Child Benefit (Uprating) (Hansard, 15 December 1987)

HC Deb 15 December 1987 vol 124 cc926-1074 926 3.38 pm

§ Sir Brandon Rhys Williams (Kensington)
I beg to move, That leave be given to bring in a Bill to require the Secretary of State for Social Services, in the event of an increase in the Retail Price Index in 1988 or any subsequent calendar year, to lay before Parliament the draft of an uprating order to produce an increase in child benefit with effect from the beginning of the following financial year of not less than a corresponding percentage, and to make future increases in child benefit a charge on the National Insurance Fund. Once again, I am seeking the leave of the House to introduce a Bill in respect of the uprating of child benefit. May I remind hon. Members of the long title of the Bill that I am proposing, which is as follows: to bring in a Bill to require the Secretary of State for Social Services, in the event of an increase in the Retail Price Index in 1988 or any subsequent calendar year, to lay before Parliament the draft of an uprating order to produce an increase in child benefit with effect from the beginning of the following financial year of not less than a corresponding percentage, and to make future increases in child benefit a charge on the National Insurance Fund.

§ Mr. Dave Nellist (Coventry, South-East)
On a point of order, Mr. Speaker. Given that this is an important ten-minute Bill on child benefit, I wonder whether you, Mr. Speaker, would ask those Members leaving the Chamber to do so quietly so that the rest of us can hear the hon. Member for Kensington (Sir B. Rhys Williams).

§ Mr. Speaker
I am very grateful to the hon. Member for Coventry, South-East (Mr. Nellist) for his help. Will hon. Members please leave quietly?

