HC Deb 18 November 1987 vol 122 cc1163-75 10.14 pm
The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Michael Portillo)

I beg to move, That the draft Family Credit (General) Regulations 1987, which were laid before this House on 3rd November, be approved. The regulations represent a further key element in the new income-related benefit structure which is to come into effect from next April.

As the House will already be aware, family credit is a new benefit for working families with children. It will replace family income supplement, which has, over the years, brought valuable help to low-income working families. However, FIS was introduced in 1971, originally on a temporary basis, and has served its purpose. What we now need for the late 1980s and beyond is a new benefit which is part of a coherent structure of income-related benefits, designed to achieve a more rational approach to the assessment and delivery of benefits to people in and out of work. Family credit, together with the family premium in income support, represents a major improvement in the help to low-income families with children.

The draft regulations contain the detailed rules for the new scheme, and build upon the framework set out in part II of the Social Security Act 1986. The Act provides that awards should normally last for 26 weeks rather than the 52 in FIS. That will make family credit more responsive to changes of circumstances and will, for example, mean that extra amounts following the birth of a new child, or following a benefit uprating, can be paid more quickly.

One major improvement of the reforms is that, for the first time, the provisions of the three income-related benefits — income support, housing benefit and family credit—will be properly aligned. For example, the child rates in family credit are derived directly from the income support children's rates and the family credit threshold is aligned with the income support married couple rate. All three benefits will apply a common approach to the treatment of capital. All will be based on net earnings and, wherever possible, other detailed rules are applied consistently across the benefits.

One advantage of closer alignment of rules and rates is to ensure that there will in future be far greater consistency in the treatment of people whether they are in or out of work. So, for example, the draft regulations stipulate that the claimant or partner must be in remunerative work to qualify, and that work is defined as 24 hours a week or more. Income support uses the same definition and excludes people from that benefit if the hours worked are above that level. So the two schemes are complementary, which will be a significant improvement on the present position where FIS and supplementary benefit can overlap in this area.

Part III of the regulations, which deals with circumstances in which persons can be treated as members of the claimant's family, is very much in line with the provisions for income support and housing benefit. Family credit, like FIS, is paid only where there is a dependent child. For that purpose, the regulations also include a young person, defined as a person aged 16 to 19, who is still receiving full-time, non-advanced education.

Most of the rules relating to the family's income and capital in part IV of the regulations are the same as those in income support. I shall therefore confine myself to pointing out where the family credit rules differ from those for the other two benefits. The differences arise from the need to arrive at what is a normal income, because of the fixed nature of family credit once awarded. This is, of course, particularly relevant in the case of earnings, and the regulations provide detailed rules about the period over which earnings should be looked at to establish normality. They also provide that, in the case of a person who has just started a new job, we can ask the employer to forecast what the wages will be and to make an award on the strength of that, rather than waiting until a pattern of actual earnings has been established. This will be of particular help to those leaving unemployment and taking up work.

Family credit is payable to the self-employed as well as to those working for an employer. For the self-employed, the regulations provide for the income from the business to be determined simply by reference to the cash flow of receipts and expenditure during the six months before the claim. This will be simpler and more straightforward than requiring the production of commercial accounts. The new proposals for assessing the income of the self-employed were the subject of consultation with several representative organisations and were generally welcomed as providing a more straightforward procedure than the present arrangements in FIS.

Finally, on earnings, I remind the House that we shall have regard to earnings after deduction of tax and national insurance, and also after one half of any contribution to an occupational or personal pension scheme. Assessment on the basis of net wages ends the worst effect of the poverty trap—the absurd position where an increase in gross earnings can lead to a reduction in overall income because of the knock-on effect on benefits.

At present, about 70,000 families are in that position. What is more, by replacing benefits with extra cash for working families, we are ending the cliff edges which can leave a family significantly worse off when its income takes it just above the cut-off level for free school meals and milk. These are significant improvements. We also believe that, after next April, only a tiny number of families with children would be worse off working than out of work and on benefit.

That brings us to part V and to the calculation of the amount of entitlement. Each family has a maximum credit, made up of an adult credit and a credit for each child depending on his age. Those credits are set out in schedule 4. The maximum credit is payable in full where the family's income is less than the threshold: this will be £51.45, the same as the income support rate for couples. Where the income is more than the threshold, a percentage of the excess is deducted from the maximum credit and the balance remaining is the amount payable. Regulation 48 lays down that this percentage taper shall be 70 per cent.—unchanged from the 1985 White Paper proposals.

