HC Deb 02 May 1984 vol 59 cc443-7 'The Secretary of State shall in preparing the increase in sickness benefit in November 1984 include in it such sum as is necessary to make good the effect of section 1(1) and 1(2)(a) of the Social Security (No. 2) Act 1980 upon such benefit.'.—[Mrs. Beckett.]

Brought up and read the First time.

Mrs. Beckett

I beg to move, That the clause be read a Second time.

Mr. Speaker

With this it will be convenient to take:

New clause 16—Increase in maternity allowance'The Secretary of State shall in preparing the increase in maternity allowance in November 1984 include in it such sum as is necessary to make good the effect of section 1(1) and 1(2) (a) of the Social Security (No. 2) Act 1980 upon such benefit.'. New clause 17—Increase in invalidity pension'The Secretary of State shall in preparing the increase in invalidity pension in November 1984 include in it such sum as is necessary to make good the effect of section 1(1) and 1(2)(a) of the Social Security (No. 2) Act 1980 upon such benefit.'.

10.15 pm
Mrs. Beckett

This is a relatively simple matter on which we wish to take the opportunity to press the Government. The three new clauses deal with another area of deprivation. In 1980, the Government decided arbitrarily to bring in an abatement of several benefits of the order of 5 per cent., in lieu, so they said, at the time of taxation, the theory being that at some stage in future the benefits would be taxable, and, until they were, their value would be reduced by 5 per cent. to make approximately the same claim on Government resources. At that time, there was a protest. Since that time, there has been increasing protest. The abatement appears now to be even more arbitrary than it did when first introduced, and certainly more arbitrary than in recent years.

In the last Budget, the Chancellor of the Exchequer, in one of his few moments of generosity, although perhaps slightly ill-directed, gave large increases in tax allowances. Whereas a few months ago it might have been possible for the Minister to argue that a comparatively small number of people were affected by the abatement, the Chancellor, by his action, has brought more people within the ambit. Even those who would not have had to pay tax on the allowance if they had been brought into tax are losing by the abatement. Since, by definition, they are among the worst off in society, otherwise they would be within the bracket to make them liable to tax, yet again we are in the area where the Government are taking from the poor to give to others of the poor or to the rich, which is their usual pattern.

It is estimated that in the coming year the numbers receiving sickness benefit will be of the order of 150,000, those receiving maternity allowance, 140,000, and those receiving invalidity allowance, 740,000. I would be grateful if the Minister can say whether the Government have any figures of what proportion of these individuals are affected by the abatement, but would not come into taxation.

We wish to press the Government on this now, because it is comparatively recently that the Minister's colleagues in the Treasury told the House that they have no immediate plans to bring these benefits into taxation. The unfairness and arbitrariness of the Government's action will persist, therefore, and become daily more evident. We ask the Government to tell the House when they expect to remove this abatement.

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

As the hon. Member for Derby, South (Mrs. Beckett) has explained, the background to the abatement and, therefore, the new clause is what I can claim to be the long-agreed need on both sides of the House to make sickness benefit, maternity allowance and invalidity pension taxable. It is generally accepted that that is a reasonable policy; otherwise those whose incomes are solely made up of earnings are less well treated than those incomes made up partly of earnings and partly of the relevant benefits.

Because it is not yet possible to bring these benefits into tax—that is a matter for the Chancellor, and I cannot add to what the hon. Lady said — the abatement introduced in 1980, it is argued, should be restored in any event. On sickness benefit and maternity allowance, 1.hat is not an argument on which I would place very much weight. By definition, these are short-term benefits and, therefore, go to those who have recently been in the labour market and are likely to have other earnings. Generally they are above the tax threshold.

While I cannot answer the hon. Lady's question about the proportion of those receiving sickness benefit and maternity allowance who would be in the tax bracket, the overwhelming probability is that most of them would, for the reasons that I have given.

I recognise that the position is somewhat more complex on invalidity benefit, because undoubtedly not all those on invalidity benefit would be liable to tax if that benefit were brought into tax. The figures have recently been given to the hon. Member for Pontypridd (Mr. John), and suggest that on the basis of last year's statistics — the latest information we have from the Inland Revenue—about 25 per cent. would not be liable to tax at all and a further 20 per cent. or so would pay less tax than if the benefit were increased by 5 per cent. and tax were introduced.

