§ Mr. Peter Temple-Morris (Leominster)It gives me great pleasure, even at this somewhat unenlivening hour, to open what the House might consider to be one of the more important debates to be heard during the long night that we are now enjoying. I welcome my hon. and learned Friend the Minister for Health, who is as alert as ever and ready to answer all queries that are put to him from both sides of the House. The House might be somewhat confused to see me, someone who in House of Commons terms devotes his time increasingly to foreign affairs, suddenly materialise in a puff of nocturnal smoke to open a debate on social services. All I can say is that the procedures of the House never cease to surprise me, although I have been here for some time. When a few weeks ago those procedures materialised in the shape of my hon. Friend the Member for Kensington (Sir B. Rhys Williams) who wished to propose this subject, I, recognising as do hon. Members on both sides of the House his great interest in this important subject, added my name to a piece of paper and it was first out of the hat. That explains my presence here. I am pleased to be here.
It will not surprise you, Mr. Deputy Speaker, or my hon. Friends to hear that I do not propose to say anything startling. I shall leave that to the experts whose ardour matches the hour and will follow me after I have set the scene, which is the most important thing that I can do.
Applying an amateur but, I hope, realistic eye, I should perhaps first define the social services. It is not possible to have a debate on the financing of the social services without involving the full umbrella of the responsibilities of the Department for Health and Social Security. I regard the National Health Service as the first entity, personal social services, the local authority role, joint funding and the rest as the second and social security—which is the most important in terms of cost—as the third.
We are dealing with a vast amount of public expenditure. The social services cost no less than 44 per cent. of public expenditure. That translates, so The Times this morning tells us, to about £51 billion out of a total estimated expenditure next year of £126.4 billion. That is a staggering sum of money, and no less than £36 billion of it is spent on social security.
In that regard we are dealing primarily with pensions. I understand that the Government are committed to protecting pensions against prices. An even larger part of that £36 billion is spent on unemployment benefit. On that I simply say, "So far, so good".
I do not wish to embarrass anyone, but there was a slight hiccup which perturbed many hon. Members during the previous Parliament. I refer to the 5 per cent. abatement of unemployment benefit. That was put right earlier this year. Perhaps I shall preserve my amateur status if I say that I had strong feelings about that—so much so that they carried me into the Lobby against the Government and into one of several agonising talks with my right hon. Friend the Minister of Agriculture, Fisheries and Food, who was then the Chief Whip.
Running parallel with the enormous sums of money that I have mentioned are a series of terribly difficult decisions for the future. I respect those who have to take those decisions. However, I invite them to bear in mind that, whatever decision is made this year and the years ahead, 930 it is not enough to demand increases all the time. Someone must pay for them. We have to earn everything that we give to those in need. Someone always has to pay, and we must never forget that. The more our country earns, the more it can afford in that regard.
The other side of the coin is that, in assessing such issues, there must be a serious — if not obvious —reluctance to cut assistance to the less well off. It is a tribute to the Government and to the British people that so far we have carried a high level of unemployment remarkably well. We have won an election with no fewer than 3.5 million unemployed. That is a new reality. It would have been unheard of 10 years ago. Above all, we won that election because we looked after the unemployed. That is most important. There may be higher unemployment in the forseeable future, but we hope that reductions will occur. However, with advanced technology and the world problems that we face, one does not need to be a genius to foresee that there may be higher unemployment. That being so, we have a serious duty to care. That caring mentality is a vital part of this Government's political image.
I shall address myself, first, to the National Health Service. The debate would be empty without mention of the Government's achievement. I dare say that my hon. and learned Friend may touch on it, but it is for Back Benchers to salute the Government's achievement in overall expenditure on the NHS. We are all familiar with the figures. My hon. Friends and I mentioned them during the election campaign, and we have heard them again since then. However, they will forgive me for mentioning that the increase in total expenditure on the NHS has increased from £7.75 billion in 1978–79 to £15.5 billion in 1983–84, and that there are many more nurses, midwives, doctors and dentists. I shall spare my hon. Friends the figures, as I am sure that they know them by heart, just as I do.
The thing that worries us all is the danger of the bottomless pit. The more we give, the more people rightly expect. The more that we advance medically, the more treatments and drugs that can be offered, the more patients can be treated, and so on. But, at the end of the day, we can provide only what the nation can afford.
I congratulate the Government on the follow-through to the February 1983 circular and on testing the cost effectiveness of the cleaning, laundry and catering services. I understand that possible savings of about £800 million are involved, which will be used for patient care. Such matters are not easy, and obviously the unions involved are very disturbed. Like me, other hon. Members probably encountered NHS employees during the election campaign who were extremely anxious. Nevertheless, the Government should press ahead firmly.
Partnership with the private sector is an important aspect of Government policy. Nowadays, 4 million people, including many trade unionists, are covered by private insurance. They have sensibly been introduced to it by their unions, and they are very welcome. There is nothing to be ashamed about. Rather, it is a matter for rejoicing. The more private care that is supplied, the freer the public sector is to provide for those who remain in the greatest need. Pay beds provide an income of £52.5 million, which goes straight into the NHS.
In nursing homes for the elderly, well over half of the total number of beds are in the private sector. The use of those beds frees much-needed beds in the public sector. 931 We must encourage this partnership. I know that there has been recent legislation, but we should also take careful control of the licensing requirements for those who take care of the elderly, not only in nursing homes, but, perhaps more importantly, in rest homes.
An enormous challenge for the future, which engulfs both the private and the public sectors, is the care of the elderly. In terms of increased expenditure and demand, this will be a matter of all hands on deck. It is an enormous growth area. In 2001 there will be 493,000 more people aged over 75 and 288,000 more people aged over 85 who will need increasing care and services. That may cause great anxiety to those who address their minds to the subject.
I shall say a few words about care in the community, following the 1981 consultative document, and the importance of joint funding between the Department of Health and Social Security and local government. That vital development should be encouraged. I wish that it did not have to be encouraged, because this money is spent in the same cause, as it leads to problems, the most obvious of which is the possible conflict between two budgets with different priorities.
We are dealing with two great Departments of state —the DHSS and the Department of the Environment. There are also difficulties in the balance between central and local government. Although many councils wish to commit funds to jointly funded projects, they may not be able to do so because of local or national priorities, or a combination of both. That is becoming an increasing problem. Authorities enter jointly funded projects, but, for one reason or another, local economies take place. That will happen increasingly in the years ahead.
There are difficulties with the taking up of revenue costs. After necessary expenditure on a given project is taken up — I am aware that we are dealing with a graduated take-up of seven years or however long it may be, but seven years is a long time—it is a considerable strain on local authorities. That must be borne in mind, as must changed circumstances.
As an example, in my county—I do not ask my hon. and learned Friend to reply to it now, although I dare say that he is familiar with it — we have the Worcester development project, which is a pilot project to put the mentally ill into the community. That was financially dependent on the sale of a former site, Powick hospital. The sale has not been achieved, and the take-up of revenue costs has been altered.
No hon. Member would permit me not to mention and congratulate all those who, by their voluntary effort, help in all those areas. I welcome the Government's support, not least in the form of tax advantages in the 1980 and 1983 Budgets.
We must care for pensioners and the unemployed. The main success of the Government, and central to their economic strategy, has been the lowering of inflation. This will increasingly be seen as an enormous help in dealing with all these matters.
It has been a pleasure for me to open this important debate on this vital subject. I hope that we find enough money for the necessary projects.
§ Mr. Tony Favell (Stockport)This [s a maiden speech, which I did not expect to be making at this hour. My constituency is formed from two former constituencies 932 —Stockport, North and Stockport, South. Stockport, South was represented by Tom McNally, who was well thought of. Throughout the campaign I heard nothing but good said about him, and I wish him well. Stockport, North was represented by the hon. Member for Denton and Reddish (Mr. Bennett), who sits on the Labour Benches. I am glad that he has made me welcome. I have been made welcome also by other Members within the metropolitan district of Stockport—my hon. Friends the Members for Cheadle (Mr. Normanton) and for Hazel Grove (Mr. Arnold)—and I am grateful to them.
