§ Mr. William Hamilton (Fife, Central)
I am glad to initiate the debate. In many respects it follows on from the previous one, and refers to the Manpower Services Commission Vote and the Supplementary Estimate. The debate is immediately concerned with the 3 million people who are on the dole. Last week in the Budget debate I referred to this matter and to the high costs of unemployment, some of which can be measured and some of which cannot. I mentioned then the document that is in the Library and to which I shall refer later in some detail, as I think that it is worth putting on record.
There are several ways of attempting to measure the total cost and the individual cost in money terms. There is the money that is lost to Government Departments, for instance, the taxes lost to the Exchequer, income tax, national insurance contributions, the indirect taxes that are not incurred by the unemployed and so on. On the other side, in terms of benefits paid out, there is unemployment benefit, sickness benefit, supplementary benefit, rent and rate rebates, administrative costs and so on.
The House of Commons research note No. 64 deals with these matters. It was published this month, so it is fairly up to date. No one would deny that the research department is an extremely reliable source of information for Members. I do not think that many hon. Members realise how powerful a weapon it can be if it is properly used. That document shows three separate estimates of the costs to the Exchequer of unemployment in 1981–82 that have been recently published.
First, there is the Treasury's estimated cost of an extra 100, 000 unemployed in 1981–82. That shows that in terms of taxes forgone and benefits paid the figure in round numbers was £500 million for every 100, 000. The MSC, on whose Vote this debate is hinged, had an estimate of £438 million.
§ The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne)
I apologise for interrupting, but the hon. Member referred to a Treasury estimate. Could he give his source for that, because that would be helpful to the House?
§ Mr. Hamilton
I quote direct from the research document. I gather that the Minister does not have the document. On page 1 it says thatThree separate sets of estimates of the Exchequer cost of unemployment in 1981–82 have been published recently (for full details and a discussion of the construction of each estimate see below).Below we find Table I and the three estimates. There are three columns, one of which is for the Treasury, the second for the Manpower Services Commission, and the third for the Institute of Fiscal Studies. It goes on to describe in detail the figures that have been produced by the Treasury on this matter.
The Manpower Services Commission's estimate of the cost of an extra 100, 000 unemployed in 1981–82 was £438 million, and the Institute of Fiscal Studies' figure was £450 million. If one takes the median figure, it would not be outrageously inaccurate to say that about £450 million was the cost for each 100, 000 extra unemployed in 1981–82.
The February 1981 edition of the Treasury's economic progress report included an article on costing unemployment. On 18 February 1982, The Times reported that an 310 updated version of the economic progress report figures had been prepared, but that the Government had decided not to publish it. I challenge the Government to publish it. What are they hiding? If they produced the earlier report, why do they not produce this one? We have a right to know the figures.
The 1982 estimate is reported to show—we can only surmise, in view of the Government's reluctance to publish—that in 1981–82 an extra 100, 000 unemployed would cost £500 per person, or £500 million in tonal, compared with £340 million in total or £340 per person in the previous year.
§ Mr. Bruce-Gardyne
I apologise for interrupting the hon. Gentleman again, but I am somewhat worried by what he said earlier. I have not seen the report from the House of Commons research department. The hon. Gentleman said that it had attributed this estimate specifically to the Treasury. It had no right to do that. It was quoting, as the hon. Gentleman has now made clear, a report in The Times, which I shall be happy to answer. If the research department of the House of Commons is attributing that estimate specifically to the Treasury, as opposed to a report in The Times, I can only say that the House of Commons research department is acting without proper authority in so doing.
§ Mr. Hamilton
I do not know whether the Minister is trying to confuse me or the House. The document is clear, and I trust the House of Commons Library with my lire. I believe that the document is absolutely accurate, when it specifically says that the February 1981 edition of the Treasury's economic progress report included this article, on which its figures are based. The figures in the first column attributed to the Treasury are directly related to the original document. The figures in The Times are the surmised figures that have been deduced from the report that has not been published but which is available in the Treasury. I am saying that that document should be published.
§ Mr. Andrew F. Bennett (Stockport, North)
It is crazy when a Treasury Minister intervenes to question my hon. Friend's figures. Surely the Minister should tell my hon. Friend what the Treasury figure is.
§ Mr. Hamilton
I hope that we shall be given the Treasury figures before the debate is concluded. The first figures that the Library document quotes are Treasury figures. I have said that the second set of figures are surmised by The Times. I want a denial or confirmation of those figures. The Treasury figures must be with the officials. The Treasury have the economic progress report, but the Government have refused to publish it.
The House of Commons Library makes it clear that £500 million, which is the cost of an extra 100, 000 on the dole, cannot be multiplied by 30 to arrive at the cost of 3 million on the dole. I shall not weary the House with all the reasons that the Library set out in the paper. Despite all those difficulties, the Manpower Services Commission, which we are discussing—
§ Mr. Deputy Speaker (Mr. Bernard Weatherill)
Order. We are not discussing the Manpower Services Commission. We should be discussing supplementary benefits. This is a Vote on the Department of Health and Social Security.
§ Mr. Hamilton
Yes, Mr. Deputy Speaker. The original Estimate is £734 million and the new Estimate is £848 million, which is a Supplementary Estimate of £22.6 million. Presumably the MSC has spent some of that money on producing, or is about to do so, the figures that I am about to give to the House.
§ Mr. Deputy Speaker
Order. We are dealing with Class XII, Vote 2, on page 114. That is the subject of the debate.
§ Mr. Golding
We are dealing with an extra expenditure of £420 million. We know that the bulk of that sum is to provide supplementary benefit for those who are unemployed. The burden of the argument is that the Government have spent an additional £420 million in supplementary benefit alone to sustain the high level of unemployment.
§ Mr. Hamilton
I am obliged to my hon. Friend. I confess that I was in some difficulty. I am anxious not to get out of order. You know me well enough to know that, Mr. Deputy Speaker. However, I hope that I shall not be inhibited from putting on the record the case that I want to present. I shall try as best I can to keep strictly within order as defined by the Estimate to which my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) has referred.