The children's rates in family credit are based on those in income support, but take account of the rate of child benefit. That ensures alignment with income support and also means that any change in the rate of child benefit would not affect the net position of those receiving family credit.

Mr. Brian Wilson (Cunninghame, North)

In arriving at those complex arrangements about taking people beyond the threshold of the poverty trap, did the Minister take into account how the poll tax will disrupt all his calculations? By forcing poor people to pay a minimum of 20 per cent. of the poll tax, any marginal benefits will be cancelled out and more. The Minister will have to do all his sums again.

Mr. Portillo

People will be much better placed if they live in an area where the authority imposes reasonable rates.

The extra amount that we are putting into family credit is much more important for low-paid families and a higher rate of child benefit would be of no net value to them.

The child rates also include a cash element in place of the free school meals and free milk which are available to FIS families now. That cash element is £2.55 for each child and reflects the latest information, from a recent survey of local education authorities, about the charge for a fixed price school meal. The average worked out at 65.6p a day. Given that the cash is paid in every week of the year, not just in term time, the £2.55 is slightly more than the amount shown by the average charge. The cash element is the same for all ages of children and is especially generous to families with young children below school age, who at present receive only free milk, worth about £1.82.

Take-up of free school meals by families receiving FIS has never been more than about 70 per cent. Family credit will now put money into the hands of all family credit mothers, including those whose children, for whatever reason, have not been taking advantage of free school meals.

Mr. Frank Field (Birkenhead)

The Minister said that the claiming of free school dinners has never been above 70 per cent.. hut for family credit he claims only a 60 per cent. take-up. If a 70 per cent. take-up is so poor, why is this scheme so good?

Mr. Portillo

I did not say that it was poor. I said that, whereas 70 per cent. of those claiming FIS take free school meals, 100 per cent. of people claiming family credit will get the cash. That is the important difference.

Mr. Field

But the Minister says that only 60 per cent. of those who arc eligible will claim; his phrase was "only 70 per cent.", which is slightly dismissive. Yet he advocates this measure because it will have a 60 per cent. take-up.

Mr. Portillo

I was not in the least dismissive. I was pointing out the advantage of 100 per cent. of those people taking school meals—

Mr. Field

But it is only 60 per cent.

Mr. Portillo

It is 100 per cent. of the 60 per cent., but under family credit the take-up of the money is estimated to be 70 per cent. That is the advantage.

We estimate that many more children—up to 100,000 more—will benefit from the extra cash, compared with the numbers receiving free school meals from FIS and local discretionary schemes combined. A further 100,000 under-fives will benefit from the cash, compared with the number receiving free milk under the FIS passport and the low-income schemes. I should, perhaps, add that there will be no changes in the entitlement to free school meals or welfare milk for the most vulnerable families of all, those receiving income support.

Part VI of the regulations deals with the very few instances in which family credit has regard to changes of circumstances during the period of an award — death, and certain circumstances in which a family breaks up and a new claim is made for family credit or income support.

No doubt the House will wish to know what all this means in terms of the number of people who will benefit. and how much they will receive. Virtually all family credit recipients will receive more—often substantially more—from family credit than they would have from FIS, if it continued.

Mr. Wilson

Is that before or after the poll tax?

Mr. Portillo

For example, a single parent with two children aged 12 and 14 and earning around half average earnings—£90 net, or £110 gross—would receive family credit of over £27, compared with FIS of under £5. A couple with children the same age and earnings of around £103, or about £130 gross would receive no FIS, but will now stand to receive family credit of over £18. A family with three older children and earnings of £l10 net, or £140 gross, will now receive £23 family credit compared with nothing from FIS.

Mr. Field

If they claim.

Mr. Portillo

The hon. Gentleman keeps returning to that point, but we are directing the benefit to twice as many families as have been taking up FIS. We think that the take-up will be higher, but, even if it is not, it will go to many more families than FIS. I should have thought that it would be welcomed for that reason, and was riot something at which the hon. Member for Birkenhead (Mr. Field) or his hon. Friends would carp.

Mr. Field

Where do the Government get their confidence that the take-up rate will be higher? Where did the figure of 60 per cent. come from?