I accept that the abatement was not a perfect solution to the interim problem of achieving equity through bringing these benefits into taxation, but there are three points that the House should bear in mind. First, on present benefit levels it is likely that the taxation yield will be about £140 million, against the cost of restoring the abatement on invalidity pension of £60 million. In other words, those on invalidity benefit generally and on average — I acknowledge that this is against the background of the figures that I have just given—would be worse off if taxation were introduced and the abatement restored. Many of them are, in fact, better off under the existing system than they would be if the hon. Lady had her way.

Secondly, we have gone some way towards assisting those who in some respects may be judged to be in the most difficult position by restoring the abatement of the invalidity allowance — the age-related increase of the invalidity benefit, which is largest for those who are disabled at the younger end of the age range. We restored that abatement within a year of the original proposals. That has been of some help and was intended as a token of our good intent.

Thirdly, by abolishing the invalidity trap last year we have ensured that the least well-off of those on that benefit do not suffer financially from the abatement, because they will gain in supplementary benefit anything that they lose in the 5 per cent. abatement. That previously was not possible, because 50,000 or 60,000 were trapped within invalidity benefit and not able to qualify for the long-term rate of supplementary benefit for complicated and technical reasons of which the House will be aware. By having abolished that part of the system, we have averted the effect of the abatement on the poorest invalidity pensioners. I think that that was the right priority at a time of difficulty over resources. As always, the issue is one of priorities and I do not believe that the Opposition have made out the case for choosing the priority that we are debating. If all three amendments were accepted and implemented, the cost would be approaching £100 million.

I am glad to repeat the unequivocal pledge that the Government have given previously, that the abatement will be restored when invalidity benefit is brought into tax. When sickness benefit and the maternity allowance are brought into tax we shall consider the abatement of those benefits as well. Against that background, I cannot advise the House to accept the amendment.

Mrs. Beckett

I am grateful to the Minister for a reply which was characteristically clear. Of course, it would be pleasing if he were clear and also gave us the answer that we wish to hear. He has given us some interesting figures. I understand that 185,000 of those on invalidity benefit are losing 5 per cent. of the value of the benefit because of the abatement and would not be paying tax if the circumstances were as he described and the benefit were brought into taxation. These people should not be losing, and they would not lose if the benefit were brought into tax. I understand also that a further 20 per cent. of those on invalidity benefit would retain some of the value of such a move. About 148,000 would be in that position. I estimate that about 330,000 are suffering from the abatement in the way that the Minister describes.

I recognise that there are problems with the balancing effects that the Minister has described, and I recognise that some of the changes which the Government have introduced have been in the right direction. However, it is not good enough for the Minister and his Treasury colleagues to keep on saying that the abatement will be restored. In effect, they are saying, "Some day the prince will arrive, wave his magic wand and bring the policy change into effect—but not today." It has been "not today" for far too long. That has been the position for a considerable period, and for the sake of over 300,000 beneficiaries who are now losing out—

Mr. Newton

I should make it clear that my figures relate to last year. The figures for this year are not available. The hon. Lady's figures are correct on the estimates that have been given, but I should like her to acknowledge that about 100,000 of the 330,000 are on supplementary benefit and will not be suffering the financial effects of the abatement. This means that the number affected is rather smaller than she suggests.

Mrs. Beckett

I accept that. I agree that we are dealing with those who are not the worst off because of some of the changes that have been made, but we are dealing with those who are just above that level. These are people who are suffering because the change has not been made for which we are calling in the new clause. For that reason, we seek to press the new clause to a Division.

Question put, That the clause be read a Second time:—

The House divided: Ayes 40, Noes 155.