Despite all the difficulties, the MSC was quoted by the Financial Times on 9 November 1981 as saying that the cost of unemployment this year would be £12.45 billion. That would include the supplementary benefit to which we are referring. In November 1981 unemployment stood at 2.84 million and it is now much higher than that.
The third investigation into this issue was made by the Institute of Fiscal Studies. In the November 1981 issue of its journal an article was published on the Exchequer costs of unemployment, which include the supplementary benefits in the Vote. It arrived at a figure startlingly similar to that produced by the MSC. It estimated the overall cost to be £12.947 billion.
A large number of those 3 million people are living on supplementary benefit and, by definition, are on the poverty line. Their families, friends and relations are indirectly affected. Therefore, the actual number affected could be 10 million, 12 million, 15 million—who knows!
Circumstances vary widely. Some of those people will not be on supplementary benefit. They will probably have savings, or relatives to help them out. Circumstances also vary as to the size and age of families as well as their entitlements to various benefits such as supplementary benefit, rate and rent rebates, free school meals, welfare milk and so on.
Table II on page 13 of the House of Commons document shows that at December 1979, the total cost to the Government of a married couple on average earnings with two children was in the region of £6, 000 a year.
None of those figures, nor any of the figures we are discussing in this Vote, takes account of the wealth lost through those people being on the unemployment roll. Unemployed building workers could build houses, schools and hospitals. Others could produce coal, steel and textiles. Such things are not produced because workers are not given the opportunity to produce that wealth. Nor can we measure the misery and ill-heath caused by the indignity of being on the dole.
312 You referred, Mr. Deputy Speaker, to the fact that we are discussing supplementary benefit. Any hon. Member who regularly holds his surgery and visits his constituents must be appalled by the poverty induced by unemployment and the appalling misery endured by anyone who attempts to eke out an existence on supplementary benefit allowances.
The impression is created by some hon. Members that somehow money is easily come by in the DHSS. Anyone who has tried to get money from the DHSS will know that that is not true. One does not easily get money from any Government Department.
It is self-evident to many of us that much ill-health is caused by unemployment, especially to those on supplementary benefit who are the worst off. I have with me a cutting from The Scotsman, dated 6 November 1981. It refers specifically to these matters, and there is increasing evidence in support of what I have said about health. Perhaps the DHSS and its Scottish equivalent will produce the basic health statistics of the unemployed and those on supplementary benefit compared with others in full employment.
I have certain figures with me that I should like to put on record. There is increasing evidence that the recession and unemployment can cause death. I can quote an actual case that came to my notice about 12 months ago. The husband of a friend of mine suddenly lost his job. He was not old—only in his fifties—but within 12 months he had died of a heart attack. One does not know whether that was directly due to his being unemployed, but it could not have helped.
According to The Scotsman article some time ago, Professor Harvey Brenner of the John Hopkins university, Baltimore, gathered statistical evidence in the United States which seemed to suggestthat when an industrialised society accumulates a million job losses over a five-year period the corresponding health cost is 217, 000 deaths and 63, 000 admissions to psychiatric hospitals.A report published early in 1981 showed that Professor Brenner's results were equally valid for England and Wales.
It stands to reason that the loss of job, career and status can lead tostress-related problems such as blood pressure and heart disease.The example which I cited from Newcastle upon Tyne is a case in point.
The article continues that in Scotlandthe harsher climate, and the traditional diet and drinking habitsmake the health implications of unemployment much more severe than they might be south of the Border.
Dr. Leonard Fagin of Claybury hospital, Essex, is reported in that article as saying:The spate of suicides and riots in unemployment-stricken towns had recently brought to the public's attention a feature of joblessness which had not figures in the minds of those that thought it would only have financial and probably minor social consequences.Dr. Fagin makes the point thatall members of a family can be affected by the job loss of the breadwinner.That is common knowledge to those of us who move among such people. Dr. Fagin also said:disabled people who lose their jobs tend to show serious and rapid decline"—of morale, health, and the rest.
Pressure has been brought to bear on the Home Secretary from inside and outside the House to use more 313 violent methods of dealing with the increased crime and vandalism which appear to be coming onto our streets and into the open. We do not know how far vandalism and crime are the direct result of enforced idleness, with the bitterness, hopelessness and anger which that engenders. The answer is not to "hang 'em and flog 'em" but to put them to work. That is the more sensible and humane answer.
The Government are deliberately hiding from public gaze as much information on these matters as they can. The facts are too embarrassing to be revealed so the public are kept in the dark. The brutal, fearful truth is that the figures which I have quoted will become much worse in the next two years, and probably for even longer, unless there are radical changes in the Government's policies. There are no signs of that yet. Time is running out. The problems are becoming intolerable—certainly for the people who have to bear them and for those of us who have to watch them.
§ Mr. John Golding (Newcastle-under-Lyme)
When I heard of this Supplementary Estimate of £420 million for supplementary benefit, I was deeply shocked.
One reason why I wish to speak in the debate is that I had hoped that it would be possible for the Select Committee on Employment to look at this additional outgoing, but it is a Vote which is proper to the Department of Health and Social Security and therefore to the Select Committee on Social Services.
I have taken an interest in supplementary benefit ever since I presented my first case at a tribunal more than 30 years ago—for my own mother. Since then, I have come to understand much of the feeling of people who are forced to draw supplementary benefit and who often—quite wrongly—feel that they lose dignity thereby.
As a young officer at the Ministry of National Insurance back in 1948, 1949 and 1950, I became able to put an age to people according to whether they referred to national assistance, as it then was, as "national assistance", "the parish" or "the poor law". One could date them by the way in which they described what is now known as supplementary benefit.
It is tragic that the Government have to ask for an additional £420 million. My guess is that most of it is due to the massive increase in unemployment, particularly long-term unemployment. Some of it may be attributed to the necessity to increase supplementary benefit for pensioners with fuel allowances and the like, but I assume that most of it is to support the unemployed.
