HC Deb 26 November 1984 vol 68 cc707-14

Question again proposed, That the amendment be made:—

10 pm

Mrs. Beckett

The final part of the Bill deals with statutory sick pay, a subject on which Conservative Members were notably silent. My hon. Friend the Member for Birkenhead (Mr. Field) asked why the Government are not taking more pride in this area. It is the privatisation of sick pay, and normally they are proud of privatisation. It is an election pledge that has been fulfilled. In another sense, it is not. When the Government boasted so much about privatisation they made it less than clear that it might apply even to welfare provision which is so long established. Why are the Government making the changes in advance of the publication of their review? I know that statutory sick pay will not be included in the review, but presumably the review will have some impact on those who receive it. Why are the Government rushing into activity? Are they doing so, as my hon. Friend the Member for Birkenhead suggested, to make savings?

Why do the Government intend to relieve employers of the burden of paying national insurance contributions a full year ahead of their having to assume the burden of paying an increased period of statutory sick pay? I look to the Minister to give us an explanation as the Secretary of State singularly failed to do so. I hope that he will tell us how much this will cost.

The low-paid in particular tend to be much worse off when on statutory sick pay than they would be in receipt of sickness benefit. The proposal to extend the period of statutory sick pay goes contrary to the arguments advanced by Ministers not so long ago. I am aware that the Select Committee suggested at the time of the debates to which I have referred that an extension to 28 weeks might be suitable. However, I remind the Minister that it entered two important caveats, neither of which shows any sign of being met by the Government. First, it pointed to the difficulties of families with children which will lose all entitlement to additions related to the size of the family. It said that there should be substantial increases in child benefit sufficient to make up for the loss that such families would endure under statutory sick pay. Secondly, it recommended that the low-paid should receive normal earnings rather than, as now, a substantially reduced figure merely because they are low paid.

I hope that the Minister will explain the protection that is likely to be offered to employees after the extension of statutory sick pay. If he does not do so this evening, I hope that he will respond later. It has already been said that there are problems with the correct administration of the scheme. There is another problem which has not been identified so far in the debate. The Secretary of State said much about freedom in his introduction. As is often the case, it appears that in some areas the freedom which might be created is the freedom to lose out substantially. What freedom will be enjoyed by an employee whose employer does not pay statutory sick pay? The employer will receive refunds of contributions and he may receive them for a year. However, I understand that the Department has no power to force employers to make payments of statutory sick pay. Unfortunately, already the leeway in the administration of the scheme allows the possibility of substantial harassment in terms of the requirements for notifying sickness, and so on. The fact that someone whose employer refuses to pay statutory sick pay can do nothing other than go to the ordinary courts is an alarming aspect of the scheme. It is even more alarming when one realises how greatly the Government intend to extend the provision.

This is a rather strange Bill. It is something of a hotchpotch. It is noticeable that Conservative Members including the Secretary of State have concentrated on the popular and what the Secretary of State called the exciting sections of the Bill, leaving the Minister for Social Security to mop up the disagreeable bits. In Committee, we shall try to ensure that the disagreeable bits as well as what the Secretary of State thinks are the more pleasurable bits are fully highlighted. It is for that reason that we will vote for the amendment.

10.5 pm

The Minister for Social Security (Mr. Tony Newton)

I am forced to observe that it is in the nature of the world that Secretaries of State take what they think are the agreeable bits and Ministers of State mop up what they think are the disagreeable bits.

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

What about Parliamentary Under-Secretaries of State?

Mr. Newton

My hon. Friend may well ask about the unfortunate Parliamentary Under-Secretaries of State. I shall think about that later. In spite of all that has been said, I do not regard the restoration of the 5 per cent. abatement of invalidity benefit in advance of taxation as a particularly disagreeable bit.

I am conscious of the fact that the House is anxious to make progress. At least one former Deputy Chief Whip who is not paying attention was particularly anxious to make progress. I hope that, in those circumstances and especially in light of the fact that the hon. Member for Derby, South (Mrs. Beckett) kindly acknowledged that some of her points could be covered in Committee, my hon. Friends will acknowledge that some of their points could be covered at a later stage. I hope that the House will understand if I move fairly rapidly over the issues raised in the debate.

