Social Security

HC Deb 20 December 1988 vol 144 cc301-35 4.34 pm

The Minister for Social Security (Mr. Nicholas Scott)

I beg to move, That the draft Social Security (Contributions and Allocation of Contributions) (Re-rating) Order 1988, which was laid before this House on 7th December, be approved. I understand that it would be for the convenience of the House if we also debated the draft Social Security Benefits Up-rating Order 1988.

The first order deals with the re-rating of national insurance contributions and lifts them upwards in accordance with practice. The second order uprates social security benefits and both apply to 1989–90.

At the outset, may I make a point that is familiar but nevertheless bears repeating? The massive increase in expenditure on social security benefits for the coming year is about £3.4 billion. It is possible for the nation and the Government to afford such a massive increase only because we have a successful economic policy which brings considerable benefits to our people and provides the resources for the upratings. We are trying to strike a balance between the interests of those in receipt of benefits and the working population who must pay to provide those benefits.

In the coming year we plan to spend nearly £27.5 billion on contributory benefits. As the House is aware, the key to the contributory principle is that entitlement to these benefits is earned by the payment of national insurance contributions. The Government's proposals for national insurance contributions were announced by my right hon. Friend the Secretary of State on 1 November. We do not propose to change the rates of class 1 contributions in the coming year; 1989–90 will be the sixth year in succession when we have not increased the main class 1 rates. The lower earnings limit for class 1 contributions which is linked by statute to the basic retirement pension rate, rounded down to the nearest pound, will be £43 a week from next April. The upper earnings limit will be fixed at £325 a week, nearly seven and a half times the basic pension level. The regulations which bring the new earnings limits into effect will be made and laid as soon as the benefits uprating order has been approved by Parliament.

The re-rating proposals are contained in the draft Social Security (Contributions and Allocation of Contributions) (Re-rating) Order 1988. The House will recall that in 1985 we reduced the contribution rates paid by lower-paid workers and their employers to help those workers and to reduce employment costs. The reduced contribution rates cut significantly the impact of contributions on people on lower earnings, but they did not affect their benefit entitlement in any way. We now propose to increase each of the earnings limits below which the lower contribution rates are payable in line with inflation, rounded to the nearest £5.

The proposals will further ease the burden on some lower-paid workers and their employers, and I am sure that the House will welcome that. Most other employees will not pay any more in contributions, unless their earnings rise. People earning at or above the new upper earnings limit of £325 a week will pay £1.80 extra a week, or £1.44 if they are in contracted-out employment. In 1989–90, class 1 contributions are expected to yield about £31 billion which will be apportioned between the national insurance fund and the National Health Service.

The House is aware that self-employed people pay their national insurance contributions in two parts—the flat rate class 2 contribution and the profits-related class 4 contribution. We do not propose any change to the class 4 rate, which will remain at 6.3 per cent. in the coming year. The profits limits for class 4 contributions, which determine the level of profits on which contributions are payable, will be increased, broadly in line with the earnings limits for class 1 contributions, to £5,050 and £16,900 respectively. The upper profits limit is exactly 52 times the class 1 upper earnings limit. We also propose to increase the class 2 contribution by 20p to £4.25 a week from next April. The class 2 rate is linked to the class 1 lower earnings limit and its increase reflects the proposed rise in that limit.

Self-employed people with profits at or above the proposed upper profits limit of £16,900 will pay about £57 more in the coming year. Self-employed people are expected to contribute about £955 million in contributions in 1989–90.

The draft order also increases the amount of class 1 contributions allocated to meeting the costs of the National Health Service. From April 1989 we propose to increase employees' NHS allocation to 1.05 per cent. and the employers' allocation to 0.9 per cent. in respect of earnings on which class I contributions are paid. The allocation will raise over £4 billion for the NHS in the coming year.

The report by the Government Actuary on the effects of our proposals on the national insurance fund has been laid with the re-rating orders. It is estimated that the total income received by the national insurance fund will be slightly more than £29 billion in 1989–90 and total expenditure, including administration, is estimated to be slightly more than £28.5 billion. The surplus anticipated for the coming year will be £500 million, which is much lower than was originally expected for the current year. However, that surplus must be kept in perspective. It is equivalent to just one week's benefit expenditure paid from the fund in the coming year.

I shall now turn to what I believe the House will find the more interesting of the two orders.

Mr. Tim Smith (Beaconsfield)

Before my hon. Friend moves on, will he comment on two matters that were raised by the Institute for Fiscal Studies and discuss them with the Treasury? The first point relates to the lower-earnings-limit trap. Someone on £43 a week who takes an extra £1 in pay will be worse off.

The second point relates to the upper earnings limit above which 34 per cent. deductions become 25 per cent. deductions. Will the Department examine those two problems and discuss with the Treasury ways of sorting them out?

Mr. Scott

There are no plans to change that. I understand the desirability of smoothing out those matters and the Government are aware of that. There are no plans to alter the present pattern of national insurance contributions and their rates.

Mr. Frank Field (Birkenhead)

Will the Minister follow the advice of his hon. Friend the Member for Beaconsfield (Mr. Smith) and formulate plans for changing national insurance contributions? Is the Minister aware that in this country we have 40 per cent. of all part-time work in Europe? The reason for that is that we have built into our system an enormous bias against people creating full-time jobs. If they do, both employers and employees have to pay contributions. Therefore, I add to the plea made by the hon. Member for Beaconsfield and ask the Minister to examine not only the effect on marginal tax rates of moving into and out of national insurance, but whether employers' contributions should begin at the first pound of earnings.

Mr. Scott

The hon. Gentleman is knowledgeable on this matter. If there were a flat rate of national insurance contributions across the board, we would not face that problem. The problem arises because we are introducing lower rates for national insurance contributions, which, in turn, introduces steps. I can see the desirability of smoothing out all this, but that would require substantial thought. We have such considerations in mind, but there are no present plans to deal with the problem. I accept the point of my hon. Friend the Member for Beaconsfield (Mr. Smith) that such matters might be discussed in Government.