I regret the necessity for that additional amount, first, because I believe that in this day and age it is wrong for unemployment benefit to be a short-term benefit. In previous decades, it was reasonable to regard it as a short-term benefit, restricted to 12 months, rather than as a long-term benefit such as a pension or invalidity allowance. it is quite wrong, however, to regard unemployment as short term when the Manpower Services Commission estimates that there will be 1 million long-term unemployed in 1982. Even if we confine ourselves to the period to which the Supplementary Estimate relates, the MSC has said that, in the 12 months to October 1981, the number of people out of work for more than a year doubled to 747, 000. We are therefore thinking in terms of between 750, 000 and 1 314 million long-term unemployed. In those circumstances, it is quite wrong to consider unemployment benefit as a short-term benefit.
There is no justification whatever for reducing the incomes of those who are forced to be unemployed, as millions now are, after 12 months. Certainly there is no justification for taking away a benefit which they regard as a right and which they have earned by paying contributions and putting them on supplementary benefit about which they often have very different feelings. I deplore the need for this additional £420 million because those moneys could have been spent more profitably for the Government, for the country, and, most important of all, for the unemployed, by ensuring that they received work experience or training after they had been unemployed for 12 months.
I cannot accept a society in which people are unemployed for such long periods. It is miserable enough to be unemployed for one, two, or three months. One has only to see the insecurity that that can produce in proud people to know that we must avoid it if possible. All research has shown that there is a tremendous demoralisation as the period of unemployment increases. There is a collapse of morale within the individual, and, unfortunately, a lessening of the employers' propensity to recruit people the longer that they have been unemployed.
Long-term unemployment is a total tragedy. l agree with my hon. Friend the Member for Fife, Central (Mr. Hamilton) that it is a tragedy not only for the individual but for the whole family. Long-term unemployment is a great curse.
Let me remind the House that we are now talking about a problem which, according to the Manpower Services Commission, will affect 1 million of our fellow citizens this year. It is no small problem. It is not a marginal problem. Long-term unemployment, together with youth unemployment, is one of the central social problems facing the House and the Government. Because of that, more attention should be paid to providing training and work experience for the long-term unemployed to restore their morale and confidence rather than the payment of supplementary benefit.
The Select Committee on Employment is diverse. It is an all-party Committee. Its members have differing political philosophies and views, one from another. However, it was the unanimous view of the Select Committee, on reading the corporate plan of the MSC and hearing the evidence given by its Chairman, that attention should once again be drawn to the level of provision for the long-term unemployed.
Bearing in mind the considerations that I have already outlined, the third report of the Select Committee stated that:providing training and work experience for the long-term unemployed should be a principal objective of the MSCAlthough I deplore the increase in unemployment, I should have been far happier if the Minister had asked for a Supplementary Estimate for increased provision on the MSC budget for the long-term unemployed rather than ask, as he has done, for the £420 million for supplementary benefit.
It is an important and valid point that a substantial proportion of that £420 million could have been avoided if provision had been made in other ways for the long-tern unemployed. That is why the Select Committee unanimously decided to recommend to the Secretary of 315 State that the Manpower Services Commission's request be met, that provision for the community enterprise programme in 1982–83 should be 60, 000 filled places instead of the 30, 000 provided by the Secretary of State.
The Government cannot rely merely on the payment of supplementary benefit to alleviate the plight of the long-term unemployed. There must be a better way. Supplementary benefit keeps individuals and families at a low economic level, and at an even lower psychological level. The Government do not realise the bitterness being created in our society because people are being forced to live on such benefits. During the past two or three years there has been a tremendous transformation in public thinking. At previous elections, Labour Members have been charged with encouraging layabouts and with encouraging people to live on social security. That charge is not heard today, because throughout the council estates and working class areas, generally, people have come to realise that they have not brought unemployment on themselves. It is far beyond their ability to cure it. Unemployment has been caused by a multiplicity of economic factors.
It is just not good enough for the Government to rely on the payment of supplementary benefit. They must act quickly not only to reduce the number of people unemployed and to minimise the impact of unemployment on our youth, but also tackle a major problem behind that figure, long-term adult unemployment. Until they act, we shall waste money while sitting back, washing our hands of the greatest social evil of our age.
§ 1.3 am
§ Mr. Bob Cryer (Keighley)
We are dealing with an additional expenditure on supplementary benefit of £420 million, under Class XII, Vote 2. However, nationally, the cost of unemployment is much higher. The additional expenditure that we are dealing with is due entirely to the Government's policies, which have caused the present tremendously high level of unemployment.
My hon. Friend the Member for Fife, Central (Mr. Hamilton) mentioned the Library research note, which points out that the total cost for 1981–82—assuming an average of 2.84 million unemployed—in £12, 477, 000, 000. That is made up of direct payments of unemployment benefit of £2, 004, 000, 000, supplementary benefit of £2 billion, loss of income tax of £4, 257, 000, 000, loss of national insurance contributions of £3, 280, 000, 000 and loss of indirect taxes, including VAT, at just under £1 billion, at £906, 000, 000. That is a massive cost. Of course, it is due directly to the Government's policies that we are dealing with this tonight. The great pity is that the Government are having to come for money to pay supplementary benefit because of their policies.
The cost is not simply in increased supplementary benefit payments. It is longer term. The reason for the payment of the supplementary benefit arises out of the sharp and savage decline in our manufacturing industry base. For example, the current issue of Economic Trends published by West Yorkshire metropolitan county council for February points out that the statistics are frightening, with the rapid erosion of the county's manufacturing 316 employment base from 330, 000 in June 1979 to an estimated 265, 000 in June 1981, a loss of one in five manufacturing jobs.
No wonder the Government have to come to the House for extra money for supplementary benefit payments. To quote a few examples of the industries that are so badly affected in West Yorkshire that they are in a difficult position to recover—
§ Mr. Deputy Speaker
Order. That would be going rather wide of this debate. It must be concerned with supplementary benefit. It has nothing to do' with the industries that have been affected.
§ Mr. Cryer
These payments are made not to Martians but to people in the form of supplementary benefit. At one time, before we had this rotten Government, these people worked in the chemical and allied products industry, in metal manufacturing, in engineering and in textiles and clothing.