§ Sir Brandon Rhys Williams
I believe that it is worth the time of the House to consider for a few moments the origin of child benefit and the reason why it is somewhat controversial at this time. As hon. Members will remember, the system of family allowances was introduced, with all-party support, in 1945 by the caretaker Government. That system continued until the mid-1970s as a universal benefit targeted to families with children according to the number of children in the family. However, child benefit has a much older origin than that, because it originated with the child tax allowances that featured at the very start of the income tax system when it was introduced by William Pitt at the end of the 18th century. It was decided in the mid-1970s that the two kinds of child allowance should be amalgamated. I calculate that, if child tax allowance had continued and had been uprated in the same way as the other tax allowances since that time in accordance with the Lawson-Rooker-Wise formula, it would now be worth to taxpayers in net terms, about £450 for each child.
Child benefit has not been uprated in the same way as other tax allowances and, therefore, this year it is worth only some £370 per child. Bearing in mind that that sum As paid direct to the mother and is not liable to tax, it is an important benefit for the nearly 7 million families who claim it. It is targeted to all families without test of means.
I should like to raise one or two points about the benefit because the majority of the people who claim it are people who are also liable for income tax. For them, the child benefit has the effect of a remission of their tax burden. The amount of tax and the amount of benefit breaks even 927 for couples with one child only at about £100 per week, and even for couples with four children the break-even point is below the national average of male manual earnings. Between 4 million and 5 million families pay more in income tax than they derive in child benefit. Therefore, for that large number of families, child benefit constitutes a welcome remission of their tax burden. In fact, it constitutes a tax cut targeted towards families according to the number of their children.
Many people favour a reduction in the general rate of income tax, and they believe that, in some ways, that is preferable to an uplift in the rate of child benefit. I do not share that view. In fact, single people stand to do best if there is an across-the-board, untargeted reduction in income tax. However, if we were to relieve the tax burden of families specifically by raising the child benefit, the money would go to the people who obviously have the greatest need at each particular level of income.
It is worth going back to the arguments that many of us remember about the amalgamation of child benefit and family allowances in the mid-1970s. I believe that there were three particular reasons why the House decided that child benefit should be introduced to supersede family allowances and child tax allowances: first, for the ease of administration; secondly, on account of the question of incentives, which was extremely important then and, indeed, is certainly extremely important now, given the growing awareness of the importance of the poverty trap for so many people in this country; thirdly, because of the question of take-up. We had virtually 100 per cent. take-up of the family allowances before the amalgamation, and, since the amalgamation, in the form of the child benefit, once again we have virtually 100 per cent. take-up of this popular benefit, which still goes directly to the mothers.
These are particularly important questions today. Every one of us knows the pressure there is on the supplementary benefit offices to deal with their monumental load of case-work. We must remember that the child benefit not only has the highest take-up of all the family benefits; it involves virtually no case-work and is the cheapest of the family benefits to administer.
Then there is the question of incentives. I must bring to the attention of the House the tragic way in which the numbers are growing, inexorably, of people who are obliged to apply for means-tested benefit of one sort or another. I received a parliamentary answer a few days ago which shocked me and would shock anyone who studied it carefully. It appears that there are now between 15 million and 16 million people in this country who are dependent in one way or another on means-tested benefits. Worse than that, it is officially estimated that there may be about 5 million or 6 million further people who do not claim means-tested benefits, but would be eligible for benefit if they chose to do so. That is a large part of our population for whom, when they have calculated the effect of so doing, there is not a great deal of purpose in working or saving. Conservative Members and, I believe, Opposition Members, too, believe in the importance for self-respect of working and saving.
This country cannot continue to have an inexorably rising number of people who are obliged to apply for means-tested benefits. Although it may be administered in a kind manner—I know that the people in the DHSS and in the local authorities and elsewhere who have to deal 928 with case-work do their utmost to be humane and reasonable—that number of millions of people must class themselves, inevitably, as second-rate citizens. The great advantage of the child benefit is that it is a universal benefit, and people who improve their lot do not lose their eligibility for that important benefit.
This year, by not uprating the child benefit, my right hon. Friend the Secretary of State unhappily has tipped about another 40,000 people on to the heap of those who are eligible to apply for means-tested benefit. We have before us now the prospect of the community charge. I believe that that may add as many as a further 2 million to the number of people who are eligible to apply for means-tested benefits.
The time has come for the House to make a clear recommendation to the Departments concerned about the future of child benefit. When I introduced a similar Bill about 18 months ago there was a Division, and the number of Members who voted in favour was 152; only three Members voted against. The Department should have noted the expression of opinion in the House at that time; but it did not. I regret that my right hon. Friend the Secretary of State chose not to increase child benefit this year, but I should like to make it clear to the House that my Bill as drafted is not a confrontation with my right hon. Friend. I understand his reasons; at the very time when the new family credit is being brought in, which everyone must welcome, he did not feel inclined also to uprate child benefit. I understand his reasons, though I regret his decision. My Bill however, is not a confrontation with that decision. The effect of my Bill, if passed by the House, would be only to put child benefit on the Lawson-RookerWise formula with effect from next year. That truly is something on which the House could unite in all parties.
I realise that there are certain people, inside and outside the House, who feel that they do not need child benefit, so why should it be given to them? To them, we should make the point that they are entitled to a reduction in taxation if tax cuts are in the air, and there is no reason why tax cuts should not be targeted specifically to families—

§ Mr. Speaker
Order. The hon. Gentleman has had 10 minutes. Will he now bring his remarks to a close?

§ Sir Brandon Rhys Williams
I will indeed do so.
There are some 10,000 claimants in each constituency, which is a point that hon. Members may care to bear in mind.
My last point is to explain why the national insurance fund features in my long title. We should revive the concept of national insurance, so that child benefit, just as much as pensions and unemployment relief, may be seen to emanate from the national insurance fund. I trust that the House will support my Bill.

3.50 pm

§ Mr. Frank Field (Birkenhead)
rose—

§ Mr. Speaker
Does the hon. Gentleman wish to oppose the Bill?

§ Mr. Field
I seek to oppose this important proposed Bill. It is important because it affects 7 million mothers and 14 million children and it would be wrong for it to be nodded through. The only way in which we have a chance to express our individual preferences is in the Division 929 Lobby, and when the time comes I shall seek to divide the House. Needless to say, I hope that the Bill is given leave to be brought in by a massive majority.

§ Mr. Speaker
Order. The hon. Gentleman must oppose, not praise and then oppose.

§ Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—

§ The House divided: Ayes 234, Noes 20.