The second order uprates the benefits, and I understand that some Opposition Members intend to vote against it. I shall deal with three matters relating to the uprating order. The first involves pensions. On the radio, the hon. Member for Livingston (Mr. Cook), if I heard him correctly, accused the Government of neglecting Britain's pensioners. If the Government's record amounts to neglect, heaven knows what description would be adequate for what happened to pensioners under the previous Labour Government. I wholly reject the hon. Gentleman's allegation and shall seek to prove that it is the last accusation that could be legitimately levelled against the Government.

The Labour party tends to be obsessed only with the level of the basic state pension. Any pensioner in Britain will say that the issue is much wider than that. We have honoured our pledge to protect pensioners against inflation rather than follow the path of the previous Labour Government who made grand promises and then had cruelly to dash hopes when they were unable to fulfil their pledges.

Mr. Frank Field

Before the Minister leaves the previous Labour Government's record, would he care to remind the House that that Government, despite their faults, increased the national insurance pension by 20 per cent. in real terms? Will the Government match that record?

Mr. Scott

I freely acknowledge that that is a fact. I am trying to persuade hon. Members—

Mr. Field

It is true.

Mr. Scott

I have acknowledged that it is true. If the hon. Member for Birkenhead (Mr. Field) listens, he will learn. That is a fat lot of good to pensioners if their savings are destroyed and the opportunity to obtain other income is diminished. Pensioners are interested in what happens to their total incomes—the money they can spend on the goods and services they need. That is more important to them than the basic state pension. Our case on that broader issue is unassailable when compared with Labour's record.

Under the previous Labour Government total pensioner incomes reduced from 55 per cent. of average manual earnings to 53 per cent. by the time the Labour party left office. Between 1979 and 1986 we restored total pensioner incomes to the level at which they stood when the Labour party took office and they now represent 60 per cent. of annual manual earnings in Britain.

We have done more than that. Our period in Government has been characterised by a steady growth in pensioner living standards. We have tackled inflation in a way that escaped the ability of Labour Members when they held office. By tackling inflation we have made it possible for pensioners' savings to contribute significantly to their living standards.

Pensioner incomes reduced by an average of 3.4 per cent. per year during the years in which the Labour party held office. Since we have been in office, pensioner incomes have increased by 7 per cent. in real terms in each year to an overall total of 64 per cent. over the first seven years. That is important to British pensioners. We have also increased the basic state pension.

We have encouraged and are encouraging still further the spread of occupational pension funds and personal pensions. The result of our policies is that, over our first seven years in office, pensioner incomes rose twice as fast as the incomes of the population as a whole. They increased by 23 per cent., compared with 3 per cent. when Labour was in office. In other words, we have increased pensioners' standard of living by a factor five times as great as that which the Labour party achieved.

Mr. Jeff Rooker (Birmingham, Perry Barr)

That cannot be denied. However, how much of that figure was accounted for by SERPS coming on stream? The Minister must acknowledge that that was introduced by the Labour Government in 1978 and was bound to come to fruition in the early 1980s.

Mr. Scott

I cannot give the House a breakdown of the figures. However, inflation is important and I have given the House the figures about the impact of inflation on pensioner incomes and savings. The greater spread of occupational pensions and the steps we are taking to encourage that are also important. I freely acknowledge that the introduction of SERPS was a step in the right direction.

However, the Labour party introduced a scheme for SERPS which would have been unaffordable in the middle of the next century and which would have been a burden that most taxpayers could not afford. We have modified SERPS and made it more affordable. Therefore, we are not following the path of the previous Labour Government and raising pensioners' hopes with grand promises, only to dash them because of mismanagement of the economy.

Sir Anthony Meyer (Clwyd, North-West)

My hon. Friend is quite right when he says that pensioners' incomes have increased, but there is a danger of misleading the House. On average, the incomes of most pensioners have increased substantially. However, the other side of the coin is that the incomes of a large number of pensioners have decreased. That fact tends to get hidden in the talk about averages.

Mr. Scott

My hon. Friend has anticipated what I was about to say. It was precisely because we were conscious of the fact that not all pensioners had shared evenly in the improvement in pensioners' incomes that my right hon. Friend made his announcement that from next October additional help will be made available to them in the form of a new and extended structure of pensioner premiums under the income support scheme. [Interruption.] Perhaps the hon. Member for Livingston does not like to be reminded that this Government have tackled the long-standing problem of the poorer pensioners. I do not intend to go over the ground that my right hon. Friend the Secretary of State covered so comprehensively in his statement. However, we have taken steps to tackle the problem and we have provided additional resources for that purpose. It will cost nearly £200 million in a full year.

The Government's record on pensions is unassailable, but successive upratings by this Government have also ensured that the benefits paid to people who suffer from long-term illnesses and disability have more than kept their value. Many disabled people have received a real terms increase in the amount of benefit that they receive. Those in receipt of the mobility allowance have had a 9 per cent. increase in real terms since July 1978. An estimated 190,000 people under pensionable age receive more from the disability premium, together with income support, than they would have received in supplementary benefit alone.

Our record of a sustained and enhanced value of benefits has to be set against the background of a prodigious rise in the number of recipients. For example, since 1979 the number of invalidity benefit recipients has increased by 86 per cent. to 1.1 million. The number of attendance allowance recipients has increased by 180 per cent. to 740,000 and the number of those in receipt of the mobility allowance has increased by 470 per cent. to 540,000. This combination of real increases in the amount of benefit paid and the large increase in the number of recipients has produced a 90 per cent. rise in real expenditure since 1979 on benefits for the long-term sick and disabled. That is a record of which the Government can be proud.

Total expenditure on these benefits now stands at over £7.3 billion, a real terms increase of £3{5 billion since 1979. Opposition Members, including the right hon. Member for Stoke-on-Trent, South (Mr. Ashley), have suggested that increased expenditure attributable to the increased numbers of recipients is in some way not so praiseworthy as an increase in the real value of the benefits. However, I believe that we can express quiet satisfaction, if not pride, in the fact that at a time of tremendous extra demand for disability benefits we have managed to cope with the increased numbers and to maintain and at times to enhance the real value of the benefits.