The whole point of debating the issue is to see why the payment of the supplementary benefit is necessary. It is important to go just a little wider to point out that not only are we dealing with £420 million but that if something is not done, as my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) said, the supplementary benefit payments are going to get not smaller but bigger. The Government do not have any policy to deal with this problem. They express sorrow and sympathy, yet day after day they go to the Dispatch Box and announce policies which put more people on the dole and more people in the supplementary benefit queue, and they know it.
In passing, there has been a decline of 15.1 per cent. in chemicals and allied products, of 32.4 per cent. in metal manufacture, of 21.3 per cent. in engineering and of 32.2 per cent. in textiles and clothing. There has been a loss of 39, 000 jobs in the county's textile and clothing industries. That is why we are talking about supplementary benefit.
When a man or a woman has been unemployed for 12 months, unemployment benefit ceases and the person goes on to supplementary benefit. Manufacturing is the kernel of our development as a nation and the loss of jobs in the manufacturing and other sectors is crucial in regard to supplementary benefit.
The Government are in a vortex. They are cutting back on public expenditure, which is curbing jobs in both the public and private sectors, which in turn is causing them to pay larger sums in unemployment benefit and, of course, the concomitant supplementary benefit.
I should like to quote my constituency in passing, as an explanation. Between 1976 and 1979 there were a number of offers of regional selective assistance. The Government do not like that sort of public expenditure, so they are cutting back on Keighley as an intermediate area. Those offers created—according to Govenrment figures in answer to a question of mine on 2 March—
§ Mr. Deputy Speaker
Order. The hon. Gentleman is going miles wide of the debate, which has nothing to do with that subject.
§ Mr. Deputy Speaker
Order. That is as may be, but in this debate we are dealing with supplementary benefits. We cannot go wider than that.
§ Mr. Cryer
What I was saying, Mr. Deputy Speaker, was that between 1976 and 1979 regional expenditure in Keighley created 628 jobs. Those people in jobs would not require supplementary benefit. The Goverment are cutting back on that sort of regional expenditure, so they will face more expenditure of the sort that we are discussing. Between 1980 and 1981 they paid only modest sums, which created 139 jobs through regional selective assistance. It is much more important to create proper jobs than to keep propping things up with supplementary benefit as the Govenrment are doing.
I want to speak specifically about the cost in loss of dignity when people obtain supplementary benefit. When they go off unemployment benefit and on to supplementary benefit they must have a form from the employment office, which they take to the supplementary benefit office. Sometimes they are not given the correct form, so that at the Department of Health and Social Security office they are told that they must return to the employment office, which will sometimes tell them "We don't backdate the forms which you need in order to qualify for supplementary benefit at the DHSS office". In other words, the receipt of supplementary benefit is not always the easy matter that people sometimes describe or imagine.
When people are on supplementary benefit they would much prefer to be needed members of society, playing what they consider to be an important part in society. People's importance in society is recognised in a significant way by providing them with jobs. When they do not have work and are on supplementary benefit they also feel rejected.
What is worse is when the DHSS starts sending out letters to people on supplementary benefit, who are among the recipients of the sum that we are discussing. In Keighley there are 4, 000 people chasing about 80 jobs. One of my constituents produced to me a letter from the DHSS office at Worth House, Worth Way, Keighley, which said:Dear Sir or Madam,—it was duplicated, of course—We are concerned, as no doubt you are, about your continuing unemployment, and I should like to see you to discuss any difficulties you are having in finding work and whether we can help you in any way. Would you therefore call at the above address on"—then it gives the date and time.When you arrive please show this letter to the receptionist. If you have started work in the meantime please let me know on the enclosed form. Then there will be no need to keep the appointment.People feel rejected, and they go round in increasing desperation looking for jobs. They can tell stories about applying for 20, 30, 40, 50, 60 or 70 jobs. I have a constituent who has written after more than 60. He is not unique. Because they are in receipt of supplementary benefit they get a form from the DHSS which saysWe are concerned … about your continuing unemployment".It is a grotesque parody as if they have to scrutinise that massive portion of humanity because they somehow feel that there might be some dubiety about their obtaining supplementary benefit. There simply is no alternative; people are driven on to supplementary benefit by the Government's policy.
318 I wrote to the DHSS about this and received a helpful reply from the local manager. It says:Although the letters are prepared and issued locally, the wording is based on a national draft instruction as to the letters' content.It is a draft instruction that the DHSS is to harass those people who are already facing significant difficulties. The difficulty faced by people on supplementary benefit is illustrated in the annual report of the Electricity Consumers' Council for 1981. It shows that disconnections increased from 90, 936 in September, 1977 to 112, 071 in the year ended September 1981.
I do not want to criticise in any way the amount of money for supplementary benefit that we are arguing about. I want to see it increased. People often have difficulty in obtaining an adequate and proper amount of supplementary benefit. They are scrutinised extremely carefully by the officers of the DHSS.
I want to exempt my local DHSS office from any criticism arising from the letter I have described, because it is quite clear that they are acting on a national instruction. They probably do not want to exercise that sort of scrutiny because they recognise the sense of outrage felt by people who receive that letter.
§ Mr. Golding
Does my hon. Friend agree that it would be better to end the payment of supplementary benefit to those who are unemployed and to continue to pay them unemployment benefit after the 12 months is up?
§ Mr. Cryer
I entirely share the view of my hon. Friend the Member for Newcastle-upon-Lyme that unemployment is clearly a longer-term matter and the arbitrary cut off of 12 months' unemployment benefit was decided when it was easier to obtain a job. That clearly is not the case now and until we get a change of Government those circumstances are not likely to return. It would be far preferable for people to remain on unemployment benefit than to switch to supplementary benefit. It would help the many people who are perturbed to find that they are handed the wrong form and have to move between the Department of Employment and DHSS offices in order to have the matter sorted out.
I want to comment on the social cost of unemployment which is represented by supplementary benefit payments. There has been greater crime, and I have no doubt, as my hon. Friends have mentioned, that there will be a welling-up of feeling on the Government Benches for hanging, flogging, pulling toe nails out or anything onto which they can grip for an instant solution, when there simply is none.
