Welfare Services and Benefits

HC Deb 10 February 1984 vol 53 cc1121-78 9.34 am

Sir Geoffrey Johnson Smith (Wealden)

I beg to move, That this House, recognising the growing pressures of demand and demography on the provision of welfare services and benefits, calls upon the Government to encourage a wide-ranging discussion on their future provision. This debate is about not just the welfare state but the private provision of welfare services and benefits by individuals and voluntary institutions. If we are to have a truly caring society, private and public provision must go hand in hand. For people to be solely dependent on the state would not just erode personal responsibility but would deny them their freedom and their democratic right to exercise choice and to provide for their families. However, I know that I shall carry the whole House with me when I say that to rely solely on private provision, however well motivated, would be to deny the services that collectively we rightly feel morally obliged to provide for the community.

In short, I am not here to argue for the dismantling of the welfare state. Private and public provision need not be at odds. The challenge that we face is to ensure that they develop harmoniously. We know that all Governments and parties have played their part in creating, sustaining and developing the welfare services and benefits that are, indeed, the trusted hallmark of a civilised society. We have all built on the foundations of Victorian and Edwardian philanthropy and legislation, and, in modern times, on the framework of the Beveridge report of more than 40 years ago. It is a record of which both sides of the House can be justifiably proud.

Therefore, I hope that hon. Members on both sides of the House will judge from the tone of my opening remarks that it is not my intention today to be politically contentious. I know that the welfare of our people, and especially the welfare of the needy and deprived, can rightly generate fierce arguments and excite strong passions.

However, I hope that today we can give calm, constructive, more dispassionate and less partisan, and even perhaps more philosophical consideration to the future of our welfare services and benefits. We need to do so if only because we must all admit that in the past Governments have made mistakes, and one of the serious consequences of that is that we have created anomalies and new injustices. We need to do so also because society has changed since the Beveridge report of 1942. For example, the position of women in our society has changed radically. There has been an unforeseen growth in the number of single-parent families, and many of us are very concerned about the implications for families of the increase in the divorce rate.

We all know too of people who, as a result of legislation, are very confused by the multiplicity of means-tested benefits. Indeed, some are so confused that they do not know what they are entitled to. The hon. Member for Oldham, West (Mr. Meacher) has often spoken most eloquently about the low take-up of some benefits. We also all know of families in which it pays not to work, where needs are not properly met, where the benefits received are not really required, and where a little bit of encouragement would do a lot to help some individuals and families to become more independent.

We must consider the changing needs of families which are smaller and more split up. People live longer—that is a fundamental change—and medical discoveries have escalated the cost of the National Health Service. It is therefore no surprise that 40 years on from Beveridge expenditure on health, welfare and education has expanded and is still expanding at an explosive rate. That is true not only of our country, but of western Europe as a whole.

In the past 20 years, as the OECD report states, the provision of social services has grown almost twice as fast as the gross domestic product. If we in western Europe do not do anything about that we will be talking not about dismantling the welfare state, but about how soon it will go into liquidation.

In the United Kingdom alone in 1963–64 expenditure by the Government on social security, health and education was 43 per cent. of total public expenditure. It has now risen to 53 per cent. The pressure of demand for these services is so great that a Government returned twice on a platform of reducing taxation and restraining public expenditure now finds that public expenditure takes a greater proportion of gross domestic product than it did even a few years ago. That proportion has risen from just over 40.5 per cent. to 43.5 per cent. The National Health Service, about which we have heard so much in recent months, is supposed to have been subjected to savage cuts, but expenditure on it has almost doubled since 1979 and it has received a real increase in resources, allowing for inflation, of about 7 per cent. Yet we hear of rising expectations and the pressure for new services and so on.

All the nations of western Europe are concerned by that trend. We are all trying to do too many things with too little money. This country, unlike others, has based itself on the Beveridge principle that everybody with a child or who is sick or old is entitled to state benefit, not because they are in need but because they have children, are sick or old. In the long term that system has proved to be unfitted to meet the modern challenge.

It is not surprising that with that principle, which has motivated successive Governments for so long, we cannot cope adequately with some categories of people whom we know to be in real and desperate need. Nor is it any wonder that in this crazy patchwork quilt of allowances and benefits our tax system is increasingly put under an even greater strain than in other countries, so that financing our social objectives is increasingly at variance with the economic objective of rebuilding our economy in the face of the new technology that threatens our older industries.

I wish to discuss two areas of special concern because it is not enough just to describe the problem in general terms. First, there is the time bomb of pensions. I welcome the Under-Secretary of State to the Front Bench. I appreciate his presence and I hope that he will comment in detail later. The time bomb of pensions was referred to recently by my right hon. Friend the Prime Minister. The care of the elderly goes side by side with the question of pensions.

The pensions time bomb has a long fuse. Although the number of pensioners rose by 10 per cent. in the last decade their numbers between now and the end of the century should be more or less stable. It is as well to emphasise that. However, there will be a one third increase in the number of people over 75. It is this group which understandably makes very special demands, especially on the Health Service.

As my right hon. Friend the Secretary of State for Social Services has said, we should not become too excited about that financial burden because between now and the year 2000 the ratio of people of working age to pensioners will improve. In 1978 in England and Wales there were 2.76 workers to each pensioner. By 1991 there will be 2.85 workers to each pensioner and by 2001 just over three. Those figures assume that we maintain a high employment rate. It would be a bold soul today who would forecast a return to the high levels of employment in western Europe that we enjoyed in the 1950s and 1960s.

The long fuse of the time bomb begins to burn particularly furiously about 30 years later when the ratio of working people to the elderly will fall sharply and the full burden of the state earnings-related pension scheme begins to make its mark. I am advised that that will involve a rise of over 60 per cent. to meet the cost of pensions. On top of all that we shall have to consider how to finance the index-linked pension scheme. It is no wonder that we read of suggestions about how we can avoid that horrific burden.

I should like to make two brief suggestions to the Government. Current beneficiaries are supported by current contributors. That means that fewer and fewer will be paying higher and higher contributions to more and more beneficiaries. We have no investment fund. I do not know why we have not set one up. I do not pretend to be a pensions expert, but that seems to make sense. People's contributions could earn interest. Why do we not set one up or allow more people to contract out into the private sector? Better still, as it is a complicated matter, why cannot we hear more from the Government? Let them encourage a panel of experts to give us the range of options.

It is a complicated subject, but if we are to make sensible changes we must start explaining the changes so that the public can understand. We understood well enough in the second world war and there is no reason why we should not now. Surely there must come a time when we say that there will be no newly created inflation-proof pensions. We should set a date so that at least we keep faith with those who have such pensions or have been promised them. It is interesting to read in today's papers that British Airways is reported to have said that it did not wish to continue with inflation-proof pensions for its employees, but offered to buy them out.

The most serious problem facing us is the interaction of our tax and social security systems. There is nothing new in what I am saying, nor is there anything particularly new in what I am asking for. Something should be done about that interaction which has serious implications for us. The problem is well known to hon. Members. It is a bureaucratic nightmare. I am almost as sorry for those who have to administer the system as I am for those who seek to benefit from it.

Many millions of our citizens benefit from our social security system. I do not want to exaggerate the difficulties, but it is far from fair and it wastes manpower and money. It cannot be right when those on very low incomes pay income tax and are also regarded as poor enough to receive state benefits. Extra taxes and withdrawn benefits mean that some of our lowest-paid workers are made worse off when their wages rise.

I should like the Government to examine ways of integrating the tax system with the provision of benefits. In the early 1970s—how well I remember it—we had a dawn full of promise and the Conservative Chancellor of the Exchequer, then Mr. Anthony Barber, had the idea of introducing a tax credit scheme under which all income would be taxable and each person given a weekly tax credit to offset against his liability. What is wrong with the idea? Is it too costly? Some people tell me that it is. What do the Government think of the negative income tax scheme whereby a person is taxed if his income exceeds a certain threshold?

Certainly the difficulties of administering an integrated tax and benefit system looked formidable in the 1970s. But those difficulties should no longer apply when the Inland Revenue is computerised in 1988. Surely it is time to consider reform so that we can take advantage of that technology, otherwise what is the point of having it?

Hon. Members will recall that when the National Health Service was formed its costs were expected to plateau out as better health care reduced the incidence of illness and disease. As we know, it has not worked out that way. One reason for that has been the undreamt miracles of medical technology and advances in diagnostic procedures. There is also a far higher turnover of patients in our hospitals, which cannot be achieved without intensive and careful nursing care. We have saved more lives—often at great expense. Therefore, we have more elderly people with special medical needs.

The National Health Service, with all its faults, has responded remarkably well in many areas, and I know that it is much valued, but I want to sound a cautionary note in case we allow our pride in the NHS to run away with us. It is interesting to note that there is no civilised country in the western world which, having studied our system of health care—where care is free at the point of demand—has opted for our system. I do not think that any of us would pretend that we have a monopoly of care or compassion. Nor could anyone say that the standards of British medicine are higher than those in other countries. In some areas, they are extraordinarily good—as good as any in the world—but there are many areas in which they are not as good.

I have had experience of health care through my family. My wife is a physician who has worked with the National Health Service. Many of her colleagues on this side of the water and in the United States know that what I am saying is true.

Most countries have opted for a mixture of state and private insurance. They have not opted for our system of the Health Service being paid for almost exclusively out of taxes. As a consequence, they have found that a larger proportion of their wealth has been spent on health. It does not matter which party is in office, we are not at the top of the league. On the whole, Britain spends a lower proportion of its gross national product on its Health Service than other countries of similar size and wealth and comparable values. In too many areas the NHS is underfunded. There are too many old hospitals and too few consultants.

I want to make it easier to attract more funds to health care. That will not happen while we insist that there is a deep divide between the NHS and private health care. Private health care need not be incompatible with public regulation and control. The NHS is not, of itself, a guarantee of quality, as the Black report of 1980 revealed when it documented major and disturbing inequalities between the social classes.

The allocation of resources by a state health monopoly was heavily criticised by the Royal Commission of 1979, which reported that the level and pattern of expenditure was heavily influenced by the lobbying of pressure groups, by the interest groups of the health professions and by politicians who placed the NHS alongside other public expenditure commitments.

But with all those faults, I do not—I am sure no hon. Member would—seriously suggest that we would gain by switching exclusively to a private system based solely on competition and pricing. There must be a public service dimension.

I congratulate my right hon. Friend the Secretary of State for Social Services, who is on the Front Bench, on the steps that he has taken to encourage the privatisation of certain in-house hospital activities. I hope that in the months to come he will not only spell out the advantages of some of the steps that he has taken, but suggests that the Government have plans to go further so that there is a better mix of public and private finance.

The NHS has plenty to offer the private sector, especially its capital-intensive services such as radiography, but the private sector must be prepared to make full payment. Equally, the NHS can do as local authorities do and purchase from the private sector to cope with temporary blockages, waiting lists and so on. That sort of flexibility exists in the provision of services for the elderly by local authorities, but there is little flexibility in dealing with the problems of health. I hope that such flexibility will be encouraged. I am glad that that view is supported by the health services management centre.

I also want to see an end to the outdated view that it is morally wrong to have private beds in an NHS hospital. I know that the contention is that the growth of private beds and private insurance would convert the NHS into a two-tier system—one for the rich and one for the poor.

I think that most hon. Members recieve a copy of the quarterly review of the National Westminster Bank. In its latest edition, there was an article written jointly by a Dutchman and an Englishman about health care in their respective countries. The article was called "Economic Priorities and Social Expenditure: a Comparison of Dutch and British Health Service Policies." The Dutch have private insurance as well as state provision. The article stated: An attempt was made to establish whether such fears"— about the two-tier system— are also prevalent in the Dutch system. This has not proved to be the case and a number of reasons were given. First, both private and public patients are treated in the same hospitals. It is now realised in the United Kingdom that the Labour government made a fundamental mistake in 1973 in removing private hospital beds from the NHS and, thereby, losing essential controls over the scope of private medicine. Second, more than two-thirds of all privately — insured patients in the Netherlands take out insurance policies which cover them for treatment in Class III — the standard ward. Only about one-third are prepared to pay for Class II, corresponding to our semi-private rooms and very few opt for Class I. There is, therefore, no physical separation between private and public patients who are both treated in the same hospital and often in the same wards. I do not know why people have the feeling of great divide that exists in Britain. It may have something to do with the perennial obsession that so many people in this country still have with what they call the class system, and it spills over into our attitude to health.

The argument that the private bed infringes on the concept of equality of treatment, regardless of means, is mistaken. I believe, as does the author of the Bow group pamphlet "Beveridge and the Bow Group Generation", that the underlying concept of the NHS is adequate health care. The author is right to remind us that if Beveridge could accept voluntary provision over and above a national minimum, and if politicians could accept inequality in pensions over and above a guaranteed minimum, why should not politicians also accept the same principle in health care?

Our present system denies a fuller role for the individual and denies to the NHS the increased revenues that flow from encouraging the individual to make additional provision through insurance.

The Chancellor of the Exchequer, writing in the Sunday Express in October last year, commented: If the Government continues to provide all the same services, functions and benefits as it does at present, State spending is likely to rise even higher in relation to the size of our economy. He went on to say that the prospect might be for still higher taxes. Some people ask, "Why not? A small rise in taxation is a price worth paying to maintain services that we value," and I understand that. But, as we know, in recent years the total take by the state from the citizen has increased, and my worry is that if we go on doing that year after year tax rises will get worse.

An economic miracle may save us, but I do not see one round the corner for us or for western Europe. Therefore, it would be foolish to look to higher taxes to meet rising costs, with all the effects that that would have on the economy. Therefore, the policy—which I understand to be that of my right hon. Friend — of better value for money, a fairer and more efficient benefits system and a more flexible mix of public and private finance could point us in a different and, I believe, more hopeful direction.

The time has come for us to put an end to leaks from the Government. There is nothing particularly clever in people who are trusted by the Government leaking matters to newspapers, which assume on the whole an honourable posture in our society but believe that it is not meretricious to publish confidential documents. As someone who used to be a journalist of sorts, I understand why the temptation sometimes proves too great, because on the whole we in this country are too secretive. The Government could be more candid with us. They should pose the options, give the facts, encourage discussion and commision reports on critical issues.

More than 40 years ago the Beveridge report helped to educate the nation about what was possible and it gave us a remarkable sense of purpose and unity. We can and must achieve that again.

10.2 am

Mr. David Winnick (Walsall, North)

I apologise at the outset for having a sore throat, but I will do my best.

The hon. Member for Wealden (Sir G. Johnson Smith) has dealt with an important matter and, as was to be expected, he spoke in a courteous and amiable manner. However, that must not deter us from recognising the dangers to the welfare services that will remain so long as the present Administration are in office. We must also recognise some of the dangers that would arise if some of the hon. Gentleman's proposals were put into effect.

About 18 months ago we had a leaked report—I listened with interest to the hon. Gentleman's remarks about leaked documents; no Government have done more leaking in that respect in recent years than Tory Administrations—from the Central Policy Review Staff, the Think Tank, which set out ways for radical cuts in public spending that would have amounted to dismantling large parts of the health and welfare services.

The Think Tank observed that estimated savings of £3 billion could be made if all social security payments, from pensions to supplementary benefits, no longer rose in line with inflation. If that were ever implemented, it would indeed be a crippling blow to those living on the most limited of incomes. The uproar caused by the Think Tank report was sufficient for the Government, at least for the time being, to dissociate themselves from the suggestions then made. However, does anyone seriously doubt that if the Cabinet thought that it could get away with what was suggested those proposals would not have been implemented? The answer, I think, is obvious. The Think Tank proposals were put aside for the time being because of the public uproar, and for no other reason.

We have had a warning from the Prime Minister. In an interview with the London correspondent of the New York Times in January of this year she said that Britain faced a time bomb over social security spending. She did not intend, she told the correspondent, to sit by and do nothing about the cost of pensions and the National Health Service. Of her own philosophy in such matters, the right hon. Lady, commenting on public spending on health and pensions, said: You are redistributing responsibility and you are taking quite a bit of a man's independence by taking away so much of his income. Thus spoke the Prime Minister who, by her economic policies, has undermined the independence and dignity of so many by forcing them to live for months, indeed years, on the dole.

Opinion polls and surveys show that there remains an overwhelming majority of people in favour of the existing state health and welfare services. I would argue that that is the only barrier to the Prime Minister and her Cabinet colleagues doing their worst to the welfare and social services. That overwhelming opinion in Britain—not by any means all Labour—against dismantling the National Health Service and other basic welfare services which have been built up in the past 40 years has proved a formidable barrier which many Conservative Members believe can be overcome.

I do not deny that the lack of growth in the economy and the return of mass unemployment have meant much reduced revenue to pay for the services that we are discussing today. After all, about £15 billion annually is spent on unemployment and related benefits, and we know from the appearance before the television cameras of the hon. Member for Derbyshire, West (Mr. Parris) that it is not a particularly pleasant experience to live in such circumstances. I watched the programme "World in Action" a few weeks ago in which the hon. Gentleman explained how he tried to live on the same amount of unemployment benefit as those unfortunate enough to be on the dole. As he was frank enough to admit at the end of the programme, it was not a pleasant experience by any means.

How much worse it must be for those who must endure that week in and week out, year in and year out, rather than for just a few days in front of the television cameras. They know—this is no reflection on the hon. Member for Derbyshire, West—that when the cameras stop running and the week is over they will not have a nice secure financial background, with an income, to which to return.

Mr. Peter Bottomley (Eltham)

Like the hon. Gentleman's.

Mr. Winnick

A little different from mine, I think. At least I do not try to preach to the unemployed. I do not say, as the hon. Member for Derbyshire, West argued even at the end of his experience, that perhaps benefits are too high in some cases.