It is against the background of an unprecedented coverage of social security assistance to disabled people that the Government can properly take credit for devoting some new money to new, imaginative and flexible ways of providing financial help that is outside the benefit system. The independent living fund is already proving to be a unique success in its flexible response to severely disabled people who need to buy high levels of care in order to live independently in their own homes. With that sort of success in mind, I was particularly glad that my right hon. Friend was able to announce to the House in his uprating statement that we are providing £5 million, and the clearing banks another £5 million, to set up a trust fund to enable Motability to increase its help to disabled people to obtain vehicles.

Mr. Jack Ashley (Stoke-on-Trent, South)

Will the Minister confirm that a mere 354 people have benefited from the independent living fund?

Mr. Scott

The right hon. Gentleman refers to a mere 354 people. A new scheme such as the independent living fund requires personal visits by social workers to applicants to assess their needs if they are to maintain their independence. For that reason the independent living fund has got off to a slow start, but the vast majority of the payments to those people are made on a weekly basis. Those payments will continue. I am absolutely certain that the independent living fund will be a very important part of the support that the Government give to the more severely disabled people.

Mr. Robert N. Wareing (Liverpool, West Derby)

How much has been spent on advertising the existence of the independent living fund? Does it match the £66 million that was spent on advertising shares in nine publicly owned authorities?

Mr. Scott

The hon. Gentleman should make a more sensible intervention than that.

Mr. Wareing

What is the answer?

Mr. Scott

We are talking about a small number of people who need exceptional help in order to maintain their independence in the community. It is the responsibility of the independent living fund's trustees to advertise. They have placed advertisements in the specialist press so that social workers and others who are in touch with severely disabled. people will know what kind of support can be given to the severely disabled. They are also responsible for distributing thousands of leaflets and posters to the offices that are in touch with severely disabled people in order to get the message across. The number of applications being made to the fund is a tribute to that publicity. I am quite confident that the independent living fund will form a very important part of the support for severely disabled people.

Mr. Michael Jack (Fylde)

Is my hon. Friend aware that in the Disablement Income Group's magazine Progress, No. 15, it is confirmed that by August of this year the fund had received 800 applications and that applications are now arriving at the rate of 25 a day?

Mr. Scott

I am grateful to my hon. Friend for that additional information.

I turn finally to a subject that I know arouses strong feelings in all parts of the House and that I understand i s to be used as a pretext by the Opposition to vote against the second order. We all know why the hon. Member for Livingston should be seeking, with varying degrees of success, if I understand correctly the radio reports, to persuade his right hon. and hon. Friends—[Interruption.] I am not surprised that Opposition Members do not like listening to this. Do they intend to troop through the Lobby and vote against pension increases and increased benefits for disabled people? Is that where the hon. Member for Livingston is to lead his Back Benchers? I am astonished that he should be thinking along those lines, and I am not at all surprised that the Opposition should not like to have it spelt out to them.

The two best descriptions that I heard on the radio this morning about the path down which the hon. Member for Livingston is seeking to lead his Back Benchers were, first, that they have scored an own goal and, secondly, that they have shot themselves in the foot. I leave the House to decide which of those two descriptions is the best way to describe the path down which they are going.

This year—as last year—we have not uprated child benefit. However, the hon. Member for Livingston was wrong this morning to describe the stand taken by my right hon. Friend the Secretary of State as a freeze for all time. My right hon. Friend is under a duty year by year to review child benefit and to decide whether it should be uprated. It may be that next year or the year after it will be appropriate for child benefit to be increased and to be uprated in line with inflation, but this year we have decided to follow a different path.

Mr. Robin Cook (Livingston)

I am most grateful for this ray of hope at the end of the tunnel. Will the Minister explain precisely what considerations led to this year's freeze when the Chancellor of the Exchequer had a surplus of £10,000 million to give away in the Budget? What possible additional surplus would lead him next year to believe that he was able to afford an increase in child benefit?

Mr. Scott

We shall have to wait and see. If the hon. Gentleman, instead of enunciating the views that he expressed this morning on the radio, had read my hon. Friend's uprating statement, he would have understood perfectly the arguments that lay behind the decision not to uprate child benefit this year.

Mr. Robert McCrindle (Brentwood and Ongar)

Leaving aside the question of uprating, and taking a little further what the Minister has been telling the House in the past few minutes, would it not be helpful if he were on record as telling the House and the country that the question of uprating must be separated from the continued existence of child benefit? Will he give the House an undertaking that at least until the next general election, when a future Government may or may not have a mandate for replacing it, child benefit will continue to be paid as now, with the decision on uprating being left from one year to the next?

Mr. Scott

That is precisely the stance that my right hon. Friend the Secretary of State has taken. Child benefit will continue to be paid to the mother as now, and the decision will be taken annually whether to uprate it fully or partially. My right hon. Friend will take those decisions at the appropriate time.

Mr. Jim Lester (Broxtowe)

I recommend to my hon. Friend and to my right hon. Friend the Secretary of State an excellent article by Hermione Parker in The Times today about targeting benefit and whether we should be content with a system of child benefit when a family earning £137 a week pays more in tax than it receives in child benefit.

Mr. Scott

I read Miss Parker's article. I thought that it was rather long on analysis and short on prescription. It covered familiar territory. My hon. Friend and I have discussed the matter from time to time and I understand very well that if one applies a universal benefit, one maximises take-up, but the benefit tends to be ill-focused on those who need it most. On the other hand, if a benefit is better focused and targeted on those who need help, there is a take-up problem. Using a phrase which first came from the Opposition, my judgment is that a sensible social security system needs a judicious mixture of universal and targeted benefits. That is a sensible way forward. That judicious mixture may well apply not only to the range of benefits, but to the time when upratings and other measures take effect. It remains the duty of my right hon. Friend the Secretary of State to weigh all those matters in the balance at each uprating.

It is worth reminding the House that, although child benefit has not been uprated this year, it remains a very important means of support for families in Britain. It comprises one tenth of social security expenditure amounting to some £4.5 billion. That sum continues to go to families in child benefit.