Stockport is a fine town in the north-west which I am proud to represent. It is ideally placed between the industrial and commercial centres of the north-west region and the magnificent countryside of the Pennines. It has first-class communications, being less than 10 miles from Manchester international airport and the motorway system takes drivers literally within yards of what is regarded as one of the finest—if not the finest—shopping areas in the Greater Manchester area.
Over the years Stockport has diversified from cotton into high technology industries—engineering, plastics, foodstuffs and printing. This diversification has meant that there are far fewer unemployed in Stockport than in almost any other town in the north-west. Having adapted to modern-day needs, it looks forward to the future with confidence.
Unfortunately, the social security has not adapted at the same time. I feel that we have spent far too much time wondering about where extra money is to come from and far too little about making it more efficient. If we had thought about how we could save on the cost of distribution, we should have more to spend on the poor, the sick and the old.
Savings have been made. A great start has been made recently with the new sick pay scheme, which, it is estimated, will save about 3,000 Civil Service jobs, for which the Government are to be highly commended. The new housing benefit scheme may save 700 or 800 lobs. I suggest that far greater savings could be made if we were to invoke a sensible tax credit scheme. No doubt, we shall soon hear my hon. Friend the Member for Kensington (Sir B. Rhys Williams) outline that scheme, and therefore I shall not go into it in great length but I wish to make a number of points. First, the scheme would combine the PAYE and social security schemes. Secondly, it would take hundreds of thousands, perhaps millions, of people off supplementary benefit. Thirdly, it would largely remove the need for family income supplement. When the proposal for a tax credit scheme was introduced in a Green Paper in 1972, it was estimated that eventually between 10,000 and 15,000 Civil Service jobs would be saved.
Our welfare benefit system is now even more complicated, and I suggest that the number of jobs saved would now be nearer to 15,000 than to 10,000. This will mean not just 10,000 salaries saved but a saving in the offices and equipment used by those civil servants. The savings on administration could run into hundreds of millions of pounds. The change would not be easy, but the long-term benefit would be enormous.
The elimination of family income supplement alone would greatly reduce man hours on, for example, the calculation of fares to hospitals, free school meals, dental and optical treatment, free prescriptions, and milk and vitamins for pregnant mothers.
933 I commend to the House the Green Paper published in 1972 by the then Chancellor of the Exchequer and the Secretary of State for Social Services, which said:
A system of tax credits would simplify the tax system and its administration, saving many thousands of civil service posts. It would increase the incomes of many who are hard-pressed. It would do so without the need for a means test. It would rationalise the system of family support. It would reduce reliance on supplementary benefit and would largely remove the need for a FIS scheme. And, given the will, it could achieve this at a cost that could be managed. The Government therefore commend the proposals as being the best approach to a solution of the problems of the tax and social security systems.Those problems are still with us. They are worse now than they were then. I commend that scheme. It is as valid today as it was then.
§ Sir Brandon Rhys Williams (Kensington)I am particularly happy to follow my hon. Friend the Member for Stockport (Mr. Favell), who made a notable maiden speech which I hope will attract the attention that it deserves. I am naturally delighted that he should be campaigning on behalf of a subject for which I have myself campaigned for many years. He did so with style, knowledge and assurance. I am sure that all hon. Members who heard him, and many others who will read his speech, will look forward to his next contribution. I hope that he will continue to fight on this subject.
I should also like to express my thanks to my hon. Friend the Member for Leominster (Mr. Temple-Morris) who has been taking an increased interest in the subject. He did not expect that he would have the privilege of opening a three-hour debate at this difficult hour, but he rose to the challenge in a way that I appreciated. I hope that the Department has taken particular note of what he said about the National Health Service, which I do not intend to deal with.
The financing of the social services raises immediately the question that I have asked on previous occasions: who is paying what, to whom and why? I feel that the Chancellor should publish his accounts in a new form. It is a proposal which has been recommended in a recent leader in The Times and I believe has significant support in the Treasury. It is a matter upon which I hope my right hon. Friend the Chancellor of the Exchequer will take the initiative.
I should like my right hon. Friend to make a clear distinction between the Government's spending on current account, showing where the money comes from; the Government's spending on capital account and where the capital is raised; and the transfer account by which the Government churn money round but do not spend it.
I received a disappointing parliamentary answer today from the Chancellor in reply to a question, when I suggested that he might publish information and tables showing Government expenditure under those three headings. He referred me to an article in Economic Trends in 1981, which merely analyses data from the family expenditure survey and does not attempt to deal with the information that the Government must have as to what they are doing about the redistribution of income.
My view is that it is important not to speak of pensions, child benefit, unemployment insurance and the rest as Government expenditure in the sloppy way that we do, 934 because the Government do not spend that money. The pensioners, the mothers or the unemployed spend it at their own discretion. That money is not, properly speaking, Government expenditure, but the way in which the Government draw the money out of the system and hand it back can create significant effects on the propensity to work, to consume and to save. This is an aspect of the Government's intervention in the working of the economy that the House should study. We should be given more accurate and precise data on which to base our examination of what is happening. I suggest that if the information were published on the lines that I have recommended, it would be just as interesting and important for Ministers as it would be for Back Benchers on both sides of the House.
It is a commonplace, as we all have to admit, that the economy is in bad balance. We are consuming too much —particularly imports—and we are producing too little. We are saving too little, adapting too slowly, giving too much effort, particularly in the public sector, to repeating old routines, and not giving enough attention to innovation. The way in which we operate the support system for incomes accentuates all these faults in the economy. The redistribution of income industry, which must occupy hundreds of thousands of people, is as much in need of drastic overhaul, modernisation and slimming down as any of the long-established industries in the private sector, and any of the public industries, such as steel, which have been shown in recent years to be grossly overmanned and obsolete by exposure to the forces of competition.
However, there are no effective powers of competition to the redistribution of income industry. It operates according to its own rules, to a great extent, and we cannot examine its efficiency by comparison with similar industries in other countries. There has been some revival of the private sector as a form of competition, but it is partial and incomplete. We need the opportunity to make a real examination. A situation has now arisen which is sure to draw the attention of the House to the operation of the redistribution of income. We know that the Government are looking for ways of saving a large sum of public expenditure, and it seems that the social services are under attack.
I shall take an example to illustrate the point that I am making. It may be a fanciful one, but it makes my point. Let us imagine that 100 people, more or less at random, were chosen to stand in a circle and that each was asked to hand £1 to the person standing on their right. When they saw the object of the game, they would probably be quite willing to do so, because they would see that nobody was suffering and everybody would gain as much as they lost.
Having done it once, we might persuade those same people to do it with £10. They would probably agree if they had the money on them. We might even ask them to do it with £100, which would create a few more difficulties, but it might be possible to imagine a redistribution cycle in which everybody was benefiting in the same way as everybody else.
Let us imagine what would happen if we said to this group of people instead that we wanted to start on a different basis—that we wanted some of them to put £1 in the hands of the man on their right, some of them £10, some £100 and others nothing. The game would soon 935 break down, and there would be chaos. That is a little image of the redistribution of income as we are now conducting it.
We have lost sight of the principles. People do not know who is paying what, to whom and why. Unless the Government can provide an acceptable and rational explanation for why some of us part with money, others receive money and the majority do both simultaneously —for example, taxpayers who receive child benefit—there will be increasing friction and resentment about what the Government are doing. We must have clarity as to the Government's intentions. We must clear away the years of obscurity that have made it almost impossible for members of the public—or hon. Members of this House — to discern what is actually happening about the financing of the social services.
The social services have turned into something like a bran tub with prizes for the people who are roughest, reach furthest or work longest to extract the benefits. On the other hand, taxation has become for almost everybody an imposition which is seen to be unfair and felt to be essentially and deeply unjust. Socially and politically, those are two extremely bad developments. Everyone thinks that he is paying too much tax and that others are not paying the taxes that they ought to pay. That causes resentment in itself. At the same time, many people think that others are gaining too much in benefits and that too much money is spent on welfare. That also causes resentment. Our comprehension of what the Government are doing has been clouded, and the result has been extremely disadvantageous and disruptive to the unity of society.