We shall consult about the extension of statutory sick pay, the invalidity benefit proposals and the detailed provisions in the regulations governing the various occupational pensions. We shall certainly ensure that the useful and important comments by my hon. Friends are taken fully into account.

The hon. Member for Oldham, West (Mr. Meacher) asked for various assurances on the pensions review. There is no question of us seeking in the Bill to pre-empt the pensions review. The logic of the hon. Gentleman's request that we should not pre-empt the pensions review is that we should also not engage in the interim in the business of giving undertakings about this, that and the other. I am sure that the hon. Gentleman will acknowledge this point. For example, before the latest public expenditure round, endless requests were made to say whether we would do anything about housing benefit. Once Governments or Oppositions get into the business of denying everything they are asked to deny, they are in an impossible position the first time they do not deny something. If we are not to pre-empt the conclusions of reviews, we cannot go about denying everything that is put to us for denial, because it would make a nonsense of the basic proposition.

As has been clear from the debate, the Bill concentrates mainly on occupational pensions. A good deal has been said also about a number of other issues. As a number of hon. Members have observed, the statutory sick pay scheme is being extended from its present eight weeks to 28 weeks. Much of the detail of that extension which has not hitherto been discussed in detail with employers will be set out in regulations. We want to ensure in resolving the details that we get the views of organisations representing employers and employees.

The hon. Member for Birkenhead (Mr. Field) mentioned the linking rules for invalidity benefit. The hon. Members for Derby, South and for Oldham, West raised the point of the contrast between the two and eight-week linking rules for periods of sickness. Those points clearly need studying, and we shall certainly consider them in the process of refining the proposals that we shall seek to bring before the House in due course.

It must be recognised—I want to emphasise this—that employers have demonstrated, and that is what made us move towards the extension, that they can operate statutory sick pay successfully. They deserve considerable credit for the way in which they have done so.

It now seems sensible to move forward to rationalise the arrangements for sickness benefit, in the broadest sense, so that employers are responsible for the first six months in virtually all cases except for those who fall sick while unemployed, or those who are self-employed who will not be covered by the statutory sick pay scheme. The Department then takes on responsibility for the longer-term sick in the shape of the invalidity benefit scheme.

We recognise that employers will be caused some extra work. It is partly in recognition of that that we make the proposals, upon which the hon. Members for Derby, South and Oldham, West commented, for compensating employers on the liability for national insurance contributions on existing SSP a year in advance of the proposal to extend SSP. Employers will not pay contributions for the extended SSP scheme.

That is sensible, for two reasons. First, it recognises that there are costs for employers and, secondly, as I said during the debate on the national insurance regulations late at night some time last week, a reduction in national insurance contributions is one of the ways in which the Government can foster the creation of jobs. Although in that context £40 million is a modest sum, it is another gesture in the direction which we believe to be important of trying to keep down employers' overheads so that there will be more jobs. That is the Government's fundamental objective.

Mr. Frank Field

The Minister says that there will be job advantages because employers will pay less in national insurance contributions. As employers will be paying sickness pay, there will be no decrease in their costs. Where is the gain for jobs?

Mr. Newton

There will be a reduction in the overheads borne by employers. The hon. Member must remember that the full amount of SSP paid out is reimbursed to employers through the national insurance fund. Over and above the full reimbursement of what employers pay in SSP, they will no longer have to find £40 million for contributions which they would otherwise have had to find on that SSP paid out.

The hon. Member for Oldham, West talked about this proposal as if it were a great public spending saving measure in terms of reducing the amount paid to people who are sick, I should make it clear that the saving of expenditure on national insurance sickness benefit, which is of the order of £200 million, is matched by the £270 million of SSP paid out and reimbursed.

The major difference between the two is made up—there are some more complicated calculations with which I shall not weary the House at this stage—of the extra tax paid on SSP which we expect to be about £70 million.