Chief constables have been calling for firmer action. Earlier in today's proceedings, the Prime Minister denied any connection in the increased level of unemployment and the deprivation that people face, the very low levels of supplementary benefit payments on which people find it is a struggle to live, and the increased electricity, gas and water charges, all by virtue of Government direction and policy. The social consequences are that crime is likely to increase and that it is likely that there will be rioting on the streets.
One of the dangers of a large number of unemployed is that society can shift in a rightward direction such that people on the Right of the Conservative Party and beyond who pose instant solutions such as more prison sentences, and more dictatorial powers from the centre, will find support. What is needed from the Government is a change of policy. Payments of supplementary benefit should be 319 reduced not by the cut in benefits that the Government are intent on producing but by putting more people back to work. That is the policy needed to ensure that the House does not have to vote such large sums for supplementary benefit.
People should be provided with what the Government implied would happen in 1979 through their Saatchi & Saatchi posters and their statements. The Government stated that they would provide proper jobs for people. They dismissed Labour's job creation schemes as providing trick jobs. Now the Government depend more than ever on job creation schemes and supplementary benefit payments.
The Opposition want to see policies introduced that will provide proper jobs in manufacturing and service industries. This is the only course to follow if the country is to recover its economic prosperity. We cannot rely on the Government to fulfil that aim. We shall work together for the election of a Labour Government that will carry out the alternative economic strategy set out by the leadership of the party and the parliamentary party at the beginning of this week.
§ Mr. Andrew F. Bennett (Stockport, North)
I join in extending congratulations to my hon. Friend the Member for Fife, Central (Mr. Hamilton) on initiating this debate on the cost of unemployment. It is an important topic that should occupy much more of the time of the House than it does. I appreciate that in submitting his request for a debate on the Consolidated Fund (No. 2) Bill my hon. Friend had to ensure that the cost of unemployment was tied to one of the Vote headings, but it could, I believe, have been tied to about a dozen. I find puzzling the procedure that means the subject has to be tied to one heading.
It has been shown that the extra expense of supplementary benefits has triggered off a number of other costs. What is the total direct cost to the Government of the present level of unemployment? The Minister intervened during the speech of my hon. Friend the Member for Fife, Central to challenge some of his figures. The simple answer is for the Minister to say what the Treasury believes is the figure.
Hon. Members also wish to explore the composition of those drawing supplementary benefit. Are they people who have been out of work for a short or long period? What are the implications for future expenditure, and where should we apply most of our efforts to get people back into work? Should that be given to those out of work for a short or long time?
We must then ask how far this expenditure has triggered off extra costs to the Health Service, family distress, breakdowns and other costs, particularly to the personal social services. I also want to ask how far the fact that these people have been out of work and have had to draw benefits means that they have lost opportunities to gain new skills. People gain new skills in Britain from being in work. By carrying out jobs they learn new methods. I also want to ask questions about that aspect.
I go on to ask about the cost to the community in general and whether it was not a misuse of resources to pay people supplementary benefit, when they could have been doing much more useful work for the community. I finally 320 ask, because they have had to draw benefit, how far some of them have been provoked into crime. I certainly felt that the Prime Minister's words in the House this afternoon were profoundly depressing. I want to explore that aspect.
What is the full direct cost? It has been suggested that the total cost of unemployment is £14 billion. My Library brief states that there are problems if one tots up the cost—the estimates are provided by the Treasury—of an extra 100, 000 unemployed and merely multiplies that figure by the total number of unemployed. When the Minister replies, perhaps he can tell us what is the real cost of unemployment. I wonder whether he will go further and tell us what is the cost for an individual or an average family. His right hon. Friends have been pressed on several occasions, particularly during Treasury Questions, to tell the House what is the full cost of an unemployed individual.
§ Mr. Deputy Speaker
Order. If the Minister were to accede to that request he would be out of order, because we are not dealing with that in this debate. We must stick to the Supplementary Estimates that are the subject of the debate.
§ Mr. Bennett
As a result of spending this sum on supplementary benefit, what is the full cost to the Government? I thought that we were entitled to ask what cost had been triggered off by this sum. Many of these items are included in the Supplementary Estimates. The Minister would not be out of order if he answered this basic question: what is the full cost of someone being unemployed?
The Minister has said on many occasions that it is impossible for the Treasury to provide such a figure. It seems that the Treasury is very reluctant to provide it and it is amazing that the House of Commons Library can give an estimate of it. It takes as an example someone who first became unemployed in December 1979—a married man with two children—and gives his full cost to the Government as about £6, 006. Probably £346 would be the cost and supplementary benefit, income tax rebate £194, rent and rates £223, free school meals and welfare milk £114, unemployment benefit £2, 080—perhaps on the benefit side of the question—and, as lost revenue to the Government—a national insurance contribution of £1, 321, indirect tax £400 and income tax £1, 328. That gives a total of £6, 006.
I wish to know whether, as a result of that extra cost, we shall trigger off all those implications for the Government with the other benefits having to be paid out and the lost income. The question that the country wishes to have answered is: what is the full cost of unemployment? What are the results of what sounds like a relatively small amount being paid out in supplementary benefit?
If we are really talking about each unemployed individual drawing benefits, partly made up by supplementary benefit, of about £6, 000, why cannot we find more useful ways of employing that person? I could find many constituents who would be pleased to accept a wage of about £6, 000 and who would then be doing something much more useful than they are at the moment. For example, play leaders would not need much training. The number of people who are allowed to enter universities and colleges is being cut by the Government, and yet for much less than it costs to keep someone who 321 is out of work and married, with two children, one could be paying a student grant and the full university costs. That is clearly an area in which the money could be better spent.
Many more people could be employed in the hospitals in Stockport. With the deplorably low wages in hospitals, many people could be employed for the same amount as the Government are now paying out in benefits. Tragically, the home help service is being cut by the Government. Instead of having asked for extra money for supplementary benefit, the Government should have put into the Supplementary Estimates an extra sum to employ more people as home helps.
I could go on to make the point again and again. I do not wish to go much further with it, but I stress to the Government that, in their figures for the full cost of unemployment—not just the item that is before us tonight—the alternative employment of those people rather than the paying out of benefit would be extremely important.