I sometimes think that if Conservative Members had to experience — and not just in front of the television cameras — for quite a time and without a secure financial background what so many of our constituents must endure, they might be more reluctant to preach to the unemployed and suggest that people must accept mass unemployment.

Substantial sums are lost to the Exchequer because of the numbers out of work, those who are not paying tax or who obviously pay much less tax than they would if they were in employment. Some argue—I think that the hon. Member for Wealden would — that because of mass unemployment and so on, and because of the amount of money lost to the Exchequer as a result of that, we should accept that less should be allocated by the state to public spending and the welfare services. The Labour party believes, however, that that is an argument for not spending less on public spending and for reversing the policies of inflation and economic decline. It is an argument for economic growth and the ending of mass unemployment. One of the worst things that could happen would be for us to accept, as the hon. Gentleman suggested we should, that mass unemployment is here to stay and that it is inevitable. I hope that I am not being unfair to him when I say that he gave the impression that it would be a bold politician who would argue that unemployment would be very different in the years ahead. That is not my view.

Sir Geoffrey Johnson Smith

I think I said that it would be a bold person who could expect us in the near future to have the rates of employment that we enjoyed in the 1950s and 1960s.

Mr. Winnick

I accept that that is how the hon. Gentleman put it. However, I think that he is more or less accepting—if I am wrong, obviously I shall retract—that mass unemployment is here to stay for a long time. I know that that is the view of the majority of Conservative Members. But that is certainly not my view nor the view of my party. I do not believe that mass unemployment can be ended quickly and I have never argued along such lines. On the other hand, I am not willing to accept that it is right, proper or inevitable that well over 3 million people should be on the dole, some for years at a time. That form of mass unemployment, which existed in pre-war days, should not be accepted as natural or inevitable now.

In some respects we are engaged, I suppose, in a philosophical argument today. There is a basic difference between the two sides of the House. That difference goes even further because there is a difference between Labour Members and the rest of the House, including Liberal and SDP Members. We have never accepted that Tory politicians, especially those on the right of their party, have ever basically accepted the post-war social reforms. I well remember the discussions and debates about the attitude of the Conservative party to the National Health Service and to other reforms which took place about 30 years ago. I was not then a Member of the House of course.

The Labour party took the view that the Conservative party merely paid lip service to the reforms that were introduced and implemented by the post-war Labour Government and that basically it did not accept them, although it had to do so from an electoral point of view. It was for electoral reasons only that it paid lip service to the reforms and maintained them during the 1950s when it formed Governments. We now have a Government, however, who are well to the right of other Tory Governments of the post-war period. We have a Tory Cabinet which has no basic sympathy for the services and reforms that were introduced by the Attlee Government and who would like to replace many of the reforms by private provision. I am sure that we shall hear Conservative Members arguing that the private sector has a large role to play, which it should play, in the provision of services which for most of the post-war years it has been believed and accepted should be provided by the state. We on the Labour Benches continue to hold that belief.

There is a danger because so much of what was built up during the early post-war years could be put at risk. As I said earlier, at the end of the day it is only public opinion that will save these services from the axe. I take an entirely different view from that of the hon. Member for Wealden. My view, like that of my right hon. and hon. Friends—a Socialist view—is that the dignity and independence of the large majority is enhanced when there is large-scale state provision in health care, pensions and welfare facilities. These services should not just be restricted to the chronically sick, the poor and the aged. Britain is a far more civilised country to the extent that these services are provided through the taxpayer, are organised in the public sector and at the end of the day, unlike so many countries, especially the United States, are made available to anyone, irrespective of whether he has provided for himself by private insurance.

The one headache in Britain that we do not have is that which is caused by paying medical bills. That is a tremendous benefit that we should not underestimate in the least. It is a fallacy to believe that the services which have been provided help only the poorest in our society. There are so many on average and above-average incomes who, as a result of NHS and other provision that is organised and provided by the state, are helped and who avoid the worst pitfalls of what happens in the United States.

We have heard and read much about the position in the United States. Conservative Members argue that private sector medicine can help individuals and supplement state services. Those arguments must be set against what happens in the United States. There are reports—they seem not to be exaggerated—that a person who needs hospital treatment in America will not be admitted, or his relatives will not allow him to be admitted, unless he can first provide documentary evidence that the bills will be paid. Surely that is an illustration of commercial medicine. That is not the sort of thing that I should like to see happening in Britain. It was stated in a report in The Economist last year that, although the United States is spending over $300 billion a year on health care, there are 34 million Americans without health insurance for all or part of the year; 11 million or more of these are workers and their dependants who have lost their coverage because of unemployment. Members of a few unions, such as the United Auto Workers, retain their health insurance for up to a year after they are laid off, but most policies expire within a month of the last day at work. If some of the suggestions that were made by the hon. Member for Wealden in so courteous a matter were put into effect, the experiences of many United States citizens would be shared by people in this country.

It seems that Conservative Members still believe in the policies that caused them to argue and vote against the introduction of the NHS. As the hon. Gentleman said, they believe that the state should exist to provide some services. I have never argued that that is not their view. In their opinion, the state should be around to provide services, but they think that those services should be basically for the poor, the chronically sick and the aged. They believe that the rest—I am not suggesting that the hon. Gentleman said this in so many words — should be provided and organised by the private sector. That, basically, is the idea of so many Conservative but they are reluctant to come out and say as much. It is a view which formed a great deal of what the Think Tank's leaked report outlined. The Prime Minister obviously believes that providing such services from the cradle to the grave undermines people's independence. That view, which has long been held by the Conservative party, is the greatest danger with its present majority when it comes to providing services and facilities for millions of our fellow citizens. It is necessary for the Labour party, not only in Parliament but outside, to do its utmost to defend and organise the service established since the war.

The Labour party made arrangements for an ambulance to travel around the country urging people to sign a petition to defend and save the National Health Service. One day last December I went on a similar excursion to parts of the west midlands. We made a point of going into those areas represented by Conservative Members where people showed no hesitation in signing a petition. They understood that the Government presented a danger to the National Health Service. They did not say to us, "This is just Labour party propaganda. What is the point?" There was an overwhelming wish to sign the petition.

Mr. Andrew Rowe (Mid-Kent)

Was the increase in expenditure on the National Health Service that the Labour party was envisaging with its ambulance project larger in real terms than the increase that the service enjoyed since 1979?

Mr. Winnick

The hon. Gentleman must have the facts and figures. If not, he can soon look them up and see that there was a cutback. There was a threat to the National Health Service, and people understand that. The hon. Gentleman may not wish to do so, but many of his constituents, including those who voted for him, understand that threat as did those people who had no hesitation in signing the petition. They may not vote Labour and agree with us on a host of issues, but they understand that the Government have no sympathy for the National Health Service, that there is a danger to the NHS and that the Labour party is right in trying to defend the NHS and similar services from further cuts and reductions in service.

The hon. Member for Wealden has done a useful service in initiating this important debate. Our views remain the same as they have always been—that the provisions created by the Labour Government's majority in 1945 should stay. They are a tremendous asset to Britain. If, as the hon. Member for Wealden said, other countries have not followed suit, that is their misfortune.

10.23 am

Mr. Peter Hordern (Horsham)

After hearing the hon. Member for Walsall, North (Mr. Winnick) showing his delight in the document leaks and creating bogeys about the policies of my right hon. Friend the Secretary of State, I am forced to the reluctant conclusion that he is not quite the statesman that he looks. I warmly congratulate my hon. Friend the Member for Wealden (Sir G. Johnson Smith) on initiating the debate. I do not know when we last had a debate on this subject but it is important that there should be a proper debate on the imposition of taxes and the wide range of benefits available to us to ascertain whether a more sensible system could be created. The other day, I looked at what Lord Beveridge had said in the report that came out in 1942. He said: social insurance and the allied services, as they exist today, are conducted by a complex of disconnected administrative organs, proceeding on different principles, doing invaluable service but at a cost in money and trouble and anomalous treatment of identical problems for which there is no justification. He was going to put that system right. Forty years later, that seems to be a fair description of today's system of welfare services and benefits. There are 57 different types of allowances against income tax, 11 against income and corporation tax, four against the petroleum revenue tax, 10 against capital gains tax, three against development land tax, 12 against capital transfer tax and six against stamp duty. As those figures are for 1982–83, they do not include the allowances introduced a year ago by my right hon. and learned Friend the then Chancellor of the Exchequer for high income earners in the business development scheme. My hon. Friends are aware of the schemes I mean—the type that allows a rich man to buy a bookshop in Battersea. I have not counted all of them, but 27 main types of benefit are available from the Government. I do not believe that any of us would believe that that is what Lord Beveridge had in mind.

Sometimes the proliferation of benefits has grown by deliberate acts of Government policy. Hon. Members who have been in this House for some time will recollect the number of private Members' Bills introduced in the House and subsequently carried into legislation which provide extra benefit. No doubt, those Bills have done a great deal of good for the recipients but they have added to the complexity of the total range of benefits. Since the Beveridge report, there has never been a comprehensive review of the needs of the people and how those needs might best be met.

Today I was glad to read in the Financial Times that there is to be a spending and tax Green Paper. Perhaps my hon. Friend the Under-Secretary of State who will be replying will say whether that is the case. I hope that that is true. It will be a welcome development for the House and the country to see the future pattern of expenditure and taxes. The paper does not need to be a firm document of intent, but it will be valuable for the House and the country to have some notion of what lies ahead.

Because there are so many allowances and benefits, we should not proceed on the assumption that simplicity, through unification of taxes and benefits, is all that matters. I am aware that rough justice can be very rough to the recipients, but it is likely that a proliferation of benefits will not get through to those who need help most, and my hon. Friend the Member for Wealden introduced that point in his speech. The complexity of the variety of benefits and the difficulty in understanding them accounts for the loss in take-up of many of those benefits.

I believe that our objective must be the same as that of Lord Beveridge—an attack on want. He said: Want is one only of five giants … The others are Disease, Ignorance, Squalor and Idleness. We have made some progress against those giants. There are twice as many doctors and nurses as when the NHS started. Whatever the criticisms of the hon. Member for Walsall, North of the NHS and of the Government, the fact remains, as my hon. Friend the Member for Mid-Kent (Mr. Rowe) said in intervention, that successive Governments have always seen to it that expenditure on the NHS exceeds the rate of increase of inflation. I wish that the NHS had been better administered, and the House knows that I have mentioned that subject on more than one occasion. It is extraordinary that, even now, the NHS and the DHSS, which runs it, do not know how many people are employed in the service or what they do. The administration of the Health Service has caused an unacceptable degree of waste. A great deal more must be done to get that right.

Mr. Tim Renton (Mid-Sussex)

Will my hon. Friend elaborate on that interesting comment? My hon. Friend the Minister might like to add something as well. My hon. Friend said that the House does not know how many people are employed in the National Health Service. I was extremely interested to hear him say that. I have heard figures ranging from 800,000 to 1.2 million. That is a fantastic discrepancy. It would be interesting to know whether we could establish a more precise figure.

Mr. Hordern

I believe the truth to be that the figure of 800,000 is what is called "full-time equivalents". Part-time workers are lumped together to form a full-time equivalent. The figure of 1.25 million which I normally give is the number of people working in the National Health Service. There should be an independent decision taken by the executive in all the health regions to decide how many people should be taken on.

It will not surprise my hon. Friend to learn that when the Public Accounts Committee was recently examining the number of people employed, it had no figures beyond last summer. I do not just mean no figures in the different branches; it had no figures at all for the number of people employed. I believe that the breakdown as to the categories of employment will not be published for a month or so, and will refer to figures as they existed at June last year. There will be a long gap before it can be established how many people are employed in the National Health Service. That is an illustration of the way in which the sere ice has been run for many years, and it shows an intolerable degree of waste and poor management.

There are twice as many teachers as there were when Beveridge reported. Many new towns have been built. The war on squalor, although not won has, I think on the whole, been well fought. I do not believe that we can claim to have been successful in the war against the giant of idleness. There are diametrically opposed views as to why we have not succeeded. I do not believe that it lies within the power of Governments to guarantee full employment. We are Dot self-contained. We depend upon trade. It is not possible to imagine that trade was not affected by the two sharp increases in the price of oil or that unemployment was not bound to follow.

Beveridge's view was plain. He thought that employment could be helped by allowing the new national insurance fund to fall into deficit. We have been down that road. we have found that deficit financing, or printing money, leads to inflation and that inflation leads to unemployment; not that the national insurance fund itself has ever been used for deficit financing in the way that Beveridge suggested. It has always been in surplus.

We must ask ourselves whether we need a separate national insurance fund. Does it function as an insurance fund? Anyone who studies it dispassionately will reach the conclusion that it does not. While it is not run on the "pay-as-you-go" principle the actuarial calculation made is not in the funding for long-term commitments to pensions or anything like that. It is as to how much money is likely to be needed for the following year plus a margin of 20 per cent. or so. It is not a difficult actuarial calculation. Indeed, it is not really an actuarial calculation at all.

Whatever people may feel about the national insurance scheme, they are not investing in an insurance scheme in any true sense of the word. Beveridge intended that national insurance should be compulsory, and, as he said, men should stand together with their fellows. However, guarantee of benefit also had its obligations. Beveridge said: to seek and accept all reasonable opportunites of work, to co-operate in measures designed to save him from habituation to idleness". There was always a strong moral undertone about Beveridge. He said that a man out of work for six months had to mend a training scheme. He thought that unemployment for more than 26 weeks, continuously, would be rare in normal times. We do not live in normal times. The lesson that we have learnt since Beveridge is that the trade cycle is much sharper than it used to be and that Government attempts to boost the economy in the way that he advocated have proved to be more harmful than helpful.

Another reason for the number of people who are, in Beveridge's terms, "out of work" is the great movements of population that have taken place out of industry and into the service sector over the past 20 years. That is a great movement which is continuing. I believe that 5 million people change their jobs each year. It is a necessary process if we are to align ourselves to the change in circumstances, and challenges, which world trade demands. No pejorative charge can be made against those who find themselves out of work at present. It is a necessary consequence of the swiftly changing advances in technology that people must change their jobs. The unemployment figures are only a snapshot in any day of that process.

When we think of the advances in technology, the competition for our older industries from the developing countries, and all the changes that are bound to come, we can no longer say that those who have to bear the brunt of change are, in some way, morally responsible. It is not just the insurance practice of national insurance that has broken down, but the moral foundation upon which it rests. The national insurance fund should not pretend to be what it is not, and we ought not allow it to be so.

It follows that if the national insurance fund were abolished, national benefits would be provided by general taxation. There would be no need for contributions to the national insurance fund by the employed or the employer. There would be no need for the 10,000 staff, and £96 million would be saved from administrative costs. Those would not be the only consequences if national insurance were abolished. With its abolition would go any incentive to insure against hardship, which millions of people have accepted as a personal obligation for themselves and their families.

Beveridge was right about one thing—the traditional urge for people to provide their own insurance. Most people in employment were covered through friendly societies long before the national insurance scheme was introduced. If, therefore, the present scale of benefit is to be maintained by progressive taxation rather than by flat-rate contributions, it follows that those on higher incomes will pay more tax than they now do. So far from there being a flat-rate contribution, with people buying a flat-rate benefit, a high rate of progressive tax would secure only a flat-rate benefit instead of an income-related benefit. It would also yield more revenue than is now required to meet the benefits that are now given.

It is desirable from every point of view that there should be a strong element of genuine insurance properly funded by those institutions capable of doing so—the insurance companies. I should like to propose, therefore, that the insurance premiums should be fully allowable against higher rates of tax, should there be any change of the kind that I have described.

I understand that a married man not liable to tax may pay as much as £4 a week in national insurance contributions at present. I should hope that if national insurance contributions were to be amalgamated with income tax, it might be possible to exempt from tax about the first £250 contributed towards an endowment or investment scheme.

My noble Friend, Lord Barber, whom my hon. Friend the Member for Wealden mentioned, has not always received high praise from the House. In my opinion, as a tax reformer, he has had no equal. Apart from the introduction of VAT in the place of purchase tax, and the abolition of surtax, which everyone said at the time was impossible, he introduced proposals for a tax credit scheme. I still feel that the scheme—the basis of which was that if credit that was available to everybody exceeded tax, the difference was paid—was the best scheme so far proposed. He thought that 90 per cent. of the adult population would be in the scheme. It has always seemed to me that that form of income support, catching automatically everybody in its scope, was the best that could be provided. The snag is that, for it to be attractive to everybody, it is bound to cost extra money. Therefore, the problem lies in how to find that money.

I have no particularly fresh ideas. I am certain that if I had, they would not be fresh to the Treasury, because it would have thought of them already. When I consider investment income received by pension funds, I question, and have done for a long time, whether it is right that it should be free of tax. It seems an anomaly that it should be exempt from tax. About £100 billion is now invested in the pension funds. Of that total, nearly one third—£30 billion — is invested in property schemes. The money would not be invested in those schemes if it were not thought by the pension funds that inflation would advance fast. In themselves, those schemes do not create wealth. Since the war we have seen a proliferation of office and shop developments all over the country. I think that everyone in the House will have seen some sort of property scheme carried out locally by an insurance company or a pension fund. The result has been that the insurance companies and pension funds have invested on low yields. That is not a wise thing to do. It is not economically desirable that so much money should be tied up in non-wealth-generating schemes.

There is no better alternative than to expect those who are providing future income to invest it in generating present wealth. For that reason I do not see why investment funds should be exempt from taxation. That would make those people think hard before they invested in long-term property schemes both here and abroad. They would be inclined to make investments that gave them a higher return. They might even invest more in Government stocks. At any rate, I see no reason in principle why they should be exempt from taxation. If that were so, an extra £2,250 million would be available each year.