It will not escape the observation of the House having given those figures, that this is not, in any sense, a cut in the amount of money that people receive in the form of help when they are sick. There are redistribution effects, some of which have been touched upon, but in the large majority of cases, so far as we can judge—it of course depends to some extent upon whether people have adult dependants—the effect will not be as adverse as the hon. Member for Oldham, West gave the impression that it would be. It is a little difficult to make those comparisons in detail at this stage, because the rates of SSP and the rates of DHSS sickness benefit are out of gear. SSP rates go up in April while DHSS benefit rates went up today. At the moment it is true that for a married couple, or a man with a dependent wife, the rate of statutory sick pay is slightly lower than he would get, as of now, on DHSS sickness benefit. On the other hand, that position will be reversed next April, at which point he will be getting slightly more on SSP, on our expectations of the uprating of SSP, than he is currently getting on DHSS sickness benefit.

The effects are more complicated than the hon. Gentleman acknowledged. It should also be recognised that, while single people in the lower-paid ranges are likely to be better off, most people in the lower bands of earnings, attracting the lower rates of statutory sick pay, are much more likely to be single people, especially young single people without dependent wives or husbands, or alternatively they will be people who are themselves dependants, that is to say, who are themselves spouses of somebody who has earnings and therefore would not qualify for an adult dependency addition, even if they were on DHSS sickness benefit. That may have sounded complicated. It is indeed complicated. I hope that we shall be able to explore it rather more in Committee than we have been able to do this evening.

Mr. Frank Field

The Minister is telling the House that the Government are not breaking their election pledges to pay the families by saying that it is not so much families who will be made worse off under the measure but young people, especially young single people, will be put in a more advantageous position. Is not that somewhat ironical, in that frequently at question time Ministers tell us that the rates paid to younger claimants should be cut because of the incentives to work? If the Minister argues successfully on the family front, he defeats himself on the other front.

Mr. Newton

I am not sure that there is too much of an issue in regard to incentives to work when we are talking about short-term pay for sickness. That is an issue which can be seen as much more significant in relation to supplementary benefit for the unemployed, and is a much wider argument than we can sensibly engage in at this time of the evening.

I am conscious that the House wants to move fairly rapidly to a decision on the Bill. However, I want to say a few words about two significant useful improvements that we are introducing.

The first increases the pensions payable to some of the oldest members of the community. From November 1985, we intend to increase the rate of the over-80 pension paid to married women. All married women who qualify for this special non-contributory pension at the lower rate, which is £12.85 from today, will then be entitled to the standard rate of £21.50 at 1984 benefit levels. That is a small but long overdue rationalisation of the non-contributory retirement pension scheme for pensioners over 80 and will end an unfairness between elderly married women and other elderly people.

The effect of the change will to to top up the pensions of those few married women of 80 or more who receive a lower rate category C pension to the standard rate of category D pension. It means that all people over 80 who satisfy the residence test, which we have also rationalised this week, will now receive the same amount of non-contributory retirement pension.

With regard to the points raised on invalidity benefit, I shall not attempt to rehearse the grounds of the 5 per cent. abatement, except to make it clear to the House that the question of taxation remains for the Chancellor of the Exchequer, but neither I nor my right hon. Friend have said that the question of taxation will be abandoned. On the contrary, it remains the view of the Government in principle that taxation of invalidity benefit is right. [Interruption.] It has been common ground that benefits of this kind should be taxable. That has been common ground between both Front Benches for a long period. [Interruption.] My understanding was that it had been accepted by the Opposition Front Bench.

My right hon. Friend has said that two further changes will be added in Committee, and there has been some reference to them. First, duplication between invalidity allowance and the earnings-related additional component or guaranteed minimum pension under an occupational pension scheme will cease. The point is that when invalidity allowance was introduced in 1971, it was intended to provide extra financial help, as the hon. Lady said, to those who became chronically sick early in their working lives. But the thinking behind that was that they would not be able to build up earnings-related pension rights for later in life. As a result of the changes that have been made, since 1979 it not only has been possible for invalidity and retirement pensioners to get an extra earnings-related element in their pension—the additional component—but in practice they have visibly shown their ability to do so by doing so. In other words, those rights have started to come into effect. We feel that those two additions to invalidity benefit and retirement pension are broadly for the same purpose. Therefore, we think it reasonable and sensible to deal with the overlap between them. That is a logical change.