Mr. Portillo

The figure is based on the fact that, as a more generous benefit, family credit will be more widely available. If it is more widely available, more people will know about it. There will be more talk about it at workplaces, and there will be a publicity campaign to launch it.

I admit to the hon. Gentleman that we have to guess what the take-up will he, but I think that it is reasonable to assume a fairly modest increase from 50 per cent. to 60 per cent. of families, and from 60 per cent. to 70 per cent. of expenditure.

Mrs. Margaret Beckett (Derby South)


Mr. Portillo

Time will tell. In a year's time, we shall argue about facts rather than theories. but I consider that quite a reasonable assumption.

Overall, we expect that over twice as many families should receive family credit as received FIS: about 470,000 instead of 200,000. We shall be looking for significant improvement in take-up. We shall have a major publicity drive, and the fact that it will be more worth while to claim the credit will also be helpful. Apart from ensuring that help reaches those for whom it is intended, we are anxious to ensure that family credit plays its full role in improving work incentives, and encouraging people to take available jobs.

Finally, I should like to remind the House of a point covered not in these regulations but in the Social Security (Claims and Payments) Regulations which the House approved last week: that family credit will normally be paid to the mother. That is important as background to our decision not to uprate child benefit in April 1988. Family credit will cost £220 million more than FIS. By not uprating that child benefit, we save £120 million net. We are putting an extra £220 million into the hands of almost half a million mothers. By contrast, a general increase in child benefit would have cost much less, but would have spread the money far more thinly across millions of mothers, most of whom are clearly not those in the greatest need.

Family credit is a bigger scheme than FIS, and I believe that I can say confidently that it is a better scheme. It encourages breadwinners with families to stay in work, and stimulates those out of work to look for work without the fear of losing more than they might gain. It puts more money towards families who need it most. For those reasons, I commend the draft regulations to the House.

10.29 pm
Mrs. Margaret Beckett (Derby, South)

It is not the Opposition's intention to erect artificially high standards by which to judge the family credit scheme. The standards that the Government have set for themselves will do very nicely, thank you. We shall judge by the standards that they have set and by the fulsome compliments that they have paid themselves over the past few months when referring to the generosity and scope of the scheme. I must concede that the scheme is the nearest thing to a success that the Government have drawn from the most fundamental reform for 40 years, the most fundamental since the Beveridge report. I suppose that it could be said that it is the jewel in the crown of the Government's package of reforms. It is the one area in which there are a few more gainers than losers.

What even a keen observer might not discern at first glance from the ecstasies that we have heard from the Government over recent weeks is that there will be about 270,000 losers as a result of these proposals. About 130,000 single parents and 140,000 couples in full-time work, with children and claiming family income supplement and/or housing benefit will lose from the overall package of changes. The observer might not discern also that a good deal of the generosity for which Ministers have praised themselves so highly in recent weeks will be at the expense of families with children. Thirdly, the Government claim that they are being far more generous in the overall payment of family credit as opposed to FIS, the benefit which is being replaced, because the take-up will be significantly higher than that of FIS. This issue has been taken up by my hon. Friend the Member for Birkenhead (Mr. Field) in several interventions.

We hope that the take-up of family credit will be higher than that of FIS. Whatever doubts we may have, and we have many, about the Government's overall strategy, and whatever reservations we may have about whether they are reducing dependence on benefits while their policy is so heavily dependent on making resources available primarily through family credit to low-income families in work, we must all hope for the maximum possible take-up. It is difficult, however, to determine on what basis that hope should be assessed. The Minister has said—this has been said by the Government ever since the family credit scheme was first proposed—that it is expected that take-up will be at least 60 per cent. The take-up of FIS is about 50 per cent., so the Government can be pressed over and over again to justify their claim that the take-up of family credit will be substantially higher than that of FIS. Ministers seem to find the distinction between justification and repetition a fine one that eludes them.

There was a time, in the bold early days, when the Government were determined to pay family credit through the pay packet, and there were echoes of that in the Minister's speech this evening. When responding to my hon. Friend the Member for Birkenhead, he replied in terms that were used when family credit was intended to be paid through the pay packet. I think that in those days it was only the Monday Club that supported that proposal. It was not even supported by the Institute of Directors and the few other organisations that the Government were able to drum up express agreement with from time to time. Finally, the Government were forced to drop the proposal to pay family credit through the pay packet. They accepted that it would continue to be paid to mothers.