Those who have acted in the name of Keynes have caused great damage since the war. However, I agree with one thing, which is that in the long run we are all dead. Investment companies and pension funds are inclined to think that life can proceed without them. They are looking 20, 30 and 40 years ahead. They invest not in productive goods and services or in the exchange of goods and services, but in unproductive office buildings that they buy and sell to each other.

I have another suggestion on the nationalized industries' pension funds, which were mentioned by my hon. Friend the Member for Wealden. As the House knows, they are index-linked. I have never seen the reason why they should be if they are funded schemes of, if they are to be indexed-linked, why they should be funded schemes at all. It is interesting to note that if nationalized industries' workers were treated in the same way as civil servants that would save the revenue £1,000 million every year. We have just seen an example of that in the National Freight Corporation, which was de nationalised, rightly, a year or so ago. Some £50 million was raised from the sale. However, £48 million had to be given back to pay off the deficit in the pension fund, only because it was index-linked. The same will happen with British Airways and, on a large scale, with British Telecommunications. My hon. Friend and the Government must address themselves to that point. In principle, can it be right, if an index-linked pension is to be provided—I am not quarrelling with that concept—that the taxpayers should have to pay just because it is a funded scheme rather than a "pay-as-you-go" scheme? I hope that that point will be taken into account.

There seems to be no substitute for the current generation of wealth by the free exchange of goods and services. The measures that I have suggested so far are related only to pension funds—I am sure that there are many others—and between them they would raise over £3,000 million a year. There are other curious anomalies. I am talking only in the context of a tax credit scheme. My test is a simple one. Would I ask an elderly widowed pensioner in Horsham to pay for this part of Government expenditure? Some curious anomalies arise from that test. Improvement grants and the process known as enveloping are the worst examples.

My hon. Friend will recognise that improvement grants go mostly to those who are buying their own houses through a mortgage, and are, therefore, already getting mortgage tax relief. Under enveloping in Birmingham, the council recognised that not enough people were receiving those grants. Therefore, the council asked the Department whether it could have a more active policy, and it agreed. The council went down whole streets in Birmingham, knocking on people's front doors and asking those who were buying their own homes whether they would like a 90 per cent. improvement grant for a new roof. They asked, "What is the catch?", and the council replied that there was none because the Government were paying.

I do not believe that my elderly widowed pensioner in Horsham should be paying for that activity. Such expenditure must be considered carefully in the context of providing an important social advance. There are too many bitty pieces of Government expenditure trying to please too many people and failing to do so because they are inadequate in every sense.

All those matters must be looked at in the context of getting a single tax and tax credit scheme that is fair to all and provides income support for those who need it most. I hope that the Treasury Green Paper on long-term public spending and tax will lead to a revival of interest in the tax credit scheme. If such a straightforward and easily intelligible scheme could be combined with a tax incentive to save for personal insurance, we could build a new society based on transparent equity and individual freedom that comes with true independence.

10.47 am

Mr. Ted Garrett (Wallsend)

The hon. Member for Wealden (Sir G. Johnson Smith), who unfortunately has left the Chamber, introduced the debate with a personal knowledge based on the fact that his wife is a physician. Therefore, we have seen the warts in both the public and private sectors.

I detected in the hon. Gentleman's speech faint praise for the NHS and positive praise for the private sector. I object to the private sector because a scheme has not yet been devised whereby it pays its full contribution to costs incurred by the state for services provided by the NHS and used cheaply by the private sector. I refer to training of the medicals and paramedicals, research and other facets with which most of us are familiar. It is regrettable that the hon. Gentleman underplayed that factor.

In his motion the hon. Gentleman uses the word "demography". It plays an important part in our assessment of the private sector. If one lives in the southern half of the country, or in the more affluent areas, it is clear that the private sector continues to flourish and expand, although not as rapidly as was originally envisaged. Conversely, in areas such as the north-east, one would have to look hard to find a private hospital. Indeed, as far as I am aware, there are only two major private hospitals in the whole of the north-east, and I understand that a further one is being contemplated. So it is probably the scale of affluence in regions that decides the level of private treatment.

Moreover, there are limits to the service that the private sector can provide and is providing, as I am sure no one would deny. The state side will always have to look after the people who cannot afford private medicine. Those are the people who are getting a fairly rotten deal today. I can do no setter than draw attention to the unholy row in the Northumbria ambulance service, which administers the services in Tyne and Wear and the county of Northumberland. Unfortunately, we have acquired a power-crazy bureaucrat in the form of the chief ambulance officer, who set up a scheme to reduce the ambulance service by one third. The ambulance service is already overstretched, and it is not uncommon for patients who are often frail and mentally disturbed to have to wait two or three hours after treatment for an ambulance and that is in addition to the time that they have to wait before they receive treatment. To reduce the service is crazy.

There have been public meetings throughout the area. Those meetings have been convened not by the Labour party, but by various interested parties. Protests have been made by chambers of commerce and members of the Conservative party, the Liberal party, the medical profession on and trade unions. They were unanimous in believing that the cuts should not be imposed.

Yesterday there was a meeting at which it was decided to modify the cuts. Today's Newcastle Journal says that the job losses are to be 79 instead of 116, and that the ambulances will not be reduced by the number that was announced. However, the ambulance cover is still a matter of great concern, and I urge people in the area to continue their protests and to continue to press for a better ambulance service, not a reduced one. If the right hon. and learned Member for Hexham (Mr. Rippon) were here this morning, I am sure that he would have expressed his concern about the vast areas of Northumberland—that does not include the industrial areas of Tyneside—that will be inadequately covered. I fear that something will happen that will discredit the people who are trying to force through the scheme.

I speak as a member of the committee that formed the first ambulance service when the National Health Service Act was implemented on 5 July 1948. I was also a member of a hospital management committee at that time. I well recall the enthusiasm and the desire of all concerned to make it a success and to make the dream a reality. Sadly —and I am sure that no hon. Member would disagree—the National Health Service has struck some serious problems. In my opinion, it is not the result of overmanning, but is basically due to a change of attitudes in our society. We are a less caring, less compassionate society. I remember when every hospital management committee had a good league of friends—people who gave tremendous voluntary service. There was the Women's Royal Voluntary Service, as well as other organisations, and they provided fringe amenities which are being cut in hospitals in many areas.

It is unfortunate that no one has mentioned preventive medicine. We must apply our minds to this aspect of medicine in our plans for the future of the Health Service. Here I believe that the medical profession could play its part by somewhat reducing the standards that it has set itself in ordinary medical examinations. For example, how many hon. Members have regular blood pressure tests? Such tests provide an important early diagnosis. It is not necessary for a medical man to carry out such tests. When people say that the Government are right to extend the area in which spectacles can be purchased, do they realise that the eyes tell the optician a lot of medical history, and that the optician refers the patient to the general practitioner if there is any cause for concern? That preventive factor will be reduced if we extend too widely the sale of spectacles without proper optical care. Preventive medicine can keep us all more healthy.

We are basically a more healthy nation than we were when I was a child before the war. We have come to accept better standards of health, and rightly so. We all realise now that there are minor illnesses which we need not get and which can be alleviated. That is why we hear the persistent grouse about lengthy waiting lists. We get in our postbags virtually every week stories of people who are waiting for not major surgery, but often minor surgery — an irritant, something that undermines normal physical fitness. We have not tackled that problem yet. Whether the private sector can meet that demand I do not know, but I do know that the National Health Service is not meeting the demand.

Therefore, to say that we are allocating additional resources is not quite correct. We are not allocating additional resources to meet ordinary demands. As a nation, we must apply ourselves to that problem, and we must reallocate our financial resources to meet the demand.

The hon. Member for Horsham (Mr. Hordern) rightly spent some time in telling us where resources can be made available. I am obliged to him for enlightening me on the matter. However, he did not say whether, if the proposals are accepted, the Government—of whatever political colour—will reallocate the financial resources that are available, or whether they will use them in other directions. It is up to us as elected Members to maintain pressure on the Government to make that change.

Hon. Members will have received, as I did, correspondence from general practitioners about the reorganisation of the deputising services. I am not a great advocate of the medical profession—I have a cynical view of it, based on my experience as a member of a management committee—because it is sometimes overprotective of its members. However, having studied its representations on the reorganisation of deputising services, I think that the profession has a case. The Minister should reconsider the matter to see whether we can secure a compromise.

I hope that my remarks will be considered by the Minister, and especially by the Minister for Health, who was in the Chamber earlier but who has now left. I hope that as the debate continues hon. Members will continue to discuss the future of the service to see how we can help the public to get a better Health Service based on sound financing.

11.1 am

Mr. Timothy Yeo (Suffolk, South)

I am pleased that my hon. Friend the Member for Wealden (Sir G. Johnson Smith) has raised this matter, which is a central issue in Britain today. I congratulate my hon. Friend in his absence on the statesmanlike way in which he introduced the debate. He and my hon. Friend the Member for Horsham (Mr. Hordern) have said almost everything that I intended to say, so the House will be glad to know that my speech will be abbreviated. Their contemplative approach to the subject was correct.

Combative or party-political slanging matches are not conducive to solving the difficulties that we face. When the rhetoric is removed, there is general agreement about our aim, which is shared entirely by the Government and by the Conservative party. It is absurd to suggest, as did the hon. Member for Walsall, North (Mr. Winnick), that the Conservative party has no interest in ensuring better welfare provision. Our concern is solely to maintain that provision and to improve it for the elderly, the sick, the disabled, the very poor and the unemployed.

Mr. Winnick

The hon. Gentleman has confirmed what I said. I did not suggest that the aim of the Government or their supporters was to dismantle completely the National Health Service and the welfare services. I said that the Government believe that services should be provided for the poor, the chronically sick and the aged. I also said that, in the main, Conservative philosophy, as exemplified by the present Cabinet, is that the remainder of the population, especially those who receive the average income or more, should have their services provided by the private sector.

Mr. Yeo

I am grateful to the hon. Gentleman for confirming that the Government are concerned about the most under-privileged sections of the community.

Mr. Winnick

There is no profit in the poorest section.

Mr. Yeo

However, I entirely reject the suggestion that the Conservative party wishes to provide for the remainder of the population solely through private means. The Conservative party will not abandon its commitment to maintaining a general level of National Health Service and welfare provision to everyone who wants it, and it is ridiculous to pretend otherwise.

We must take into account two factors in planning future provisions. The first is the limitation on overall resources. As my hon. Friend the Member for Wealden said, during the next 10 or 20 years we are unlikely to achieve growth rates similar to those that we enjoyed in the 1950s and 1960s. Of course we all want more growth, and if we could achieve it by waving a magic wand, we would. I was amused by the hon. Member for Walsall, North, who said that it would be wonderful if we could achieve those rates of growth, which appear to be happening in the United States at present, but who continued, almost in the next breath, to criticise the provision of health and welfare services in America. Did it occur to him to make the connection between the free enterprise philosophy that prevails in the United States and the fact that it is achieving higher rates of growth?

The second factor that must be taken into account is that there are growing demands on the welfare services, especially, as my hon. Friend the Member for Wealden said, because of the increased numbers of elderly people. I shall not argue about how much of our national resources should be allocated to the provision of welfare benefits, although I welcome the publication of a Green Paper on long-term spending plans. We must recognise the fact that there are considerable restraints and competing demands on national resources. The Government must provide not only health services and welfare benefits, but housing, education, transport and defence. The increasing demand for those services and the fact that we have limited resources means that we should not raise expectations unrealistically. The idea that all services will always be protected against inflation is wholly wrong and destructive. To achieve improvements we must face the fact that some services will have to be cut.

However, I do not suggest that the overall allocation of resources to welfare services and benefits should be reduced. We must face reality, and the growing numbers of very old people and our proper desire to improve the conditions of the worst off may mean that we have to be more selective in spending available resources.

Selectivity has rather a bad name because of the old-fashioned and understandable anxiety about the way in which means tests used to be applied. However, selectivity is the only way to ensure that resources are given to those most in need. It is the only way in which we can achieve worthwhile improvements in standards. Sadly, I fear that many Opposition Members are still more anxious to fight yesterday's doctrinaire battles than to debate constructively how today's and tomorrow's needs can best be met.

When planning future provisions we must consider, first, the system to be used and the principles on which it should be based; and, secondly, how to manage that system most effectively. Present arrangements cannot be graced with the title of a system. As my hon. Friend the Member for Horsham said, it is full of the most absurd complexities. It is a piecemeal arrangement that has grown over the years, and its complexities are one reason why there is such a low take-up of benefits. Possible claimants do not understand how to claim benefits, and their confusion is shared by me, and perhaps by other hon. Members, when faced with individual cases at Saturday morning surgeries.

We have already had some discussion about the system of social security benefits, and I shall enlarge on the point, made by my hon. Friend the Member for Wealden, about the interaction of taxes and social security benefits. That now means that, according to the statistics provided by the Child Poverty Action Group and the Institute for Fiscal Studies, there are more households on low incomes that face effective marginal tax rates of 75 per cent. or more than there are households on high incomes. That is an absurdity that reached its height, as The Economist pointed out last October, with a household with an income of £110 a week which could, under certain circumstances, face an effective marginal rate of tax of 287 per cent.

In 1979 it was right for the Government to give priority to reducing the penal marginal rates of tax at the top end of the scale. That was an essential way to restore incentives, but just as it was right to deal with the top end of the scale then, now priority should be given to dealing with the absurdly high rates at the bottom of the scale. An immediate action would be the raising of child benefit in the forthcoming Budget by a larger amount than that suggested in the autumn statement. I hope that my right hon. Friend the Chancellor will resist temptations to concentrate the available resources on raising income tax thresholds. It is clearly proven that that is not the most efficient and sensible way to deal with the poverty trap—it is an expensive and inefficient way. That method is only a short-term palliative.

The answer to the problem has to be much more fundamental, as my hon. Friend the Member for Wealden pointed out. We need a unified tax system of tax and social security benefits. The Government have the parliamentary majority with which they could introduce such a system. I hope that we shall have a commitment on 13 March to a comprehensive overhaul of the tax and social security system.

I do not mind whether the new unified system is based on the tax credit scheme that was being examined in the early 1970s. It could be some other variant such as the basic income guarantee scheme or the negative income scheme. Whatever it is, it needs to be set in motion urgently. There would be some administrative savings from this. The abolition of the national insurance system, mentioned by my hon. Friend the Member for Horsham, would save some 10,000 jobs. It would save the absurdity of the 90 million weekly entries that are now required in book-keeping terms just to preserve that system, a system of which the original basis has been largely undermined.

We must recognise that any unified system of tax and social security benefits would have some cost, but many of the advantages of such a system would be for disabled people. I welcome some of the recent steps taken in disability benefits and particularly the abolition of the household duties test. The introduction of a severe disablement allowance could be the first step towards a comprehensive income and cost allowance for the disabled.

Social security provisions are just one part of the system. There are many other aspects, some of which are called into question from time to time. It is right for the Conservative party to reaffirm its long-term commitment to state provision of welfare benefits and services. By "provision", I mean state funding. The state finds the resources but can then choose the method of provision and we need to be more imaginative in choosing methods. It is right for us to examine the potential for privatisation in the NHS. That does not conflict with the underlying commitment to free and freely available services.

Privatisation does not have to take place through commercial organisations. It can equally well be effected by the use of voluntary organisations. For years, local authorities have been paying fees for children to go to special schools run by voluntary organisations. That form of privatisation has been accepted by local authorities. It can provide the model for other forms of privatisation that could draw on the expertise and specialised knowledge of the voluntary organisations.

Mr. Michael Meacher (Oldham, West)

Does the hon. Gentleman accept that, if privatisation proceeds and is taken further, one of the results will undoubtedly be what we have already seen, whether in the cleaning of classrooms in Merton or the testing of laundry cleaned in the Sunlight laundry in Cheltenham—that is, a lack of standard;? Would he also accept that privatisation leads not to greater efficiency but to savings through reducing what are already disgracefully low wages, down to even below £1 an hour? Do the hon. Gentleman and his party approve of such things?

Mr. Yeo

I am afraid that there are many instances within the NHS and other parts of the public sector of appalling standards. There is no monopoly of virtue in the public sector. It is easy enough to dig around the country to try to find isolated examples where standards of privatised work may not be satisfactory.

Mr. Jonathan Sayeed (Bristol, East)

Many people want to give their help voluntarily and should be able to do so. I agree with what my hon. Friend is saying, as such people would be able to assist on a voluntary basis without becoming part of the local authority machinery and being bound up with its rules and regulations.

Mr. Yeo

I agree that there are many voluntary organisations and volunteers who work for those organisations who would not find it easy to fit into a state monopoly of provision.

I shall finish dealing with the point raised by the hon. Member for Oldham, West (Mr. Meacher). If standards are thought to be falling, then it is up to the management and the authority concerned to ensure that that is put right. Just as they have a duty to put things right when the functions are being carried out by NHS employees, so they have a duty to maintain standards in the organisations to which contracting-out has taken place.

Mr. Richard Holt (Langbaurgh)

Does my hon. Friend agree that, in the private sector, which is so often held up to ridicule by the Labour party, all hospital services are not condemned but envied?

Mr. Yeo

The standards in the private sector, which have attracted criticism in the House and elsewhere, are very high.

We must be concerned to see that where there are alternative methods of providing welfare services or health services, we are as imaginative as we can in choosing those options that offer the best value to the taxpayer. Encouraging such different methods is in the interest of efficiency.