Division No. 273 [10.28 pm
Atkinson, N. (Tottenham) Kirkwood, Archibald
Beckett, Mrs Margaret Lloyd, Tony (Stretford)
Bermingham, Gerald Marek, Dr John
Campbell-Savours, Dale Meacher, Michael
Carlile, Alexander (Montg'y) Meadowcroft, Michael
Cocks, Rt Hon M. (Bristol S.) Milian, Rt Hon Bruce
Cohen, Harry Morris, Rt Hon A. (W'shawe)
Corbett, Robin Morris, Rt Hon J. (Aberavon)
Corbyn, Jeremy Nellist, David
Davis, Terry (B'ham, H'ge H'I) Pike, Peter
Dobson, Frank Skinner, Dennis
Dubs, Alfred Stott, Roger
Dunwoody, Hon Mrs G. Wallace, James
Field, Frank (Birkenhead) Wareing, Robert
Fisher, Mark Wigley, Dafydd
Freud, Clement Williams, Rt Hon A.
Garrett, W. E. Wilson, Gordon
Harman, Ms Harriet Winnick, David
Hogg, N. (C'nauld & Kilsyth)
Holland, Stuart (Vauxhall) Tellers for the Ayes:
Howells, Geraint Mr. Frank Haynes and
Kennedy, Charles Mr. Jack Dormand.
Alexander, Richard Brown, M. (Brigg & Cl'thpes)
Alison, Rt Hon Michael Buck, Sir Antony
Amess, David Burt, Alistair
Ancram, Michael Butterfill, John
Arnold, Tom Carlisle, Kenneth (Lincoln)
Ashby, David Chapman, Sydney
Aspinwall, Jack Chope, Christopher
Baker, Nicholas (N Dorset) Clark, Dr Michael (Rochford)
Batiste, Spencer Clarke, Rt Hon K. (Rushcliffe)
Bellingham, Henry Cockeram, Eric
Bendel!, Vivian Colvin, Michael
Berry, Sir Anthony Conway, Derek
Biffen, Rt Hon John Coombs, Simon
Body, Richard Cope, John
Boscawen, Hon Robert Couchman, James
Bottomley, Peter Cranborne, Viscount
Boyson, Dr Rhodes Currie, Mrs Edwina
Braine, Sir Bernard Dorrell, Stephen
Brandon-Bravo, Martin Dover, Den
Bright, Graham Dunn, Robert
Brinton, Tim Evennett, David
Brooke, Hon Peter Fallon, Michael
Favell, Anthony Lyell, Nicholas
Fookes, Miss Janet Macfarlane, Neil
Forth, Eric MacGregor, John
Fowler, Rt Hon Norman Maclean, David John
Fox, Marcus Major, John
Gale, Roger Malins, Humfrey
Garel-Jones, Tristan Marland, Paul
Glyn, Dr Alan Mather, Carol
Goodhart, Sir Philip Maude, Hon Francis
Goodlad, Alastair Maxwell-Hyslop, Robin
Gorst, John Mayhew, Sir Patrick
Gower, Sir Raymond Mellor, David
Grant, Sir Anthony Meyer, Sir Anthony
Greenway, Harry Miller, Hal (B'grove)
Gummer, John Selwyn Mills, lain (Meriden)
Hayhoe, Barney Mitchell, David (NW Hants)
Hickmet, Richard Moynihan, Hon C.
Hirst, Michael Murphy, Christopher
Hogg, Hon Douglas (Gr'th'm) Newton, Tony
Holt, Richard Nicholls, Patrick
Howarth, Gerald (Cannock) Norris, Steven
Jackson, Robert Onslow, Cranley
King, Rt Hon Tom Osborn, Sir John
Knight, Mrs Jill (Edgbaston) Ottaway, Richard
Lester, Jim Page, Richard (Herts SW)
Lewis, Sir Kenneth (Stamf'd) Parkinson, Rt Hon Cecil
Lilley, Peter Peacock, Mrs Elizabeth
Lloyd, Ian (Havant) Powell, William (Corby)
Lloyd, Peter, (Fareham) Powley, John
Lord, Michael Prentice, Rt Hon Reg
Luce, Richard Price, Sir David
Proctor, K. Harvey Thorne, Neil (llford S)
Rhodes James, Robert Thurnham, Peter
Rhys Williams, Sir Brandon Tracey, Richard
Robinson, Mark (N'port W) Trotter, Neville
Roe, Mrs Marion Twinn, Dr Ian
Rowe, Andrew van Straubenzee, Sir W.
Sackville, Hon Thomas Viggers, Peter
Sainsbury, Hon Timothy Waddington, David
St. John-Stevas, Rt Hon N. Wakeham, Rt Hon John
Shaw, Sir Michael (Scarb') Walden, George
Shelton, William (Streatham) Waller, Gary
Sims, Roger Wardle, C. (Bexhill)
Smith, Tim (Beaconsfield) Wheeler, John
Soames, Hon Nicholas Whitfield, John
Speed, Keith Wilkinson, John
Speller, Tony Winterton, Mrs Ann
Spencer, Derek Winterton, Nicholas
Squire, Robin Wolfson, Mark
Stanbrook, Ivor Wood, Timothy
Stern, Michael Woodcock, Michael
Stevens, Lewis (Nuneaton) Young, Sir George (Acton)
Stevens, Martin (Fulham)
Stewart, Allan (Eastwood) Tellers for the Noes:
Stradling Thomas, J. Mr. Archie Hamilton and
Taylor, Teddy (S'end E) Mr. Micheal Neubect
Thompson, Donald (Calder V) Question accordingly negatived.
Thompson, Patrick (N'ich N)

Question accordingly negatived.