ Mr. Paul Dean (Somerset, North)
I welcome the increases in pensions and other benefits, the making up of the 2 per cent. shortfall and the increase in child benefit, all of which show the Government's continued commitment to protect the most vulnerable sections of the community.
I welcome also the increase in the capital limit for supplementary benefit and ask my right hon. Friend whether, to encourage thrift, that can be indexed so that it does not fall behind in future years. In regard to the longterm unemployed, will my right hon. Friend give increasing attention in future plans to the mounting evidence that those who have been unemployed for a long time, particularly those who have dependent children, do not have arrangements that give them adequate support?
§ Mr. Fowler
My hon. Friend knows that the Government have already improved the position for the over-60s and we shall continue to keep the matter under review. I am grateful for my hon. Friend's comments on the supplementary benefit capital disregard figure and on the other benefits that we are increasing. The present capital disregard is a disincentive to thrift. The cut-off level is too low, which is why we are improving it and increasing it. I cannot give a commitment on indexation, but we shall keep it under review.
§ Mr. Harry Ewing (Stirling, Falkirk and Grangemouth)
The Secretary of State mentioned the Social Security and Housing Benefits Bill, which is in Committee. Is he aware that clause 18 removes from local authorities in Scotland their discretion under the Local Government (Scotland) Act 1973 and the Housing Finance Act 1972 to disregard completely war widows' pensions and war disablement beneficiaries' pensions for the purposes of rent rebates? Can the Secretary of State reassure the Royal British Legion in Scotland that that discretion will be restored when the Bill comes back for Third Reading?
§ Mr. Fowler
The discretion remains with the local authorities. The Royal British Legion can be reassured on that.
§ Mr. Patrick Cormack (Staffordshire, South-West)
May I add my thanks to my right hon. Friend and say that I believe that the package will be warmly received generally? However, will my right hon. Friend reconsider the capital limit on supplementary benefit? Does he accept that many people in their fifties, who are out of work 855 through no fault of their own and with little chance of being employed again, will see this measure as a penalisation of thrift? Does he accept that although the increase is welcome it is far too modest?
§ Mr. Fowler
I understand my hon. Friend's concern. He has been one of the hon. Members most concerned about the position. We have made a substantial step today. As I said to my hon. Friend the Member for Somerset, North (Mr. Dean), we shall continue to keep the matter under review.
§ Mr. A. W. Stallard (St. Pancras, North)
Does the Secretary of State accept that his announcement of the £5 increase in the earnings limit will be received with widespread disappointment by many thousands of people who wish to hear an assurance from him that the Government intend to carry out their manifesto pledge to abolish the earnings limit during the lifetime of this Parliament? Does he accept also that there will be widespread disappointment at the absence of a statement about the future of the death grant?
§ Mr. Fowler
I hope that some time next week we shall publish a consultative document about the death grant. The earnings limit has been increased to £57. That will enable pensioners to carry out part-time work without penalty, and I am sure that the hon. Gentleman will join us in welcoming that addition. We are committed to abolish the earnings rule, but I cannot give a timing for it.
§ Mr. R. A. McCrindle (Brentwood and Ongar)
May I return without apology to the point raised by my hon. Friends—capital disregard in relation to supplementary benefit? Does my right hon. Friend accept that, despite this welcome package, there will be some disappointment, not because the amount has been raised to £2,500, but because it has not been possible to arrange a separate system that does not imply the penalty on thrift that the capital disregard appears to do? Will he especially consider the fact that many people who have £2,500 may have that sum as a result of systematic saving over the years, sometimes through an endowment policy? Will my right hon. Friend take on board the fact that many who otherwise support what he has said would wish him to consider the point more carefully than he has evidently done already?
§ Mr. Fowler
We have already considered the point carefully, and I share the concern expressed by my hon. Friend. I can add only that the findings of the supplementary benefit and policy inspectorate will be made known. They will cover many of the points and we shall return to the matter.
§ Mr. Mike Thomas (Newcastle upon Tyne, East)
Is the Secretary of State aware that his proposals offer nothing to the unemployed and very little to the poor? Is he aware that the Government, because of the failure to make good the 5 per cent. abatement, are cheating the unemployed of about £1 a week and that as a result of the Budget unemployment will continue to rise? Is he further aware that social security benefits have still not been restored to their level in real terms when the Conservative Party came to power? Is he also aware that, for the wage earner, what the Chancellor of the Exchequer gave away in tax cuts yesterday he has already taken back in national insurance contributions?