When the Government start to tinker with this unhappy system, which we reluctantly accept and mostly criticise, there are outbursts of intense opposition. Such resentment leads to worse dangers of tax evasion and social security frauds, which are becoming increasingly widespread and socially acceptable. I implore my right hon. Friends to publish the figures showing how expenditure on income support has grown, how it may grow in future and what the Govermnent's intensions really are. They must make clear the basis on which public money is allocated between one citizen and other.
I hope that the Minister shares my view that a clear statement of intention is needed from the Government so that the public can understand how the Government intend to deal with the redistribution of income.
I would like to touch briefly on the principles by which money can be redistributed, so that we can see what we are aiming to finance, what the Government are trying to pay for and where savings can be made. We could have a universal system of benefit, such as child benefit, which relates to citizenship. I was delighted to hear my right hon. and learned Friend the former Chancellor of the Exchequer in his Budget speech a few weeks ago say that child benefit was a keystone in the Government's policy. I felt that that must be the position, but it was good to hear him affirm it.
The concept of insurance was another great innovation that was brought into the finances of the social services at about the turn of the century. The idea is that one is entitled to receive benefits not because of need but on the strength of contributions made over the course of time. That concept has entitled people to receive benefits at certain phases in their life-cycle without proof of need. The insurance concept was a great step forward when it 936 was introduced, and it is tragic that it has broken down. We still have the trappings of an insurance system, and important benefits such as unemployment benefit, are paid with deference to the insurance principle. Unfortunately, the scope for that is rapidly diminishing.
Going back still further, William Pitt introduced a kind of secret or negative welfare state into the tax system. As long ago as 1798, the proposal for the introduction of income tax embodied the idea of child benefit. Pitt was so far sighted that he included in the tax system from the outset the concept that a man with children to support must be allowed to bear a smaller tax burden than a man without such family responsibilities. That was, as it were, a left-handed way of redistributing income by diminishing the liability to contribute to income tax for those who were felt to have the larger obligations.
Even further back, the Elizabethan poor law was based on the principle of giving selective assistance to those established as being in need.
We still operate all those systems, but in a muddled way. A large element of relief of need is based on the Elizabethan poor law principle. We have an income tax system which has been partially cleaned up in gradual pursuit of the idea of a tax credit scheme but which still has very large negative allowances; a national insurance system which is tottering but is still maintained as a kind of magic formula by the Government; and we have a universal child benefit in place of the family allowance, together with some other examples in which the principle of universality has been accepted. Thus, in financing the social services the Government are applying four completely different principles evolved over time, but they are not declaring their hand as to which is to be the basis for redistribution of income in the future.
I said that the insurance principle had failed. I shall say a little more about that, although it is a subject on which my views are well known to the House. It was a fine idea that flat rate contributions should finance flat rate benefits, albeit with a large element of Government subsidy. That was the original concept that inspired Winston Churchill and Lloyd George 70 or 80 years ago. Since then there has been enormous growth in the demand for income support, and I welcome that. The awakening of our social conscience to the need to support the destitute, the disadvantaged, the invalids and so on was right. The inevitable consequence of it, however, has been that flat rate contributions cannot possibly provide sufficient money, even when substantial elements of Government subsidy are introduced here, there and everywhere in the scheme.
A few years ago, the House recognised that flat-rate contributions for national insurance made no sense and had to be abandoned. We then went over to the principle of earnings-related national insurance contributions; but it was really no more than a farcical gesture to the insurance principle, as it now operates on a system totally unlike any other insurance principle and is not in fact an insurance principle at all. The national insurance system is financed out of income tax, but, to maintain the illusion, part of the money collected through PAYE is described as the national insurance contribution.
Many other aspects of the national insurance scheme prove that the time has come to wind it up at once to stop all the time wasting and the irritating, pettyfogging aspects of its operation, which no longer maintain the illusion of 937 independence for the beneficiaries and merely add to the inefficiency of the entire redistribution of income operation.
In the increasingly difficult economic circumstances of recent years, the Government have in practice returned to selectivity while retaining the trappings of insurance and maintaining the universal benefit system as far as it has gone. But where has that reversion to selectivity taken us? Many people who have studied the whole question, albeit rather superficially, have concluded that selective benefits are the correct answer, that they are intrinsically right and that subsequent developments in the principles of benefit have been wrong. They are so anxious to achieve a system where the finance of welfare is reduced to its bare minimum that they have shut their eyes to the consequences of selectivity.
Where has the reversion to the principle of selectivity brought us in recent years? We all know about the poverty trap—the inevitable consequence of applying benefits selectively. We all know about the "Why work?" syndrome. The facts are incontrovertible and often published, and there is no question but that large numbers of the population are affected.
There is also the problem that for many people there is no point in saving or joining an occupational pension scheme because, by the time they retire, if they have deprived themselves during their careers in order to save, they discover that they have simply excluded themselves from benefits which would be available to them immediately had they not saved or joined an occupational pension scheme.
More than 7 million people are now dependent on supplementary benefit. This scheme is therefore not just a safety net kept ready for a small fraction of the population which, for one reason or another, is not self-reliant and unable to look after itself. People who advocate selectivity envisage a Utopian society where almost everyone is self-reliant, able to look after himself, his wife and family, to save, to be independent and to owe nothing to the community. In this vision it is recognised that an element in the population will be unable to rise to such a level of self-reliance and will need help; but it is hoped that it will be small.
I have heard speeches from hon. Members explaining the difference between the deserving poor and the undeserving poor, as though both were small categories of need which could be dealt with without destroying the principle that the British population is basically self-reliant and independent. I reject that line of thought, because the facts make it impossible to accept such thinking.
Now that we have over 7 million on supplementary benefit, we have again created two nations—those in work and those in need. We cannot continue like this. The number of people on supplementary benefit is increasing. The Government's policies are increasing the number and we have no hope of arriving at a time when the number will be sharply reduced.
If my hon. and learned Friend the Minister for Health disagrees, perhaps he will say when he expects the number of people dependent on supplementary benefit to fall below 6 million, 5 million, 4 million, 3 million, 2 million and 1 million. Even 1 million people on supplementary benefit is infinitely more than we should be willing to tolerate in our society.
938 The aim of selectivity is to assist one of the Government's important aims — the reduction of the burden of taxation so that it is no longer a disincentive to work. Although the financing of selective benefits calls for a lower level of Government activity at the money raising end of the redistribution function, and therefore seems to assist the financing of the social services at minimum cost, it creates effects that are the precise opposite of the Government's much-praised and often-stated aims of hard work, thrift and self-reliance. Those aims are sacrificed while we persist with the policy of selective benefits.
Millions of people have been drawn into a humiliating dependency from which it is demonstrably fruitless to strive to release themselves. That should not be allowed to continue, and it must not be made worse by ill-considered Treasury pressure on the DHSS at the present time.
Can we cure the problems being created by the application of the selective principle? Can we apply it in a more subtle manner and so dispose of its disadvantages? Or do we have to reconcile ourselves to high rates of taxation of income to finance the social services? An effort is being made to raise the tax threshold so that at the point where people enter work again on low incomes or where people on low incomes have the opportunity of bettering themselves by obtaining a small increase in their earnings, the tax burden does not apply in such a way as to hamper or frustrate their interest in harder work.
There is a move to limit or even to cut the benefits of the unemployed, so that the gap can be increased in that way. We may also see the introduction of a national minimum wage, which would have the effect of raising the point at which people enter work, to achieve the concept of clear water between what people receive when they are out of work and what they receive in a full-time job.
I have studied the facts in considerable detail, and I believe that it is not possible to create clear water between what people receive when they are out of work and what they may earn when they re-enter employment, unless we take dramatic steps to make income tax yield more from the better off—even at lower basic rates of tax—at the same time as we lift the tax burden from the lower paid. We need a large yield from income tax, even if we arrange matters so that at the lower level of income the tax burden appears to be reduced.
To create that area of clear water we must do a number of other things, some of which are socially unacceptable. It will be necessary to end the favourable treatment of husband and wife who are both at work and have no dependants. I have advocated that for a long time. Few people would regard it as wrong if the Government were to tread that path; but it is not possible to find the necessary money to end the various tax disadvantages at the point where people at the low end of the scale have to be encouraged to save and to work, unless we also do other things that are not likely to be acceptable.