Mr. Tony Banks (Newham, North-West)

Surely the issue is that targeted benefits have to reach the target. The thing that bothers us is that the target benefits are not reaching the people who need them. I hope that the Minister has seen a press release from the London Welfare Rights Officers Group which shows that boroughs around London cannot even get the leaflets to tell people about their rights. What does the Minister propose to do about that?

Mr. Scott

If the hon. Gentleman draws my attention to any such cases, of course I shall look at them. But I acknowledged the problem of take-up. Of course it is in the Government's interests to seek to ensure that take-up is as high as possible. If we provide benefits, we want them to reach people and we shall be taking further steps to increase the take-up of family credit.

Child benefit remains a very important benefit. I want the House to be absolutely clear about the effect of freezing child benefit on the uprating of family credit. Child benefit is disregarded in the assessment of family credit, so unless we compensate families receiving family benefit they will suffer from the fact that child benefit is not to be uprated. Therefore, we are compensating them. We are uprating child credits by the "Rossi" index and then adding to them the 45p by which the child benefit would have been uprated had we increased it in line with the increase in the RPI. Therefore, families on family credit have lost nothing by the freezing of child benefit. As I have explained, they are gaining considerably because we are adding a further 50p to each child credit at a total cost of some £25 million. Thus we are increasing each child credit by 95p in addition to the increase for inflation.

I shall illustrate the effect from next April. A family with just one child aged five and with gross earnings of £75 would presently get family credit of about £25 and would be entitled to more than £30 under the new rates from next April and would still be entitled to some family credit if its gross earnings were up to £139 a week. Families with two children would be even better off. The benefit is not limited to the very poor. Many families on quite reasonable earnings can qualify for the extra help of family credit. This month we are issuing a leaflet about family credit for every family collecting child benefit from the Post Office. I hope, and my right hon. Friend the Secretary of State expressed this view at Question Time yesterday, that hon. Members on both sides of the House will take every opportunity to bring the benefits to the attention of their constituents. We are running a radio campaign and at the time of the uprating next April we shall be running a major advertising campaign involving television and other media.

Mr. Bob Cryer (Bradford, South)

Will the Minister use his influence with Conservative-controlled Bradford council which is closing three benefit advice shops dealing with more than 50,000 inquiries a year and providing valuable advice? One-stop shops with leaflets, if they actually arrive, are no substitute for the expert advice which, according to the Minister, fits in exactly with his policy on the take-up of benefits.

Mr. Scott

The closure of those advice shops is a matter for Bradford city council. However, our own social security offices are perfectly capable of providing advice to claimants who may need help.

Mr. Rooker

Where is it stated that it is the function of civil servants in the Department of Social Security to give advice? It is not their function. That is why on every leaflet that the Department produces constituents and claimants are directed to citizens advice bureaux. Is it the function of civil servants to give advice? If it is, can we have a proper statement and a proper advice shop in every local office?

Mr. Scott

The Government give massive help to citizens advice bureaux across the country, but there is no question but that the staff of social security offices are willing and able to advise claimants about their rights.

The uprating package for income-related benefits which my right hon. Friend the Secretary of State has already announced and against which I understand the Opposition intend to vote is a package for poorer families. It is an essential element in the Government's efforts to ensure that poorer families are given extra help rather than spreading the jam thinly across the population. We are making extra resources available to children and young people through income support and housing benefit as well as family credit. The benefits are totally in accord with our policy aims of concentrating help on those who need it most. The uprating provides for substantially more than inflation. For example, the income support allowance for a child under 11 has gone up by no less than 9.3 per cent.

I understand the arguments advanced by my hon. Friends and others for universal as opposed to focused benefits. I repeat my belief that we need a judicious mixture. Without prejudging next year, I believe that our priorities this year are absolutely right to concentrate help in the way that I have discussed with the House. It is a generous uprating which directs massive resources to where they are most needed. It is a substantial increase in a programme which is already the biggest in Government. Our proposals strike a fair balance between protecting the interests of benefit recipients and the interests of those who pay for those benefits. I commend the orders to the House.

5.8 pm

Mr. Robin Cook (Livingston)

I am delighted that the Minister began by putting on the record the contrast between the ways in which the Government and the last Labour Government treated pensioners. He was encouraged by my hon. Friend the Member for Birkenhead (Mr. Field) to place on record—and, as he admitted, it is factually correct—that under the Labour Government the state pension increased by 20 per cent. in real terms over six years. I entirely concur with the Minister that the Government have found that unaffordable; they certainly have not attempted to emulate it. Over the nine years in which they have been in office, the state pension has increased by a beggarly 2 per cent. in real terms. That is the true contrast between the stewardship of the Government and that of the last Labour Government.

It is perfectly fair to focus on those figures, because the state pension is the part of pensioners' income for which the state is responsible. It is not true that the last Labour Government were obsessed only with state pensions. On the contrary, they introduced. SERPS, the earnings-related pension, because they recognised the inadequacy of the basic state pension. Like any income-related or occupational pension, it would have taken a couple of decades to come fully into use. It will never do so, because the Government have remain obsessed with the state pension and only two years ago halved the value of SER PS for future pensioners on the ground—the Minister rightly anticipated this—that its future value would not be affordable. The only problem is that, although that was a statement by Ministers, it was not subsequently supported by the Government Actuary, who pointed out that the financial costs could be met. It was doubtful whether the political will would be found to meet those costs, which is at the bottom of the contrast.

The debate stems from the uprating statement that was made two months ago. On that occasion, we pressed for an emergency debate so that the House could express a view on the Government's decision to freeze child benefit to death. The application was refused, but the Leader of the House said that the House would have an opportunity to debate the freezing of child benefit when the uprating orders were before the House. He went so far as to promise us a debate before Christmas, which was not much of a concession because it is necessary to resolve the orders before Christmas so that the books can be made up in time for April. We are humble people and take what crumbs we can from the Leader of the House.