It was at that time that the Government claimed that the take-up of family credit would be higher than that of FIS because it would be paid through the employer and the pay packet. Everyone else said that it would lead to a reduced take-up. Whether it was the Government or others who were right, it seems that there is no argument for increased take-up. No further argument and no alternative justification has been advanced for a higher take-up, and the figure remains at at least 60 per cent. It should be said, however, that in the uprating statement the Secretary of State implied that take-up might rise to as high as 70 per cent. I am not sure whether the Secretary of State misunderstood the figures that he was given. The Government have put forward no justification for this measure, as the Minister demonstrated tonight.

In the hope that some new form of words had been devised, I tabled a question to the Secretary of State. I must commend the person who drafted the reply ; if family credit is the jewel in the crown in the Government's package of reforms, this is a gem of a parliamentary answer: The assumption reflects that used in the technical annex to the White Paper 'Reform of Social Security'. Because family credit is a more generous benefit than family income supplement and will go to many more families, we expect it to become much better known." — [Official Report, 5 November 1987; Vol. 121, c. 867.] That is a circular argument. I ask the Government why it will go to more families and they say, because it will go to many more families. That is a gem of a parliamentary reply, but an argument it ain't.

I remind the Minister, who spoke about how we will have to view the scheme in the light of experience—it is on experience that we should occasionally draw—that when family income supplement was introduced, levels of take-up were predicted as high as 85 or 90 per cent. Certainly, I remember the figure of 85 per cent. being predicted by the then Secretary of State, and my hon. Friend the Member for Birkenhead (Mr. Field) assures me that the Secretary of State said that if take-up were only 85 per cent. the scheme would be a failure, and that he was confidently expecting 90 per cent. As the level of take-up is currently about 50 per cent., perhaps we can expect take-up of family credit to be about 35 per cent.

Whatever the upturn in the take-up of family credit, it is noteworthy that even on the Government's wildest claims it will be less than the take-up of the benefits that are being raided to divert resources into family credit. Take-up of child benefit is almost 100 per cent. Take-up of free school meals, whatever it may be among families drawing family income supplement, is running generally at about 66 to 75 per cent.

One of the most inexplicable of the unexplained changes that the Government have made—no argument has been advanced to justify it — has been the withdrawal of the right of local authorities to supply free school meals to low-income families who are not necessarily to draw them as a right. It is a mean debarring that will rule out schemes presently run by two thirds of local authorities in Britain, presumably because the Government feel that it is something from which low-income families in their areas will benefit. About 500,000 children not on supplementary benefit, according to the latest available figures, receive free school meals. Ministers have argued that those on family credit will get some compensation, but nevertheless there are 300,000 children not currently on family income supplement getting free school meals, and it seems unlikely that they are all in families that will qualify for family credit, even if they are in families who will claim it. In addition, the right to welfare milk is abolished in the present Social Security Bill.

The Government have justified freezing child benefit by their claim that the increased resources — about £120 million, according to Government figures—that would have been needed to increase child benefit are required for family credit. I noticed that the Minister advanced a slightly different argument — that apart from that argument, which I presume he supports, it is all right to freeze child benefit because it is paid to the mother and the money is going into family credit, which is also paid to the mother. How would the Minister have justified it if the Government had got away with their original proposal and paid the benefit through the employer? No doubt the Minister would have discovered some other ingenious justification.

If one adds the £175 million a year that the Government saved the last time they froze child benefit a couple of years ago to the £120 million that they are saving now, families with children have probably provided all the extra money that the Government claim to be putting at the disposal of the family credit scheme.

The Secretary of State said in the uprating statement —the Minister echoed it in opening the debate—that an increase in child benefit would not have helped children in families on benefit. Families on family credit are, at best, merely being compensated for the loss of an increase in child benefit. They are not receiving extra money, because child benefit was not increased over and above the amount that they would have received had it been inflation-proofed. Families entitled to family credit but not claiming it will enjoy only the loss and not the compensation.

I do not intend to dwell on the value of child benefit as a useful benefit as opposed to the means-tested and targeted approach to family poverty implied by family credit, but I am sure that the House will be aware that it has been estimated that the freezing of child benefit alone has pushed 10,000 more families into dependency on benefit. That has been done by a Government and a Secretary of State who claim that they want to reduce dependence on benefit.