I was asked for these figures. We estimate that 375,000 existing invalidity and retirement pensioners who receive both invalidity allowance and additional component or GMP will be affected. Their loss will vary between a few pence and the maximum invalidity allowance of £7.50, but for the majority it should be a relatively small loss, and in any case we shall make transitional arrangements to ensure that no existing invalidity or retirement pensioner has his benefit reduced when the change comes in.

As the hon. Lady knows, the second proposal relates to adult dependency additions. She rightly identified the extent to which there is a rule that discriminates against women. We think it right to move against that discrimination, although we are not compelled to do so by the EEC directive. I hope that we shall at least have the hon. Lady's assent to move against that discrimination. I cannot give her the concrete undertaking that she sought that the rule will be no less generous than the existing rule for men in relation to their dependents partly because there are some injustices in the present position and some doubts about how far the present rule can be seen as a realistic test of dependency. However, we are giving further thought to precisely how that should be done and I hope that we shall be able to consult about that, too, as I am sure the hon. Lady wishes as well. I cannot give an absolute undertaking at the moment, but we shall consider what she said.

I am sorry—perhaps I am not—that my speech has been rather a rattle through several complicated points. I hope that I have dealt with some of the issues that were raised and I look forward, if that is the right phrase, to discussing them further with the hon. Lady, the hon. Member for Oldham, West and, who knows, the hon. Member for Birkenhead in Committee. Meanwhile, I commend the Second Reading of the Bill to the House.

Question put, That the amendment be made:—

The House divided: Ayes 138, Noes 217.