Having said that this debate was the right time to express our opposition to the freezing of child benefit, the Government machine has spent the past couple of days on heavy briefing saying that we are voting against the orders because we are opposed to any increase in pensions. For all that I know, it has been briefing people in the Press Gallery that we are in favour of cutting pensions, turning off heating supplies to the elderly and turning them out into the night.

I was startled to read in the Sunday Times that I had turned down a separate vote on child benefit. Given the lengths to which we went to obtain a separate debate, it is rich cheek to suggest that we turned one down. Conservative Members know that that is not true and that the House was never offered a separate debate. [Interruption.] I asked in the House, and we also asked through the usual channels, for a separate debate on child benefit, but we were consistently refused one.

The Secretary of State prides himself on the fact that he has made no secret of his hostility to child benefit but he has never had the courage to ask the House to put it in cold storage. It is on record in the Sunday Times, courtesy of Rupert Murdoch, that the Secretary of State, or Bernard Ingham—it is not clear who—thinks that there shoud be a separate vote on child benefit. I am happy to assure the Secretary of State that his dearest wish will be fulfilled. We shall provide the House with the opportunity of a separate vote on child benefit in the new year and invite it to consider whether it wants Britain to approach 1992 as the only country in Europe that is running away from child support. Tonight, we shall merely treat with indifference the miserable increases provided for in the uprating order.

Nowhere are the increases more miserable than in those offered to pensioners. The uprating order provides that pensions will be increased by 5.9 per cent. in April but long before April inflation will hit 7 per cent. Moreover, a large part of that inflation will hit pensioners especially hard as a result of Government action. The cost of electricity has increase by this year by 9 per cent., and in April it will increase a further 6 per cent. Water has increased by 10 per cent. this year and in April it will increase by by a further 10 per cent. Gas has increased by 6 per cent. this year and in April will increase by a further 6 per cent. Rents have increased this year by 12 per cent. and in April will increase by a further 10 per cent. All those increases are in sectors directly under the influence of the Government, but they are all increasing at a greater rate than that which the Government are offering pensioners.

Mr. Edward Leigh (Gainsborough and Horncastle)

While the hon. Gentleman is dealing with pensioners, perhaps he will reflect on the wise words of my right hon. Friend the Secretary of State that there is no point in promising the earth but delivering the International Monetary Fund. In so reflecting, will he say what happened to the pensioners' Christmas bonus in 1975 and 1976?

Mr. Cook

I have already told the House—the hon. Gentleman needs to be told the same thing twice before he gets it through both ears, so I will repeat myself—that under the last Labour Government pensioners' income increased by 20 per cent. in real terms, despite the IMF, the difficulty that the Government faced, and the fact that we did not have oil revenues to squander on the rich.

Mr. Rooker

My hon. Friend has made it quite clear that the Opposition will facilitate a specific and targeted vote on the freezing of child benefit. Will he make it clear that the Opposition will be prepared to make it a free vote? Will the Government do the same?

Mr. Scott

In the heat of the moment, the hon. Gentleman may have used words that, when he checks Hansard, may not prove to be accurate. He said that under the Labour Government pensioners' incomes increased by 20 per cent. in real terms; they increased by only 3 per cent.

Mr. Cook

We should be delighted to have the Minister's figures on the record as often as he cares to repeat them. Does the Minister agree that under the Government pensions have increased by only 2 per cent.? I will give way to him if he will agree about the clear contrast between increases of 20 per cent. under the last Labour Government and only 2 per cent. under this one. Moreover, that 2 per cent. increase has been made over the past nine years. The Minister is anxious to talk about the last Labour Government, but it would be nice if he was equally as anxious to discuss the Government's miserable record.

Another set of figures are relevant—

The Secretary of State for Social Services (Mr. John Moore)

The hon. Member for Livingston (Mr. Cook) is wriggling.

Mr. Cook

I am not wriggling. We would welcome confirmation of those figures from the Secretary of State. There is a tenfold difference between them, and it was achieved in two thirds of the time, which is why Labour Members can hold up their heads about what the Labour Government did for pensioners.

Ministers constantly take refuge in the increase in SERPS and what has happened to occupational pensions, but they should be ashamed of what they have done to state pensions.

Another set of figures is more relevant than the issue of prices—those for inflation, not only in prices but in earnings. The Labour Government provided for pensions to be increased in line not with prices but with earnings. If that formula had been retained, the basic state pension today would be worth £11 a week more for the single pensioner and £18 a week more for couples, which is about a quarter of its present value. That is the measure of the difference between the record of the Labour Government and this one.

Mr. McCrindle

rose—

Mr. Cook

I will give way later. I anticipate that the hon. Gentleman will want to say something about child benefit, so he may wish to wait until I reach that part of my speech.

While prices have increased by 5.9 per cent. over the past year, earnings have risen by 8.6 per cent. Why was it adequate for the pension to keep pace with prices when everybody else was trying to get ahead of prices? That difference between inflation of prices and inflation of earnings would mean that the increase that we are debating tonight, had it gone up with earnings, would be almost half as much again—that is, an extra £1.15 a week for a single pensioner. That is the equivalent of a daily newspaper every day or half a pint of milk a day. That is the meaning of £1 a week if one lives on the subsistence income of so many pensioners, and that is what the order cheats them of.

Mr. McCrindle

The hon. Gentleman has made the perfectly reasonable point that, under his Government, pensions were linked to earnings, whereas they are now linked to prices. Does he consider it appropriate to remind the House that, desirable though that objective may have been, out of the five years during which his Government were in office, it was possible to carry through that link on only three occasions? That was as a result, I seem to recall, of the appalling economic situation over which he presided.

Mr. Cook

The hon. Gentleman was good enough to say that my point was entirely reasonable. Let me respond in the same moderate way. He has also made a perfectly reasonable point. The pension was fully uprated in line with earnings three years out of five, which compares starkly with the performance of this Government, who have not uprated in line with earnings in one out of nine years. The bottom line is that, as a result of the three increases, the pension was worth 20 per cent. more at the end of those five years. Conservative Members cannot get away from that figure.