The Minister referred to the depth of the poverty trap that can exist with family income supplement. Indeed, the Government are reducing the worst of the depth of the poverty trap by the better rates at which family credit will be paid. But if we look in a little more detail at the impact of the rates, in particular the impact of the rates taken in conjunction with other changes that the Government are making, we shall see that, although they have removed the situation in which a rise in gross income could lead to an actual fall in net income, to someone facing a marginal tax rate of over 100 per cent., unfortunately, they have greatly increased the number of those with high marginal tax rates.

In most cases, the number of those with high marginal tax rates are facing far higher rates than the maximum rate paid by the richest taxpayers, whom the Government loudly and often deplore. Also, the rates at which marginal tax will be paid by such families are considerably higher than those that were paid in the past under the family income supplement by those who are not actually subject to the highest rate of over 100 per cent.

Under the Government's proposals, a two-child, low-paid family on family credit alone faces a marginal tax rate of 81 per cent. That means that they will lose 81p of every £1 of increase in income. If they get housing benefit also, the tax rate is increased to 85p in the £1, even for an owner-occupier who gets only rate rebate. For a family in exactly the same circumstances, on family credit and receiving riot only rate rebate but rent rebate because they are in rented property and not in their own home, the marginal tax rate—the rate of withdrawal—rises to 98 per cent. They lose 98p of every £1 increase that they receive. Such a family may not be as grateful as the Minister seems to expect for the 3p or so in the £1 saved from the worst rates of withdrawal under the old scheme.

The Minister gave us two or three interesting examples. Unfortunately, I was not able to write quickly enough to take down all the details of the examples that he quoted, but they compare with some of the examples that I have been given. It is an interesting comparison.

On the figures that I have, a single parent earning £90 gross, with two children of nine and 12, and drawing housing benefit, will gain £15.38 from the change from family income supplement to family credit. The Minister explained to the House what a generous Government they are to be giving such a person such a great increase. He gave an example of somebody with slightly older children, and drawing family credit of about £27. That is a lot of money. It is extremely unfortunate that, owing to the package of changes that the Government are putting before us, that single parent, who will gain £15.38 from the change to family credit, will lose £15.40 from the changes in housing benefit. That is a net reduction in income of 2p. Perhaps Conservative Members will not consider that figure significant, but it is not quite the same as the glowing picture that the Minister painted.

A family on £110 gross, with average rent, rates, water rates and so on, will gain £12 to £13 on family credit, compared with what they would get today on family income supplement. What a pity that, when housing benefit is taken into account, after meeting their housing costs, they will face a net loss in income of £5.89 a week.

In another place, the Government acknowledged that, indeed, such problems might arise. They said, "What a pity it is. It does not affect the fact that it is a terribly generous scheme, but it is inevitable." Rubbish. There is nothing inevitable about making changes in a scheme that will give a substantial improvement in the income that is paid to people at work directly as between family credit and family income supplement, and taking it back on housing benefit. The proposal was not cast on tablets of stone. It did not come down from the Mount with Moses. It is a choice that the Government have made to save far more — hundreds of millions of pounds — on housing benefit. At the same time, they want substantial credit and pats on the back from the House because of what they are doing, through family credit, for low-income families in work. If the family credit taper had been less harsh—and the savings from housing benefit less substantial—the poverty trap could have been more substantially reduced, or perhaps even eliminated.

We shall not vote against the regulations at the end of the debate because for once there will actually be more gainers than losers. However, I remind the Government of the comments made consistently — whenever the regulations have been described and whenever the family credit scheme has been discussed or assessed—by every commentator from the Select Committee on Social Services to Conservative Back Benchers and Conservative party organisations. Whether the Government can claim family credit to be a success even in their terms will depend heavily on whether the take-up of the scheme for once meets expectation. I remind the Minister how much he and his Government have reduced their expectations since the family income supplement scheme was introduced.

We welcome improvements for those families who will get more money from the scheme. However, we deeply deplore the loss to the many families who are being conned by the Government and told how generous they are being—at the expense of child benefit—to low-paid families in work. Those families will find, that they are no better off—or, indeed that they are substantially worse off—as a result of the regulations.

10.47 pm
Mr. Ronnie Fearn (Southport)

It would be churlish of me not to admit that family credit will do something to eliminate poverty for low-income families with children. That is why alliance Members have always regarded family credit as one of the more acceptable provisions of the Social Security Act 1986. My greatest worry about family credit is the Government's complacency over the take-up rate. When they introduced the idea of family credit the then Secretary of State proudly announced that it would have an estimated take-up rate of 60 per cent. As I understand that the take-up rate for family income supplement is about 40 per cent., I concede that the increase would be a great improvement.