Division No. 19] [10.22 pm
Adams, Allen (Paisley N) Deakins, Eric
Ashton, Joe Dewar, Donald
Atkinson, N. (Tottenham) Dixon, Donald
Banks, Tony (Newham NW) Dobson, Frank
Barnett, Guy Dormand, Jack
Barron, Kevin Douglas, Dick
Beckett, Mrs Margaret Dubs, Alfred
Benn, Tony Duffy, A. E. P.
Bennett, A. (Dent'n & Red'sh) Dunwoody, Hon Mrs G.
Bermingham, Gerald Eadie, Alex
Blair, Anthony Eastham, Ken
Boyes, Roland Evans, John (St. Helens N)
Brown, Gordon (D'f'mline E) Ewing, Harry
Brown, Hugh D. (Provan) Fatchett, Derek
Brown, R. (N'c'tle-u-Tyne N) Field, Frank (Birkenhead)
Brown, Ron (E'burgh, Leith) Fisher, Mark
Buchan, Norman Foot, Rt Hon Michae
Caborn, Richard Forrester, John
Callaghan, Rt Hon J. Freeson, Rt Hon Reginald
Callaghan, Jim (Heyw'd & M) George, Bruce
Campbell, Ian Gilbert, Rt Hon Dr John
Campbell-Savours, Dale Golding, John
Carter-Jones, Lewis Gourlay, Harry
Clark, Dr David (S Shields) Hamilton, James (M'well N)
Clay, Robert Hamilton, W. W. (Central Fife)
Clwyd, Mrs Ann Harrison, Rt Hon Walter
Cocks, Rt Hon M. (Bristol S.) Hart, Rt Hon Dame Judith
Cohen, Harry Hattersley, Rt Hon Roy
Concannon, Rt Hon J. D. Heffer, Eric S.
Conlan, Bernard Holland, Stuart (Vauxhall)
Cook, Frank (Stockton North) Home Robertson, John
Corbett, Robin Hughes, Dr. Mark (Durham)
Corbyn, Jeremy Hughes, Robert (Aberdeen N)
Cowans, Harry John, Brynmor
Craigen, J. M. Jones, Barry (Alyn & Deeside)
Crowther, Stan Kilroy-Silk, Robert
Cunliffe, Lawrence Lambie, David
Davies, Ronald (Caerphilly) Leadbitter, Ted
Davis, Terry (B'ham, H'ge H'l) Leighton, Ronald
Lewis, Ron (Carlisle) Richardson, Ms Jo
Lewis, Terence (Worsley) Robertson, George
Litherland, Robert Robinson, G. (Coventry NW)
Lloyd, Tony (Stretford) Rogers, Allan
Lofthouse, Geoffrey Ross, Ernest (Dundee W)
Loyden, Edward Rowlands, Ted
McCartney, Hugh Sheerman, Barry
McKelvey, William Shore, Rt Hon Peter
McNamara, Kevin Short, Ms Clare (Ladywood)
McWilliam, John Skinner, Dennis
Madden, Max Smith, Rt Hon J. (M'kl'ds E)
Marek, Dr John Snape, Peter
Marshall, David (Shettleston) Soley, Clive
Maxton, John Spearing, Nigel
Meacher, Michael Stott, Roger
Michie, William Strang, Gavin
Mikardo, Ian Thomas, Dafydd (Merioneth)
Millan, Rt Hon Bruce Thomas, Dr R. (Carmarthen)
Morris, Rt Hon A. (W'shawe) Thompson, J. (Wansbeck)
Morris, Rt Hon J. (Aberavon) Thorne, Stan (Preston)
Nellist, David Tinn, James
Oakes, Rt Hon Gordon Torney, Tom
O'Brien, William Wareing, Robert
Orme, Rt Hon Stanley Weetch, Ken
Park, George Welsh, Michael
Parry, Robert Wilson, Gordon
Patchett, Terry Winnick, David
Pike, Peter Woodall, Alec
Powell, Raymond (Ogmore)
Prescott, John Tellers for the Ayes:
Redmond, M. Mr. Allen McKay and
Rees, Rt Hon M. (Leeds S) Mr. Sean Hughes.
Aitken, Jonathan Grant, Sir Anthony
Alton, David Greenway, Harry
Ancram, Michael Gregory, Conal
Ashby, David Griffiths, E. (B'y St Edm'ds)
Atkins, Rt Hon Sir H. Griffiths, Peter (Portsm'th N)
Beaumont-Dark, Anthony Ground, Patrick
Biffen, Rt Hon John Grylls, Michael
Body, Richard Hamilton, Hon A. (Epsom)
Boscawen, Hon Robert Hamilton, Neil (Tatton)
Bowden, Gerald (Dulwich) Hampson, Dr Keith
Bright, Graham Harris, David
Bruce, Malcolm Harvey, Robert
Bryan, Sir Paul Haselhurst, Alan
Buchanan-Smith, Rt Hon A. Hawkins, Sir Paul (SW N'folk)
Budgen, Nick Hawksley, Warren
Butcher, John Hayes, J.
Carlisle, Rt Hon M. (W'ton S) Heddle, John
Carttiss, Michael Henderson, Barry
Cartwright, John Heseltine, Rt Hon Michael
Clark, Sir W. (Croydon S) Hickmet, Richard
Clarke, Rt Hon K. (Rushcliffe) Hind, Kenneth
Clegg, Sir Walter Hogg, Hon Douglas (Gr'th'm)