930

Division No. 112]	[3.50 pm
AYES
Abbott, Ms Diane	Eastham, Ken
Adams, Allen (Paisley N)	Evans, John (St Helens N)
Allen, Graham	Ewing, Harry (Falkirk E)
Alton, David	Ewing, Mrs Margaret (Moray)
Anderson, Donald	Fearn, Ronald
Archer, Rt Hon Peter	Fields, Terry (L'pool B G'n)
Armstrong, Ms Hilary	Fisher, Mark
Banks, Tony (Newham NW)	Flannery, Martin
Barnes, Harry (Derbyshire NE)	Flynn, Paul
Barnes, Mrs Rosie (Greenwich)	Foster, Derek
Barron, Kevin	Foulkes, George
Battle, John	Fraser, John
Beaumont-Dark, Anthony	French, Douglas
Beckett, Margaret	Fyfe, Mrs Maria
Beggs, Roy	Galbraith, Samuel
Benn, Rt Hon Tony	Galloway, George
Bennett, A. F. (D'nt'n & R'dish)	Garrett, John (Norwich South)
Benyon, W.	Garrett, Ted (Wallsend)
Boateng, Paul	Gilbert, Rt Hon Dr John
Bowis, John	Glyn, Dr Alan
Boyes, Roland	Godman, Dr Norman A.
Boyson, Rt Hon Dr Sir Rhodes	Golding, Mrs Llin
Bradley, Keith	Gordon, Ms Mildred
Brown, Gordon (D'mline E)	Gould, Bryan
Brown, Nicholas (Newcastle B)	Grant, Bernie (Tottenham)
Brown, Ron (Edinburgh Leith)	Greenway, Harry (Ealing N)
Bruce, Ian (Dorset South)	Griffiths, Nigel (Edinburgh S)
Bruce, Malcolm (Gordon)	Griffiths, Win (Bridgend)
Buchan, Norman	Grocott, Bruce
Buckley, George	Hardy, Peter
Caborn, Richard	Harman, Ms Harriet
Callaghan, Jim	Haynes, Frank
Campbell, Ron (Blyth Valley)	Healey, Rt Hon Denis
Campbell-Savours, D. N.	Heffer, Eric S.
Carrington, Matthew	Henderson, Douglas
Clark, Dr David (S Shields)	Hinchliffe, David
Clarke, Tom (Monklands W)	Hogg, N. (C'nauld & Kilsyth)
Clay, Bob	Home Robertson, John
Clelland, David	Hood, James
Clwyd, Mrs Ann	Howarth, George (Knowsley N)
Cohen, Harry	Howells, Geraint
Coleman, Donald	Hoyle, Doug
Cook, Frank (Stockton N)	Hughes, John (Coventry NE)
Cook, Robin (Livingston)	Hughes, Robert (Aberdeen N)
Corbett, Robin	Hughes, Robert G. (Harrow W)
Corbyn, Jeremy	Hughes, Roy (Newport E)
Cormack, Patrick	Hughes, Sean (Knowsley S)
Cousins, Jim	Hughes, Simon (Southwark)
Cox, Tom	Hunt, John (Ravensbourne)
Cran, James	Ingram, Adam
Cryer, Bob	Jack, Michael
Cummings, J.	John, Brynmor
Cunliffe, Lawrence	Johnson Smith, Sir Geoffrey
Cunningham, Dr John	Jones, Barry (Alyn & Deeside)
Dalyell, Tarn	Jones, leuan (Ynys M6n)
Darling, Alastair	Kellett-Bowman, Mrs Elaine
Davies, Ron (Caerphilly)	Kilfedder, James
Davis, Terry (B'ham Hodge H'I)	Kinnock, Rt Hon Neil
Day, Stephen	Knapman, Roger
Dewar, Donald	Knox, David
Dixon, Don	Lambie, David
Dobson, Frank	Lamond, James
Doran, Frank	Leighton, Ron
Dunnachie, James	Lester, Jim (Broxtowe)
Eadie, Alexander	Lestor, Miss Joan (Eccles)