However, I am far from convinced that family credit will reach that estimated figure and, having heard the Minister's remarks, I am even more keen to find out how the Government reached the figure. I am sure that it was not plucked out of thin air.

I am sure that the whole House will be concerned about the plight of the 40 per cent. who, according to estimates, will not claim their entitlement to family credit for several reasons. Of course, many who fall into that category will not claim it because they feel, wrongly, that there is a stigma attached to claiming benefits. It would help enormously if there were less talk of scroungers in relation to those who claim benefit. Those entitled to claim benefits are getting what is legally theirs and there is no shame in that.

What steps do the Government intend to take to improve the take-up rate of family credit and benefits in general? It seems that there is plenty of money to be found to provide wall-to-wall coverage explaining how to take part in the Government's major share issues. If millions of pounds are available to help individuals to improve their position by making small investments, the Government must be prepared to show the same enthusiasm for helping those on low incomes, and, indeed, those who depend on benefits. The obvious answer would be to spend a reasonable amount on advertising to explain the changes in social security next year and to explain who is entitled to claim.

Perhaps the Minister could tell the House how much he intends to spend on advertising. All too often, that job is left in the hands of organisations such as the citizens advice bureaux. The groups do a fine job, but their resources are already stretched to their limits and they have many responsibilities. One way in which the Government could help would be by providing the CABs with extra resources to help them to cope with the massive increase in the number of people who wish to know their entitlements. Last year the CABs dealt with 1.25 million inquiries on social security alone.

Groups that have the job of explaining these difficult rules should have the clear support of the Government.

There is anxiety that the Local Government Bill may affect the ability of local authorities to launch campaigns to explain what benefits people are entitled to. The concern is that the clause dealing with political campaigns may be so wide that it will make a take-up campaign illegal. I should be grateful if the Minister could assure me that that will not be so. If not, will he tell the Secretary of State for the Environment what a harmful proposal it could be?

When the Secretary of State told the House of his highly unpopular decision to freeze child benefit, he attempted to defend the indefensible by directing more money to income support and a further £220 million to family credit. The arguments about the merits of universal benefits and the demerits of means-testing have been made many times in the House in recent weeks and I shall not repeat them. If the Government are determined to divert resources to means-tested benefits it would be fairer if the poorer families such as those on family credit were given a respectable increase rather than merely compensation.

10.50 pm
Mrs. Virginia Bottomley (Surrey, South-West)

I am grateful for the opportunity to pay tribute to the initiator of the benefit that has led to family credit. It was my right hon. and noble Friend Lord Joseph who established family income supplement. It was a remarkable recognition of the plight of many thousands of families who were in greater poverty in work than they would have been if dependent on social security benefits. It was a recognition of that position, which offends all our basic instincts, that led my right hon. and noble Friend to introduce that benefit. In the debate on the modification of family income supplement into family credit and the way in which it was financed I do not think that sufficient recognition was given to this point.

Nor do I think that we have sufficiently recognised that one major improvement is that family credit gives greater benefit to older children. For many years teenage children, who are much more costly than younger children, were not catered for adequately by the social security system. I am glad that this has been dealt with in the development of family income supplement into family credit.

I appreciate the points made by my hon. Friend the Under-Secretary of State that the benefit will be more responsive and that there will be greater simplification. The use of net wages will lead to greater justice, and fewer families will be better off out of work than in work. It would be churlish not to acknowledge all those important points.

At the same time, I have reservations about the justification for diverting child benefit increase money to family credit. It is the misfortune of children that the way the tax and social security system recognises their existence is regarded as a cost by the Treasury. It is the fortune of house owners that mortgage interest relief is not regarded in the same way. I feel more strongly about the arguments for diverting mortgage interest relief payments into housing benefit than I do about changing child benefit into family credit payments. It is not of major importance at the moment, but the whole system needs fundamental assessment and investigation before we move any further.

Those are only minor points compared with the need to point out sufficiently that the regulations, by improving and developing the family credit system, make for much greater benefits for those impoverished families in work. I warmly welcome the regulations.