§ Mr. Fowler
If the hon. Gentleman had listened to my earlier reply he would know that what he said at the end of his supplementary question is untrue. I shall set it out for him so that he fully understands. The hon. Gentleman must take on board fairly rapidly the fact that we are spending almost £3 billion more, that we are giving full price protection next year, that we have restored the shortfall and that we have made many other changes that the public will welcome. I am content that the public should judge this package.
§ Mr. Ted Leadbitter (Hartlepool)
Will the Secretary of State bear it in mind that the House is rather disappointed with his announcement that there will be a consultative document on the death allowance? The House is aware that the Government opposed a Private Member's Bill on the subject only a short time ago, and a consultative document will encourage no one. Does the Secretary of state accept that he should either place a document in the Library or come to the House and make a full statement about the impact of Government measures on poor arid lower-income families, having regard to the balance of the allowances that he has announced today and the insurance contributions that were announced last December and which are to be effective from April, so that we can see the real effect on families?
§ Mr. Fowler
I should be happy to debate that matter at any time, on the Floor of the House or anywhere else. We believe that it is reasonable to issue a consultative document about the death grant. Although the hon. Gentleman waxes indignant about the death grant now, the Labour Government did nothing about it during six years in office. The public might also remember that.
§ Dr. Brian Mawhinney (Peterborough)
Does my right hon. Friend accept that many hon. Members wish to congratulate him on the decisions that he has announced today, especially those to reduce the shortfall in unemployment pay and to take the mobility allowance out of taxation?
§ Mr. Fowler
I am grateful to my hon. Friend. I hope that there will be a welcome for some of the measures that we have put forward and that disabled people will welcome the measures that my hon. Friend mentioned.
§ Mr. Kenneth Marks (Manchester, Gorton)
Does the Secretary of State accept that, because of Government miscalculation of the inflation rate, pensions this year are 2 per cent. lower than they should have been? How much money are the Government saving this year because of that? Is that money lost for ever to the pensioners?
§ Mr. Fowler
Our procedure means that we shall make good the 2 per cent. shortfall in the annual uprating in November.
§ Sir David Price (Eastleigh)
Is my right hon. Friend aware that those hon. Members on this side of the House. who have campaigned for years to get the mobility allowance taken out of tax, are extremely grateful to him and to the Chancellor of the Exchequer? Do we take it as being one move further towards establishing a general disability income, for which many hon. Members on both sides of the House have campaigned for even longer?
§ Mr. Fowler
That is a long-term aim. I am grateful for my hon. Friend's remarks. All that I can say is that there has been an 83 per cent. increase in the mobility allowance 857 as well as the fact that we have taken it out of tax. I hope that disabled people will recognise the steps that we have taken.
§ Mr. David Winnick (Walsall, North)
Is the Secretary of State aware that the new capital limit for receiving supplementary benefits remains much too low? Why is redundancy money included, as that obviously harms many people in their late fifties who have been made redundant and whose chances of getting another job are remote? When will the Government give a heating allowance to those people on low incomes who do not receive supplementary benefit? For how much longer must those people be penalised?
§ Mr. Fowler
I can add nothing further about the supplementary benefit capital disregard. The hon. Gentleman raises an important point about fuel. We shall now make available over £300 million a year in aid for fuel costs. Another important step is that we shall not claw back the overshoot for 1981.
§ Mr. Chris Patten (Bath)
I welcome wholeheartedly the Government's decision to make up the 2 per cent. shortfall in supplementary and unemployment benefit, but will my right hon. Friend note that there is concern on the Conservative Benches about the decision to calculate supplementary benefit increases on a different basis? Will he say how much lower supplementary benefit will be in the coming year on the new basis than it would have been on the old basis?
§ Mr. Fowler
With respect to my hon. Friend, who I know has a great interest in and knowledge of these matters, there should be no concern about what we are doing. We are simply preventing double counting on the housing element. In the coming year we are increasing the scale rates of supplementary benefit by 10½ per cent., and in addition we shall be making full provision for the housing costs of the supplementary benefit recipients.
§ Mr. Leslie Spriggs (St. Helens)
Is the Secretary of State aware that widows who receive a pension from the mineworkers' pension fund are to be assessed for taxation? As many of these widows find it difficult to make ends meet, will he act to stop the taxation of widows who receive pensions from the mineworkers' pension fund?
§ Mr. Toby Jessel (Twickenham)
As each year there are about 150,000 more retirement pensioners than there were the year before, is it not a remarkable achievement, in the current economic conditions, not merely to maintain the value of the pension, but to plan to increase it in real terms, as my right hon. Friend intends to do?
§ Mr. Fowler
My hon. Friend makes an important point and it is in line with the pledge that we gave at the last election.