This brings me on to the second part of the scheme concerned with the management of the system. Good management is absolutely essential if we are to extract the best from the limited available resources. Before coming to this place I worked in the commercial sector for a number of years, and, more recently, as the head of a large service charity. The point made by my hon. Friend the Member for Horsham about the NHS not being certain how many employees it had reminded me of the extraordinary position when I went to the Spastics Society. In 1980 it faced substantial problems, with an annual deficit of £800,000. As a result it had introduced stringent controls over the appointment of new staff. The organisation had 2,500 staff employed throughout the country, but the appointment of any additional member of staff had to be a decision taken at the highest level in London. As a result, there were a dozen people sitting around a table in London discussing whether an extra cleaner was needed in a residential centre in the Lake district, an issue of which they could have no possible knowledge. At the same time, the society did not know how many people it employed in total. That, in microcosm, parallels some of the problems in the NHS today.

My example shows the need to devolve decisions down to a local level so that unit heads can be accountable for their budgets. They can make the decisions, they are the people who know whether they need extra staff. At the same time, they must be held to account for their budget, and that must include medical staff as well. If we achieve that—and this is one of the issues that has been well aired after the publication of the Griffiths report—not only will management be functioning in the right place—at local level—but we shall probably find that we have far better control over the overall numbers of people employed because we know who is responsible for keeping a tally and for keeping within their budget figures.

The experience of moving from commerce into the voluntary sector made me acutely aware of the difficulties of introducing commercial attitudes and tight and efficient working practices into sectors where there is no commercial pressure. Management in areas such as the National Health Service is more difficult for that reason than it is in many sectors of business.

There are problems relating to criteria and measurement. In business, simple figures can be collected of sales, production and profit, but what methods of measurement are available in the NHS? We can measure the number of patients going through a hospital, but faster patient turnover will mean worse patient care. It is not easy to achieve sensible measurement in the NHS. For that reason, it is all the more important to strive for greater efficiency.

I am sure that people in this House and elsewhere who have looked at different areas of the NHS of which they have personal knowledge have become aware of the scope for savings if a common sense attitude is taken and if someone is allowed to be in charge and to say, "This is what we shall do to save some money."

Progress has been made but we have much further to go, and the Griffiths report points to several most welcome steps which could be taken. They include the release of assets which are tied up in functions which are not relevant to the NHS itself. Our concern with better management should be an obsession for everyone involved with the administration of the NHS if we are to sustain and improve the provision offered by the service.

There are many other issues on which I should like to touch, such as how resources should be allocated to different functions and to different regions. The subject of preventive medicine was rightly mentioned by the hon. Member for Wallsend (Mr. Garrett).

It is high time that in this House and elsewhere we escaped from the mindless assumption that increased expenditure on welfare services is always a good thing. Sometimes there appears to be a kind of virility contest in which even my right hon. Friend the Secretary of State takes part, saying how much more money we are spending in different areas. I do not believe that it can be taken for granted that that is desirable.

The way in which welfare services and benefits are delivered is important. We have to ensure that the system is humane. Recipients of services and benefits are just as often offended by the inhuman and discourteous treatment that they receive as they are by any possible inadequacy in the amount of benefit or service granted to them.

There is real danger that excessive provision of welfare services and benefits encourages a dependence on the state, which might well be welcome in Communist countries but which discourages the sort of individual initiative that we have been proud to promote in Britain for centuries.

One of the Government's most welcome initiatives is their policy for care in the community. It has never been suggested that this policy would be cheap or that it was introduced for reasons of cost, but we must recognise that care in the community involves care by the community. It is right and desirable from every point of view that the community should play a full part in the provision of welfare services.

I plead with the Government to ensure that as far as possible evey incentive is given to families and relatives caring for elderly and disabled people. I know that my hon. Friend the Under-Secretary of State is familiar with my views on the need to end discrimination against married women in that respect.

I welcome the debate and warmly congratulate my hon. Friend the Member for Wealden on the choice and phrasing of his motion.

11.23 am

Mr. Michael Meadowcroft (Leeds, West)

I am grateful to the hon. Member for Wealden (Sir G. Johnson Smith) for the terms of his motion and for introducing it. I apologise to him for not being able to be present at the begining of the debate, having been incarcerated in an underground tunnel for part of the time. I listened with interest to the remainder of his remarks. The hon. Gentleman's motion has given us an opportunity to develop a real debate on welfare services and benefits rather than simply to recite yet again established party policy. I do not agree entirely with the remarks about it not being a proper subject for ideology and philosophy, because there are real differences between the views of political movements on welfare services and benefits, and they are perfectly proper differences.

The subject has been bedevilled by an exaggeration of, and an overemphasis on, dogma, to the exclusion of ways and means of coping with the crisis that we face. In considering the motion, we have an opportunity to present views which may in a sense leave chinks in our armour that can be exploited later. I look forward to the contribution of the hon. Member for Oldham, West (Mr. Meacher) and hope that he will deal with the new situation that we face, rather than simply giving a recital of the old party policies.

The new situation has several components, the first of which is the failure of the state. Much as we would wish to see the state succeed and be able to cope with the myriad demands put upon it, experience of the way that the service is delivered suggests that the state does not provide, in its style and attitudes towards people, the kind of care that they should receive.

Secondly, there is the problem, already referred to, of low growth in the economy and the impossibility of spending our way out of the problem, while at the same time we have the need to reduce inequalities in society.

Thirdly, there is the huge problem of the massively increased expectations of people, which are not and cannot be matched in full by resources. We are all familiar with constituents who, with considerable anguish, mention their concern about an elderly parent or relative who has been waiting two years in pain for a hip replacement. We would all like to see such operations—for which there is an excellent prognosis—carried out without delay, but it is interesting to recall that not many years ago it was impossible to provide such treatment. Now, because it is possible, it is assumed that it should be immediately available to all who need it.

There is great difficulty in matching expectations against resources. This has led to our continuing to search for a system that is fair and just to people in need, not least because fairness and justice are such self-evident truths and values. The search for that system has often produced draconian ways of trying to achieve or enforce it, and has upset some of the linkages and sensitivities in society. I have come to the conclusion that to overemphasise the principle of fairness is counterproductive to some of the aims that we wish to achieve in society. Unfortunately, it has become a sort of holy grail that it is not possible to achieve.

There is debate concerning the development of considerable detail in the way that we administer social security and income support, as opposed to developing discretion in dealing with people who present themselves with obvious needs. Both the Left and the Right in politics have tended towards an increasingly detailed system in recent years, but for different reasons. On the Left, understandably, people wish the system to be challenge-able. If people are not getting their entitlements, details are needed so that they may challenge before a tribunal the lack of provision. Detail in that sense is beneficial to clients in need.

On the Right, there has been a tendency to go towards detail because it enables authorities to apply checks and balance; and to cut back on entitlements. The emphasis on the existence of so-called scroungers has tended towards the development of detail. There is a great mountain of books and schedules that endeavour to deal with every anomaly and every case that comes before the Department of Health and Social Security. I do not believe it is possible to devise a system which covers the multiplicity of human needs. Almost by definition, they are infinite. Every time one loophole is plugged, two or three more appear. Therefore, the continued search for a fair system tends to make DHSS officers who are trying to sort out the detailed provisions hostile to the needs of the individual.

The hon. Member for Horsham (Mr. Hordern) mentioned the multiplicity of benefits. They are not always understood by those behind the counter, let alone those in front of it. I was recently on a bus travelling along Whitehall, and two elderly gentlemen were discussing quite loudly the case of someone who was ill and who had become unemployed. One said "Of course, he's not on the dole now." The other said "Oh no, he's gone on to infertility benefit." Thus, there is a certain lack of understanding about the basics of the system.

I accept the point made earlier about the need to revise the idea of tax credits. If we are to move away from our obsession with numerous claimed means-tested benefits, we must work towards a tax credit system in which everybody is assessed centrally for their basic provision. No doubt the Minister will say that such a scheme would prove more expensive. However, if it is decided that that is the only way to resolve some of the problems of poverty and inequality in our society, we shall have to sell the increased cost of that system to those who have the good fortune to be in employment and who are therefore better off.

If we consider double taxation, we can see that fairness and coping with need may be mutually exclusive. Many of those who come to surgeries complain that, having provided for themselves by making superannuation and pension contributions, they find that they are taxed again on that provision when they later retire or are out of work, because their benefits are reduced. Again, that encourages the attitude that it is not worth providing for oneself. It leads to great anguish when people compare themselves with those who have not provided so prudently for themselves. Again, justice and fairness do not really enter into the equation.

Our whole system of income support is based not on fairness but on need, and the two things are therefore incompatible. Accordingly, we should look afresh at some of the things that have been found unpalatable in the past. I am convinced that it would be of great benefit to those who wish to be less dependent and to provide for themselves if there were a substantial lift in the disregards against benefit. In recent years moonlighting and the black economy have flourished not because people want to fiddle their taxes or avoid their proper responsibilities, but because they are in desperate need. People in desperate need will resort to that.

We all have double standards. Although hon. Members deplore tax avoidance, few hon. Members will refuse the offer of getting work done £100 more cheaply if they paid in cash. However, we all know what that means at the other end of the process. Therefore, we should accept the scale of the black economy and realise that, unless we lift the disregards against benefit so that people do not lose their social security payments when they are earning relatively small sums, we shall not do anything to solve the problem.

There is a precedent, because we already have the enterprise allowance scheme, which is primarily aimed at those who have capital through being made redundant. If they put £1,000 into the manufacture of some product, the state will guarantee them £40 a week for a year without any loss, no matter what they earn. The scheme has been successful and I commend the Government for it. Indeed, it has also proved valuable. However, if that is right and proper there is a precedent for not losing benefit if more than a certain amount is earned.

Our search for fairness may not be successful in the working world. Conservative Members are sometimes very facile in the way in which they deal with the problem of people wanting to work. Like the hon. Member for Suffolk, South (Mr. Yeo), I have experience of the voluntary sector, and I know that the vast majority of people desperately want to work. There is a queue outside the door even for the lowest paid jobs that are funded by the MSC. The vast majority are not idle or work-shy. However, the inflexibility of the way in which the MSC operates means that people are not encouraged to take on jobs or to make themselves independent.

It is somewhat farcical that unemployed people should be put off going on courses that might help their job prospects, their personal development, or their chances of manufacturing some product because they will lose so much of their benefits. They cannot have an education grant and the benefit at the same time. It would surely be better to say that a sum was available from the state for things that were clearly beneficial to the individual and the community. Similarly, there is no incentive for early retirement in the present system, because there is no encouragement for people to retire early by paying them at least a portion of their pension in advance. Consequently, they stay at work longer than they might otherwise do. I accept that it would be very expensive to lower the retirement age, but more flexibility would be beneficial. However, the Government have gone the opposite way, because the age for the job release scheme has gone up, although it would have been better to reduce it.

The current system is different from that envisaged by those who developed our welfare services, particularly in respect of fuel prices. The existing system cannot cope with fuel costs. We still try to contain them within social security payments, supplementary benefit and so on, although fuel prices are now much higher than was envisaged when the system was set up. In the past, pressure was put on local authorities to build all-electric properties. Now there are massive problems of insulation and of big rooms that are heated solely by electricity. Funnily enough, the Ronan Point disaster exacerbated the problem because the ensuing and quite proper decision not to have gas heating in multi-storey flats has led to huge fuel bills, with which ordinary people cannot conceivably cope. That is a new problem that must be considered on its own terms.

New thinking is also required on linkages. Many of the problems are considered in isolation. For example, we discuss the NHS as if we could cope with its financing and other problems on their own. We then discuss social security as a separate entity. The voluntary sector is left as a Cinderella, to be included in any sector as it suits the purposes of others. Even in terms of sheer finance, it is clear that there is a massive interrelation. For example, institutional care is greatly affected by attendance allowances and so on. It was known from Lloyd George's time that, when an elderly person had an income of his own through a pension, the family was less inclined to put him or her into care. Such psychological factors are important when considering the problem of expectations versus resources.

The story is similar with social services provision. Unless we consider the way in which the home help service can prevent heavy extra expenditure on placing the elderly in care, we cannot consider the costs or benefits involved, let alone the social benefit of people remaining independent in their own accommodation. Therefore, there is a considerable interrelation that has not been properly researched or considered, but which cannot be avoided when we consider such subjects.

We must endeavour, not only to provide the right service to the right people in the right way, but to come to terms with the fact that people have not responded in the way envisaged by Beveridge. The Beveridge principle was based on universal provision, free at the point of delivery. It was thought that people would respond to that by understanding what it meant and then making the appropriate demands. That has not happened. Most people have come to believe that if they leave the doctor's surgery without a piece of paper the doctor has not dealt with them properly. Prescribing and clinical freedom is out of hand. It is impossible to cope with that within the present structure.

Successive Governments have tried to vary and mix different aspects, which do not fit together. Surely it is illogical to suggest that the point at which to charge money is when a person is ill or needs glasses. We have not devised anything but the price mechanism to inhibit people from making excessive demands. Most Governments have faced the same problem since the war and have reacted in the same way.

We should consider ways in which people can become more involved. I hope that the hon. Member for Wealden had that in mind when he talked about the wider debate. People should realise that the general practitioner may not be the first line or port of call when someone has a need. More preventive medicine may be possible in the community, in the nursing services and community health centres, for instance.

It is difficult to accept the argument that private medicine has a role. I cannot see the logic in saying that because someone has more resources he should be able to purchase a better service. As the hon. Member for Wallsend (Mr. Garrett) said, the problem is that it is impossible to devise a way for the private sector to pay the full cost of a private service.

The hon. Member for Suffolk, South argued about the United States. It is as if a law of physics applies to social services and that every action leads to a reaction. Surely we do not want the divided society that the United States has.

We all suffer from selective vision at times. We pick out the pieces of a service that we want to encourage and diminish the services that we do not want. Encouraging private medicine will not assist the problem in the National Health Service. It will always be peripheral to that problem and be a point of tension. Encouraging private medicine will not persuade people to understand more about self-help. The women's health movement has made a tremendous contribution and is an example to men of what can be done with new insights and new attitudes.

Mr. Sayeed

Surely those who are paying for private medicine are also paying for the NHS service, which they are not using, and are therefore paying twice? They are paying towards those parts of private medicine that the hon. Member says are subsidised by the NHS.

Mr. Meadowcroft

I accept that because it is self-evident. However, if one suffers from diabetes one needs insulin. The need is the same whether one has money or not. A medical need is an absolute need and it is not dependent upon a financial power to buy in the market. I am unhappy that private medicine should be regarded as having a market equivalent to any other market. That attitude does not encourage an awareness of community needs and of the inter-dependence of people, which is at the heart of the solidarity and security that we need.

Instability is an immense problem, particularly in our cities. Unless we draw people together instead of dividing them we shall not cope with that problem. Instability in our streets could destroy much of what we are doing in other ways. We must find ways of enabling people to assist themselves. People do not want to be dependent on the state, but without the state many would have no services whatever.

Housing policies and their effects on social services and social security are linked. One of the disasters of the post-war years was the demolition of old property. People were content to live in such property because of the low expenditure involved. There was an evolutionary circle. People were able to enter the housing market and provide for themselves. In Yorkshire people said, "You look after the roof first". Even food and clothing came second to putting a roof over one's head. That attitude has been eroded by demolition. We have forced people on to the margin of living by taking away a sector of housing with which they could cope from their own resources. That has massively increased expenditure and dependence on social security, because rents have increased enormously in all areas where formerly people did not want subsidised rents or any support because they coped themselves.

The staying put scheme does not mean that elderly people are forced to make improvements, but it is a sensitive way of using volunteers to talk to people who have a small need. Perhaps they need a downstairs toilet or a stair lift to enable them to stay in their own home. By spending a little of capital resources one can save an enormous amount of revenue expenditure later. We have not picked that linkage up.

Pensions and what will happen to the bulge of elderly people in future pose a massive financial problem. I am not sure that earnings-related pensions will be beneficial. I suspect that they will produce inequalities in old age that will tend to create tension and bitterness rather than bring people together. Like my noble Friend Lord Banks, I think that we should consider the flat-rate pension again. He argues that to use the money accumulated in the state earnings-related scheme would enable us to raise the flat-rate pension now by 25 per cent. That would assist us with the problem in future.

All this is crucial to our discussion about finance and social care and how we bring the two together. It is not often realised that middle-aged and elderly people use the social services in a proportion of six to one. I am not sure that the resource allocation working party formula copes with that. I suspect that it does not.

The other aspect of demography that is not appreciated is the growth in the number of single parents and the effect that that has on the provision of services. The rate-capping proposals will harm the capacity of local authorities to provide services such as nurseries from which single parents can benefit because such services enable them to provide for themselves. That is another aspect of linkage.

We are experiencing more of a social crisis than an economic crisis. Our task is to provide a capacity for dignity within provision. That has a lot to do with style, the way that the DHSS operates, what its offices are like and how people are treated when they are there. Attention to detail and massive schedules does not assist.

The Public must have a different attitude. For instance, they should say, "The whole 'scrounger business is not really on". In every 12 streets probably one person is swinging; the lead. Everyone in the 12 streets will know that person and the problem becomes exaggerated. Compared with the number who are avoiding income tax the number involved in scrounging is tiny. The search for the scroungers harms our attitude to the vast majority who deserve and need help—help that they often do not take up.

I hope that the wider debate called for in the motion is developed. The issue should be debated more widely than in Parliament. We must convince the public that poverty must be tackled in new ways, especially with circumstances of low or nil growth. People must accept the challenge that faces them. In the end, if the price is that those privileged enough to have an income have to contribute; more, we must sell that idea to the public.

11.51 am

Mr. Tim Renton (Mid-Sussex)

I do not propose to follow the line taken by the hon. Member for Leeds, West (Mr. Meadowcroft) in his interesting and philosophical speech. I found it stimulating to listen to him. I wish to comment on the point made by the hon. Member for Wallsend (Mr. Garrett) that it was hard to find a private hospital in the north-east. He fairly drew a contrast between the affluence and lack of affluence of different regions.