10.55 pm
Mr. Portillo

With the leave of the House, I shall reply to the debate. First may I say how much I appreciated the speech of my hon. Friend the Member for Surrey, South-West (Mrs. Bottomley) it was the model of an ungrudging speech. I know how strongly my hon. Friend feels about child benefit, yet she was generous enough to pay tribute, none the less, to what we have done under the family credit draft regulations.

I was disappointed that the hon. Member for Derby, South (Mrs. Beckett) did not adopt the same spirit. The hon. Lady was rather grudging in her welcome, despite the fact that the regulations will bring a tremendous advantage to a large number of families. I found it confusing that the hon. Lady should argue that, because the take-up of the benefit is less than 100 per cent., we should spend the 120 million more wisely by raising child benefit and spreading it thinly over both those in need and those not in need.

I appreciate the argument that the hon. Members for Derby, South and for Birkenhead (Mr. Field) have made about take-up. We all wish that take-up could be higher. Granted that we intend to do everything we can to make it higher, I do not see that there is a conclusive argument for saying that it would be better to give 4p a day per child in child benefit to families who do or do not need that benefit—or rather, only to those who do not need it because that money would not affect those on income support or family credit. It is a weak argument.

I was not sure in the end whether the hon. Member for Derby, South was saying that she thought that FIS had been a good or bad benefit. She quoted the argument that if there had been less than an 85 per cent. take-up it would be judged a failure. I cannot imagine that she believes that it has been a failure, as it is self-evident that it has provided a great deal of help to working families. If the Labour Government had thought it a failure, doubtless they would have scrapped the benefit. As family credit is bringing more relief to more families, I cannot believe that the hon. Lady does not, in her heart of hearts, believe that it is a move in the right direction.

Mr. Frank Field

Let us leave the lop spreading thinly and the rest of it as a good debating point. Will the hon. Gentleman respond to the points made by my hon. Friend the Member for Derby, South? We were given some figures that presented some massive increases in income for families claiming the new benefit. My hon. Friend thought that perhaps the Minister had misled the House unintentionally or did not understand the interaction with housing benefit. Were the figures that he gave us those reached after the clawback of other changes in social security benefit?

Mr. Portillo

No, they were not.

Mr. Field


Mr. Portillo

The percentage of families on family credit who are receiving housing benefit is about 20 per cent. The percentage who are receiving both a rate rebate and a rent rebate or rent allowance is about 4 per cent. I am perfectly prepared to admit to the hon. Gentleman that the credit that some people gain is, to some extent, clawed back. The extremely high marginal rates of withdrawal that have been quoted apply to 4 per cent. of families. In fact, 80 per cent. of families are outside housing benefit altogether; that is partly an achievement of the family credit system.

One of the problems that the Opposition appear to have all the time is their inability to welcome anything that produces a large number of gainers if an extremely small minority of people will gain less.

Mrs. Beckett

The figures that I have show that there is only a marginal proportion of gainers to losers — perhaps a few tens of thousands. According to the figures that I have been given, there are a substantial number of losers.

If the Minister is correct, only a tiny percentage of people may face marginal tax rates of 98p in the pound. If that proportion is so tiny, and the Government are being so generous, it is a pity that they could not have put in just that teeny-weeny bit of extra money so that that did not happen. I had a feeling that I would be told that I had been grudging, but the Government congratulate themselves so heartily that I thought that anything further from me would be superfluous.

Mr. Portillo

I take the hon. Lady's point. On take-up, the hon. Member for Southport (Mr. Fearn) asked how much money we would spend on advertising family credit. It will be £3 million, or perhaps a little more. He also asked whether we would support the attempts of citizens' advice bureaux to publicise the benefit. The Government also already provide substantial support for their excellent work. A sum of £7 million springs to mind, but I would want to check that. We recognise their excellent work. The hon. Gentleman asked whether the Local Government Bill would affect local authorities' ability to promote take-tip campaigns. I shall happily refer that question to my right hon. Friend the Secretary of State for the Environment. I am sure that he will want to consider the matter carefully.

We have had a short and interesting debate. The lateness of the hour and the lack of whole-hearted onslaught by the Opposition tends to show that the Government are providing a benefit which will be of great value to working families and redress many of the problems which hon. Members on both sides of the House take seriously —those facing people in work or those thinking of going back into work. The draft regulations provide real improvements. For that reason, I commend them warmly to the House.

Question put and agreed to.

Resolved, That the draft Family Credit (General) Regulations 1987, which were laid before this House on 3rd November, be approved.