Many pensioners will not smell a penny from this uprating, because they are the victims of last April's cuts. Last April, they found that the cash that they received exceeded their entitlement under the new rules. As a result, their benefit was frozen at its current level, and it will not go up with inflation next April. Next April, 500,000 claimants will get no increase as a result of transitional protection. The reason they are caught in the new version of the property trap that was invented by the Government is that they were receiving extra additions for diet, laundry and heating, all of which were abolished in April.

Mr. Frank Field

By definition, targeted.

Mr. Cook

As my hon. Friend says, by definition, all those extra additions were targeted on the frail, the elderly and the disabled. We are talking not just about 500,000 claimants but about 500,000 of the most vulnerable and most disabled claimants. The Disability Alliance calculates that it will take several years before some of the most severely disabled claimants get an increase in any uprating order.

If there is one thing worse than getting no increase because one is receiving transitional protection, it is losing one's transitional protection. It is appropriate to reflect on the thousands of claimants who, since last April, have lost their transitional protection and. next April will find themselves worse off in cash terms than they were last April.

Three weeks ago, I brought to the attention of the House claimants who had lost their transitional protection, because, under the party of the family, they were ill-advised enough to get married, and that triggered the loss of their transitional protection. I share with the House three other cases, all of whom were corralled among the 88 per cent. last April who we were told were not losers as a result of the changes.

The first is a constituent of my hon. Friend the Member for Newport, West (Mr. Flynn), Mrs. Edwards. Mrs. Edwards was in receipt of £7.77 towards the extra costs of a diet that she required for herself. Since last April, her husband has died. As a result of the death of her husband there was triggered a fresh assessment of entitlement to social security. In the course of that fresh assessment she lost all her transitional protection, even though it was in respect of an allowance for her own dietary and health needs. She still has the same health needs, but she gets no help for them.

Mr. Frank Field

There is targeting.

Mr. Cook

The second case comes to me from Sandwell citizens advice bureau. It relates to Mrs. Finden, aged 85 and a widow for 26 years. She is severely disabled with arthritis. Recently, Mrs. Finden had the misfortune to be admitted to hospital for seven weeks. After six weeks her benefit was suspended. She came out of hospital only one week later, but, because her benefit had been suspended, when she came out there was a fresh assessment of her benefit. Because there was a fresh assessment of her benefit, she lost her transitional protection. Having come out of hospital, she is £3.25 a week worse off. In its letter, the citizens advice bureau explained: We find it difficult to explain to this elderly and confused claimant why her benefit has gone down.

The Government are putting doctors in the bizarre position of advising patients that, irrespective of their health, it would be better to get out within six weeks, because they might otherwise lose part of their benefit.

It is not only pensioners who are losing transitional protection. One can lose transitional protection by having children. My hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara) has drawn my attention to the case of one of his constituents, Mr. Peter McKay. In April, Mr. Peter McKay was left with £11.50 a week transitional protection for laundry and diet. His wife recently had another child. The other child should have brought about an entitlement to increase in income support of £10.75 a week. However, as their benefit already exceeded their entitlement by more than that sum, they did not get a penny of the additional sum to which they had been entitled for that child. In other words, they are left with an extra mouth to feed and no extra resources. Effectively, they are being asked to spend on the child the resources that formerly went to Mr. McKay for his own diet.

That case brings us naturally and inevitably to the most objectionable part of the uprating order. The Minister said that this is a package for poor families. We certainly assent. It is a package to make families poorer. Paragraph 8 of the order provides that child benefit will be frozen for the second year running. To be fair to the Secretary of State, when he spoke of uprating, he made no pretence that the decision had been reluctantly forced on him this year alone by the shortage of ready cash. It would be difficult to make that case. The Chancellor is sitting on a Budget surplus which is substantial enough to support even his solid frame. The last time he counted the surplus, he came up with a figure of £10,000 million. It is fair to say that people who have made stabs at it since then have come up with larger figures.

How much bigger must the Budget surplus be before the Government can afford to increase child benefit'? These are the circumstances in which the Secretary of State should be grabbing his share for claimants. The rich had their share of the Budget in March. It is now time for claimants to get the crumbs from the table. Instead, the Secretary of State is planning to spend £100 million less next year than he planned to spend last January in the expenditure White Paper.

That is the background to the freeze in child benefit. We have a Chancellor who has more money than he expected, and a Secretary of State who discovers that he has more room to spare in his budget than expected. It should not have been so difficult for the Secretary of State to get the money out of the Treasury. After all, who is the man with whom he negotiates at the Treasury but the Chief Secretary? Who was the Chief Secretary two years ago? He was the Minister for Social Security, who, only two years ago in Committee said: we believe that universal child benefit is desirable. I am afraid that he was wrong. He said: We are likely to be boringly consistent on that point for the foreseeable future, and, I hope, permanently."—[Official Report, Standing Committee B, 6 March 1986; c. 684.] He was the person with whom the Secretary of State had to negotiate—a man who regarded his commitment to universal child benefit as boringly consistent.

Against that background it is quite clear that the reason for the freeze in child benefit is not financial but political. To be fair, the Secretary of State is quite open about it. Since his appointment, I cannot recall the Secretary of State finding a kind word to say about child benefit. The benefit is a sorry thing. It is in the care of a team who are not committed to it. If they were more honest, they would say that they want to abolish it. At least then we would get a separate vote on it. Instead, they are allowing it to fade away by failing to do the annual maintenance.

Let me couch three arguments in terms which even Tory Members can relate to and understand. I invite them to think of child benefit, not as a benefit, but as a tax allowance. After all, it replaced child tax allowance and it is the only means by which we now recognise the extra cost of children. If hon. Gentlemen try to think about it as a tax allowance, I know how much more warmly they will think about it. Had child tax allowance remained, I have not the slightest doubt that they would have uprated it each year without pausing for thought.