Cockeram, Eric Holland, Sir Philip (Gedling)
Cope, John Holt, Richard
Couchman, James Hooson, Tom
Dorrell, Stephen Howarth, Alan (Stratf'd-on-A)
Douglas-Hamilton, Lord J. Howarth, Gerald (Cannock)
Dykes, Hugh Howell, Ralph (N Norfolk)
Eyre, Sir Reginald Howells, Geraint
Fenner, Mrs Peggy Hunt, David (Wirral)
Fletcher, Alexander Hunter, Andrew
Forsyth, Michael (Stirling) Jessel, Toby
Fowler, Rt Hon Norman Johnston, Russell
Fox, Marcus Jones, Robert (W Herts)
Fraser, Peter (Angus East) Joseph, Rt Hon Sir Keith
Freeman, Roger Kellett-Bowman, Mrs Elaine
Gale, Roger Kennedy, Charles
Galley, Roy King, Roger (B'ham N'field)
Gardner, Sir Edward (Fylde) King, Rt Hon Tom
Garel-Jones, Tristan Kirkwood, Archy
Glyn, Dr Alan Knight, Gregory (Derby N)
Goodlad, Alastair Knight, Mrs Jill (Edgbaston)
Gow, Ian Knox, David
Gower, Sir Raymond Lang, Ian
Latham, Michael Roberts, Wyn (Conwy)
Lawler, Geoffrey Roe, Mrs Marion
Lawson, Rt Hon Nigel Ross, Stephen (Isle of Wight)
Lennox-Boyd, Hon Mark Rost, Peter
Lester, Jim Ryder, Richard
Lewis, Sir Kenneth (Stamf'd) Sackville, Hon Thomas
Lightbown, David Sainsbury, Hon Timothy
Lilley, Peter Sayeed, Jonathan
Lord, Michael Shaw, Sir Michael (Scarb')
Lyell, Nicholas Shepherd, Colin (Hereford)
McCrindle, Robert Sims, Roger
Macfarlane, Neil Skeet, T. H. H.
MacGregor, John Smith, Sir Dudley (Warwick)
MacKay, Andrew (Berkshire) Smith, Tim (Beaconsfield)
MacKay, John (Argyll & Bute) Soames, Hon Nicholas
Maclean, David John Spence, John
McNair-Wilson, P. (New F'st) Spencer, Derek
McQuarrie, Albert Spicer, Michael (S Worcs)
Major, John Squire, Robin
Malins, Humfrey Stanley, John
Malone, Gerald Steel, Rt Hon David
Maples, John Stern, Michael
Marland, Paul Stevens, Lewis (Nuneaton)
Marlow, Antony Stevens, Martin (Fulham)
Mather, Carol Stewart, Allan (Eastwood)
Maude, Hon Francis Stewart, Andrew (Sherwood)
Mawhinney, Dr Brian Stradling Thomas, J.
Maxwell-Hyslop, Robin Sumberg, David
Mayhew, Sir Patrick Taylor, Rt Hon John David
Mellor, David Taylor, John (Solihull)
Merchant, Piers Temple-Morris, Peter
Meyer, Sir Anthony Thomas, Rt Hon Peter
Miller, Hal (B'grove) Thompson, Donald (Calder V)
Mills, Iain (Meriden) Thompson, Patrick (N'ich N)
Mills, Sir Peter (West Devon) Thorne, Neil (Ilford S)
Mitchell, David (NW Hants) Thornton, Malcolm
Moate, Roger Thurnham, Peter
Molyneaux, Rt Hon James Townend, John (Bridlington)
Monro, Sir Hector Tracey, Richard
Morris, M. (N'hampton, S) Trippier, David
Morrison, Hon P. (Chester) Twinn, Dr Ian
Moynihan, Hon C. van Straubenzee, Sir W.
Mudd, David Waddington, David
Murphy, Christopher Wainwright, R.
Neale, Gerrard Walden, George
Needham, Richard Walker, Bill (T'side N)
Nelson, Anthony Wallace, James
Neubert, Michael Waller, Gary
Newton, Tony Wardle, C. (Bexhill)
Nicholls, Patrick Watson, John
Onslow, Cranley Watts, John
Oppenheim, Phillip Wells, Bowen (Hertford)
Osborn, Sir John Wells, Sir John (Maidstone)
Ottaway, Richard Whitney, Raymond
Owen, Rt Hon Dr David Winterton, Mrs Ann
Page, Richard (Herts SW) Winterton, Nicholas
Parris, Matthew Wolfson, Mark
Pawsey, James Wood, Timothy
Pollock, Alexander Woodcock, Michael
Powell, Rt Hon J. E. (S Down) Wrigglesworth, Ian
Powell, William (Corby) Yeo, Tim
Price, Sir David Young, Sir George (Acton)
Proctor, K. Harvey
Rathbone, Tim Tellers for the Noes
Rhodes James, Robert Mr. Peter Lloyd and
Rifkind, Malcolm Mr. Tony Durant.
Rippon, Rt Hon Geoffrey

Question accordingly negatived.

Main Question put forthwith pursuant to Standing Order No. 41 (Amendment on second or third reading), and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).