A most depressing aspect of the increase in unemployment is not just that far more people are unemployed, but that many more people have been unemployed for a long time. Nearly 1 million people will have been out of work for 12 months. It is depressing to be out of work for a week or a fortnight, but when one gets to the point where one has been struggling to find work for 12 months it beomes appalling. But if, added to that, one does not have enough money, so that one is struggling all the time, the position becomes intolerable to many individuals.
That is the appalling aspect of the present benefit system. My hon. Friend the Member for Keighley (Mr. Cryer) suggested that the present benefit system was designed when people were normally out of work for a short time. Let us consider supplementary benefit. There is a short-term rate and a long-term rate. The short-term rate is based on the assumption that someone will be on it for a short time. One goes on to that rate having some reserves of household equipment and clothing, and needing only a sum of money to tide one over until a decent income can once again be earned.
The long-term rate assumes that the store of clothes and household equipment will start to run out and must be replaced. People must remain on the short-term rate for 12 months, and then they go on to the long-term rate, except those who are unemployed. Those people will be condemned to stay on the short-term rate for ever. They will be assumed never to need to replace clothing household items. That is appalling. If there is a floor level, a basic level at which people need to survive, with a short-term and a long-term benefit, we cannot say at the same time to one group of people, the unemployed, that they will never be allowed to get from the shot-term to the long-term rate. In other words, they will always be condemned to receive less from the State than the State recognises that they need if they are to be on benefits for a long time.
The Estimates should have had a bigger sum to ensure that people who have been on benefits for about six months could move from the short-term to the long-term rate.
§ Mr. Golding
Some of these points were made by my hon. Friend the Member for Keighley (Mr. Cryer). Would it not be better for this Estimate not to be there but for the unemployed to continue to be paid unemployment benefit? 322 It is not good enough to argue for more supplementary benefit. It is better to argue for more unemployment benefit.
§ Mr. Bennett
Unfortunately, the whole system of unemployment and supplementary benefits is complicated. I am sure that my hon. Friend is aware that many are drawing unemployment benefit who have to have a top-up from supplementary benefit to have the minimum that they require. The most important thing is to guarantee that people receive the money that they would be entitled to on the long-term supplementary benefit but cease to means-test it and simply say that that is the unemployment benefit. It should be paid to that individual as of right. It should be fixed at the present level of the long-term supplementary benefit. I accept that we must try to do something about this.
What is now the composition of the amount of money in the Supplementary Estimate? How much of it is made up from those who are drawing unemployment benefit, with a topping-up supplementary benefit, and how much of it is a purely supplementary benefit? In other words, how much is being paid to those whose unemployment benefit has run out and have to rely entirely on supplementary benefit?
The Government have to look at the measures that they are taking to ensure that those out of jobs for 12 months have at least an equal chance of getting employment as those out of work for a short time. I am told repeatedly by constituents who have gone after job after job that it becomes less and less likely that they will get a job the longer they are out of work. They find that the jobs go to those out of work for a short time.
Unfortunately, employers give preference to those who have worked last week or last month, rather than to someone who has not worked for 12 months. The Government must start thinking of ways by which they can discriminate in favour of ensuring jobs for those who have been out of work for a long time. Those are the ones who need the work, for their dignity and self-respect. It is extremely difficult to face up to applying for 80 or 90 jobs and to be turned down every time. These people have to apply for benefits and are often hauled in before a benefit officer and asked whether they are really trying.
I had a constituent who threw at me about 15 letters refusing him a job, because he wanted to express his bitterness. He was struggling to find a job but was being called in by a benefit officer and questioned on whether he was really making an effort. What will the Government do for those who have been out of work for 12 months, very nearly 1 million of them? What will they do for those who have been out of work for 18 months or two years, of whom there are almost a quarter of a million? Those are the people who need help from the Government.
How far do the costs of unemployment trigger off costs for the Health Service? It is difficult to show the effect that unemployment has on people's health. It is suggested that when people are out of work there is a decline in morale, which affects their health, and they are therefore more prone to illness. There is also evidence that higher unemployment has reduced sickness, because people in poor health seem to be those who lose their jobs first. Thus, the Government pay less sickness benefit. I hope that the Minister will tell us the true cost of unemployment to the Health Service.
323 What are the implications for pensions? Many of the people between the ages of 55 and 65 who are now out of work not only have to draw supplementary benefit now, but are denied the opportunity to have a decent income in old age. First, they cannot save on their supplementary benefit, although most people between the ages of 55 and 65 save for their old age. They may not want to put money in the bank, but they may want to buy household equipment, get the house decorated, and so on. They cannot do that in preparation for retirement.
Secondly, such people cannot contribute to the new earnings-related scheme for retirement pensioners. So not only do those people have to survive on supplementary benefit between the ages of 55 and 65 before drawing their pensions, but their pensions will be much lower than those of people who have been working and contributing to the new earnings-related scheme, and thus drawing pensions based on their earnings at retirement. The Governmnt should consider the implications for retired people.
Moreover, it is not just a matter of the pensions that those people will get when they retire at 65, because those pensions will stay with them for the rest of their lives. Thus, the pension rights of people who are out of work in the last four or five years of their working lives are affected for many years to come.
There are many other aspects that I could mention. I am concerned, for instance, about the strain on the family that is created by people who have to live on benefits. I wonder whether the Minister could get through a month on the amount that he would receive in benefits, without finding that it was harder to be polite to people and to prevent conflict and strain in a household. My constituents tell me about the matrimonial disputes that have resulted from the lack of income and the tensions that result from the loss of dignity at not having a job. The costs are considerable.
At the beginning of my speech I mentioned the loss of skills. For most people in work there is a constant process of learning new skills. It is particularly sad that people who are unemployed for long periods are out of the work environment and thus cannot learn new skills. New techniques and methods are regularly introduced in factories in my constituency, and people in work learn them. Even if they do not directly work on the new machinery, they pick up information about it. People out of work for long periods find that industry is passing them by, and when they apply for a job and are asked aout new techniques they know nothing about them.