It is no accident that I am the third Member of Parliament from Sussex to speak in the debate, following my hon. Friends the Members for Wealden (Sir G. Johnson Smith) and for Horsham (Mr. Hordern). The south-east faces the special problem of an increasing population. My part of Sussex has the second highest growth rate in the country, behind only Milton Keynes. We have, thank goodness, low unemployment—we are very lucky—but we also have low rating authorities. Traditionally, as good Conservative authorities, they have been low spenders. We have a combination of circumstances, and in many ways we are fortunate, but if this Government and the next Government intend to rely on the NHS alone, there is no way that we can meet the growing demand for health care from an increasing population. We must, therefore, look for solutions that are different from the solutions sought by the hon. Member for Wallsend.

Mid-Sussex is lucky because at long last, after 20 years of striving—10 of which I have spent campaigning as a Member of Parliament — my right hon. and learned Friend the Minister for Health has finally approved a new district general hospital in Haywards Heath. It will replace the splendid but aging hospital in Cuckfield. That hospital has provided a magnificent service over the years, but there is no room for expansion. I am especially pleased that my right hon. and learned Friend has agreed that the new hospital should be built on the "quick build" basis. That means that it will be more economical and, we hope, completed by 1988 rather than 1990. It will cost about £25 million. I am grateful to my right hon. and learned Friend for having listened to our representations, and I pay tribute to his understanding. I also pay tribute to the hard work of Martyn Long, the chairman of the Mid-Downs health authority. Although the new hospital on the St. Francis site will have room for expansion, it will have only 40 more beds than the existing hospital. With a growing population, that emphasises the problem to be faced in the future.

I thank my hon. Friend the Member for Wealdenmy—neighbour in Sussex—for raising this subject for debate. I congratulate him on his most interesting speech. I am grateful to have the opportunity to speak because, at the last general election, I was fortunate enough to inherit the town of East Grinstead from my hon. Friend. If anybody should now be called the hon. Member for East Grinstead, it should be me.

East Grinstead has the remarkable Queen Victoria hospital, which combines in the most unusual way the national eye bank from which corneal transfers are made and the superlative McIndoe wing, with its four modern operating theatres, largely funded out of private sources, and especially contributed to by American and Canadian forces. As many hon. Members know, the wing specialises in plastic surgery and the replacement of bone. Next door to those sophisticated facilities are ordinary general and geriatric wards. The sophisticated part of the hospital comes under the Tunbridge Wells health authority, and the ordinary wards under the Mid-Downs health authority. It is a splendid mix of general and specialised health care.

During my first lengthy visit to the hospital, a number of tributes were paid to my hon. Friend the Member for Wealden for the great attention that he paid to the hospital for many years. I hope that in the years to come I can be half as successful as he was.

Before moving to more general subjects, I declare an interest in privatisation. I am a director of a company called Advance Services, one of whose many services nationwide includes laundry. I do not mention that to get, as the BBC would say, any gratuitous advertising. I wish simply to tell hon. Members of our experience to date during the few months in which we, with many other companies, have been tendering for laundry contracts within the NHS.

Our experience is that the price at which the contracts are let is very much lower than we had originally anticipated. For those that we have won, we have tendered successfully at about 8p per piece. Such a price is necessary to win the tender. It is about 40 per cent. lower than the price for the work before tender. We have just won a tender at 8.75p per piece, whereas the previous outside price was 18p, and internal costing within the hospital was 15p per piece. On the other side of the coin, a contract was awarded to the in-house tenderer—the direct labour staff—at 7.76p per piece. That was by far the lowest tender. Yet the previous costing was about 15p per piece. That shows the magnitude of the savings available.

It was originally thought that about 10 per cent. could be saved by the privatisation of laundry contracts. Yet at this relatively early stage, it is more like 30 or 40 per cent. If that figure can be carried through the whole of the programme of privatisation, in laundry, catering and cleaning, where £900 million is spent a year, more than £300 million a year would be saved. That would build 10 new 300-bed hospitals such as that to be built in my constituency. Opposition Members who worry about privatisation should bear that in mind.

The hon. Member for Oldham, West (Mr. Meacher) referred to the standards in lower price contracts. Of course, that is a fair and crucial point. However, the contracts that we are awarded last for only one year. If we fall down on standards—which we have no intention of doing—we should soon be in difficulties. We have had to install specialist equipment to deal with the mix of garments. If we fall down on standards and lose the contract at the end of the year—as we should—we would have installed capital equipment for no lasting benefit.

Mr. Meadowcroft

Does the hon. Gentleman accept that the labour content in these contracts is inevitably and justifiably high and that savings will not necessarily accrue to the Exchequer if substantial numbers of people are thereby unemployed? The people in question are low paid — probably below the cost of keeping a person unemployed—so there must be a set-off against any assessment of saving that might be achieved.

Mr. Renton

I regret having given way to the hon. Gentleman because his intervention seems to be a continuation of the argument for encouraging inefficiency and extra spend in the NHS, when the whole of this debate is about how we are to obtain additional resources for the NHS. We all know, whatever our political persuasion, that there is a limit to the totality of resources and that the fundamental purpose of my hon. Friend the Member for Wealden in raising this issue is to emphasise that within this limit on resources are ever-increasing demands for health care.

It is a natural growth market. It is natural and normal that families should want better health care for the young and old and that they should regard that as more important perhaps than the holidays they take each year and the new motor cars they buy. The Government do not try to put limits on holidays, and we encourage the purchase of new motor cars. By concentrating exclusively on public free provision through the NHS, we are in danger of putting a severe limit on the natural growth market arising from the increased demand for health care.

How are we to meet this demand in the years to come? There was a 17.5 per cent. increase in real terms in the spend on the NHS in our first four years in office. Let us not pretend that that was a planned increase; it happened because of the growth in demand. If we add to that factor the increase in the number of over 80s as a percentage of the population — who, naturally, have a greater requirement for health care, at a greater cost—we see that we face a very difficult situation.

In answer to a parliamentary question of mine on 28 November, the Under-Secretary pointed out that the population over 80 years old per 100 of the population of working age had grown from 3.2 per cent. in 1960 to 4.9 per cent. last year and was expected to grow to 6.6 per cent. by the year 2000. Obviously the demand inbuilt into the aging profile of the population is very great indeed. If we add to that the new machinery, drugs, equipment and operations that are increasingly available, we have a third factor, all leading exponentially to increasing growth.

I was impressed when visiting the Hurstwood neurological centre in my constituency during the Christmas holidays by the new EMI brain scanner, which enables the centre, through diagnosis, to detect lesions in the brain long before was previously possible, and this leads to preventive treatment and operations that were not previously done. However, having got the brain scanner two years ago—largely with the help of local charities—the talk there is already about the new machine, working on nuclear magnetic resonance, which will be that much more efficient in diagnosis throughout the body, but it will cost nearly twice as much as the brain scanner.

All of that brings me to the fundamental point of which the hon. Member for Walsall, North (Mr. Winnick) spoke, the availability of resources. We must start to do the longterm thinking now, and that thinking must revolve round the point of how we marry the resources of the public sector to those available within the private sector. I was struck by an answer given by the Minister for Health to my hon. Friend the Member for Harrow, East (Mr. Dykes) on 14 November in which he pointed out that, by and large, not only was our expenditure on the NHS a lower percentage of GDP, at 5.4, than in any other western European country, bar Greece, but that our expenditure on the private sector as a percentage of GDP was also much lower than almost any other western European country. Indeed, at 0.5 per cent. of GDP in 1982, it was only about a quarter of the 1980 figure for France and Western Germany. That emphasises how far we are behind our neighbours on the Continent in bringing together the resources of the public and private sectors.

A suggestion often made is that we should make contributions to private medical insurance tax deductible, or at least allowable against the higher rates of tax, as my hon. Friend the Member for Horsham mentioned. There is an argument for that, but I fear that if we were to go exclusively along that route there would still be a great barrier between the private and public sectors. There would Ire a thought in the mind of the public that one was good, the private sector, and that the other, almost by definition, was bad—that one was efficient and the other was inefficient—and we must concentrate on breaking down that barrier.

I have a few suggestions of my own on how that might be done, and I appreciate that these suggestions might strike Labour Members as radical, perhaps even outrageous. However, unless we go along the lines of investigating long-term solutions at this stage we will get nowhere.

A consultant in my constituency suggested to me at Christmas that we should examine the thought that the NHS should publish a list of standard drugs and operations that were available effectively free throughout the NHS, and every year the list would be up-dated. But beyond that, the more exotic modern operations, such as organ transplants, and exotic new drugs should not be available free within the NHS. It would, therefore, be up to the individual and his family to take out insurance to deal with this other list, and that insurance—I repeat, for exotic organ transplants and so on—would be, when used, encashable at NHS or private hospitals. A development from that thought is that it might be necessary to have a general insurance scheme for hospitalisation, again encashable at either private or NHS hospitals.

The hon. Member for Walsall, North scoffed at the American system. I think sometimes that British television does not do anything to make us feel more friendly towards the American system.

Mr. Frank Dobson (Holborn and St. Pancras)

Nor does American television.

Mr. Renton

I hope that the hon. Gentleman will listen to my argument because it is worth thinking about the way in which the Americans run their hospitals. Each hospital is a profit centre on its own basis. Each has to make its own decision; about new capital equipment — about its capital spend generally—and the administrator is like a managing director. The employees — nurses, porters, consultants and doctors — all share in the success, medically, and the profit of the hospital.

It is also worth remembering, as I was told the other day, that under that system there are modern brain scanners within a 50-mile radius of Chicago than in the whole of the United Kingdom, because they have been able to create the resources to invest in the most modern equipment.

Mr. Dobson

rose—

Mr. Renton

With respect to the hon. Gentleman, I will not give way, because I am anxious to bring my remarks to a close.

Leading on from the NHS, I come to the inter-related point to which the hon. Member for Leeds, West referred, the connection between health care and the pension scheme. It must be worth considering whether, with the aging profile of the population, everyone over 50 should be required to take out medical insurance—again, for use either in private hospitals or in the NHS—if they want free medical and hospital treatment in future years. This compulsory hospital insurance would continue after retirement for all those in receipt of earnings-related pensions. I suggest that only those on the basic state pension without any other source of income might be excluded from compulsory medical or hospital insurance.

That leads me to make a few remarks about our pension system. I was glad that my hon. Friend the Member for Horsham went into the matter in such detail. I realise what an expert he is on the subject. The growth and availability of pensions is to be greatly welcomed. It is a matter of satisfaction to us all that those who are retired and unable to increase their income by their own efforts are increasingly looked after by pension systems.

But a fact that we must also recognise is that the Crossman-Castle earnings-related pension scheme will be unlivable with in one or two generations' time. I do not believe that the state will be able to afford the scheme, especially against the profile of an aging population that I have briefly sketched. I am told that in real terms the net cost over the next generation will grow a hundredfold from £10 million now to £1 billion. It has been estimated that by the year 2030 it will require one third of average earnings to fund the required pensions. That means that our children, as they leave work, will be looking to their children to put up about 33⅓ per cent. of their incomes in national insurance contributions. In addition, they will have to pay tax at at least the standard rate.

I do not believe that that solution will be acceptable and we cannot continue to drift into it without debate. My hon. Friend the Member for Wealden was right to press for a debate on the long-term consequences. My right hon. Friend the Secretary of State for Social Services has started an inquiry into the important subject of pension portability. I agree that pensions should be portable, but I suggest that my right hon. Friend should develop a long-range inquiry into the funding of pensions in total, and that he should enlarge it further, or set up a separate inquiry, to cover the Health Service and how the nation will cope with the understandable but ever-increasing demands for health care.

I do not believe, by the way, that the answer lies in a special tax on drug companies. It is by their research that new drugs are produced. The essential purpose of new drugs is to keep us out of hospital. I am pleased that my right hon. Friend the Chancellor of the Exchequer announced yesterday that he will produce a Green Paper on tax and public spending trends up until 1990. I hope that my hon. Friend the Secretary of State will follow the Green Paper and the lines that I have sketched and will produce matching long-term forecasts on how matters are likely to develop in the NHS and state pensions if we stay on our present course; these forecasts should be accompanied by a debate on radical remedies.

Many of us are reluctant to talk about long-term consequences. As my hon. Friend the Member for Horsham said, Keynes used to ask whether the long run mattered because "in the long run we shall all be dead". At least we shall be out of office or out of Parliament and, therefore, not as concerned as we are now. However, this is the start of a new Parliament. We have a large majority and we must consider radical options, or even outrageous options, and debate them. If we do not do it in 1984, we never will.

12.15 pm

Mr. Andrew Rowe (Mid-Kent)

It is far too easy to look backwards, especially for Members of this place who work, as we do, in one of the most ancient sites in the whole of Europe. It is especially easy for the British to look backwards because we once had a pre-eminent position in the world, which we no longer have. So it is that many of my hon. Friends look back through somewhat rose-tinted spectacles to a time when men stood on their own two feet and by working hard and risking everything built Utopia at home and an empire unparalleled abroad.

There were such men and what a great deal we owe them, but they built what they built at least in part on labour so cheap, hours so long and drains so bad that their sons and grandsons revolted. Alongside their triumphs they erected the great humanitarian institutions that have done so much to care for those who have been injured by the system and to ensure that future generations do not suffer similarly. I, like the vast majority of my right hon. and hon. Friends, have no truck with those ideologues who imagine that there should be no need for public provision of such services.

Nostalgia is not confined to the Government side of the House. The Opposition Benches are filled—at least they are filled when the subject under debate interests Labour Members—with hon. Members who are so mesmerised by the folklore of the 1930s, and so dazzled by the undoubted achievements of post-war Governments, that they seem incapable of understanding the extent to which their good intentions and ideologies, and those of their predecessors, have spun webs of bureaucratic paternalism of a density that has almost smothered an entire generation of British citizens.

I well remember a chief probation officer in Glasgow who told me of the shock with which he realised, when he became the highest paid social services officer in Scotland, that his salary rendered him someone who should, apart from could, buy his own house. For 50 years he had assumed that house purchase was for others. It is that nostalgia for state dependency, coupled with ruinous inflation that such policies demand, that invalidates so much of the criticsm and comment of Labour Members.

As my hon. Friend the Member for Wealden (Sir G. Johnson Smith) so ably contended, we must look forward to a new era with new ways of solving historic problems. The problems are complex, costly and combustible. The mix is composed of many ingredients. First, it includes millions of people who are unable to find the work that most of them so much desire. A recent study commissioned by the Department of Employment reveals that there has been an astonishingly small decline in the desire to work among people. That shows yet again the high personal standards that all our constituents maintain.

Secondly, there are 600,000 more pensioners than there were 10 years ago. Thirdly, there is the dismaying increase in the cost of the technology that is required by the NHS and other services. Fourthly, although this is perhaps more a symptom than a cause, it is an abusurdity by any definition of the system of support that 7 million are currently dependent on supplementary benefit.

These facts and many others have built a cage for Ministers with no obvious way out. How can more be found if no one is asked to receive less? In the short term, much can be done by increases in efficiency. I welcomed especially the speech of my hon. Friend the Member for Suffolk, South (Mr. Yeo), which revealed the tremendous efforts that are being made by health authorities, local government departments, voluntary organisations and many others to ensure that the value obtained from the money spent is sharply increased. It is clear that that alone will not be sufficient. In the longer term, we must hope that the changes in attitude from dependency to self determination, from the expectation of handouts to the belief that making prudent provision for oneself is a reasonable approach on the part of many citizens, will help to make much of the expected increase in demand. The principal anxieties exist, however, in the medium-term.

It is important that my position and that of, I suspect, many other Conservative Members, should be put as clearly as possible. Of course, I support the search for savings in a social security budget that accounts for 30 per cent. of total public expenditure, the search for efficiency in service delivery, and the proposition that there should be less disincentive for those who can work to go to work.

There is a huge difference between the importance of £1 to someone running a household on supplementary benefit and to someone with a bank account and credit facilities. That is why I did not vote in the housing benefits debate. There were too many cases in which arrears had been allowed to build up, through no fault of the recipient. It seemed clear that the full scale of the impact of the changes on some of our poorest citizens had not been fully appreciated.

Changes have now been proposed. Although I remain uneasy about their effect on some of the 10 per cent. of my constituents who will be affected, I am prepared to accept that my right hon. and hon. Friends, whose record in this field is unparalleled, have done as much as they can in the short term.

We should not think again in the short term. All of us know that we will again need to find savings next year and the year after. I hope that the Under-Secretary of State will assure the House that any changes next year will have been fully evaluated in the 12 months between now and then so that we understand the full impact on individuals throughout the system, because it is the individual who suffers when the average is misunderstood.

It is hard to sell the idea—I am sure that many hon. Members have already found this to be so in their constituencies—of making changes that are important to many and setting up an inquiry to find out the effect. It is hard for many Conservative Members to sell policies that appear to be looking for savings chiefly from the least well-off. Most people know that the present system needs a major overhaul. They, and we who represent them, will find it increasingly hard to argue that the principal impact should fall on those people on or below the average wage when so many of those earning well above the average wage enjoy a wide variety of subsidies from the same purse.

I hope that my hon. Friend the Under-Secretary of State will accept that many of us will continue to support the general policy, but will look critically at each proposal as it comes forward. The anxieties expressed about those proposals should not be dismissed as the unnecessary whimpering of a few remaining wets.