It will be necessary to end mortgage interest relief and the concessions to life insurance, which largely diminish the amount of the real yield from income tax. It will be necessary to cut the standards of living of the unemployed in a way that would cause serious social unrest. It will also be necessary to impose a national minimum wage at a level that would put many more people out of work. I hardly have to say more to convince the House that I do not favour the application of the principle of selectivity in financing the social services.
939 Of course, the principle can be applied — and is applied—in a half rate manner. For instance, a half rate selectivity exists in the administration of the family income supplement. As someone improves himself, if he is in receipt of family income supplement, there is a long delay before he loses his entitlement, and then he loses only 50 per cent. of his benefit. It is like a 50 per cent. tax, but it operates in such a way that, when he loses the benefit, it overlaps with entry into the income tax system. There is the simultaneous burden of the loss of benefit and the loss of earnings through tax. That system means, yet again, a return to the disincentive effect.
Should we aim to provide a social system which gives a basic income guarantee to every citizen? That is the ideal of universal benefit. In point of fact it is what we do at present. It is not so monstrous, because very few people in Britain fall below the minimum standards which we think it necessary for a citizen to have because the forms of relief which we offer fail to reach them. A regrettable number of people live below the supplementary benefit level for one reason or another, but we are, in a rough and ready manner, applying the principle of the basic income guarantee to every British citizen as best we can.
Let us suppose that the Government were to go over to a basic income guarantee or tax credit scheme as a matter of policy. There is no reason why it should be introduced in such a way as to add enormously to the burden of financing the social services. I have discussed this with my right hon. and hon. Friends, many of whom pay tribute to the idea of tax credit and agree that it is a Conservative party commitment, but they say that it is not possible to introduce it in today's circumstances because it would be too dear. They take the view that it must wait many years — at least until the computerisation of the existing PAYE system is completed. If a basic income guarantee system were introduced, the computerisation of PAYE would be superfluous, so I do not respect that argument.
The question is whether such a scheme would involve great cost. There is no reason why it should not be introduced in such a way as to leave most people where they are now on the static balance. From the dynamic view we must imagine what would happen in the economy after the reform had been achieved. I believe the results would be fruitful. There would be great advantages in terms of the Government's objectives, except in one respect. There would be more incentive to work, more incentive to save and a greater degree of self-reliance among citizens. They would all feel free to better themselves. There would be huge savings in casework and administration, and we would come back to the ideal of one nation in contribution and in benefit.
We would, on the other hand, be bound to accept a high marginal rate of income tax. The actual burden of income tax would not be increased, but the marginal rate of tax would have to be at least as high as it is now, taking into account national insurance contribution, the employer's contribution and the national insurance surcharge.
The Government have to face that problem. They have to make a choice between their incompatible objectives. It is a matter of balance whether they go for low taxes and low benefits or accept a higher rate of tax to finance a range of social services which is more in line with public expectations and demands.
If one wanted to over simplify, one could say that the Government have to make the choice between love and money. They must choose whether to look to the people 940 who want to take more out of the system for themselves or to pay attention to those who are willing to afford a generous level of transfer from those who have to those who need.
We must call on the Chancellor and other responsible Ministers to clarify the facts, to make known their principles, and then to let the public make the choice.
§ Mr. Andrew Rowe (Mid-Kent)I stand here for the first time as the somewhat improbable result of an enforced union between the old constituencies of Rochester and Chatham and Maidstone. My godfather was the Boundary Commission, which ordained that the new constituency of Mid-Kent should be created out of parts of the other two. I am both delighted and proud to be here to represent it.
Like all the new Members to whom I have spoken, I have been warmed by the kindness to us of right hon. and hon. Members, but few could have been more assiduous in their kindness than my two predecessors. It will be my earnest endeavour to try to ensure that the constituents they have bequeathed to me will not suffer any loss from the change.
I have always heard it said that this is a difficult place in which to speak, not least because one always finds that what one wanted to say has been better said before one rises to speak. I cannot believe that it can often happen to a maiden speaker that he is called upon to follow a speech of such profundity, originality and wisdom as that of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). If I find myself repeating in an inferior way some of those sentiments, I hope that I shall be forgiven.
I support the call for a fundamental change in the manner of financing the social services. As every Member knows, the potential demand for social services is infinite. Even if, as experience has taught us, the limits of what can be achieved by statutory services in the relief of misery are often disappointingly narrow, the optimism of compassion is reluctant to accept those limits and the temptation to try to create a "Ministry of Happiness" is one to which legislators and administrators are both prone. Yet the reality is that already the foreseeable demand outruns the foreseeable supply. We have a clear duty to consider the social services' budget this year, next year and to the end of the century and to find new ways of balancing the books. Otherwise, in a desperate attempt to make do and mend, to meet for example, the needs of the rapidly growing number of people in their eighties and nineties, we shall destroy all that we and our predecessors have tried to build.
All of us know that national insurance is not an insurance scheme. It is a pay-as-you-go taxation system. What is more, each time the employer's contribution is increased to pay for the services, more employees are dropped off the firm's payroll to add their claims to the pool. Everyone likewise knows that the eligibility system for benefits and services works in a way that penalises the principles of thrift and self-help which the Conservative party admires. "Unearned income" is a wicked phrase. It was coined by feckless and envious grasshoppers to give them an excuse to raid the larders of the frugal and conscientious ants who believed in setting something aside for their old age or against misfortune.
There is something obscene in a system which says, "Because you have frittered away every penny that you 941 have earned you can have at once this service or that benefit, while you who have put by some of your earnings must wait or get less."
During the five years that I worked in Conservative Central Office much time and creative energy was spent on trying to devise a better system of collecting for and dispensing social services. In the end it was judged to be too expensive in the short term to make the change, but I believe that we must return to that effort. Otherwise, we shall find that every company in Britain will have its standing charges increased inexorably year by year, just when they should be coming down if these companies are to have any chance of competing.
In addition, we shall find that the pensions which millions of British people have scraped to set aside will be worthless on redemption and the party which rightly claims to believe in "a many generation society" will have sold our grandchildren's future to pay for our parents' old age.
All that I have sought to do tonight is to assert the need for a radical reassessment of the financing of the social services. I know that many of my hon. Friends will assent to that call, but the constraints are numerous and the difficulties immense. I end by mentioning two.
It is essential that we experiment with new concepts in the financing of the welfare state. I found myself in great sympathy with the speech of my hon. Friend the Member for Kensington. I also believe, however, that the 13.9 per cent. of Mid-Kent's population who are old-age pensioners or the near 14 per cent. who are unemployed will not take kindly to the proposition that they should be the chief or, indeed, the only guinea pigs in that experimentation. The challenge is huge, but it is essential that we do not run away from it.
§ Mr. Timothy Yeo (Suffolk, South)It is my pleasant duty to congratulate my hon. Friend the Member for Mid-Kent (Mr. Rowe) on his fluent and constructive maiden speech. I do so as one who went through the same experience three weeks ago, and I regret that there are not more hon. Members present to hear my hon. Friend. However, I am sure that his remarks will be widely noted and that both sides of the House will look forward eagerly to his future, no doubt distinguished, contributions.
I welcome the debate, even though it is so thinly attended by a small band of insomniacs. I hope that I can stay awake for the next 10 minutes! It provides an opportunity for us to reiterate the absolute commitment of the Conservative party to the National Health Service and the social security system. I am sure that, like me, many of my hon. Friends spent much of the election campaign reiterating that commitment.
Our commitment extends to the basic principles underlying the way in which the NHS and social security benefits are financed. I am sure that there is agreement on both sides of the House that the primary source of finance for our social services must be taxation.
At the heart of Conservative party philosophy there has always been the recognition that the state must provide for those members of the community who are unable to provide for themselves. That recognition dates from long 942 before the existence of the Labour party and I believe that it will remain part of the Conservative Party's philosophy long after the Labour party has disappeared.
In reaffirming our commitment to state financing for the social services, we do not insist that that should be the only method of finance. It is also part of our philosophy that those who can afford to pay for services should be encouraged, if not forced, to pay for them. Just as we support the mixed economy, we support those who wish to make private medical provision. By doing so, they significantly reduce the burden on the state and the taxpayer. It is right that private medical insurance should be available to those who wish to pay for it, and it is directly in the interests of all NHS patients that that should be the case.
