HC Deb 19 April 1983 vol 41 cc148-9
5. Mr. Hardy

asked the Secretary of State for Social Services in how many cases applicants for benefit have been required to surrender insurance policies.

The Under-Secretary of State for Health and Social Security (Mr. Tony Newton)

Since no one can be required to surrender an insruance policy, I assume the hon. Member has in mind the number of people who may have decided to do so in order to qualify for benefit subsequently. We have no information on this, but the indications are that very few people have been excluded from benefit by virtue of holding insurance policies.

Mr. Hardy

Is the Minister aware that the risk of substantial loss resulting from the virtually compulsory surrender of insurance policies has led to widespread anxiety? Does the Minister agree that the concessions that have recently been announced, because an election may be approaching, have not been sufficient either to relieve anxiety or to reduce the penalty for thrift or misfortune?

Mr. Newton

The hon. Gentleman is slightly overstating his case. Only people with an insurance policy whose surrender value was above the capital limit, which is at present more than £2,500, would have to surrender it, as distinct from running down the rest of their capital. The figure from next November will be £4,500. That is a useful, sensible and balanced improvement.

Mr. R. C. Mitchell

Is the Minister aware that the Prime Minister keeps telling the House how much thrift should be encouraged, and does not this legislation do exactly the opposite and discourage thrift?

Mr. Newton

Any capital rule can be said to discourage thrift. Many insurance policies are used as a form of saving, which is not as readily distinguishable from other forms of saving as some hon. Members suggest. The £1,500 special exemption figure is a reasonable balance to draw.

Mr. Foster

The Minister knows that we welcome the concession in the Budget, but he could have eliminated the problem completely at very little cost, yet failed to do so. What will the Minister do about redundancy payments? The Government have got rid of the earnings-related supplement and are now taxing benefits. However, does he agree that something should be done about redundancy payments? Do not the unemployed suffer sufficiently without this type of indignity?

Mr. Newton

By next November the capital cut-off figure will have risen by 50 per cent. in only 12 months. That is a significant help to those with redundancy payments. The difficulty of distinguishing between redundancy payments and savings, except at the instant when the payment is made, would be insuperable.