930

Lewis, Terry	Redmond, Martin
Litherland, Robert	Rees, Rt Hon Merlyn
Livingstone, Ken	Reid, John
Livsey, Richard	Richardson, Ms Jo
Lloyd, Tony (Stretford)	Robinson, Peter (Belfast E)
Lofthouse, Geoffrey	Rogers, Allan
Loyden, Eddie	Rooker, Jeff
McAllion, John	Ross, Ernie (Dundee W)
McAvoy, Tom	Rost, Peter
Macdonald, Calum	Rowe, Andrew
McFall, John	Rowlands, Ted
McKay, Allen (Penistone)	Ruddock, Ms Joan
McKelvey, William	Sedgemore, Brian
McLeish, Henry	Sheldon, Rt Hon Robert
McTaggart, Bob	Skinner, Dennis
Mahon, Mrs Alice	Smith, Andrew (Oxford E)
Marshall, David (Shettleston)	Smith, C. (Isl'ton & F'bury)
Marshall, Jim (Leicester S)	Smith, Rt Hon J. (Monk'ds E)
Martin, Michael (Springburn)	Soley, Clive
Maxton, John	Spearing, Nigel
Meacher, Michael	Squire, Robin
Meale, Alan	Steel, Rt Hon David
Meyer, Sir Anthony	Steinberg, Gerald
Michael, Alun	Stott, Roger
Michie, Bill (Sheffield Heeley)	Strang, Gavin
Millan, Rt Hon Bruce	Straw, Jack
Molyneaux, Rt Hon James	Taylor, Mrs Ann (Dewsbury)
Moonie, Dr Lewis	Taylor, Matthew (Truro)
Morgan, Rhodri	Thomas, Dafydd Elis
Morley, Elliott	Thompson, Jack (Wansbeck)
Morris, Rt Hon A (W'shawe)	Townsend, Cyril D. (B heath)
Morrison, Hon C. (Devizes)	Vaz, Keith
Mowlam, Mrs Marjorie	Wall, Pat
Mudd, David	Wallace, James
Mullin, Chris	Walley, Ms Joan
Murphy, Paul	Wardell, Gareth (Gower)
Nellist, Dave	Wareing, Robert N.
Nicholson, Miss E. (Devon W)	Welsh, Andrew (Angus E)
O'Brien, William	Welsh, Michael (Doncaster N)
O'Neill, Martin	Wigley, Dafydd
Orme, Rt Hon Stanley	Williams, Rt Hon A. J.
Parry, Robert	Williams, Alan W. (Carm'then)
Patchett, Terry	Wilson, Brian
Peacock, Mrs Elizabeth	Winnick, David
Pendry, Tom	Wise, Mrs Audrey
Pike, Peter	Worthington, Anthony
Porter, David (Waveney)	Wray, James
Powell, Ray (Ogmore)	Yeo, Tim
Prescott, John	Young, David (Bolton SE)
Price, Sir David	Young, Sir George (Acton)
Primarolo, Ms Dawn
Quin, Ms Joyce	Tellers for the Ayes:
Randall, Stuart	Sir Brandon Rhys-Williams
Rathbone, Tim	and Mr. Tony Marlow
NOES
Allason, Rupert	Jones, Gwilym (Cardiff N)
Amos, Alan	Mans, Keith
Biffen, Rt Hon John	Mitchell, Andrew (Gedling)
Brazier, Julian	Redwood, John
Clark, Sir W. (Croydon S)	Smith, Sir Dudley (Warwick)
Coombs, Simon (Swindon)	Stanbrook, Ivor
Dover, Den	Wells, Bowen
Forth, Eric	Wheeler, John
Gow, Ian
Hamilton, Neil (Tatton)	Tellers for the Noes:
Hunt, John (Ravensbourne)	Mr. Frank Field and
Janman, Timothy	Mr. Archy Kirkwood.

§ Question accordingly agreed to.

§ Bill ordered to be brought in by Sir Brandon Rhys Williams, Mrs. Rosie Barnes, Mrs. Ann Clwyd, M r. Jim Lester, Sir Geoffrey Johnson Smith, Mr. Tony Marlow, Mr. Tim Rathbone, Mr. Robin Squire, Mr. Dafydd Wigley and Mr. Tim Yeo.

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