I wish to discuss briefly the longer-term future and raise with my hon. Friend the Under-Secretary of State one of a number of possible ways out of the cage. That is an essential ingredient in the great debate for which my hon. Friend the Member for Wealden called and must be carried out without fear of leaks or anxiety about rumour, because only those documents marked "Confidential" attract the interest of the press. If far more documents were publicly displayed and frequently discussed without fear or favour we would have a much better debate and a much better informed electorate.

There is an astonishing and all-pervading paradox: everywhere there are jobs crying out to be done, but nobody finds it worth while to do them; everywhere there are people working, but paying no national insurance contribution or tax. That activity is crucial to our current economy. As the hon. Member for Leeds, West (Mr. Meadowcroft) pointed out, many people rely on the nation Al insurance payment to recover some of the sense of dignity and involvement stripped from them by the personal disaster of their unemployment. The problem is not, as I suspect some people in Inland Revenue have been led to believe by their training, discovering how we eliminate that practice, but how we legitimate it. My hon. Friend and neighbour the Member for Maidstone (Mr. Wells) has a felicitous phrase for what I mean. He looks for "a system of honourable moonlighting." So we should.

How do we resolve the political difficulty that the people who most resent the moonlighter are those who live closest to the benefit level but pay their rates and taxes from their legitimately earned income? I do not know the answer, but I ask the Under-Secretary of State to consider whether there is scope for a device such as raising the threshold at which the national insurance contribution is demanded. If liability for national insurance were not incurred I at such a low level and were based on the amount paid out rather than the number of days worked, and if the tax threshold for the lowest paid were raised, there would be more people in work, higher family incomes and more consumer spending. We would recoup the costs of this device from the taxes on that consumer spending.

I welcome keenly the request for a wider debate on this subject. The enterprise allowance has breached the principle that would prevent us taking action. As the enterprise allowance allows people to take money from the benefit system while they raise themselves to stand on their own feet, we should be able to find some way of tempering that system to enable us to get out of this box.

12.27 pm

Mr. Michael Meacher (Oldham, West)

I congratulate the hon. Member for Wealden (Sir G. Johnson-Smith) on choosing this subject for debate. We all know him to be a fair-minded and generous man, and he introduced the debate in a fair-minded, considered and philosophical manner. In fact, he is so fair-minded that I wonder for how long he will survive in the modern Conservative party. I welcome the hon. Gentleman's remarks, which I thought were put fairly.

The debate gives us an opportunity to put into perspective and refute, which is what I want to do, some of the wilder scaremongering that has been kicked up deliberately from time to time to cast doubt on the future viability of the welfare state. The latest example, which the hon. Gentleman quoted, and to which other hon. Members have referred, was the Prime Minister's interview last month as reported in the New York Times, although it has been a recurrent theme under this Government.

I fully accept that this is a very proper issue for debate. I welcome the inquiry that the Government have set up into pensions, although I shall say a word about its composition and the manner in which it is being done. First, there was the notorious Think Tank report of a few years ago which was full of dark and terrible forebodings about the prohibitive level of income tax which would follow if public expenditure on social and welfare services was not reined back.

When The Economist leaked the contents of that report, it was revealed that those dire predictions were founded principally on the assumption of a persisting low growth of the British economy. That assumption may well prove valid as long as the Prime Minister's monetarist predilections prevail, but which, many hon. Members will agree, is not inevitable. The hon. Gentleman said that we may not necessarily return to the economic growth of the 1950s and 1960s. We all have different views about that. However, it is possible to achieve a faster rate of economic growth than that we have achieved in the past few years.

In May 1981, we had the Chancellor's grave warnings about the prohibitive projected cost to the national insurance fund of inflation proofing contracted-out pensions. Again, the assumption was the likelihood, even the inevitability, he seemed to take the view, of low economic growth.

On 22 January this year the Prime Minister is reported as having referred to a "social security time bomb". I have a copy of the New York Times article. She was referring to the prospect that, towards the end of the century, a large lump of new pension payments will come due. Employee contributions towards pensions have thus far been used to meet general government expenses, and unless some changes are made, she argued, there will not be enough money to foot the bill. The Prime Minister gave no evidence to support those, I suggest, unsupportable allegations. Moreover, such scare tactics are all the more surprising when they had been put firmly in their place by the Secretary of State for Social Services speaking at the Financial Times conference only two months previously. He strongly rejected the view that the earnings-related state pension scheme might result in an unsupportable burden for the next generation.

As against the Prime Minister's usual megaphone demagogy, I found the Secretary of State's reasons, which he gave in detail, to be precise, clear and convincing. The. hon. Member for Wealden referred to the main one, which was that the total number of pensioners, after rising to a peak in 1985–86, will fall, gradually but steadily, over many years into the beginning of the next century. In addition, as the hon. Gentleman said — and this is crucial when considering the viability of these large payments — the number of people of working age to every pensioner will improve during the next 30 years. That is a major point that needs to be taken on board. The number of pensioners will rise markedly duing the second and third decades of the next century, but the relevant point is that the ratio of people of working age to pensioners will be only slightly less than it is now.

So much for the Prime Minister's scare tactics—because that is what they are. I suggest that the so-called social security time bomb is more an artefact of her jaundiced imagination than a serious analysis of pension prospects. It is her usual stock in trade that we have seen so many times, and in other areas, to frighten the nation with the spectre that the welfare state cannot be afforded, to pave the way for the political assault on it which has always been her obsession.

The only justification for the Prime Minister's pessimism, to be fair to her, would be if the rate of unemployment were to increase steadily during the rest of this decade. It would create an unfavourable ratio between those of working age and those in receipt of retirement pension. I, therefore, challenge the Prime Minister to come clean and tell the country what are the assumptions that lie behind her Jeremiah prophesies of doom and gloom about the funding of the welfare state. If they are of continuing rising unemployment—if that is what lies at the back of her mind—that says a great deal more about the bankruptcy of her economic policies than about the lack of viability of the welfare state. I say that again: it says a great deal more about the failure of those economic policies and aspirations than about the inevitable, as she would like to say, lack of viability of the welfare state.

The Prime Minister's plaintiveness is no more credible when it is directed at the higher level of pensions, which are steadily increasing year by year under the state earnings-related pension scheme. That scheme, maturing in 1998 over a 20-year period, provides the best deal that pensioners have ever had. The Prime Minister and the Chancellor are now putting it firmly in their firing line because they say that it is unaffordable and a mounting burden on the working population. I shall examine the argument behind that thesis. That shibboleth has no more grounding in reality than the other fears that the Prime Minister has aroused.

I shall quote what I regard as a definitive source—the Government's own Social Security Advisory Committee report, paragraph 6.7: On the most costly of the Actuary's six central assumptions about the movement of earnings, earnings limits and benefits, the contribution to the Fund required to sustain the pension scheme would be 16.7 per cent. of earnings by 2005–06 provided that unemployment averages 6 per cent. for the 20 years from 1985 onwards. Even if one made the much more pessimistic assumption that unemployment would average 12 per cent. throughout the period and also took pessimistic views—for this purpose—about fertility and mortality, contributions on the Actuary's calculations would have risen only to a little over 20 per cent. in 2005–06. For the sake of hon. Members, I shall put those figures, which are based almost on a worst-case analysis, in perspective. It cannot be said too strongly that the developing contribution burden is very much in line with what is already being paid to meet the costs of exceptionally high unemployment. At present employers and employees paying at the standard rate have been paying contributions of 17.6 per cent. to the national insurance fund, which is well within the 16 to 20 per cent. range that the Actuary foresees for pension contributions, on the most pessimistic assumptions. Therefore, where is the justification for the Prime Minister's panic?

Perhaps the Prime Minister has in mind the years in the second and third decades of the next century. We cannot ignore that. It is fair. At that time the earnings-related pension scheme will be fully mature and the number of pensioners will be reaching its peak. However, the Social Security Advisory Committee says that beyond 2005–06 the contribution rate does become much higher, partly through adverse demographic changes and partly as the scheme moves gradually to full maturity; but at this distance of time we do not think there can be solid grounds for altering the scheme now for fear of all the worst outcomes occurring steadily for 40 years. Assuming that some improvement will take place in the economy"— not an unreasonable assumption— and in present employment levels,"— I do not think that we are stuck at 3 million unemployed for ever by a very long way— the Actuary's figures appear to us to show that at least for some years into the next century the contribution rates necessary for national insurance, including the pension scheme, are likely to be little greater than those being paid already. Those are weighty words from an independent source, the Government's own advisory committee.

For those reasons, I believe that the nation would be well advised to treat the Prime Minister's ideological frenzy to a healthy degree of debunking. Perhaps the same fate should be reserved for the Secretary of State's ill-starred inquiry into portability, to which the hon. Member for Mid-Sussex (Mr. Renton) referred, and the long term costs of pensions, where such is the Government's regard for truth and balanced argument that they have seen fit to pack it with five Tory Ministers, two members of the life assurance business, and one Right-wing economist, but no other representative of other relevant interests. If ever there were a rigged jury, that must surely be it.

Like the salesman trying to sell secondhand stair-rods to the bungalow owner, the Secretary of State has yet to learn that zeal is not enough. One must have a product for sale that is generally wanted. I submit that what our pensioners want is Labour's state earnings-related pension scheme, because they know that it offers the best provision that they have ever had. It is perfectly soundly fundable. No one, least of all the Secretary of State, who has been very fair in his comments on the matter, has produced any evidence to suggest that it is not perfectly fundable, well into the next century.

I shall go further, bearing in mind the wider debate that the hon. Member for Wealden initiated. If there is a crisis in the financing of the welfare state, it is not because the level of benefits is too high, but because the tax base to support it has been persistently eroded to build up an alternative welfare state, largely concentrated on the rich. In fact, there are three welfare states in this country. Apart from the state provision for the community as a whole, there is fiscal welfare—the whole medley of tax reliefs; the hon. Member for Horsham waxed eloquent about the 27 or more different kinds of tax relief, an even wider range than I had realised — as well as occupational welfare, which is sometimes euphemistically referred to under the misnomer of "fringe benefits". Some fringe! Both the last two systems are worth far more to the well-off individuals who gain from them—and it is the well-off who gain most from them—than the state provision for the poor, who are always, in the mythology, supposed to be the main beneficiaries of welfare.

Fiscal welfare—which, because of the arrangement of our tax system, is largely focused on the rich and the well-off, and largely paid for by the poor, who course have to pay more tax to make up for the tax forgone by the Revenue — now operates on a huge scale. The latest Inland Revenue calculations that I have seen put a figure of £9 billion—that is £9,000 million—on the total of pension scheme reliefs—again, I am grateful to the hon. Member for Horsham, who described how these had escalated out of all proportion that could be justified— life assurance relief, mortgage interest tax relief, and investment income surcharge exemption.

Mr. Hordern

I hope that the hon. Gentleman has not misunderstood what I said. I was talking not about reliefs available to those who invest in pension schemes, but about the investment income of pension funds. That is a very different thing.

Mr. Meacher

I accept that. I was referring to a block of tax reliefs which is parallel and alongside those that he mentioned. I am referring to individual tax reliefs which, according to the figures that were quoted, I think, in the public expenditure White Paper 1983, come to £9 billion.

The effect of granting all of the income tax allowances, exemptions and reliefs that exist in Britain at present is that only 47 per cent.—less than half—of total household incomes are now liable to tax. In my opinion, that is an absurd result. Therefore, there can be no question of claiming that there is a crisis in paying for walfare benefits for the poor so long as this largesse to provide welfare for the better-off in the tax system continues to be poured out with this unfettered abundance. Instead of cutting benefits to the poor and means-testing benefits, which the hon. Member for Suffolk, South (Mr. Yeo) seemed to believe was inevitable and still accepted by the Conservative party — one in six of the population is now dependent on means-tested benefits — the very least that the Government could do would be to start cash-limiting tax relief for the rich.

Mr. Sayeed

I was about to ask the hon. Gentleman what alternative he proposes to means testing. I should be grateful if he would tell me what he means by cash-limiting.

Mr. Meacher

I refer the hon. Gentleman to a report of the Treasury and Civil Service Sub-committee, which I had the privilege to chair and to which the hon. Member for Eltham (Mr. Bottomley) gave such good evidence, entitled "The Structure of Personal Income Taxation and Income Support". On a strictly revenue-neutral basis, the Committee explored four major options for changing the tax structure and the interface with family benefits to produce a much lower rate of taxation for the low paid, a significant reduction in the poverty trap and a significant redistribution of the overall tax burden, with which the hon. Member for Bristol, East (Mr. Sayeed) might not agree. There are many permutations in making such a review of the system. The Committee has shown that it can be done on a strictly revenue-neutral basis, which means that there will be no extra cost to anyone as a result of those fundamental changes.

Occupational welfare is no less important. So-called fringe benefits, including life assurance, company cars, subsidised lunches, free medical insurance, share options, top hat pension schemes, low interest loans and subsidised housing represent yet another welfare system that is mainly concentrated on those with high incomes and that is paid for by company tax reliefs. The rest of the community must foot the bill by paying more tax to the Exchequer so that it can recoup its losses.

Let us hear no more about a crisis in welfare state funding. If all of those so-called fringe benefits were properly taxed, as they should be, there would be no need to hit at pensioners or low-income families by cutting £200 million from housing benefit. There would be no need to tax unemployment benefit or sickness benefit, or to abolish the earnings-related supplement to unemployment benefit, for which workers have paid. There would be no need for the other punitive measures against the poor to which the Government have resorted in the name of public expenditure savings because, they say, the nation cannot afford it. Not only can we all afford the modest welfare provision that exists, but we could afford a much better provision if we were not so unfairly burdened by the enormous cost of tax-subsidised welfare for the rich and the well-off. That must be a top priority of the next Labour Government.

12.48 pm

Mr. Peter Thurnham (Bolton, North-East)

My hon. Friend the Member for Wealden (Sir G. Johnson Smith) opened the debate with a non-contentious speech, and I deplore the way in which the hon. Member for Oldham, West (Mr. Meacher) chose to attack the Government, especially my right hon. Friend the Prime Minister, with smear tactics of alleged scaremongering and megaphone demagoguery. It is extraordinary that he should have based his allegations of megaphone demagoguery and ideological frenzy on a New York magazine.

This is my first speech in the House on a Friday. I am usually conscious of the pressure of parliamentary time, and I attempted to discover the cost of a parliamentary hour. My previous question to my right hon. Friend the Leader of the House was not fully answered, but it would appear that it costs more than £30,000 an hour to run the Chamber. I am not sure how much time I shall be allowed today, but I hope that I shall not be accused of inflating public expenditure if I endeavour to limit myself to no more than £10,000 worth.

I endorse the motion in the name of my hon. Friend the Member for Wealden and welcome the news that the Government are to publish a Green Paper. I start by mentioning the name of another former right hon. Member. We have heard much of Beveridge from both sides of the House, but I refer to a previous right hon. Member for Bromley, whose birthday it is today and who I am sure hon. Members of both sides of the House will be welcoming back to Westminster as a result of his being made an earl. I refer to Mr. Harold Macmillan, whose commitment to full employment was just as great as that of Beveridge and who was equally tempted by the arguments that fiscal stimulation could provide the growth so necessary to fund the welfare state.

As Beveridge pointed out in his writings, full employment would be threatened if there was an abuse of. monopoly labour market forces and, with the benefit of hindsight, we can see now that Macmillan's pursuit of full employment by fiscal measures lost sight of this danger, which was seen only too clearly by the Treasury team that resigned 26 years ago last month. As Prime Minister, Macmillan was fully committed to maintaining full employment. It is amazing to look back now and see how alarmed he was by an increase from as little as 1.6 per cent. to 2.2 per cent. in his first years as Prime Minister.

I am sure that hon. Members on both sides of the House would like to see a substantial reduction in unemployment, both to alleviate personal misery and to provide the basis for economic growth. It is the only way to fund the welfare benefits that we all want. I welcome the news that the Government are to publish a Green Paper showing long-term projections of spending and tax. I hope that this will show a range of various economic growth rates because it is clear that if we can achieve a substantial economic growth rate we shall have the funds that we need to pay for the welfare state.

I have seen from the latest report by the Institute for Fiscal Studies that 3 per cent. growth would provide an extra £20 billion by 1990 for either reduction in taxes or increase in welfare benefits, as compared with a 0.5 per cent. per annum growth rate. That would be more than sufficient to make up for declining North sea oil revenues and would provide for the long-term pensioners on the state's earnings-related pension scheme, about whom my hon. Friend the Member for Mid-Sussex (Mr. Renton) was so concerned.

If we look at the problems of the aged, we find that the tax system prevents the active aged helping to look after the invalid aged by penalising pensioners if they try to work too hard after they have reached pensionable age. This is one absurdity that I hope that we can remove from the picture.

The problem is how we can achieve this higher rate of economic growth. After 20 years of a policy of fiscal stimulation that has clearly failed to provide the real growth that we need I am pleased that a return to sound money policies is now bearing fruit in a 3 per cent. growth in output. I have also read that the structure of the present tax and benefit system is such that the Chancellor is limited to giving away with one hand what he is taking with the other. The trouble is that nowadays the same person is having to give to the Chancellor with one hand while hoping to get back with the other and it costs £16 billion to adminster the system.

As the Sunday Times said in a leader last month, it is no good tinkering with one welfare benefit at a time, the whole edifice needs scrapping in favour of a negative income tax which tops up the income of the truly needy, while minimising the disincentive to work. I particularly welcome the call by my hon. Friend the Member for Wealden to plan now for a system of negative income tax to be introduced in 1988, when the Inland Revenue is fully computerised. I hope that the Inland Revenue staff will co-operate fully in bringing in this computerised system and that the Chancellor will take this opportunity to simplify the tax structure.