The picture in the social security system is more confused. I do not wish to trespass for too long on the ground so skilfully and professionally mapped out by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), but we accept the principle that benefits must be financed from statutory sources.
Despite that, there is the curious situation that a major part of the social security system has been based on the national insurance scheme and the contributory principle whih goes with it. The operation of that principle means that many of the most disadvantaged groups, such as single parents, disabled people and some categories of married women, are excluded. The need arises for other types of benefit, such as the non-contributory invalidity benefit, that meet the needs of those who have been unable to build up a contribution record to qualify for the national insurance benefits.
It is a myth to say that our social security system depends on national insurance contributions, because the non-contributory benefits are an essential and accepted part of the whole system. There are, therefore, strong grounds for saying that the system needs to be overhauled and replaced by a single and unified system of noncontributory benefits. In the medium-term, this would be simpler for those who are entitled to benefit, and we might achieve a higher percentage of claims because those working with, for example, disabled people appreciate how many potential beneficiaries do not claim entitlement either because they are not aware of them or they do not understand the system.
A system along these lines would be more convenient and cheaper to administer. And if it could be integrated within the tax system, a major step forward would have been taken. We would be going at least some way towards overcoming the present absurdity whereby people who are unemployed or earning less than the average wage face an effective marginal rate of tax, taking into account both taxation and loss of benefit, which can in some cases be much higher than those on very large incomes indeed. It is not good enough for administrators simply to say that such a revision of the system is not feasible because the advantages are clear. It is just a question of applying sufficient political will.
I echo the sentiments expressed by my hon. Friend the Member for Leominster (Mr. Temple-Morris) about unemployment benefit. I hope that we shall be spared any further agonising on this subject in future. There is strong feeling in all parts of the House about the importance of maintaining unemployment benefit in real terms for the large number of people who are in perhaps the most disadvantaged group of all.
943 The consideration of how to finance the social services cannot be divorced from how those services are delivered. We must continue to direct our efforts towards efficiency. There is still a great deal of persistent and widespread evidence of inefficiency and poor management in the NHS. There are still too many examples of large capital assets remaining in the hands of health authorities and not being utilised. A drive to dispose of surplus land and buildings is needed, for the sale of these assets could provide a major source of finance.
To quote from the recent and still topical example of the Tadworth Court children's hospital, a detailed study of the financial position of that hospital showed that about 15 per cent. of its revenue costs were capable of being generated by the interest on the proceeds from the sale of surplus assets around the hospital. I wonder how many other examples we should find if we carried out a similar financial analysis of the position of other hospitals? Think how many additional benefits could thereby be provided for the needy members of the community just by realising surplus assets. Those benefits could be provided without any additional cost on the taxpayer.
Reference was made to the Government's policy of care in the community and of joint funding. The care in the community policy has always had my support and that of most of the professional and voluntary organisations working in this area. But we must recognise that, if it is to be successful on a large scale, the policy of care in the community depends heavily on the ability of local authorities to provide and finance the supporting services in the community.
While joint funding is helpful, many local authorities are understandably concerned — it is true, to my knowledge, in Suffolk — about the eventual financial burden which may fall on them as they accept responsibility, especially, for example, for mentally handicapped people, who are one of the Government's declared priority groups. I hope that the Minister will go as far as he can in future in enabling revenue funding to be transferred from the health authorities to local authorities on a per capita basis for the mentally handicapped who are leaving the outmoded and unsuitable institutional environment of long-stay hospitals with the full support of the Government. The unsuitability of that environment was highlighted again only last week by disclosures in the press.
I do not suggest that voluntary organisations can step in to take over the functions of basic social security provision. We are agreed that that must remain the Government's responsibility. However, voluntary organisations in Britain have a long and distinguished tradition of innovation and experiment in social services. There are many benefits and practical provisions of care for both the elderly and the disabled which owe their origin to the voluntary organisations, and it is entirely right that that is so. The state is not well equipped to play the role of innovator. It is not equipped to do so by its decision-making mechanism, and there are proper constraints on the uses to which state funds can be put. But voluntary organisations, which are often run by the consumers of the social services, or by their families, are often in a better position to know what is needed by way of new services. They know what can be done because families do not take no for an answer. Those people are willing to risk their energies and devote their resources to proving that new 944 services can be innovated. This is a most effective form of innovation that is carried out by voluntary organisations at a minimal cost to the taxpayer.
We are in a period which by common consent is unlikely to see major growth in real terms of expenditure on the social services. That being so, it is all the more important that we make the most of the resources that we have. By allowing private provision for those who can afford it, by simplifying and unifying our system of benefits, by striving throughout for greater efficiency and a proper role for the voluntary sector, we can ensure that social services develop and prosper despite the limit that exists on total resources.
§ Mr. Derek Foster (Bishop Auckland)The hon. Member for Leominister (Mr. Temple-Morris) can hardly have expected the debate to be of such great quality when he initiated it, or that two maiden speeches would be delivered within it. They were maiden speakers of extremely high quality. I compliment the hon. Members for Stockport (Mr. Favell) and for Mid-Kent (Mr. Rowe) on their fluency, commitment and obvious knowledge and experience in these areas. We look forward to their contributions in the near future.
The hon. Member for Leominster said that he was an amateur in these matters. If that is true, thank God for the amateurs. He brought a tone of common sense to the debate, but that is not to pour scorn upon the professionals. We have had what has already been described as a profound and wise speech from the hon. Member for Kensington (Sir B. Rhys Williams). That can be expected from the hon. Gentleman's great knowledge and experience and his reflective and thoughtful contributions, for which we thank him.
It is right that we should have a debate on this subject now, even if it is early it the morning. No greater issue faces society and the Government. It faces all Governments and it is the acid test of the quality of our civilisation and the extent of our caring—a word that several hon. Members have used. It is important to examine what Governments do as well as to scrutinise their intentions.
The financing of the social services is a problem for all Governments as there are constraints on the Government's income. They are constrained by the extent to which people are prepared to pay taxes and rates, by the extent to which they achieve economic growth — successive Governments have not distinguished themselves in that respect recently—the extent to which they can borrow to fund the national debt and the extent to which they are prepared to levy charges for the services that are provided.
I should like to refer to the third special report of the Treasury and Civil Service Select Committee entitled, "The Structure of Personal Income Taxation and Income Support". It is an important document which covered some of the points that the hon. Member for Kensington covered. It says that, 35 years after its introduction, the national insurance system still does not prevent widespread dependence on means-tested benefits. For many of them, the rate of take-up is well below 100 per cent. Moreover, child benefit has not prevented the persistence of poverty among families and, in 1979, more than 6 million people were at or below supplementary benefit level. The report states more generally that there is widely held anxiety about the level of taxation on the 945 average wage earner and the way in which it has risen under successive Governments. It is not merely that the tax burden has risen overall; there has been a redistribution of that burden. Taxes have increased relatively more in the middle than at the top.
There is also a problem because of growth in demand. The demand for benefits and services has become almost insatiable. During 1971–81, the number of people of pensionable age increased by 10 per cent. whereas the general population increased by only 0.6 per cent. and pensioner households increased by 18 per cent. whereas others increased by only 10 per cent. In the same period, one-parent families increased by 71 per cent. That is the equivalent of 6 per cent. per annum. That is an enormous escalation in the demand for benefits and services. No doubt the Minister will correct me if I am wrong, but I understand that the National Health Service needs about a 1 per cent. per annum increase in expenditure to contain demographic growth. That would not provide for an improvement in the service.
It has recently been stated that the personal social services need something like a 2.5 per cent. growth per annum to achieve the same sort of objective.
In society at large we have been more efficient in recent years at identifying need. Perhaps I could put in a word for those much maligned people—community and social workers, and social scientists. It always seemed entirely laudable to me that people should be anxious to discover need, and should commit themselves to both finding and to meeting it. The meeting of social needs is every bit as laudable as meeting the needs of the market. Of course, it is more expensive and must be met from the public sector, but it is a laudable objective. I notice that the hon. Member for Suffolk, South (Mr. Yeo) has devoted much of his professional life to that.