It is instructive to compare and contrast what has happened to tax allowances and child benefit. As I said at Question Time yesterday, the married man's tax allowance has increased by 22 per cent. more than the rate of inflation under the Government while child benefit has fallen by 13 per cent. I did not get an answer yesterday, so I ask again: by what possible mental gymnastics can the Government argue that the cost of maintaining a wife has increased by one fifth and the cost of maintaining a child has decreased by one eighth? Why is there not the same chatter about how badly targeted the married man's tax allowance is? After all, like child benefit, it also goes to the rich. Indeed, unlike child benefit, it is worth more to the rich. They get their tax allowance at 40 per cent. not 25 per cent.

That brings me to another consideration why hon. Gentlemen should think of retaining child benefit. Child benefit is a highly efficient benefit. The Tory party claims to be the party of cost efficiency in the public sector. Child benefit has one of the smallest administrative overheads. Its administration costs 2.5 per cent. of total expenditure. That is almost half the administrative cost of family credit which takes 4.5 per cent. of total expenditure. I find it curious that the party of public efficiency should wish to change to a benefit which, pro rata, requires twice as many bureaucrats. I find it odd that the party of targeting is in favour of a benefit in the form of family credit which is so badly aimed.

In January the Secretary of State and the Minister promised us that family credit would hit 60 per cent. of its target. They never explained why. When my hon. Friend the Member for Derby, South (Mrs. Beckett) challenged them, the Minister replied that of course family credit would be better known because more people would know about it. That appeared a rather circular chain of reasoning which was not entirely convincing. In the event, take-up of family credit is not 60 per cent. It is not even the 50 per cent. that family income supplement used to hit. It is still below 40 per cent.

There is now a cheerful cynicism being expressed on Government Back Benches—so far it has not crept forward to the Front Benches—that it is not their fault that the take-up rate is so low. They have done their duty. They have made the benefit available. It is not their fault that people do not rush forward to claim it. That is the look-out of those entitled to it. That argument will not do because Conservative Members are putting forward family credit as a substitute for uprating child benefit and child benefit does not go to 40 per cent., 50 per cent., or 60 per cent., but to 98 per cent. of those who are eligible.

Mr. Frank Field

It is well targeted.

Mr. Cook

It is extremely well targeted on mothers. Ninety-eight per cent. of mothers with young children claim and receive child benefit—not double but nearly treble the number who get on to family credit. I always understood that the Government believed in decisions being market-led and that one should repond to the market. It is clear from the take-up rate that the market demands child benefit. It is to that success story that this House and the Government should stick.

My final reason why the Tory party should retain child benefit and uprate it has been anticipated by my hon. Friend the Member for Bradford, South (Mr. Cryer) for the past 10 minutes. The reason why the Treasury Bench and the Government should support child benefit is that, as they so frequently remind us, they are the party of the family. Child benefit is now the only universally applied recognition of the cost of bringing up children. It goes to the women who feed and clothe those children. For many women it is the only income that they can claim as their own and on which they can rely. It gives them a touch of independence of the family budget. As the author of this letter passed to me by Child Poverty Action Group said: As a woman with 2 children who had a husband earning £250 a week"— well above family credit level— but provided us with nothing, the only way we survived was with our child benefit, and that was only because he could not get his hands on it. That is the reality for many women. That is why the party of the family should support child benefit and its uprating.

It may well be that it is the fault of the father that those children were not being better provided for, but it was certainly not the fault of the children and why should they be penalised by having their benefit frozen? Heaven knows, child benefit is little enough—only one third to a quarter of the cost of bringing up a child in any week. It does not meet many of the new charges being levied on us. For example, for mothers in Bradford under a new Conservative council which now charges them £4 a week for school meals per child, that means over half of their child benefit.

A constituent of my hon. Friend the Member for Bradford, West (Mr. Madden) is a widow with five children. Because she is a widow on widow's benefit she does not receive any family credit. She does not qualify. Nor does she receive any income support because her weekly income is exactly 14p above the income support level. Because she is not in receipt of income support, her children do not qualify for free school meals. Since the Conservatives gained control of Bradford city council she is faced with a weekly bill of £20 for school meals for those five children—an increase of £9 in this year alone. Moreover, under this Conservative Government her child benefit is now worth £5.50 a week less than in 1979. For that lady child benefit is not, as the Secretary of State described it, a decorative overlay; it is one of the basic foundations of her budget. It is for her family the difference between one cooked meal a day and none.

It is for that lady's sake and the sake of her children that we shall return to this issue in the new year and give the House an opportunity to record its contempt of a Government who can find the cash for open-handed generosity to top rate taxpayers and funds that generosity by tight-fisted meanness to pensioners and children.

5.37 pm

Mr. Timothy Raison (Aylesbury)

I shall not comment or speculate on the sub-plot of the debate this afternoon, which is the intriguing question why the Opposition apparently thought that they would vote against the order and then decided that they would not after all. It is something to do with the fact that the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who is leaving the Chamber, reminded himself that at one point he wanted to be the Opposition Chief Whip, so managed to persuade his colleagues that it would be remarkably foolish to vote against these orders.

I have no intention of voting against these orders because I welcome the increase embodied in them, particularly the greater help for those over 75 and some of the elderly disabled. It would be absurd to do anything other than support them.

Nevertheless, the Government are making a mistake in not uprating child benefit and I regret the decision in article 18 of part III of the order. A policy of continuously freezing child benefit would be a great mistake both politically and, more important, in terms of the interests of families.

I have spoken on this subject a number of times during the past year or so and I do not intend to weary the House by going over all the ground again. However, I could not let this debate pass without making one or two comments. A number of my hon. Friends and I will certainly look for an opportunity during the passage of the Social Security Bill to establish the principle that the existence of child benefit is right, and that for child benefit to do its job it must be uprated with inflation.

The Government say—and I understand the reply that my hon. Friend the Minister has made—that the increase in child benefit would do nothing for those with children on family credit and income support. I am not sure whether that would apply, too, to those on single parent benefit. What really does this attempt at targeting achieve? I remind the House that the money for the uprating was in the last public expenditure White Paper. There was in no sense a demand for additional money if the benefit was to be uprated. The Chancellor of the Exchequer had agreed that the money was available. I am glad to say that the Chancellor of the Exchequer is still providing money for uprating in future years. Therefore, it is not just that the economy is in a strong enough condition to bear this, but that the money has been specifically allocated by the Treasury for that purpose, which makes it all the more sad that it should not be used for that.