The community loses because benefits have to be paid from everyone's taxes. There are other costs to local communities. For example, there is a great deal of difference between a shopkeeper who has in the area around his shop people who are in work and have reasonable levels of income and a shopkeeper who has around his shop people on benefits. In many instances that may make a difference between whether or not a local corner shop is viable. There is certainly a rapid knock-on effect for individual shopkeepers.
The Minister may be able to tell us what are the costs to the community in terms of loss of trade and loss of business of having people who are unemployed. There are many throughout the country who provide services to local communities who are concerned at the loss of income that 324 they have suffered as they have found that more and more of their potential customers are on benefits rather than on earned income.
The community loses by paying out supplementary benefit and the other costs of unemployment rather than employing people. If only some of those who are out of work from the building industry, for example, could be put into work, they would have the opportunity to create additional housing stock for the local community, which would be of considerable value in the immediate present and well into the future.
As for the costs of crime—
§ Mr. Bennett
It is difficult for someone who has been in receipt of supplementary benefit for a long time to put up with the continual pressures of the consumer society. They are told night after night as they watch their television that they should be greedy and that if they are successful persons they should be enjoying foreign holidays and many consumer goods.
§ Mr. Golding
Within the Supplementary Estimate there are sums for the payment of supplementary benefit to the families of convicted persons who are in prison. Therefore, the increase in the crime rate must relate to the Supplementary Estimate.
§ Mr. Bennett
I contend that it is extremely difficult for those who are living on minimum benefit levels to put up with the almost continual barrage of advertising from the consumer society that suggest that they should enjoy various consumer items. The vast majority avoid the temptation of crime, but it is not surprising that one or two find themselves firmly caught between what the Government are prepared to let them have in benefits and what the Government insist they watch by way of propaganda, thereby raising their expectations. It does not seem surprising that we have seen a rise in the crime rate. As my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) has suggested, the result of some convictions is extra supplementary benefit costs.
My hon. Friends are suggesting that the Government should produce a balance sheet that shows the cost of unemployment. It should tell us what is being paid out in supplementary benefit and what that is triggering off in other costs. If the Government gave the House and the country the true cost of one person being unemployed, there would be a clear realisation in the House and the country that the money could be far better spent on employing that person, giving him dignity and allowing him to make a major contribution to the community.
I challenge the Minister, either now or in the next week or so, to find a way of telling the House the full cost of unemployment and the implicatons for all the services that the Government provide. From that base we could move on to getting the Government committed to full employment and not to increasing the number who have to suffer the indignity of unemployment.
§ The Economic Secretary to the Treasury (Mr. Jock Bruce-Gardyne)
We have had a wide-ranging debate, and I shall do my best to answer the points raised without 325 running into too much trouble with you, Mr. Deputy Speaker. I fear that on some of the points this may be a matter of some complexity, but I shall do my best.
The main subject of the debate, properly raised by the hon. Member for Fife, Central (Mr. Hamilton), was the cost of unemployment. I intend to deal with that part of the debate in a moment, but first I shall try to deal briefly with some of the issues that arose on the way.
I do not thing that it advances the purposes of debate in this House for the hon. Member for Keighley (Mr. Cryer) to repeat once again that the level of unemployment and the Supplementary Estimate before us tonight in respect of supplementary benefit are a direct result of the Government's policies. On that basis, the 40 per cent. increase in the average level of unemployment that occurred under the Labour Government between 1964 and 1970 and the supplementary benefits that resulted therefrom were the responsibility of that Government. Equally, the 40 per cent. further increase in unemployment that occurred under the succeeding Government from 1970 to 1974 was their responsibility, and the 70 per cent. unemployment increase that occurred between 1974 and 1979 was the responsibility of the Government of which the hon. Gentleman was a member.
§ Mr. Bruce-Gardyne
Perhaps the hon. Gentleman will allow me to advance further into my argument. If need be, I shall give way to him in due course. It is not helpful to debate in this House to advance the sort of nonsense mentioned by the hon. Member for Keighley.
§ Mr. Cryer
I accept that the level of unemployment was too high under the Labour Government. The Minister may recall that I resigned when the Labour Government refused to support a workers' co-operative that was due to close, putting 700 people on the dole. Of course, that Labour Government were starting to reduce unemployment. My point is that during the 1979 general election the Conservative Party said that it had an answer to the level of unemployment at that time. It said so and implied so in its advertising campaign, and it has failed. In that respect it cheated the public, and it is reasonable for hon. Members to point that out.
§ Mr. Bruce-Gardyne
The point of the hon. Gentleman's argument that I heard was that this Government were directly responsible for the cost of unemployment represented by the supplementary benefits before us tonight. That was the point to which I thought it necessary to address my remarks.
The hon. Gentleman is right to say that in the last two years of the Labour Government the levels of unemployment were falling, but they were doing so when the levels of public expenditure were sharply reduced, not increased. After the intervention of the International Monetary Fund, which put the Labour Government on the rails, they reduced public expenditure which was accompanied by a reduction in unemployment. If I go further with that line of argument, I am sure that I shall be called to order.
The hon. Member for Stockport, North (Mr. Bennett) advanced a proposition which has been advocated both inside and outside the House. It needs correction tonight. The proposition is that the money spent on supplementary benefit for the unemployed would be better spent on 326 providing employment for the people who draw it. As a straightforward proposition that is unanswerable, but unfortunately the mathematics are not so simple.
I shall deal with other figures later, but on average the direct cost to the Government and the taxpayer of one person out of work is about £30 a week. If we assume that we could take into employment someone from the unemployment register at a wage of £90 a week—and that is not by any standards a princely wage—we should save the £30 a week in direct unemployment costs, we should recover £30 in tax and be left with a gap of £30. Thai is the problem. That gap would add to public expenditure, increase our need to borrow and raise the cost of interest, and we should remove from one quarter jobs which we were creating in another. I am afraid that the proposition, taken in its simplest form, does not stand up.
§ Mr. Andrew F. Bennett
The Minister gave the £30 example. What are the actual figures? The Treasury refuses to give the full costs. I said that the cost would be £6, 006—the Library estimate of what it would cost in 12 months for an unemployed married man with two children. For the Treasury to say that that figure is either true or wrong would advance the debate. Most of my constituents would settle for £6, 000 as a wage.