The problem may exist for all Governments, but it is especially hard for this Conservative Government, because of their sado monetarism, to repeat the description used by my right hon. Friend the Member for Leeds, East (Mr. Healey). Indeed, I hope that I am permitted that expression at so early an hour of the morning. The Government came to power in 1979 determined to squeeze inflation out of the system. That involved, as we have been told ad nauseam, controlling the money supply, which in turn involved cutting Government borrowing. That meant, and will continue to mean as long as the Government are in power, reducing public expenditure. To begin with, we were told that that could all be done by eliminating waste. Do we remember those heady days of the 1979 election, when public expenditure could be cut quite painlessly, and when there was no need to cut services? It could all apparently be done by the elimination of waste in the public sector. Those of us who had worked in the public sector knew that even though there may be waste to eliminate, it was very ambitious to think that it could be eliminated that quickly and easily. We were proved right.
In controlling the money supply, cutting borrowing and reducing public expenditure with the objective of tax and rate reductions, the Government — both in 1979 and 1983—are severely constraining their ability to fund the social services just when demand is increasing rapidly for the reasons that I have given. In addition, there has been a rapid increase in demand because of the growth in unemployment, which some of us believe is not 946 unconnected with the economic and financial strategy that the Government have pursued since 1979. There has been a growth in unemployment from 1.3 million in 1979 to more than 3 million in 1983. That represents a tremendous waste of human potential—a matter of regret to all hon. Members—and a very expensive waste at that.
During the recent election the Prime Minister pretended that the cost of unemployment was merely £5.5 billion. I say "merely", but that is high enough. However, that is just the cost of social security benefits to the unemployed. A Treasury report in February 1981 estimated that the cost of unemployment per person was £3,400. The report on unemployment from the House of Lords Select Committee calculated that for 1982–83 the cost was between £4,500 and £5,000 per year, which would have meant at that time, £13 billion. More recent estimates have suggested that it costs between £19 billion and £21 billion. Those estimates do not include the multiplier effect of having so many unemployed. It seems to many Labour Members that the Government have got themselves into a vicious circle of constrained finances and escalating demand.
I have tried to outline the Government's objectives, but from their record one sees that they have increased the tax burden from 44 per cent. to 48 per cent. of income for the average earner. They have increased the percentage of public expenditure in the GDP. They have increased, we read in The Observer this week, the volume of public expenditure by about 6.5 per cent. from 1978–79 to 1983–84. They have increased substantially public expenditure in some sectors. Expenditure on law and order during that period increased by 30 per cent. Expenditure on agriculture—I cannot imagine that it was intended—increased by 24.75 per cent., and expenditure on defence increased by 23.5 per cent. At the same time as increasing those aspects of public expenditure, the House knows that there have been reductions in benefits. I shall not detain the House now by listing those reductions. An hon. Member referred to the painful experience of the 5 per cent. abatement of earnings-related supplement.
So we come to the present Cabinet battle. We have already been treated by the new Chancellor to £500 million of cuts, which has been agreed. We are told that there is a great battle for a further £5 billion worth of expenditure cuts, which will be meted out to the British public during the next financial year. The Chancellor, in a written answer, claimed that 57 per cent. of the social security programme is covered by the Government's pledges to compensate for price increases. That is an important pledge, but it means that 43 per cent. of the social security programme is not covered by those pledges, including the long-term rate of supplementary allowance and child benefit.
I can only concur with the comment of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore), who said:
It is clear that child benefit, long-term supplementary allowance (including long-term sick and disabled and one-parent families) as well as maternity allowance, housing benefit and unemployment pay are excluded from any guarantee of protection against inflation.He went on to say:It would be entirely typical of this Government to cut the living standards of many of the most needy and defenceless people while handing out hundreds of millions of pounds to the most wealthy and the higher paid.What a pity the Prime Minister did not tell us about that during the election campaign. What a pity she did not 947 come clean with the British people and tell us that she would cut public expenditure in that way. We remember all too vividly that she said, "The Health Service is safe with me". No doubt the Minister will explain to us how that can be in the face of such projected public expenditure cuts. The Prime Minister poured scorn upon Labour's charges of attacks on the welfare state and upon benefits.There is no need to speak about the hidden manifesto this evening. We have no need to depend upon leaked documents. We even have no need to refer to the infamous Think Tank report. The expected attacks on the weakest and poorest are the inevitable consequences of the medium-term financial strategy and the values that underpin it.
The former Secretary of State for Transport has warned that current levels of public expenditure imply higher taxation. Government right hon. and hon. Members clearly want to cut taxation. The right hon. Gentleman went on to say
Some much worshipped and deeply sacred cows will have to be candidates for the slaughterhouse".Why did the Government not tell us this at the election? I warn the Government and the Minister of State that they have no mandate, as hon. Gentlemen have said this evening, for cuts in the National Health Service, attacks on social services or cuts in benefits.After listening to the many laudable sentiments of Conservative Members this evening, we expect some, if not all, to appear with us in the Lobbies at the appropriate time when we are trying to defend benefits, especially unemployment benefit, against what the Chancellor has in store for us.
§ The Minister for Health (Mr. Kenneth Clarke)I congratulate my hon. Friend the Member for Leominster (Mr. Temple-Morris) on his good fortune in being allowed to introduce the debate, even if it has taken place at an unusual hour. He introduced a valuable and important debate and gave many of my hon. Friends the opportunity to make a contribution. He opened by explaining that he proposed to cover all the activities of the Department of Health and Social Security. He proceeded to do so, and I shall do my best to answer all the points that have been raised. However, we all appreciate that the Department is so vast that even in two hours we cannot do much more than touch the surface.
This is an unusual hour of the night at which to make a maiden speech, and it says a great deal for those who made maiden speeches that they showed enthusiasm for this subject. My hon. Friends the Members for Stockport (Mr. Fayell) and for Mid-Kent (Mr. Rowe) made notable contributions. I am sure that we lock forward to them contributing often and, I hope, at more sensible hours.
I encountered my hon. Friend the Member for Stockport shortly after he arrived in the House, when he immediately began to lobby me, on behalf of his constituents, about deficiencies in the deputising services used by some general practitioners, and I hope to give him a response to that tomorrow. His maiden speech went much wider than that and showed a broad range of interests and originality.
I have known my hon. Friend the Member for Mid-Kent for many years and I always expected that, when he was elected to the House, he would make a notable 948 contribution. I have the pleasure of congratulating him and I look forward to his valuable contributions to all that the Conservative party has to offer in this context.
As the Minister who has been brought at this hour of the night to reply to the debate, I am proud to belong to a party which contains a group of Back Benchers who are capable of getting together to sustain a debate on social services policy for two hours. The Conservative party has not always been able to mount such an effort. This shows that at the moment our party is one of care and concern and is making the most original contributions to thought on the problems of social service policy.
The hon. Member for Bishop Auckland (Mr. Foster), as the solitary representative of the Labour party Front Bench, made an eloquent contribution which did not contain new ideas or policies in this field. His party has destroyed any ideas on social policy. I suppose that this is one occasion when one should not comment too heavily on the fact that the Liberals and Social Democratic parties did not make a contribution to the debate. Since they emerged as a new alliance in politics I have heard nothing of any new policy on social matters from either of those parties, except an attempt to rehash some of the ideas about benefits and taxation on which many in the Conservative party were working in the 1970s. Some of them were mentioned by my hon. Friends during the debate.
My hon. Friend the Member for Leominster dealt in particular with the National Health Service, and I should mention that first. I confirm entirely the commitment which my hon. Friend the Member for Suffolk, South (Mr. Yeo) mentioned to the National Health Service. I agree with him entirely that we expect the financing of the National Health Service to continue to come largely from taxation. When we spoke during the election campaign about the National Health Service being safe with us, we were reaffirming that commitment and making it clear that it was untrue to suggest that we had any intention of changing the basis upon which the National Health Service was financed, and that remains the case.
My hon. Friend the Member for Leominster gave the details of our record during the past four years of increased spending on the National Health Service. I have no need to repeat it. It is pointless for people to try to undermine our commitment and record of spending by drawing exaggerated lessons from the £100 million that we took out of the cash limits in July this year.