My hon. Friend the Member for Horsham (Mr. Hordern) listed over 130 different tax allowances on income but did not go on to mention some of the extraordinary allowances against various expenditure taxes, especially VAT, which gives rise to amazing anomalies such as the fact that chocolate biscuits are taxed at 15 per cent. but there is no tax on cream cakes. It is absurd that people should be encouraged to eat cream cakes instead of chocolate biscuits. A flat rate of 10 per cent. on all goods and services would affect the retail price index by less than 1 per cent. and would provide an additional £1.5 billion to fund tax credits or a negative tax system for the really needy.

The present system of exempting food only encourages the gluttononous and subsidises the fat at the expense of the thin. Those who cannot afford to eat as well as they should are penalised by the tax relief given to those who are eating more than they should.

The greatest gain from a simplified system of taxes and welfare benefits would be in reducing Government interference in the market economy. The provision of so many free services—which are not really free but are very expensive — distorts the market and causes problems, when we should be providing income credits for the really needy to spend in the best way that suits their individual needs. That is what we should be aiming for—or do we not trust the needy to decide for themselves how to spend their money?

I welcome my hon. Friend's motion and look forward to a Green Paper which shows the full range of different projections as the basis for future debates on this great and important subject.

12.56 pm

Mr. Jonathan Sayeed (Bristol, East)

The debate has, in the main, been good-humoured and, with one notable exception, no one has tried to score party political points.

One of the profound differences between the Conservative party and the Labour party—I accept that this is a gross over-simplification — concerns the interaction between the individual and the state. Conservatives believe that the state is there to serve the individual. Labour Members often seem to show that they believe that the individual is there to serve the state.

True compassion in action means accepting, as an individual, a group or a political party, short-term unpopularity in order to provide long-term benefit for others. It means rejecting policies that attempt to buy instant popularity, particularly when those policies are seen not to work. It takes courage to be unpopular. It takes courage to state views that do not provide instant solutions. That is the courage of conviction.

I as a Conservative — and the party I represent—deeply care what happens to the nation and its people. It is because we care that we are not prepared to squander the gains of over four years and the hard-won secure foundations for future growth.

We are not a party of fudged policies or uncosted promises. Those who read our manifesto and who have seen what has been done by us, rather than believing what has been said about us, can come to but one conclusion — that we are a party of straight talk, of honest promises, and of a belief in Britain, its people and its future. We are a positive party that trusts in the innate good sense of this nation and of its citizens and we show that by our wish to increase personal freedom.

It has been suggested that the Conservative party is interested in disbanding the NHS. Aimed as it is to frighten the least able to protect themselves, this is undoubtedly a most vicious and vile scaremongering tactic. It is totally untrue and the facts show it to be untrue.

We have increased the number of doctors, nurses and dentists by over 50,000. We make better use of the resources of the NHS, for there are more beds used and more patients treated than ever before. Capital expenditure is up by 15 per cent. Since we took office, expenditure on the NHS has doubled. Indeed, it has increased by more than 17 per cent. in real terms.

However, we have tried to use our resources more efficiently. We are slimming down the structure of administration. Two complete management tiers have been abolished and the number of management teams has been reduced by nearly 60. Performance indicators have been introduced which enable Health Service managers to compare their local performances with those of other health districts and with the country as a whole. They cover clinical activity, finance, manpower and estate management.

In February 1982, for the first time in the NHS, Ministers began annual reviews of the performances of regional health authorities, and parallel reviews are carried out by the regions of their district health authorities. In September 1983, Ministers asked health authorities to put out cleaning, catering and laundry services to competitive tender. Those services cost the NHS in England almost £900 million per year. If savings can be achieved by employing private contractors without reducing standards, more money can be released for direct patient care, and that is in the interests of the NHS. In July 1982, a system of manpower control was introduced, and in February 1983 my right hon. Friend the Secretary of State set up a team to review the effective use of manpower and related resources in the Health Service. Those changes are not wrong; all of them try to focus resources where they are needed and to take them away from areas in which they are used inefficiently.

I should like to cite one example of how resources can be better used, which comes from my constituency of Bristol, East. Some months ago a constituent who suffered severely from emphysema came to see me. On prescription, he used to obtain two cylinders of oxygen every week from the chemist, which cost the NHS about £20 per week, or more than £1,000 per year. However, he bought a small portable nebuliser which cost just over £100. He plugged it into the mains and it provides him with breathing assistance. Thus, there has been a considerable cost saving to the NHS and this saving can be utilised elsewhere.

I suggested the idea to my authority, and it is now starting a pilot scheme to see whether other emphysema sufferers can use the same facilities. That is just a small example, but it demonstrates that savings can be made. Small though each saving may be, in total they add up and are passed on to those in real need.

Pensioners have been led to believe that the Government are not interested in increasing pensions, yet we all know that that is not true. We recognise — particularly those who are younger—that the inheritance of this proud nation comes from pensioners. In the past five years prices have increased by 69 per cent. but pensions have outstripped prices and have increased by 74 per cent. This Government have always paid the Christmas bonus, unlike the Labour Government, who twice denied it to pensioners. There are many other areas involving, for example, the disabled, low-income earners, families on social security, in which we have shown by our action that we care and do not just give in to party polemics.

I remind hon. Members of the speech made by the Leader of the Opposition, the right hon. Member for Islwyn (Mr. Kinnock), on 27 October. I shall quote just a few of his words. He said: Calderdale district council authority wished to build a new laundry costing £2 million. It would save £18,000 per annum by not contracting out, but the Government insisted that it would be cheaper to contract the work out." — [Official Report, 27 October 1983; Vol. 47, c. 451.] One might say that those words are mild in themselves, but let us analyse them. The right hon. Gentleman castigated the Government for not making an investment of £2 million for a return of 0.9 per cent. The Government would do better to put the money in a building society, and to pay the extra £18,000. Then they would have £202,000 to use elsewhere. The alternative is economic semi-literacy.

I hope that I have shown in a few areas that this Government show by their actions that they care; that we as a party ensure that the nation lives within its means; that these are the actions of a responsible party and of a responsible Tory Government—of a party that trusts in people and trusts in this nation.

1.5 pm

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

I congratulate my hon. Friend the Member for Wealden (Sir G. Johnson Smith) on his success in the ballot which led to his initiating the debate today and on the subject that he chose. My hon. Friend is absent for the moment, but I am sure that he will be here soon.

I also congratulate my hon. Friend on the thoughtful and considered way that he introduced the debate and on the well-informed way in which he spoke about the difficult problems that we have discussed in the last two hours. He has done a genuine service to the House and to a much wider audience than has been able to listen to or take part in our proceedings in focusing attention in an orderly way on some of the longer term problems and considerations that we need to bear in mind when deciding on policies connected with the welfare state.

It is unfortunate that one or two of the speeches were not entirely in line with the spirit of some others. I do not want to dwell on that. I shall seek to respond to the debate in the spirit in which most of it has taken place. The attitude has been to ask questions rather than to pretend that we know all the answers. I shall certainly not stand at the Dispatch Box on behalf of the Government and pretend that we have immediate answers.

Mr. Garrett

On a point of order, Mr. Deputy Speaker. I draw your attention to a practice that has become prevalent in the House and seek your guidance. I refer to hon. Members participating in debates and forgetting the time-honoured courtesy of listening to other hon. Members, and above all of hearing the winding-up speeches from both sides.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

The hon. Gentleman refers to a convention in the House on which Mr. Speaker has commented. I am glad that the hon. Member has reminded us again.

Mr. Newton

I am grateful to the hon. Member for Wallsend (Mr. Garrett) for his courtesy, but I acquit hon. Members who are not in the Chamber at present from any intended discourtesy. I am certain that that is true of my hon. Friend the Member for Wealden and of others. I suspect that all that has happened is that I have caused a number of hon. Members, not merely to appear to be discourteous, which they did not intend, but to get indigestion through hastily bolting some modest repast or other refreshment in another part of the House. I shall certainly not feel too aggrieved if one or two hon. Members who have spoken do not want to stuff an entire sandwich in their mouths in one go.

Perhaps the hon. Member for Wallsend thought that by raising a point of order we might gain a little time so that hon. Members could return to the Chamber. I welcome my breathless hon. Friend the Member for Wealden back to his seat. I also welcome back the equally breathless hon. Member for Oldham, West (Mr. Meacher), I hope not with indigestion. In the hon. Member's absence, and somewhat delphically, I was a little critical of the tone of his contribution to what was otherwise a remarkably calm and considered debate.

As I was saying before I was so courteously interrupted, while not pretending that I can put before the House all the answers to the questions that have been thrown up—or even, I fear, discuss all the points that have been raised—I must make one thing absolutely clear. I am not sure whether Opposition Members, including the hon. Member for Oldham, West and, perhaps even more, the hon. Member for Walsall, North (Mr. Winnick), actually believe the amount of rubbish that they talk about the views of myself and my right hon. and hon. Friends towards the welfare state.

The hon. Member for Walsall, North—and here he exceeded the sins of the hon. Member for Oldham, West — spoke as though the world had not moved an inch since about 1945—or even a number of years before. He is clearly living in a world that no longer exists anywhere other than in his own imagination. The commitment of myself and my right hon. and hon. Friends, including those who have not been able to come to the debate today, to the concept of the welfare state is clear and unequivocal. That is a matter not of rhetoric, but of record.

During the past few minutes some of my hon. Friends have touched on aspects of what has happened since the Government took office. It would be outwith the spirit of the debate to turn it into a recital of the Government's claims about what they have done during that time. However, no one who looks at the real increase in spending on the NHS, the increase in the number of patients being treated in hospitals, the increase in the number of courses for dental treatment, eye testing and the dispensing of glasses, the increase in the number of health visitors and nurses or at any other measure, could suggest that this Government are not committed to the welfare state.

That is true also of social services. Look at what we have done to promote the shift away from institutional care, to encourage and develop the process of joint finance and to develop the whole theme of care in the community. A number of points have been made about social security, but it beggars credibility for Opposition Members to suggest that a Government who have not only pledged to price-protect pensions and a number of other benefits, but have brought about a position in which, by last November, the retirement pension had risen almost 75 per cent., against an increase in the price index of less than 70 per cent., are hell-bent on demolishing the welfare state.

Who ended the invalidity trap? That was a long-running source of complaint from many thousands of long-term sick and disabled people, yet that position was created by previous Labour Governments as an offshoot of other social security policies. It was abolished by this Government in two stages last year.

I could cite many other examples that I know hon. Members on both sides of the House would recognise. However, I hope that I have at least said enough to make my point quite clear. The Government's commitment to the concept of the welfare state is at least as great as that of the Opposition. The difference between us is that we realise that to show commitment to the welfare state is not simply to call for more spending and to demand more of the existing pattern of provision without regard to any other circumstances or requirements. It is certainly not enough to talk of the welfare state—and this, above all, is the criticism that I level at the hon. Member for Walsall, North — as though it was a static concept that had somehow been formed perfect and whole, shaped for all time, 30 or 40 years ago. It is not something that can be looked at as though it were settled for all time, with there being never any need for consideration or change relating to new and different circumstances. As with any institution or set of institutions, those which are prepared to face and adapt to change survive. Those which decline to do so crash into ruins.

What would worry me if some Opposition Members were in charge of the welfare state today is that it might soon be in the same state as the shipbuilding industry. That industry, having refused to face up to modern needs and problems and the need to change, has become more difficult to sustain. If we were to get into that sort of rigid approach to the welfare state, we should be doing no service for anybody.

As several hon. Members have pointed out, if we looked back to the days of the Beveridge report and the world in which that was formed—and most of what we take to be the key elements of the welfare state were shaped at that time—the transformation has been almost beyond belief. We note, for example, the rise in average living standards and in people's capacity to make purchases for themselves. We see the change in health standards. While we accept that a great deal needs to be done and that there are regional variations—and there are many arguments about how to tackle those problems — nevertheless, as the hon. Member for Wallsend rightly recognised, there has been a huge improvement in the general health standards of the population in the intervening period.

Although the subject of housing has not been raised in the debate — apart from some remarks by my hon. Friend the Member for Horsham (Mr. Hordern), which I do not intend to follow, about the improvement grants policy of the Department of the Environment—that too is highly relevant in this area, for we must remember the transformation in people's housing standards and, above all, the increase in home ownership that has taken place in that period. That factor must also be taken into account when looking at the future of the welfare state. It implies the need for some degree of willingness to look again at precisely the provision we make within the broad boundaries of the welfare state and to adjust priorities. As some needs, as seen by Beveridge, have diminished with the passage of time, so others—particularly the needs of carers within the community—are growing, and perhaps they need a larger share of provision so that they may become a larger part of the welfare state.

That is the first factor, the sheer pattern of social change that has occurred in health, housing and living standards. The second is demographic pressure — to which reference is made in the motion and which has been acknowledged in many speeches today—and the impact of that on pensions.

Mr. Winnick

I understand the Minister to be saying that the commitment of Conservative Administrations is the same as that of Labour Administrations in relation to the provision and retention of the National Health Service and large-scale public sector provision in this and other spheres. Leaving aside the remarks of the Prime Minister, as quoted by me earlier, in her interview with the New York Times—quoted also by my hon. Friend the Member for Oldham, West (Mr. Meacher) — is the Minister aware that a recent Bow group paper, which made extensive references to the views of the present Secretary of State for Foreign Affairs when he was an active member of the Bow group and who argued for privatisation, contained this comment: Those who are able to stand on their own feet and make provision for themselves should be allowed and encouraged to do so. Is that the same as Labour's commitment to the NHS and state provision on a large scale?

Mr. Newton

I wonder whether the hon. Gentleman would be prepared to put the obverse of what he is asking from me and give a commitment that under a Labour Government nobody would be allowed to make provision for themselves if they wished to do so. A danger that Labour Members often fail to face is that the obverse of their criticism of the policy of choice—

Mr. Winnick

Answer my question.

Mr. Newton

—is an implication that the choices that people already make and wish to make themselves will be denied them.

Mr. Winnick

Answer my question.

Mr. Newton

The hon. Gentleman is waving a piece of paper at me. As it happens, I do not have to wave a piece of paper. I have something better, my right hon. Friend the Secretary of State for Social Services.

Mr. Winnick

That is the hon. Gentleman's misfortune.

Mr. Newton

I am not promising to wave my right hon. Friend at the hon. Gentleman. Instead of responding to the hon. Gentleman in words, it will be better to invite him to read the speech that my right hon. Friend delivered at the 1983 Conservative party conference, which I take as being a good deal more authoritative than a leaflet published by the Bow group, despite my own historic association with that body as its secretary some years ago. The point that the hon. Gentleman has just made—

Mr. Winnick

Is quite valid.

Mr. Newton

—adds nothing to the argument and confirms what I said a few minutes ago—I hope not in his abserce—that he is living in a world of his own imagination that disappeared many years ago.

Demographic pressures are the second major factor. It is important to recognise that they do not run all one way. The number of people over the age of 65 years has already risen by one third in the past 20 years and is expected now to be more or less stable until the year 2010. Within that total the number of people over 75 years, the very elderly, will increase rapidly during the 1980s, and is expected to rise by about 20 per cent. between 1981 and 1991 before tailing off in the 1990s.

The factors that may have a bearing on pensions are speculative, as it is necessary to look a long way ahead, and are rather different from those that bear on health and personal social services, a sector in which we face a substantial increase in the demands made by the very elderly in the near future. It is important that we should recognise that this pattern has its own implications in different parts of the welfare state and, therefore, needs to be analysed in rather more specific terms than has sometimes been done during the debate.

The third factor, the performance of the economy, is one that the hon. Member for Oldham, West emphasised strongly. Whatever the changes in living standards and demographic pressures and however the pattern of change or the pressures continue, the extent to which we shall be able to meet the needs that we all wish to meet, whatever our differences about how they should be met, will depend significantly on the extent to which the economy produces the goods, the resources that we need for meeting social needs. That introduces a much greater element of uncertainty than the mere consideration of demographic pressures, and that is a fact that is not sufficiently recognised. We can make reasonably secure forecasts—they are virtually certain—of the number of the very elderly that will be with us in the next decade. We can make fairly secure forecasts of the number of people over pension age but not necessarily of the working population because that will depend to some extent on the birth rate when we progress beyond the beginning of the next century.

The factor which is much more difficult to predict—it is just as important in assessing the overall impact—is the performance of the economy. That is something that cannot be forecast with the same precision. However, the success of our welfare policies—here there is unanimity between myself and the hon. Member for Oldham, West—is linked crucially to the other factors to which I have referred. That is why we have placed so much emphasis on the importance of economic policy over the past four or five years.

The hon. Member for Oldham, West has said that he is not willing to accept economic stagnation—at any rate, he implied that that was his position. One of the reasons that make the Government more optimistic than some is that there are clear signs of recovery within the economy as a result of the policies that we have pursued. We accept that an important part of any policy is the desire to secure, preserve and extend the effectiveness of the welfare state.

I do not intend to spend much time on one matter on which the hon. Member for Oldham, West spent a great deal of time—the remarks that the Prime Minister was reported to have made in the New York Times. Against his over-heated analysis and extravagant language about the Prime Minister, we should examine the interview. From it we gain the basic posture of the Prime Minister, my right hon. Friend the Secretary of State and the Government. The Prime Minister referred to ways of bringing the facts, the reasonable forecast, before the public so we can take decisions in time. She went on to talk about discussing all those aspects openly. That is the spirit in which the Prime Minister and the Government are approaching these subjects, and that is exactly the spirit in which my hon. Friend the Member for Wealden brought these matters before the House.