§ Mr. Reg Race (Wood Green)
The Secretary of State may be pleased with his statement, but will he confirm the figure that was given by the Under-Secretary, that the Government have cut £1,520 million from social security benefits, beginning in the financial year April 1982? Will he say precisely how much the Government will save this 858 year by calculating the uprating of housing benefits in the way that they propose? Will they not save £60 million in that way from the pockets of the poor?
§ Mr. Fowler
The figure will be about £30 million in a full year. If housing costs increase by less than the general RPI, the supplementary benefit scale rate will increase by an above-average figure.
§ Mr. Speaker
Order. I shall call the two hon. Members who are left of those who have been rising, although only one minute remains, according to what I said. Mr. Tom Benyon.
§ Mr. Richard Needham (Chippenham)
Thank you, Mr. Speaker. My nose is not quite the same shape as that of my hon. Friend the Member for Buckingham (Mr. Benyon), although I accept that the rest of me is remarkably similar.
I thank my right hon. Friend for having said that he will consider the 5 per cent. abatement. I am sure that he will bear in mind that now that the benefit is coming into tax a considerable amount of money will be available for the restoration of the abatement. I am sure that he will also bear in mind that the long-term unemployed are not entitled to long-term benefits, only to short-term benefits. Will he say when he will be in a position to do something about that?
§ Mr. Fowler
I accept what my hon. Friend says and I recognise his disappointment. We shall continue to keep the matter under review during the coming months.
§ Mr. Dennis Skinner (Bolsover)
Is the Secretary of State aware that the increase for the unemployed and pensioners and most of the other benefits that he mentioned are paltry compared with the handouts that have been given, even in this Budget, to people in the higher income brackets? When it comes to heating allowances, even in this Budget the Government are prepared to hand out subsidies to firms, while refusing to give more help to people who are suffering from hypothermia, and to old-age pensioners and others who are dying in the wintry conditions? Does the right hon. Gentleman accept that the only way to combat the £2.50 and upwards rent increases, the 10 per cent. gas levy this year, and goodness knows how many other increases this year is to grant old-age pensioners an increase that is in line with the declaration of half average earnings for a married couple and one-third for a single pensioner? On the question of the taxable—
§ Mr. Speaker
Order. The hon. Gentleman is taking too long. He has already asked about three questions. The Minister must answer those questions now.
§ Mr. Fowler
The hon. Gentleman's last proposal, which I do not think is the policy of the official Labour Party—[Interruption.] We shall hear in a moment. It may be the hon. Gentleman's policy. [Interruption.] If the hon. Gentleman will calm down he will be able to hear my reply. What he proposes would cost over £10 billion extra a year. I do not believe that the public would take seriously any party or politician who puts forward proposals of that kind.
§ Mr. Tristan Garel-Jones (Watford)
Does my right hon. Friend accept that much of what is welcome in yesterday's Budget Statement is contained in the statement that he has made today? Does he agree that if advantage is taken of the other side of the Budget, as it were, both 859 in wage settlements and in industrial investment in the coming year, he may be in a position to move a little further on the welcome move that he has already made on raising thresholds?
§ Mr. Fowler
That is always possible, and I hope that we shall be in a position to make further moves. Given the general pay settlements in the current round, the 11 per cent. represents a fair deal for those who are most in need in our society today.
§ Mr. J. W. Rooker (Birmingham, Perry Barr)
Is the Secretary of State really telling us today, on behalf of the Government, that supplementary benefit pensioners and others on supplementary benefit have been overpaid by £30 million because of the way that the index was working? Is he saying that those people, those in the safety net, the poorest in the land, received £30 million too much? Will he assure the House that there will be full publication of the way in which the calculation has been made and that there will be a regular publication of the index, excluding and including housing, so that the House and the country can see how the figures are moving?
My last question concerns the 5 per cent. abatement, which the right hon. Gentleman says he has reviewed and is reviewing. Is it still the case, as it was at the time when the Social Security (No. 2) Bill went through the House, that if unemployment benefit were taxed the Government would receive more in revenue than they received from the 5 per cent. abatement? Is that still true today? If so, why cannot the Government restore the 5 per cent. abatement before they start to tax the benefit in July?
§ Mr. Fowler
My answer to the hon. Gentleman's last question about the social security cost, which also involves a tax revenue element, is that it would cost £60 million a year to make good the abatement although, as I said, we shall continue to keep the matter under review.
My answer to what the hon. Gentleman said about supplementary benefit and the housing element is that the old system double counts housing costs. Therefore, we are giving a 10½ per cent. scale increase, plus the full cost of housing, I believe that that is fair. We shall of course publish the basis on which we make that assessment.
§ Following is the information: