HC Deb 16 December 1985 vol 89 cc21-34 3.30 pm
The Secretary of State for Social Services (Mr. Norman Fowler)

With permission, Mr. Speaker, I shall make a statement on the Social Security White Paper which I am publishing today.

In June the Government published a Green Paper which set out in detail the case for change, the Government's objectives for social security and our proposals for achieving them. That Green Paper marked a further stage in the process of review and public consultation which began two years ago in the autumn of 1983.

The Government have four main aims. We want to see a simpler system of social security which provides a better service to the public. By common consent, social security at present is too complex. There are some 30 benefits, each with separate and frequently conflicting rules of entitlement, and supplementary benefit alone requires almost 40,000 staff to administer it.

We want to see more people looking forward to greater independence in retirement. Only half the work force currently have occupational pensions of their own. Our plans extend not only to occupational pensions but, for the first time, provide a new right to personal pensions.

We want a system which is financially secure. As the Government Actuary's report, published with the White Paper, demonstrates, the future cost of the state earnings-related pension scheme will grow substantially—at the same time as the ratio of contributors to pensioners worsens. The Government believe that this problem must be tackled now.

Above all, we want to see more effective help going to those who most need it. More than half of those living on the lowest incomes today are in families with children. This includes both families where the parents are unemployed and low-income working families. Added to this people can still find themselves with less income in work than if they were unemployed. Others can find that a pay rise in work can actually make them worse off. The Government believe that urgent action is necessary to tackle these problems.

One of the major priorities of the Government's proposals is to make better provision for low-income working families with children. Accordingly, we propose to abolish the present family income supplement and to introduce a new benefit, family credit.

Family credit is designed to ensure that families with children will be better off in work. It will be based on take-home or net pay—rather than gross earnings, as with family income supplement—so that the worst effects of the poverty trap are eliminated.

We expect that, compared with family income supplement, family credit will give help to an extra 200,000 families. In other words, twice as many low income families with children will benefit from the new scheme. Family credit will be paid through the pay packet, but it should be emphasised that child benefit will be paid in addition and that that payment will go, as now, direct to the mothers.

We also intend to bring extra support to families who are not in work. This will be achieved through the new income support scheme. A family premium—a special higher level of benefit—will be paid on top of the basic income support rate and on top of the rates for individual children. One of the groups who will most gain from this change will be unemployed families with children.

The income support scheme will replace supplementary benefit. The regular extra payments now made on the basis of detailed individual assessment will be absorbed into the main rates of benefit. As well as a premium for families with children, there will be an additional premium for lone parents and premiums for pensioners and the long-term sick and disabled. At the same time, the capital rule, which at present is an inflexible £3,000 cut off, will be substantiall eased, and we will also ease the earnings rules for lone parents, disabled people and long-term unemployed families.

While the broad pattern of income support will remain as set out in the Green Paper, we have modified our proposals in the light of consultations in two significant ways.

First, the income support rate will still be based on age divisions at 18 and 25 for single people. However, in order to help young families with children in particular, we now intend to have the same rate for all couples over 18.

Secondly, we intend to increase the help for families with more than one disabled child. The Green Paper proposed a double family premium where there was one disabled child or more. We have now decided to pay the extra premium for each disabled child in a household.

This last change will reinforce the special attention which we give to disabled people in our proposals. They will benefit from the premium in income support and from a higher earnings disregard. Overall, disabled people on low incomes will benefit significantly from the proposals.

However well designed the income support scheme may be, it cannot anticipate every special or emergency need. These needs will be dealt with by the social fund.

Instead of the present small universal maternity and death grants—which have both remained at the same value for over 15 years—proper help will be available from the fund to all low income families, not just those on supplementary benefit. The grant for funeral expenses will ensure that the full cost of the funeral can be met, and it is planned that the maternity grant should be set at about £75. Grants will also be given for community care purposes; for example, to help someone leaving a long-stay hospital. In addition, the fund will provide loans to help claimants cope with items other than normal weekly needs.

The main structure of our housing benefit proposals has been acknowledged as an important simplification of the scheme. Treating employed and unemployed people alike, and so getting rid of two separate systems in housing benefit, has been particularly welcomed.

We shall go ahead with this, but I intend, in response to consultations, to make two significant changes to the Green Paper proposals. First, I recognise the anxieties expressed about the effect of a single taper for rent and rates on owner-occupiers, particularly pensioners. I also recognise the concern of local authorities that a single taper would create administrative difficulties for them. We shall therefore keep separate tapers for rent and rates, and this will still be a substantial simplification compared with the six tapers in the present system.

Secondly, although the general power to run local housing benefit schemes will be ended, local authorities will retain their power to grant extra benefit to individual claimants in exceptional circumstances. I have also decided that they should retain their power to give special treatment to war pensioners.

As we made clear in the Green Paper, we believe that the basis on which help is provided with rates needs to be changed. At present, around 7 million householders receive help with some or all of their rates bill, and up to 3 million householders pay no rates. We stand by the principle that everyone should make a contribution towards the cost of his local services. The White Paper therefore reaffirms the proposal that everyone should pay at least 20 per cent. of his rates, but the proposals which my right hon. Friend the Secretary of State for the Environment will be bringing forward shortly on the reform of local taxation may affect the way this contribution is made.

The Government will be carrying forward the proposals for directing widows' benefits to those who need them most and for making maternity allowance more flexible and more closely related to recent work. The new lump sum payment of £1,000 to widows will be tax-free and will be ignored when considering help with funeral expenses. The White Paper also proposes that maternity allowances, like statutory sick pay, should be paid through employers, and a consultation document will be published shortly on this.

On timing, we shall move to the first April uprating in 1987 and at that time we shall introduce other changes like statutory maternity allowance and the new system of help with maternity and funeral costs. The main structural changes to income-related benefits and the other elements of the social fund will be introduced in April 1988. This recognises the arguments of employers and local authorities that the timetable must allow them to make proper preparations.

As far as income-related benefits are concerned, a technical annex is published with the White Paper. The figures show the possible distributional effects of the changes, but these can be no more than illustrative. The actual position at the time of change will depend, among other things, on the exact benefit rates decided for April 1988, and the illustrative figures take no account of any changes resulting from the reform of rates.

As far as pensions policy is concerned, the Government Actuary's report, published with the White Paper, shows that if no action is taken, total pension costs will increase from under £15.5 billion to nearly £49 billion a year provided that the basic pension is uprated by prices. If, as some urge, the basic pension is uprated in line with earnings, the total pension cost increases to nearly £73 billion, which would require a national insurance contribution of 27.5 per cent. The cost of SERPS alone will increase from barely £200 million today to £25.5 billion.

The Government cannot ignore the vast pension bill which is being handed down to our children. In the consultation a number of important organisations recognised that case but argued that, rather than completely replacing SERPS, the costs could be reduced by modifying its provisions. In testing whether a policy of modifying SERPS would be acceptable, the Government have two major objectives. First, we want to see the future cost of SERPS substantially reduced. Secondly, and even more fundamentally, we want to see many more people with their own pension. It is on the basis that both of those objectives can be achieved that the Government are prepared to change the proposals from those put forward in the Green Paper.

The Government propose to modify the scheme so that costs in the next century can be afforded. As with the Green Paper proposals, the Government recognise the particular needs of those nearest retirement. The SERPS changes will not affect anyone retiring this century, nor anyone widowed this century. There will also be a transitional period as the new scheme comes into effect fully in 2010. The basic pension is entirely unaffected by the proposals, and we will continue fully to protect its value.

The changes to SERPS are that occupational schemes contracted out of the state scheme should be responsible for inflation-proofing guaranteed minimum pensions in payment up to 3 per cent. a year; SERPS pensions should be based on a lifetime's earnings, not on the best 20 years as now, but special protection will be built in for women who have breaks in work to bring up families and for those who become disabled and people looking after them; SERPS pensions should be calculated on 20 per cent. of earnings rather than 25 per cent.; and widows and widowers over 65 should be allowed to inherit half their spouse's SERPS rights, rather than the full amount as now.

However, policy on SERPS is only part of the Government's pensions strategy. Our central aim is to provide many more people with their own pension. The White Paper puts forward a six point plan to achieve that. First, a special incentive will be given to encourage the setting up a new occupational pension schemes. That will consist of a reduction, or rebate, on national insurance contributions. An extra 2 per cent. rebate will be added to the existing rebate, making a total incentive of almost 8 per cent. That special rebate will last for five years.

Secondly, for the first time, every employee will be able to take a personal pension, whether or not his employer runs an occupational scheme. The holder of a personal pension will also receive the special national insurance incentive and his contributions will qualify for tax relief.

Thirdly, for the first time, employers will be able to contract out of the state scheme by guaranteeing a level of contribution to an occupational scheme—rather than accept the unlimited liability of promising a "final salary" pension. Those new arrangements will also open the way for more industry-wide schemes.

Fourthly, building societies, banks and unit trusts will be able to provide personal pension savings schemes, as well as group schemes.

Fifthly, all members of occupational pension schemes will in future have the right to pay additional voluntary contributions in order to boost their income in retirement.

Sixthly, people with personal pensions will be fully covered by the new investor protection arrangements to be made for all financial services.

The changes build on top of the reforms introduced by the Social Security Act 1985 which protect the rights of early leavers. The White Paper proposes that that protection will be extended to all members of schemes leaving after two years rather than five years, as now. Anyone changing jobs will be able to transfer all his rights into a personal pension.

The effect of the White Paper proposals will be to direct substantially more help to low income families with children, and to provide more help for disabled people on low incomes. We will take new steps to increase the spread of occupational pensions and give everyone the right to have a personal pension. We will provide a simpler and more effective benefit structure, and have now embarked on the biggest computer project of its kind in Western Europe.

Following the White Paper, the Government will introduce comprehensive legislation early in the new year. The aim will be to achieve a modern social security system directing help where that help is needed.

Mr. Michael Meacher (Oldham, West)

Is the Secretary of State aware that, following the humiliating rebuff that he received from the Green Paper consultation, we welcome the fact that the Government have been forced, by near unanimous opposition, to back off from a few of their most damaging original proposals? Is he also aware that 1.75 million more people will lose from this revised package than will gain and that it is much less about reform than about cuts totalling around £750 million? Is he aware that the changes proposed today can be expected to have little impact on the unprecedented 80 to 90 per cent. opposition registered during the consultation period and the near-unanimous hostility of the CBI, the pension and insurance industries, the churches, the women's institutes, the poverty lobby and the Law Society?

Is the right hon. Gentleman aware that, after six months of fudging on the figures and denial of information we know is available, the nation is still not being told in this White Paper the total size of the cuts in this package, or even the actual new benefit rates? Is he aware that to supply illustrative benefit rates only is wholly unacceptable when the Government have no commitment to maintain them, and when all the new benefit levels could, and should, have been set out at 1985 cash levels for the purposes of genuine comparison with the present position? Is he aware that even on his own illustrative figures, 3,800,000 households will lose benefit under these proposals, including 2.25 million pensioners? I do not know why the Secretary of State is shaking his head, because this is shown by his figures.

Is the right hon. Gentleman aware that nearly 500,000 will lose more than £5 a week and that 1.25 million households, including nearly 500,000 pensioners, will lose more than £3 a week? Is he aware that while we welcome the fact that the Government have been forced to back down from abolishing SERPS by the implacable hostility of everyone except the Institute of Directors and the Monday Club, who are the Secretary of State's sole admirers, we utterly condemn the proposed emasculation of SERPS? That will chop £12 billion, which is almost 50 per cent., off the value of pensions in the year 2033, with accumulative figures in the years up to that date. It will throw millions of elderly people back into means-tested poverty, and it is wholly unnecessary when the Government's pensions Actuary has pronounced that the funding of the existing SERPS scheme is perfectly sound.

Is the right hon. Gentleman aware that the abolition of the best-20-years rule will gravely disadvantage all those who are prevented from achieving a full working life—the long-term unemployed, mothers, the disabled, and the millions who care for the long-term sick and elderly? Is he further aware that his proposal to calculate SERPS pensions as only 20 per cent. of earnings will leave millions of low-paid workers with inadequate pensions? Is he aware that his proposal to cut widow's benefit in half is harsh and unfair, when in a few months' time, the Chancellor will be handing out far bigger sums in tax reliefs to much richer sections of the population?

On housing benefit, while the Secretary of State has been only too anxious to make expedient concessions to pensioner owner occupiers who are Tory voters, is it not sheer political prejudice that he has at the same time actually worsened, compared with the Green Paper, the position of occupational pensioners who rent accomrnodation, by raising the rent taper from 50 per cent. to 60 per cent.? How can he possibly justify requiring all households, including pensioners and the poorest on supplementary benefit, to pay 20 per cent. towards their rates bills? Is he aware that this is the first time ever that any Government, by their own intervention, have forced millions of claimants below the poverty line? Is he aware that this makes nonsense of his claim to be targeting more help on the very poorest? It shows that he is targeting cuts on the very poorest.

On the new so-called income support scheme, will the Secretary of State confirm that the Government still intend to refuse to cover mortgage interest payments for families on the dole, which means that there will be much less money for food and other essentials and which in many cases will almost certainly lead to eviction and homelessness.

On the so-called social fund—one of the most objectionable elements of the whole package—why has the Secretary of State, who claims to listen to public opinion, taken no notice of the intense and unanimous opposition to the replacement of grants by means tests and to the halving of the budget for essential household items, which will mean that hundreds of thousands of pensioners and poor families will go without? Why is he insisting upon pushing families below the poverty line—that is what will happen—by recovering social fund payments through deductions from future supplementary benefit?

On family credit, why has the Secretary of State actually increased the taper to 70 per cent. compared with only 50 per cent. for family income supplement, which was bad enough, when this will greatly worsen the poverty trap? Why has he taken no account of the unanimous opposition to paying this new benefit to the man and not the woman with the main responsibility for family care?

Does it not expose the politics of this Government when their much trumpeted review of the welfare state ends with benefit cuts of £750 million for the most needy., when at the same time this same Government have handed out £2 billion to the richest 2 per cent. of the population on over £30,000 a year? Indeed, what justification is there for cuts in national insurance benefits when people have earned their entitlement to full benefit and have a right to it and when any private insurance company which reneged on its obligations—as the Secretary of State is doing—would be taken to court and charged with bad faith and breach of contract?

There is no political mandate for this package. Not one of the Secretary of State's proposals commands national majority support. When this is put to the British people, as it now must be at the next general election, it will be one of the central reasons why this Government are swept from power.

Mr. Fowler

That is a typically foolish response from the hon. Gentleman. It shows that he has mostly not even listened to the statement, and when he has listened to it he has not understood it. The hon. Gentleman has made a series of assertions, most of which are completely inaccurate. Let me try to take the hon. Gentleman through his proposals. I make absolutely no apology for taking consultation seriously. That is why we embarked upon the consultation exercise in 1983 and published a Green Paper. As for cost, the purpose of the exercise is to make better use of resources.

The hon. Gentleman said that the figures are only illustrative. They can, of course, be only illustrative. It is impossible to work out the effect of changes following the uprating in April 1988. One cannot work out the changes. For example, without rates reform one is unable to show the effect upon single pensioners. [Interruption.] The hon. Member for Oldham, West (Mr. Meacher) may find that amusing, but rates reform clearly has an effect and impact upon single pensioners. The Green Paper on that will be issued next month, so the hon. Gentleman has only to wait.

As for benefit areas, these proposals will provide more help—not less—for 200,000 low-income families with children and for disabled people. They provide an extension of occupational pensions, a right to personal pensions and a simplification of the system. In the benefit areas themselves, the support for low-income working families with children will increase family credit by an estimated additional £200 million a year at this stage. Changes from supplementary benefit to income support are not intended to reduce help, and there will be no cash losers as a result of that change. the White Paper makes it clear that we expect spending on housing benefits to be reduced by about £450 million, as I said previously, but that must be compared with the areas where increases will take place.

As to modification of SERPS, the hon. Member must look at the Government Actuary's figures at the end of the White Paper. They show that there will be a very substantial increase in the cost of SERPS. On the basis of the hon. Gentleman's own policies—with an earnings uprating in basic pensions—the cost will go up to £73 billion, and that will mean a national insurance contribution of 27.5 per cent. The hon. Gentleman says that he wants to fight the election on issues of this kind. I welcome that challenge, but he will have to produce a policy, and at present the Labour party has none.

Dame Jill Knight (Birmingham, Edgbaston)

Will my right hon. Friend assure the House and the country that this scheme will meet the four-point "window test"—first, that all genuinely needy people will be helped; secondly, that the scheme will not actively discourage persons from standing on their own feet or taking jobs where and when they may be available; thirdly, that the scheme will neither bankrupt the country nor be the despair of future taxpayers; and, forthly, that the desperately needed streamlining of the social security system is being accomplished?

Mr. Fowler

I can satisfy my hon. Friend on those points. The proposals themselves will provide more help, particularly for low-income families and the disabled. If the Leader of the Opposition understood my point, I am sure he would also support the fact that we are tackling not only the unemployment trap but the poverty trap. That is precisely the point that my hon. Friend made. Above all, we are seeking to introduce a modern social security system, which means that the system itself must be simplified.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

Is the Secretary of State aware that the alliance believes that this White Paper contains the same intrinsic flaws as the Green Paper? It does nothing constructive to integrate the taxation system with the benefits system; it does nothing to establish modern, minimum standards-of-living requirements for those on benefit; and it does nothing to remedy the financial plight of elderly pensioners who are relying on supplementary pensions. The White Paper raises the additional spectre of the nightmare of constitutional clashes with the courts by investing in the Secretary of State massive devolved powers that he will arrogate to himself in the way that made Mr. Corton a household name in recent weeks.

Secondly, the lack of an independent tribunal system for the social fund is guaranteed to bring the right hon. Gentleman into conflict with the courts.

I appeal to the Secretary of State: he has announced that some of the changes are not to be introduced until 1988, so he has time. Why does he not use that time to have all-party talks to try to get a consensus on tax, pensions and benefits? I warn him that if the mechanism for paying benefits is not agreed and is not likely to survive an election, we are on course for financial uncertainty and administrative chaos.

Mr. Fowler

I am always an optimist, but, with the best will in the world, it seems to me that all-party talks involving the hon. Member for Oldham, West are unlikely to provide a consensus on social security policy.

I share the aspirations of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on tax and social security. Family credit is an important step in that direction and it will provide more support for the families about which he and I are concerned.

There will be full and comprehensive legislation on our proposals. No previous Government have spent more time consulting the public and seeking to involve the public and organisations in the making of policy. This exercise started in 1983. It is now time not for more consultation, but for action.

Sir William Clark (Croydon, South)

Is my right hon. Friend aware that many people throughout the country will welcome the assistance to be given to low-income families and that any a fair-minded person must agree that that as SERPS is not funded—it is a pay-as-you-go scheme—it is ludicrous to think that future taxpayers could suffer the burden if SERPS were not altered. By what amount does my right hon. Friend think that the projected £25 billion cost of SERFS will be reduced by his proposals?

With personal pensions for employees, will there be any change in the national insurance contributions of self-employed people who take out pensions?

Mr. Fowler

There will be no change for the self-employed.

My hon. Friend is right to say that SERFS is a pay-as-you-go scheme and not a funded insurance scheme. The result of the changes that I am proposing will be that by the year 2033 the cost will have come down from a projected £25 billion to about £13 billion. We shall have reduced the emerging costs by about half. We shall also have protected fully the interests of those who are nearer retirement. That is why I said that those who are retiring in this century will not be affected by our changes.

Mrs. Renée Short (Wolverhampton, North-East)

The Secretary of State will recall that the Select Committee on Social Services examined the proposals in his Green paper. It is usual for the Chairman of the Select Committee to have a note from the Secretary of State before statements are made, but I have not had such a note.

The right hon. Gentleman referred to the number of staff involved in operating the present system. What changes will he made? Will the number of staff be increased or reduced?

Housing benefit and supplementary benefit were introduced by this Government; they are now to be changed radically. What guarantee do we have that the right hon. Gentleman has got it right this time? In view of the criticisms made by many of the witnesses who appeared before the Select Committee, I think that there will be great anxiety about the Government's proposals.

The right hon. Gentleman said that family credit will be provided for the very poor, and he referred to 200,000 families. What about the rest of the very poor? There are more than 3 million unemployed people, many of whom have families. What will be done to help them?

The Secretary of State said that local authorities will be able to give extra housing benefit in certain circumstances. Will he provide the resources for local authorities to give that help? If so, how much will he provide?

I remind the Secretary of State—

Mr. Speaker

Order. I know that the hon. Lady is the Chairman of the Select Committee, but it is unfair to treat this as a debate.

Mrs. Short

I have only one more sentence. Mr. Speaker. I remind the Secretary of State that whatever consensus about pensions, housing benefits and the rest existed previously, he has now destroyed it.

Mr. Fowler

Local authorities have always had to provide the resources for local schemes, and that will continue to be the case.

I apologise if no note has reached the hon. Lady as Chairman of the Select Committee. It is on its way to her and I hope that it will arrive in due course.

With the simplification of the system and the computer strategy, there will ultimately be a substantial reduction in staff requirements.

I remind the hon. Lady that the Government have examined an income support scheme in more detail than have any previous Government. The last major review of this sort, back in the 1940s, left that area to one side. We have tried to distinguish between income support, which is the overwhelming support, and the residual support for special needs and such matters, which will be taken up through the social fund.

Mr. Robert McCrindle (Brentwood and Ongar)

As an erstwhile critic of the abolition of SERPS, perhaps I may be forgiven for expressing particular pleasure at the content of one part of my right hon. Friend's statement. Is it not clear from what he has said that, by the various inducements that are to be built up to persuade people to move to occupational pension schemes or individual personal pensions, the time will come in the not-too-distant future when the need for SERPS will have receded to the point where it is no more than a residual scheme? In retrospect, is that not far better than abolition?

As my right hon. Friend has a highly saleable proposition, will he undertake, with, I hope, the support of all his ministerial colleagues, the marketing of the scheme? Some of us feel that it is a step forward in our aim of achieving a property-owning democracy which could be equal to the sale of council houses—and we all know how successful that policy has been.

Mr. Fowler

I am grateful to my hon. Friend, whose knowledge and independence on pensions policy I very much respect. My hon. Friend is right. Our proposals will, I hope, mean that it will be the exception for those reaching retirement age not to have a pension of their own. The Government and I are entirely in favour of extending occupational and personal pensions to the maximum number of people. That is what the public want and that is what the Government are about.

Mr. Frank Field (Birkenhead)

Does the right hon. Gentleman recall that when I questioned him on his Green Paper, I asked him about the effects of his proposals on the number of poor. I return to that question: if the White Paper is implemented, will there be more poor people or fewer?

Will the right hon. Gentleman give the House his estimate of the savings or, as we would say, the cuts in public expenditure over the next two years leading up to the general election?

Mr. Fowler

The straight answer to the hon. Gentleman is that there wilt be fewer in terms of the poor, and that is the whole purpose behind the proposals that we are setting out. The hon. Gentleman will see from the White Paper that we seek to direct extra help to low-income families—a subject on which the hon. Gentleman has special expertise and knowledge—as well as to disabled people on low incomes. Regarding public spending, as I have said before, the purpose of the exercise is to make better use of resources. The major savings on SERPS are not immediate but will come in the next century. In the immediate future, I repeat that there will be increases in public spending for family credit. There will be equality for income support and supplementary benefit and spending on housing benefit will be reduced.

Mr. Roy Galley (Halifax)

The flexibility that my right hon. Friend showed during the consultation process will be appreciated and welcomed throughout the country. Despite the rumblings from Opposition Members, will he confirm that the majority of low-income families with children will benefit from the proposals? Will he give more details about the modifications to the family credit proposals and will he tell us the facts on which is based the calculation that 200,000 more families will benefit under family credit?

Mr. Fowler

I confirm what my hon. Friend has said. In the inquiry leading up to the Green Paper the problems of the poorest—those with the lowest incomes—were clearly defined. During the past 20 years the number of low-income families with children has increased. On the basis of that diagnosis we sought to develop a new policy. Family income supplement was an attempt to deal with the circumstances of the early 1970s, but it did not work and led to the unemployment and poverty traps. That is why we have developed family credit. We have made several changes to family credit such as the change from 13 weeks to five weeks, which will ease the administration of the scheme.

Mr. Lewis Carter-Jones (Eccles)

In view of the difficulties experienced by the disabled housewife and mother, will the Secretary of State reconsider his position on the treatment of the old HNCIB?

Mr. Fowler

I believe that that is dealt with by the severe disablement allowance. However, in addition to our proposals we are carrying out a survey on the needs of disabled people to help Governments to form realistic and new policies for the disabled. I believe that that will be welcomed.

Dr. Brian Mawhinney (Peterborough)

Will my right hon. Friend confirm that the help with funeral costs available to the low-paid will be in the form of grants rather than loans? Will he also confirm that in setting the premiums for elderly people the personal heating allowance will be taken into account?

Mr. Fowler

I give assurances on both points. The financial resources for heating additions will be in the income support rates. Funeral expenses will be in the form of grants, not loans.

Mr. Andrew Faulds (Warley, East)

Why does the hon. Gentleman not come clean and admit that the damaging implications of these changes, without proper disclosure of figures, are not likely to be appreciable until after the next general election, which is now nearly certain to happen before April 1987?

Mr. Fowler

I have produced a technical annex that is full of illustrative figures. However, I repeat to the hon. Gentleman that with the best will in the world it is impossible to show with those figures what the exact benefits will be in April 1987.

Sir Dudley Smith (Warwick and Leamington)

Is my right hon. Friend aware that on BBC radio this morning the Opposition spokesman alleged categorically that the longer-term funding of the present system was no problem, even without increased taxation? Will my right hon. Friend give the lie to that allegation?

Mr. Fowler

The hon. Member for Oldham, West constantly quotes the Government Actuary in support of his case. The hon. Gentleman should read with more care what the Government Actuary said, not only in the current report attached to the White Paper, which I accept the hon. Gentleman did not have the benefit of seeing before he spoke this morning, but in several reports. As the hon. Gentleman knows, SERPS will increase the value of pensions. There will be an increase of about £4 million for pensioners, and the hon. Gentleman should know that the ratio of contributors to the pensions will worsen. The public should understand that under Labour's policy, with the earnings uprating, the total cost of pensions would rise to £73 billion which would mean a national insurance contribution of 27.5 per cent. That is what the Labour party propose.

Several Hon. Members


Mr. Speaker

Order. I must take into account the fact that this is a Private Member's day and that there is a further statement to follow. I will allow questions to continue for another 10 minutes, and if hon. Members put their questions briefly, I hope that most will be able to contribute.

Mr. Gordon Brown (Dunfermline, East)

Does the right hon. Gentleman accept that, even on his inadequate illustrative figures, 7 million mothers and 12 million children will be worse off because of changes in child benefit, 3.8 million people, including 2 million pensioners, will be worse off because of changes in housing and supplementary benefit, and half the population will be worse off because because of his scheme? Will he tell us the truth? As a result of the White Paper, which brings a black Christmas for claimants, by how much does he intend to cut supplementary benefit before 1988 and by how much does he plan to cut the social security budget after 1988?

Mr. Fowler

The hon. Member knows that that is not the case. His questions show all the signs of a supplementary question rehearsed before he had the opportunity to read the White Paper.

Mr. Roger Freeman (Kettering)

Is my right hon. Friend aware that his proposals on personal pensions will be warmly welcomed by many people who wish to stay in occupational pension schemes but who wish to make additional provision through personal pensions? Will he confirm that the Government will consider the revenue restrictions on additional voluntary contributions so that the full amount—up to 15 per cent. of salary—will will apply to personal pensions contributions.

Mr. Fowler

Yes. In the legislation to follow we seek to provide everyone with the right to a personal pension irrespective of whether they are in a scheme at present. That is an important step forward. Those people will benefit from the special national insurance incentive that I have announced and they will benefit from tax relief. Those points will be welcomed by industry and the public.

Mr. Peter Viggers (Gosport)

I thank my right hon. Friend for responding to representations to preserve the special position of war widows.

Mr. Fowler

We listened to representations, and we believe that it is right to make an exception in the case of war pensions.

Mr. Andrew F. Bennett (Denton and Reddish)

Will the Secretary of State say whether it is the Government's intention to remove the right of students to claim supplementary benefit during the long vacation and their right to claim housing benefit? Does he agree that that would cause them considerable hardship? Will he confirm that it is not the Government's intention to enact the proposals through secondary legislation but that the Government will wait for statutory powers?

Mr. Fowler

As the Green Paper made clear, we want a change in the supplementary benefit arrangements for students. We would prefer a system whereby the support for students goes through grants, not supplementary benefit and housing benefit. We shall try to develop that principle. The hon. Gentleman will see when it is introduced that the legislation is comprehensive and that many of the fears that have been whipped up about it are unfounded.

Mrs. Virginia Bottomley (Surrey, South-West)

Does my right hon. Friend agree that all those who genuinely seek to meet real need effectively with resources will welcome his announcement that maternity and death grants will be made available at realistic levels to those in need, whether in or out of work?

Mr. Fowler

That is right. The maternity grant and the death grant have been unchanged for between 15 and 20 years. That position cannot remotely be defended. We are trying to give realistic and proper help to those who need it for funeral expenses and maternity expenses.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

Will the Secretary of State concede that the sort of social security system that will result from his announcement will not be essentially fairer but will be essentially meaner? Does he accept that that will happen because he is trying to redistribute income in our society within definitions of income bands that have been drawn tightly between what he regards as the deserving and the undeserving poor? Do his illustrative figures not show that 2 million pensioners will lose at least £1 a week and that more than 10 per cent. of them will lose more than £5 a week?

Mr. Fowler

The hon. Gentleman is probably quoting from the second set of tables. The basis for those tables is the position before the reform has any effect. It requires a little imagination to understand that there will be an impact on single pensioners. I do not agree with the hon. Gentleman that the system will be less fair. When he has had more time to study the White Paper, he will accept that it will direct help more effectively to those people, notably low-income families, who by any definition are most in need.

Mr. Peter Thurnham (Bolton, North-East)

In welcoming extra help for the disabled, may I ask my right hon. Friend to clarify when families with more than one disabled child can expect to benefit from the proposals?

Mr. Fowler

That part of the proposals will come into effect in April 1988, with the majority of the proposals that we shall introduce and with the new pension arrangements.

Mr. Peter Pike (Burnley)

Does the Secretary of State accept that the changes that he has proposed for SERPS and the guaranteed occupational pension schemes will mean a turning back of the clock for manual workers and a reduction in pension rights? Is not his estimate of a 27.5 per cent. contribution rate blatant scaremongering?

Mr. Fowler

I do not accept that it is blatant scaremongering. I have tried to quote the estimate put forward by the Government Actuary, as the hon. Member for Oldham, West did on the radio this morning. I have not simply pulled the figure out of the air. Does the hon. Gentleman share the aspirations of the Government to extend pensions for individuals through occupational schemes and through personal pensions? The inquiry showed clearly that the majority of people want their own pensions, and that is what we shall try to provide.

Mr. Nicholas Winterton (Macclesfield)

Will my right hon. Friend and my hon. Friend the Minister of State accept that the Select Committee on Social Services, of which I am the longest-serving Conservative Member, is grateful for the fact that he has listened to the views expressed by the thousands of people who communicated with him and to the views of the Select Committee? Will he also accept that his views on SERPS are welcome and the fact that he has amended his original views is widely appreciated? Although I do not wish to be controversial in what I say now, will he tell the House whether he is intending to be a Scrooge or a Father Christmas in his announcement? I believe that he intends to be a Father Christmas.

Mr. Fowler

I cannot win with a comparison of that sort. I am trying to be fair, I pay tribute to the work of the Select Committee on Social Services, which we took fully into account.

Mr. Max Madden (Bradford, West)

However hard the chairman of the Conservative party tries to dress up the White Paper, will not the British people soon come to see it for what it is: a charter for more cuts, more means testing and more misery? Does the Secretary of State understand that the absence of the Prime Minister and most of his Cabinet colleagues this afternoon shows that they do not regard the White Paper as a new Beveridge plan, but are ashamed of it and do not wish to be associated with it publicly?

Mr. Fowler

I do not see many prominent figures on the Opposition Front Bench. For example, I have no idea who the man with the beard is. The hon. Gentleman had better be a little more cautious in his statements. I am content to allow the public to judge the proposals. They will judge them side by side with the proposals put forward by the hon. Member for Oldham, West on the abolition of mortgage tax relief. We look forward to the further development of those proposals.

Mrs. Edwina Currie (Derbyshire, South)

Will my right hon. Friend remind us of who is paying for all this? In contrast to the comments made by the Opposition about losers, does he agree that since everyone is a taxpayer—whether through income tax, tax on savings, or VAT—we shall all gain from an improved, streamlined social security system?

Mr. Fowler

My hon. Friend is right. It is also worth remembering that we are talking about a budget of more than £41 billion a year. That is an increase of about 30 per cent. in real terms since 1979. More than half of the increase represents a real increase in benefits.

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