There are many uncertainties in this matter. Some points are clear. The Government wish to emphasise several points in their approach to the welfare state. First—this point echoes the speeches of almost all my hon. Friends — planning must take account of the likely availability of resources. I appreciate that that is another way of saying what I have just said about the economy. I point out especially to the hon. Member for Walsall, North that promises made without regard to the likely availability of resources are not worth making. The hon. Gentleman, despite his obvious hang-ups about me and my right hon. and hon. Friends, should reflect on the fact that since 1945 probably the largest single shock to the welfare state was admininstered in 1976 when the IMF was brought in under a Labour Government, primarily because that Government had behaved towards the welfare state as though money grew on trees. Far from doing anyone a service, the Labour Government brought about a crunch that probably did more damage to health and hospital services and the development of social welfare than any considered policy introduced since the war by this or any other Government. We, at least, will not forget that in our approach to the planning of the welfare state.

Secondly — I pick up the point made by my hon. Friend the Member for Mid-Kent (Mr. Rowe) and which other hon. Members may have had in mind—a crucial aim of economic policy is to keep inflation under control, not only because raging inflation makes planning in health and personal social services difficult but—I feel strongly about this point which often is not fully recognised—inflation running at about 2 per cent. a month, as we saw five or six years ago, means that no system of indexation known to man will prevent the poor from suffering badly. The rise in inflation, day in day out, week in week out, will not enable those people to be fully protected by annual or even more frequent upratings. Anyone who believes that our welfare problems can be solved by a rip-roaring economic boom, accompanied by raging inflation, has not addressed himself to the real problems in social services and those dependent on social security.

Thirdly, I refer to the level of resources. Our aim is to maximise resources. Whatever the level of resources we can make available, there will never be as much as everyone would like. People will always want to meet new needs, do other things and have other increases. Whatever the prospects, it is essential that we make the best use of all the resources that we can make available. That is why my right hon. Friend the Secretary of State has rightly placed so much emphasis on efficiency and management in the Health Service and in local authority personal social services.

My fourth point is closely related to my third. It is that in seeking to meet needs we must use all the resources that can be brought to bear, and not solely those that happen to be provided at the time by the public sector. We must ensure that the capacity of the private sector to contribute is used, and not least — this echoes the speeches of several of my hon. Friends, particularly my hon. Friends the Members for Suffolk, South (Mr. Yeo) and for Mid-Kent—the resources that the voluntary sector can bring, for example, to community care.

It is not a question of seeking to privatise the statutory sector or to nationalise the voluntary sector. It is a question of developing a partnership between all who have a part to play and who can contribute resources to the resolution of our welfare problems. That is the basis upon which we shall continue to proceed.

Fifthly, what is clear—here, I am afraid, I am less clear myself — is the need for the simplification, reflected in the debate, in social security by some form of integration of the tax and benefit systems, and, in the minds of several of my hon. Friends, the introduction of a tax credit system along the lines adumbrated by Lord Barber in the early 1970s. Many of my hon. Friends put forward the general aim, with which we would probably all readily agree — without perhaps going as far as I should like in facing some of the problems—of making progress in that direction soon. Most acknowledged that any such scheme or development in the future which would not entail heavy losses for some would be expensive to introduce.

My hon. Friend the Member for Horsham, to his considerable credit, faced up to that problem by suggesting that we might find £3 billion by altering the basis upon which pension fund investment income is taxed. Plainly, that is a matter for my right hon. Friend the Chancellor of the Exchequer and is a track down which I would not wish to go. A proposition that we should introduce a tax credit scheme financed in that way would not be wholly uncontroversial on either side of the House. To those who say, "The Government have a majority of 140. You can do what you like", I would say that we need to be more careful in formulating our policies. However, I shall ensure that my right hon. Friend is made aware of what my hon. Friend said.

Of course we would like to see some simplification, but I believe that for the time being it will, in practice, be easier to find simplification by looking at parts of the system rather than by pretending that, against the current background, we can, in one jump, go from where" we are to where we might like to be. That is a more pragmatic approach, but I shall take account of what has been said.

Unfortunately, my hon. Friend the Member for Suffolk, South has had to go. I rather differ from him in the low importance he apparently attached to the raising of tax thresholds. Those who are worried about the problems of the poverty trap and many other social problems, and about the meshing of the tax and social security system, must recognise that the raising of tax thresholds, whose present level is one of the contributory factors in people finding themselves paying tax and receiving housing and other social security benefits, is one of the least satisfactory features of our system. I know that my right hon. Friend the Secretary of State for Social Services would feel strongly — again, I would agree with him, even if I were not paid to—that one of the reasons why it is important that we in the DHSS should not run away from attempting to make at least some contribution to the curtailment of public expenditure—because of the size of our budget — is that, unless we contribute, the chances of raising tax thresholds, which is the most practical way of tackling many of the problems that have surfaced in speech after speech, will be much reduced.

If those are the factors that we have in mind, my right hon. Friend the Secretary of State, my hon. Friends and myself can show that over the past few years the Government, without pretending that they have all the answers to all the problems or know exactly what the welfare state will be like in 2000 or 2010, have steadily been tackling and seeking to tackle the problems of the welfare state and to develop it in a way that will benefit all our citizens on the basis of the considerations that I have described.

I have referred on many occasions to the need for making sure that we use our resources well, whatever they are. The work that my right hon. Friend has done in establishing and now considering the outcome of the Griffiths inquiry into the NHS is a tremendous credit to him. It suggests that we should impose new management techniques on the NHS, take a more systematic approach to manpower planning, develop performance indicators, introduce regular reviews of what is going on in the health authorities and—I know that this is more controversial — open up hospital catering, cleaning and laundry services to tender so that the best value can be obtained at the least possible cost. All those things are part and parcel of making sure that we get the best value from our resources in developing the services that my hon. Friends and I are determined to develop.

Mr. Meacher

Before the hon. Gentleman waxes too eloquent about the best use of resources, how does he justify the fact that pension contribution relief, life assurance relief, mortgage interest tax relief and investment income surcharge exemption now take £9 billion out of the Exchequer and go into the pockets of the well off, in most cases the rich, when the other side of the coin is, as we shall see next week, a cutback of £200 million from the pockets of pensioners and low-income families? Is not that the exact opposite of what the hon. Gentleman is saying?

Mr. Newton

I am reminded by my right hon. Friend the Secretary of State that we are talking about £200 million in relation to a total of £37,000 million spent by the Department of Health and Social Security.

The hon. Gentleman is walking straight into the fallacy that has undermined the welfare policies of one Labour Government after another for the past 20 to 30 years. He believes that by attacking investors, the sources of saving and investment and thus the sources of growth in the economy he can do something that is good for the welfare state. The truth is that the taxation policies, not least the policies for saving, investment and capital accummulation, pursued by successive Labour Governments are one of the reasons why there is now anxiety about whether the economy can provide the welfare state that all of us want. I put it no more strongly than that. Playing those things off against each other in the way that the hon. Gentleman seeks to do will get none of us anywhere.

Mr. Winnick

What justification can there be for people earning £50,000, £60,000 or more paying less in taxes to the tune of about £160 a week, which goes into their pockets, while under even the revised housing benefit 1 million pensioners on small incomes will have a reduction in their rent and rate rebates?

Mr. Newton

The hon. Gentleman is making in another way the point that his hon. Friend the Member for Oldham, West sought to make. Of course I cannot say that any individual in that position is making a major economic contribution. The steady development over the years of tax policies that made it more likely that people would go to the United States or Germany and build up their businesses there, or go on the golf course instead of building up their businesses, is one of the reasons why the economy has not been able to meet all the bills for social security benefits and the development of the NHS that we would like it to meet. What is more, one can see in the results that are beginning to come from the British economy that people and the economy as a whole are responding to the changes of policy and of direction that have taken place in the past four or five years.

Mr. Winnick

Does the Minister really believe that?

Mr. Newton

I hope the hon. Member for Walsall, North knows me well enough to realise that I am not in the habit of uttering statements that I believe have no validity.

The most striking feature about what has happened during the past year is how many of the forecasts made from pure doctrinare beliefs, such as those of the hon. Member for Walsall, North, are steadily being proved by the pattern of events to be the nonsense that they are. The fact that the hon. Gentleman finds if impossible to believe that one can generate a healthier economy by the policies that we have pursued does not fit the facts as they now are. It is his problem, not mine, and I am content to leave him with the problem in the rather antique world that he inhabits.

There has been a good deal of talk in this debate about leaks and open discussion. My hon. Friend the Member for Mid-Kent expressed what I think is the optimistic view that if we only published everything there would be no problem. I have a slightly warped view on the matter, having put out a document with a written answer to the House of Commons, some time in November, about the adjudication of mobility and attendance allowance. Indeed, I sent a copy to the relevant organisations so that they might comment, only to find that The Guardian, when it woke up and noticed what had happened two months later, treated the matter as though it were a leak, and said that Governments were trying to smuggle some changes through. I came to the conclusion that the only way to get The Guardian to read Hansard would be to send it in a plain brown envelope. That we have not yet done.

I have much sympathy—as do my right hon. Friend and the Government—with the fundamental thrust of argument that has gone through much of this debate, which is that discussion of these difficult issues—to which none of us can be sure about the answers — should proceed in an open public way. I go further, and say that I very much doubt whether any other Government since the war have proceeded in such an open public way in looking at, and exposing to public view, their thinking and the problems that face all Governments. There is the regular flow of information, it is a very considerable flow—through what is put into the public expenditure White Paper, for example—about spending and services, for which we are responsible. We put a huge amount of information into that White Paper about the National Health Service, about future costs of population structure change in the hospital and community health services, and the pressures that come from advances in medical technology.

In the spring of last year, my right hon. Friend published for the first time a document known as "Health Care and its Costs", which showed in full detail how these and other pressures have affected past NHS spending patterns. Any comprehensive debate on these and other matters goes beyond public spending and welfare spending into wider issues of taxation.

My hon. Friends and, I think, Opposition Members have welcomed the announcement by the Chancellor of the Exchequer yesterday that the Government will publish a Green Paper to discuss these issues in the medium-term future. My hon. Friend the Member for Mid-Sussex (Mr. Renton) urged the Secretary of State for Social Services to do the same in his sphere. Were he here, I should have to tell him that there is no way in which future trends of taxation in public expenditure can be discussed without a good deal of input from the Secretary of State for Social Services and the DHSS—the Department that spends so much of those resources on the welfare state.

In this theme of open government, there is—perhaps most notably—the inquiry that my right hon. Friend set up, and is now presiding over, into provision for retirement. There was an implication in one speech today that the purpose of that group was only to look at proposals for portable pensions. It is important to make it clear that portable pensions is in fact just a sub-group, and that the general terms of reference embrace the implications for pension provision of a larger and older retired population and the scope for changing the age at which people draw their pensions in the light of recommendations from the Social Services Committee. My right hon. Friend's pensions inquiry will hold several open sessions and will welcome evidence from any quarter. There has been a good response to the request for evidence, and I have no doubt that the Committee will wish to consider much of what has been said in today's debate, not least the comments of my hon. Friends the Members for Wealden and for Horsham.

The open and public conduct of the inquiry is a new venture in open government, and it will deal with the central issue of today's debate and with the points made by the hon. Member for Oldham, West. It has been followed by the announcement of a review of housing benefits, not, I must tell my hon. Friend the Member for Mid-Kent, as a means of analysing the effects of the changes that we have made, but simply because we recognise that much longer-term questions must be asked about the housing benefits policy. We wish to ensure that it is considered in as open and public a way as is reasonable, and the review will be independently chaired.

My right hon. Friend the Secretary of State might wish to pursue in other ways the theme of an open and thoroughgoing examination of social security. He has shown his willingness and, through him, the Government's willingness to consider the Health Service, social services and social security policy in the way that has been called for today. I assure those hon. Members on both sides of the House who called for such an examination that that is how we shall proceed.

I have not able to respond to every detailed suggestion made in the debate, nor have I tried to do so. I shall ensure that my colleagues consider all the points made, including the comments of the hon. Member for Wallsend about ambulance services in Northumberland. However, my hon. Friend the Member for Wealden called for a discussion. I hope that I have shown that the Government welcome that call and will continue to do so. By stimulating this debate and by introducing it in the way that he did, my hon. Friend has played a notable part in furthering that discussion.

1.47 pm

Mr. Richard Holt (Langbaurgh)

It is not often that a Back-Bench Member has an opportunity to speak in a debate after a Minister has replied.

One matter that has not been mentioned in the debate, which I believe should be considered more carefully, is the problem of loneliness among the elderly and the house-bound. Today 98 per cent. of households have a television set, and each of them is obliged to pay a tax of £46 for it. Although it is called a licensing fee, it is essentially a tax. Surely, in this modern society, we cannot expect the house-bound or the lonely not to have a television set. All hon. Members will be aware from correspondence that they have received of the number of people who are afraid to go out at night.

I was especially interested to hear my hon. Friend the Minister talk about the permanent interface of tax and benefits between his Department and the Treasury. I hope that this small point will be taken on board by my right hon. Friend the Chancellor of the Exchequer. The amount involved is quite small, but the benefit that could be derived by the population at large is great. We should not try to limit the abolition of the television licensing fee to certain categories, because in doing so we would have to set up yet another army of bureaucrats to control it.

Many people may find it strange that, of the total amount they pay for television licensing, the percentage that goes to the Post Office for administering the system goes up year after year. Last year, the last recorded figures, £56.5 million of the money collected was handed over to the Post Office. That money could have been used to stimulate the arts and for better programmes for the people in their homes.

I shall speak of two ladies, one of whom I spoke to about 20 years ago when she was 95 years of age. I asked her what, in her long years, had impressed her most and remained in her mind. Was it the motor car, television, communications, the telephone or anything else that had been discovered during her long lifetime? She told me that in the main it was the eradication of poverty as she had known it. We have always been, since then, a caring society.

I come more up to date with another lady who is elderly. She sits every day in her wheelchair, and she knows far more about Jocky Wilson, Steve Davis and the other people who play snooker or darts—to our benefit—than any old lady of 85 would have done in the past. She could not have done that without her colour television set, or if she did not have the money to pay the licence fee. If the Government do not get rid of this iniquitous tax, we may deny those old people, in the wefare benefit world about which we are talking, this little bit of pleasure in their twilight years.

The sum of £46 is a small amount to some but a fortune to others. To an old person on his own, £46 is an awful lot of money. To the householder with eight incomes and five television sets it is nothing, and that is unfair and biased because, irrespective of the number of sets or incomes, one household pays only the £46, of which the Post Office gets its share.

My right hon. Friend the Minister said that the quality of life has always to be improved. I agree with him. I hear people talk about the unemployed. I represent a constituency that has the highest unemployment in England, although that is not a thing of pride. If one makes men and women who would like to work and cannot into criminals because they cannot afford a licence for the television, one does no good to society as a whole.

Why do we not recognise the problem? Why do not the Government grasp this nettle? They had to grasp the nettle of radio licensing, because the matter got out of hand. In 1971, radio licensing had to be abandoned because it could no longer be controlled. I do not want to see television licensing abandoned as uncontrollable because large numbers of people are not paying. The number is escalating, and only a few are caught and brought to trial.

We recently had a debate on the effects that shoplifting has on many old, slightly mentally deranged people who are unable to control themselves.

Do we want to see many old people, on their own in a modern society, becoming criminally minded simply because they cannot afford the £46 licence fee? Indeed, the figure may be increased. Do we want to see them, as has happened in the past when they have been lonely, feeding their cats at the expense of their own stomachs until they die of starvation?

Are we not now at a stage where television is no longer the luxury of the few, but the need of the mass of the people? Would it not be a great stimulus to the technology and the job prospects of Britain if we were to end the arbitrary system of making every household pay £46 per annum, irrespective of the ability to pay? All sorts of reliefs are given to many people who perhaps do not need them as much as they are needed by the millions of people in the category to which I refer.

My hon. Friend the Minister said many wise things about the use of resources. He also said that it is necessary to maximise the social benefit from money spent. I wrote down his words. I can think of no measure that would give greater social benefit value for money than the elimination of the £46 tax on every household, which impinges so heavily on the elderly, the infirm, the unemployed and the disadvantaged.

I am fortunate to enjoy good health and I am grateful to be here. Many people, who do not enjoy good health but are not desperately ill are lonely and they suffer psychologically in a sort of mental twilight brought about by the pressures of modern society. In many ways it is assisted by the very medium, television, that I am seeking to support, because it raises expectations in many people. I hope that I have not unnecessarily raised expectations further by my speech, but I believe that I have fired the first salvo in this Parliament — certainly not the first salvo fired in this House—towards the achievement of an objective that must ultimately come to pass.

My hon. Friend the Member for Bristol, East (Mr. Sayeed) said that we should not always do things to seek popularity; we should do things which are right. I see nothing wrong in doing something that is both right and popular. I believe that it would be a very popular move in the country as a whole if the Government were to look deeply at the vexed question of a tax — the television licence—which affects everyone.

1.58 pm

Sir Geoffrey Johnson Smith

The debate has ended on an unexpectedly controversial note. I disagree profoundly with the suggestion made by my hon. Friend the Member for Langbaurgh (Mr. Holt), although, as he said, it might be a popular move.

I express my warm thanks to all hon. Members who, after a busy week, have stayed to take part in the debate. It has been one of the better Friday debates, thanks to the efforts of my hon. Friends. I am most grateful to my hon. Friends from Sussex — perhaps there is something significant in their presence—and to all hon. Members who have helped to make the debate informative and constructive. That is what I had hoped it would be when I tabled the motion.

I warmly thank my hon. Friend the Under-Secretary of State for his spirited and most reassuring speech. I noticed that throughout his speech, as at other times in the debate, my right hon. Friend the Secretary of State for Social Services was present, giving — if it were needed — further indication of his strong interest in the subject. Apart from the path of duty, I am sure that he has a very strong personal interest in the subject.

I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.