§ Mr. Bruce-Gardyne
The hon. Gentleman would do better to listen to the argument. I explained that I would come to precisely that argument later.
The hon. Member for Newcastle-under-Lyme (Mr. Golding) made a number of important points. I do not dispute the validity of some of his arguments. I hope that he will understand when I say, however, that, to a considerable extent, he raised matters on which it would be unwise of me to comment because they are matters for the Departments of Employment and Health and Social Security. I shall draw the hon. Gentleman's remarks to the attention of other Ministers.
The hon. Gentleman emphasised that it would be so much better if the money currently spent on supplementary benefit were used for the provision of work experience and training. I think he will understand that we have substantially increased the sums available for these purposes.
There is, however, a related point to which we should pay particular attention in discussing these matters. My right hon. and learned Friend drew attention to it in his Budget speech, when he said:Somewhere in the gap between the levels of income which we pay to those out of work and the earnings enjoyed by those who have a job are rates of pay which those now out of work would be glad to take if they had the chance."—[Official Report, 9 March 1982; Vol. 19, c. 731.]This is one of the crucial difficulties that we face. For a variety of reasons which would run wide of the debate, in many sectors we have raised the level of wages above the market clearing rate. I suspect that that is one of the reasons for the appalling increase in unemployment in recent years. If we could get into the gap to which my right hon. and learned Friend referred, I think that we should be moving to some extent in the direction to which the hon. Gentleman referred. That is precisely what the community work scheme is designed to try to achieve.
I entirely recognise the validity of some of the hon. Gentleman's arguments and shall certainly bring them to the attention of my right hon. and hon. Friends.
I turn to what has been the basis and the core of this debate initiated by the hon. Member for Fife, Central. I 327 apologise for interrupting him in his opening remarks, but I was somewhat bemused by what he said about the figures that he had obtained from the House of Commons research division.
I have now obtained a copy of the note to which the hon. Gentleman referred. I must say that I am a little astonished at the format that the research division has used. It quotes a figure, which the hon. Gentleman also quoted, which it simply attributes to the Treasury. One has to dig around to discover that it refers not to a Treasury figure but to a report which appeared in The Times. I must say that I find it rather deplorable that the research division of the House of Commons should present statistics in such a misleading way.
§ Mr. William Hamilton
I think that the Minister should be careful about what he says. I do not think that that interpretation can be put on the document. The House of Commons Library is very careful about these things. The document makes it fairly clear that the figures attributed to the Treasury are contained in Treasury economic progress reports. It makes it clear on page 2, after the diagram showing the three estimates—of the Treasury, the Institute of Fiscal Studies and the Manpower Services Commission.
§ Mr. Bruce-Gardyne
; The document that I have in front of me refers to the economic progress report of February 1981, and I will come to that in a moment. However, it builds upon figures which, it transpires, are drawn not from the Treasury but from an article in The Times. I take exception to the way that the statistics in this research note are presented as coming from the Treasury. To put it gently, that is a very slack way of presenting those statistics. [Interruption.] If the hon. Member for Stockport, North will possess himself for a moment he may learn something.
The hon. Member for Fife, Central referred to an article in The Times on 18 February which announced:Ministers have suppressed publication of official estimates which show that the cost to the Government of each extra person unemployed is now £5, 000 a year".Ministers have suppressed no such figure. As the hon. Gentleman knows, what happened was that estimates were given in the February 1981 issue of the economic progress report based on detailed assumptions for one particular type of unemployed person, extrapolating that on the basis of an additional 100, 000 unemployed people who had those characteristics. On that basis, an estimate was given of the aggregate additional cost at that time. Of course, that was based on assumptions, as any calculation of that kind is bound to be based.
It is true, and it will come as no surprise to the hon. Gentleman or to the House, that the Treasury constantly tries to update and to refine such figures. The Times appears to have obtained a copy of one such updating. The problem with all such calculations is that they are subject to a wide range of interpretations and to a large number of variables.
328 How could it be possible even remotely to estimate the additional cost to the National Health Service of unemployment? I readily concede that the shock of unemployment can affect an individual's health. However, can the additional cost of unemployment to the Health Service be quantified and distinguished from other costs? I regret that the answer is obviously and transparently "No, it cannot".
Even when one considers the more closely related cost, the estimate that can be put on the indirect tax that somebody previously employed might have paid—which because of their becoming unemployed they would not pay any longer—are pure guesstimates. They are inevitably worth no more than that.
The hon. Member for Fife, Central very fairly warned the House against falling into the trap of multiplying the cost of an additional 100, 000 unemployed by the total number in receipt of unemployment benefit. Unfortunately, the MSC fell headlong into that trap. The figure that it quoted, which has been cited by several hon. Members, is reconcilable only with the proposition that we could eliminate unemployment. Hon. Members may not have fallen into that trap, but it is extraordinary that a body such as the MSC should have fallen head over heels into it. The Institute of Fiscal Studies nearly did the same.
The best and only reliable figure that we can give—it will not satisfy Opposition Members—was given in response to a question asked by my hon. Friend the Member for Macclesfield (Mr. Winterton) on 18 November 1981. The total additional cost in 1981–82 of an extra 100, 000 on the unemployment register was £165 million, or £1, 650 per annum for each additional registered unemployed person. That is only the direct cost of supplementary benefit, rent and rate rebates and the immediate costs that are quantifiable and clearly and specifically identifiable. However, that is the only wholly reliable figure that we can give.
Some hon. Members have asked for some remarkably wide definitions of cost. However, with the best will in the world, the wider one goes, the more imponderable the figures become. Ultimately, I very much agree with those hon. Members who have emphasised that the important point is the replacement of the cost of supplementary benefit as involved in the Supplementary Estimate with the generation of long-term employment. That is the purpose to which the Budget was dedicated.
§ Question put and agreed to.
§ Bill accordingly read a Second time and committed to a Committee of the whole House; immediately considered in Committee.
§ Clauses 1 to 3 agreed to.
§ Bill reported, without amendment.
§ Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 93 (Consolidated Fund Bills) and agreed to.
§ Bill accordingly read the Third time and passed.