As a result of those changes, total spending on the National Health Service this year remains as we planned at the time of the Budget. There is some increase in our forecast of spending on the family practitioner service and there is therefore a small decrease in the planned cash limits of £100 million out of a total of £8 billion for the hospital and community health services. It takes the hospital and community health services in real terms back to about the level of spend that they had for last year and does not represent any reduction on last year's spending. It is pointless to take those small adjustments, as the hon. Member for Bishop Auckland did, and suggest that they somehow undermine our general record or our commitment to the future.
My hon. Friends were also right to mention that, apart from all our efforts to continue to raise as much as the economy can stand by way of taxation to finance the Health Service, it is nevertheless the case that almost limitless demands are made on the Health Service. 949 Everyone can see that, with demographic change, the pace of medical advance and the rising expectations of our population, the National Health Service has to try to cope with new needs.
For that reason, I agree with my hon. Friends who said that we must look not just at the level of spending to satisfy our desire for a reasonable level of Health Service but increasingly at the value that we receive from the money that we provide for the National Health Service. It is an essential part of a caring policy towards the Health Service that we continue to stress the need for efficiency, improved performance, constant change and development and the need to address ourselves to priorities all the time to ensure that we do our best to keep up with the needs.
My hon. Friend the Member for Leominster mentioned our policy of comparing the cost of support services in the Health Service by inviting competitive tenders from outside. It is an obvious way to ensure that we keep down to a minimum the costs of such services as laundry, cleaning, building maintenance and so on. Any money saved on those services can be released for the development of patient care.
We are consulting about a draft circular which is intended to guide health authorities on how to set about competitive tendering. There is no need for health authorities to wait for the final circular, and several health authorities are already showing an interest in tendering and are making progress. We shall shortly be producing the circular in its final form with the best advice that we can give to health authorities as to how best to procede with competitive tendering in various areas, and we hope to see progress in the year or two ahead.
My hon. Friends the Members for Leominster and for Suffolk, South also referred to our policy of partnership with the private sector in the provision of care. This is a part of our policy on which the Labour party made the greatest play during the election. It claimed that the policy was contained in a secret document that it had discovered, but it was a document that had been circulated two or three months before to regional chairmen. It contained much commonsense advice.
My hon. Friend referred to the need to ensure that one looks to the needs of the patients and ways in which one can avoid wasteful duplication of effort between the NHS and the private sector in the same geographical areas or the same specialties. We looked for ways in which they could co-operate sensibly with each other, for the benefit of the patients of both sectors.
My hon. Friend the Member for Leominster was right to refer to the wide range of private sector provisions that we have to consider, and it is not merely a question of up-market hospitals in the big cities, but of many smaller private hospitals. Probably the biggest contribution in terms of quantity that the private sector makes to care is the many nursing homes for the elderly. It is to the private sector that we look for the great bulk of provision for nursing home accommodation for the growing numbers of elderly people.
It makes sense for the hospital service, with a growing number of elderly persons occupying beds in hospitals on a long-stay basis, to look for ways in which it might be able to provide more suitable care for the patients nearer their homes by taking places for those patients in private 950 homes for the elderly thus freeing the bed for another patient. That is one of the things about which we consulted.
My hon. Friend the Member for Leominster was also right to remind us that, in addition to collaboration, we are anxious to make sure that the standards ofthe private sector are maintained. An Act in the last Parliament, carried through by this Government, with the long title the Health and Social Services and Social Securities Adjudication Act, contained an important provision for the licensing of private nursing homes, increasing the powers of the inspectorate, and making sure that all nursing homes maintained the high standard already achieved by the best.
All my hon. Friends who spoke about the Health Service referred to the need to provide care for the rising number of the elderly, and we give that a high priority in every way. We have stressed to all health authorities that care for the elderly, together with care for the mentally ill and the mentally handicapped, must be the first national priority in the development of those services.
One final matter bears on value for money and improving the performance of the Health Service, and that came in a point made by my hon. Friend the Member for Suffolk, South about the need for a drive to sell surplus land and make sure that no resources were locked up needlessly in buildings or land that should be disposed of for the best available price as quickly as possible, to get the resources to pay for the care.
My hon. Friend made a particular and topical reference to Tadworth court hospital. When, in another guise, he was working for the Spastics Society, he played a notable part in stepping in with proposals for the future of that hospital, which relied heavily on the fact that the hospital was surrounded by surplus land not being used for health purposes and for which there was no use. The key to unlocking the finances of the Spastics Society experiment with Tadworth court hospital lay in opening the way to dispose of that spare land and making use of those resources for health care.
I was talking about the elderly. With Tadworth court I am talking about respite care for families of mentally handicapped children, and I spoke of our priority of improving services for the mentally ill. As several of my hon. Friends have said, when we talk about those priority groups, we are not just talking about hospital services. In some cases, we are not even talking about hospital services.
One of our problems is that too many patients in each of those categories occupy hospital beds on a long-stay basis when they would be happier and more suitably cared for in small units at or near their own homes. That would enable redundant beds to be closed and resources released or other patients to be admitted to take advantage of the hospital services.
Recent discussions have been stirred up by the report of the development team on conditions in some hospitals for the mentally handicapped from 1976 to 1982. In considering what has been done to develop policy we are looking just as much at community services as we are to increased expenditure on the hospital service. To some extent, development of community services will steadily replace some of the unnecessary hospital care.
Reference has been made to the restraints which the present economic circumstances necessarily impose on local authority expenditure. They have been imposed on 951 expenditure on community care just as they have been imposed on the Health Service and the rest of social policy.
My hon. Friend the Member for Suffolk, South said that some local authorities had experienced difficulties in developing community care to take patients away from the hospitals and to move in the direction that we all wish. Of course there are some restraints. At present the Government are looking to local government to reduce its expenditure and get within the limits that the economy can afford.
Before anybody examining this matter gets too carried away by arguments about the inability of local authorities to finance community services let me suggest that we keep this in proportion. It must be realised that the Government are now financing personal social services on a vast scale. Under the Conservative Government, expenditure on those services has increased. The Government's policy need not necessarily constrain desirable forms of spending on personal social services.
I shall deal with each of those points and explain what I mean. First, expenditure on the personal social services as provided by the local authorities costs a little under £2 billion and about 200,000 people are employed. During the Conservatives' first four years of office, the growth in expenditure on the social services in real terms has been about 9 per cent. I make allowance for all the usual conventions which apply to personal social service spending which tend to reduce the figures if we use a straight comparison with the retail price index. In each and every year bar one since we came to office there has been a real growth in expenditure by local authorities on the personal social services. That process seems to be continuing.
Some of the authorities which complain most bitterly about Government controls and restraints and claim that their social services are being cut to the bone are actually achieving incredible increases in expenditure in real terms. I shall refer to a few London boroughs which are fond of saying that their social service provision has been cut to the bone. During the last four years of Conservative Government, Brent has increased its spending on personal social services in real terms by 31.7 per cent., Hillingdon by 33.9 per cent. and Waltham Forest by 30.7 per cent. Those increases in real terms are unmatched elsewhere in the public sector and show that the restraints on local government have not bitten so hard on the personal social services as critics claim.
§ Mr. FosterIs not the Minister taking credit in the social services, as his colleagues do in education, for increases in services that have come about only because local authorities have flouted the guidelines which the Government sought to impose on them? Had they adhered to the Government's guidelines there would have been severe reductions in the services.
§ Mr. ClarkeThat is not so, because the restraints are imposed on the totality of expenditure by each local council. Within those restraints it is open to the council to choose its priorities and to obtain the best value for money from its spending and to concentrate on the desirable parts of its activity.
My hon. Friend the Member for Leominster asked about the possibility of conflict between the policies of my right hon. Friend the Secretary of State for the 952 Environment and those of my right hon. Friend the Secretary of State for Social Services, but there is no such conflict of necessity in local government spending. The control is on the totality of local government expenditure because the Government expect local government to make its contribution to keeping down public spending. The authorities which complain loudest about what they describe as constraints on their spending in desirable areas often take themselves into penalties by increasing expenditure across the whole spectrum of services, including items such as bus revenue subsidies, sports and leisure and fringe activities of various kinds. If they concentrated on priority services and ensured that they obtained value for money there is no reason why the present system of local government spending controls should cause them to get into trouble when following sensible policies.
In this area, as in others, it is important to obtain value for money. We have spent a great deal of time in social policy concentrating on getting better value for money out of the Health Service and the social security system, as my hon. Friends have urged, but we have not always given the same attention to the ability of local government to obtain better value for the enormous sums that it spends on personal social services. We hope to assist local government to ensure that it does that.
In considering our response to the Barclay report, we have considered the future role of the social work service in the Department. We believe that there can be further development of the service's inspectorial role and, more important, of its ability to disseminate good practice among local authorities and to improve management techniques. We are at present consulting on new steps which we hope will generally help to improve the performance of local authority social service departments and get better value for the money spent.
Another key area touched on by my hon. Friends is the relationship between the Health Service and local authorities in caring for client groups, especially the elderly, and the help that the Government can give by developing joint financing and the policy set out in the document, "Care in the Community" produced a year or two ago. We have put a great deal of effort into developing that policy. It is extremely important that close co-operation is developed between health authorities and local government and that every encouragement and assistance is given to them to develop the community services required to move patients out of hospital and into more suitable community care.
There is an important role not only for the so-called statutory authorities—the health authorities and the local authorities—but for the voluntary sector. I entirely share the views of my hon. Friends the Members for Leominster and for Suffolk, South about the need to recognise the distinctive contribution that that sector can make. Again, in the so-called HASSASSA Act last Session, provision was made for the voluntary sector to have representatives on joint consultative committees considering joint financing policy in the future. We are now consulting about how that should be done as a welcome step forward, as in the various parts of the country where the arrangements are working best there are three parties involved.
Our commitment to joint financing is shown not just by constantly urging authorities to co-operate in the steps that I have described, but by making increasing funds 953 available. In our first four years of office funds for joint financing were increased by 51 per cent. in real terms between 1978–79 and 1983–84. A sum of £96 million has been allocated for the purpose of joint finance in 1983–84. Last year we legislated and made other changes which gave increased flexibility to the rules on joint finance. They extended the period of taper in cases where the money was used for transferring patients out of hospital and gave authorities the ability to expend moneys for education and housing purposes as well as for health purposes.
In addition, we went along the lines outlined by my hon. Friend the Member for Suffolk, South. Over and above joint finance, we also gave health authorities the ability, for the first time, to attach money to patients and to transfer funds with patients for as long as necessary in particular projects. It is now open to a health authority, where there is a "Care in the Community" type project which takes specific patients out of unnecessary long stay in hospital into a community-based project, to finance those patients in the community for as long as possible. We have put no limits on the amount of finance to be expended in that way, nor on the duration of the finance for a particular patient.
In the long run, that will turn out to be more important than the extra money for joint finance or a change in the rules. It is a completely new approach to policy, which I hope health authorities, local government and voluntary bodies will take advantage of when looking at the possibilities in their localities within the JCCs and elsewhere.
Social security was the subject on which both my hon. Friends made their maiden speeches. A sensible theme to be introduced is the efficiency by which we provide income support to those who need it. I am grateful to my hon. Friend the Member for Stockport for acknowledging that we had reduced the administrative costs of the system to some extent by the new arrangements for sickness pay and housing benefit. In reducing administrative costs in this area, we increase our ability to distribute income and to provide support for the groups that need it.
All my hon. Friends who spoke on this subject were thinking on broader horizons, and in one way or another all advocated variants on the tax credit scheme. I took particular notice of my hon. Friends the Members for Mid-Kent and for Stockport, who are obviously new recruits to the enthusiastic band on the Conservative Back Benches who support tax credits.
In my time on the Back Benches, before ministerial responsibility gave me extra wisdom and restraint, I was such a supporter, and I have always listened with close attention to everything said by my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who is the leading and acknowledged expert in this matter in the House. Most people who wish to get further into the subject have metaphorically sat at his feet at one time or another.
Although my hon. Friend gave clear expositions of his ideas on the subject, none of us should be deceived into thinking that the solutions to these problems will ever be administratively simple or are likely to be very cheap. He should not, therefore, lead us to the expectation that there is a rapid answer to these problems that could be instantly applied by a Government, however willing.
954 My hon. Friend often addresses himself to the question of cost. His arguments about how one should regard transfer payments, how one should regard them when considering the total level of public expenditure and how they should appear in the Government accounts, are matters that he should address to the Chancellor of the Exchequer, and I shall make sure that his views are drawn to my right hon. Friend's attention.
My hon. Friend spoke of the relationship of the tax system to our income support policies and explained what has been his theme for some years. In his opinion, the way properly to bring them together is to develop the principle of universality of benefits and get away from the overdependence of selective means-tested benefits which he believes has entered our system.
My hon. Friend acknowledged the Government's record on child benefit, which is the pre-eminent example of a non-tested benefit introduced originally as one step on the way to a full-blown tax credit system. It had its genesis in the tax credit Green Paper produced by the Conservative Government in th early 1970s. I remind my hon. Friend that, following my right hon. Friend's Budget earlier this year, child benefit now stands at a record level in real terms.
My hon. Friend said that we should now wind up the entire national insurance principle and change to his system. But one advantage of the national insurance system is that it brings home to today's wage earner the continuing cost of contributing to a system of income support for pensioners, the unemployed and so on. My hon. Friend touched on a basic income guarantee scheme, which appears to be the latest worked-up version of his ideas which he has prepared in conjunction with Mrs. Hermione Parker.
To illustrate my belief that my hon. Friend's answer to the problems is not administratively simple or necessarily cheap, I point out that he and his co-author accept that at 1981–82 prices the net cost of their scheme is estimated by them to be between £73 and £86 billion. They say that that should be raised by taxation and suggest an average tax rate of between 41 and 50.5 per cent.
I do not have time to go into great detail, but that shows the colossal scale of the change that my hon. Friend and his co-author contemplate. I do not criticise them for not having the details worked out in every particular, but it does not take long to discover that the effects on some taxpayers would be fairly startling. There would be gainers and losers. A large number of householders would be hard hit by those proposals. The indirect costs of introducing the scheme would be considerable. Although most people urging tax credit schemes say that they would reduce costs, it is not possible to ignore the transitional costs involved when the wage systems of all employers would require fundamental amendment, quite apart from the enormous costs of transforming the current systems of the Inland Revenue and the DHSS.
I do not say that simply to knock down all my hon. Friend's visionary ideas, which will obviously be added to by my hon. Friends the Members for Mid-Kent and for Stockport who have enthusiastically supported his proposals, but it is a difficult area and the practical snags are enormous. I assure my hon. Friends that as we continue with the social security policy and respond each year to the public spending pressures and the state of the economy and determine to what extent we can go beyond 955 our election pledges—we will undoubtedly maintain our pledges to pensioners and others—we will also keep sight of our long-term aims.
My right hon. Friend the Secretary of State feels strongly that we cannot simply proceed from one public spending round to the next and from one Budget to the next with a system which plainly cries out for a great deal of reform, simplification and greater efficiency. As we carry on with our policy and respond to the needs of the economy, we will have to keep sight of our long-term aims. That is obviously the message from my hon. Friends the Members for Kensington, for Mid-Kent and for Stockport.
All the new ideas came from the Conservative Benches this evening. The hon. Member for Bishop Auckland came in at the end, as the last solitary contributor from the Labour party, to make a scholarly contribution which at one point accepted the constraints on resources and the almost inexorable growth in demand for social services of all kinds. He admitted that 35 years after the introduction of the national insurance system, many people still had to depend upon means-tested benefits and that the system had not realised its founders' objectives.
However eloquently the hon. Gentleman spoke, he produced no new ideas. That is always so of his party. He used the same old phrase, "sado monetarism" and made a routine speech which implied that the answer was to identify the needs, produce the money and pour it into a system which he accepted has many deficiencies. The Labour party had not found a new social policy after four years in Opposition. After it recovers from its present trauma it will have a long way to go, but is has another four years to produce something.
I recommend the hon. Member for Bishop Auckland to go back to the drawing board. He can do no better than look at the various drawing boards which my hon. Friends consulted when composing their speeches this evening. The intelligent, constructive and creative contributions were made by my hon. Friends. The creative contribution which the Conservative party makes, coupled with the obvious care and compassion that my hon. Friends have for people who need the support of the social security system, provides the best hope for the future.