I am glad to see my hon. Friend the Minister for Social Security on the Front Bench. Will he tell us how much, net, will actually be saved by the decision not to uprate child benefit, especially bearing in mind the significant point that an increase in child benefit would have the advantage of taking out of family credit some of those now receiving it? Those people would then move above the level of means-tested benefits. I wonder whether that factor has been allowed for when calculating the savings to be achieved by not uprating child benefit.

The article by Hermione Parker in today's The Times has already been mentioned. I must say that that was a brilliant statement about the weakness of means-tested benefit. I hope that my hon. Friends on the Front Bench will think about it carefully. What I thought was especially formidable in her article was the way in which she stressed that the more we rely on means-tested benefits, the more we shall increase the culture of dependency, which my right hon. Friend the Secretary of State and others have talked about recently.

There is no doubt that it is the means-tested benefit, much more than the universal benefit, which brings about dependency and, of course, brings about, in conjunction with it, a disincentive to move on to paid employment or to better one's income. That is a serious drawback of all the means-tested benefits. I know that the Government have tried to reduce this in some respects by tapering, and they have had some success. However, there are other parts of the social security system where the incentive for increasing one's income by going out to work, if looked at in hard practical terms, is small indeed.

I do not deny that the problem of dependency exists. It is right that my hon. Friend should focus on that, but I strongly believe that the answer that is being put forward of constant recourse to targeting and means-tested benefit is not meeting the problem.

I have already said that I do not intend to deploy the argument for child benefit at length. We have heard already today that there is a take-up problem with family credit. I believe that the figures for family credit must be considered depressing and, of course, there is also the problem of incentives, to which I have referred. I simply want to stress that, as a country and as a party, we need to work hard to find a family policy that is relevant to current needs. If we look back at the figures of 30 years ago, we see that about half of the poverty was to be found among the old. Happily, that figure is now down to about a quarter, which is a great advance. The substantial advance in the position of old people is entirely good and is due to different factors, including, of course, the spread of second pensions. Although I do not deny that there is poverty among many old people, the overall picture for them is better.

When we think about poverty and hardship today, we must consider especially the people who are trying to bring up young children in circumstances that are often difficult. I, and I suspect a number of other hon. Members, will say that the peculiar factor that has deteriorated especially during the last decade or two has been the enormous increase in family breakdown. In my surgery, I am constantly struck by the way in which in earlier times it was really quite unusual for housing problems to be essentially a product of divorce or of one-parent families. Now, over and over again, that is the factor causing the tough social difficulties. I believe that that factor has a great relevance to child benefit, because it appears that women, especially, who are trying to bring up children in difficult circumstances, often against a very rough background in a harsh great city, are the people whom we should be considering. Although I acknowledge that family credit and income support are useful and that the increases in such benefits are valuable to those who receive them, I nevertheless believe strongly that the continuity of child benefit—the fact that one knows when one will receive it without any means test—gives parents bringing up children the kind of confidence that very many of them badly need. I would apply that not only to the poorest and those facing the toughest of all situations, but to many others, especially those who are not quite poor—those who, relatively speaking, if one looks at the total income of the parents, should be not at all badly off. If we are thinking about a genuine family policy designed to meet the difficulties that people face in the circumstances of which I have spoken, child benefit should form an important part of that.

Of course, there is no point in saying that child benefit should be an important part of that policy unless one is prepared to go on to say that, for it to be meaningful, it must be uprated. It cannot be allowed to be frozen and to wither away.

I hope that, when the Minister said that there has been no long-term decision about the uprating of child benefit, he meant it. I am sure that he did, because he is an honourable man. I hope that the Government will take on board the fact that they have the resources allocated to uprate child benefit in the future and that the social and political arguments and arguments of straight Conservative philosophy all point in that direction.

I recall that last time I spoke I was interrupted by my hon. Friend the Member for Norfolk, North (Mr. Howell) who said that it was absurd to give all this money to people who could perfectly well afford to do without it, and what would the old people say about what was going on. I do not believe that most of the old people begrudge the existence of child benefit, any more than those who receive child benefit begrudge the fact that very prosperous old people, perhaps, receive the £10 Christmas bonus and can travel at very low rates on the London public transport system. I do not believe that that is the prevailing mood in this country. People by and large are reasonable and civilised.

I am glad that the window has not been completely shut, but I believe that it is of great importance that we should uprate child benefit. We should consider it a major instrument of social policy. I hope that the Government will announce shortly that they aim to uprate it.

Several Hon. Members

rose—

Madam Deputy Speaker (Miss Betty Boothroyd)

Order. I appreciate the fact that the right hon. Gentleman was able to say what he had to say within 10 minutes. Many hon. Members wish to speak and I hope that they will follow the right hon. Gentleman's example.

5.48 pm

Mr. Frank Field (Birkenhead)

I shall do that if I can, Madam Deputy Speaker. I wish to make only two points. I should first like to add to what my hon. Friend the Member for Livingston (Mr. Cook) said about Labour's record on pensions. I shall comment on that, because the Government say that they are so interested in targeting. They tried to question my hon. Friend's figures about the 20 per cent. increase in real terms for pensioners. I am making a distinction between the increase in pensions and the increase in living standards.

If we consider the most vulnerable group of pensioners—those who during the period of the last Labour Government and this Government have been completely dependent on the state pension—we see that their living standards rose in real terms by 20 per cent. under Labour. Therefore, I should have thought that a Government who tell us that they are interested in targeting would have paid some attention to that fact and drawn the attention of the House to Labour's record. The Conservative Government's record stands up to scrutiny, but they have a largely untargeted programme wherein the largest gains in living standards among pensioners have gone to the richest. That is a strange form of targeting from the Government.

Secondly, I welcome the statement by my hon. Friend the Member for Livingston that the House will be given a clear opportunity early in the new year to vote on child benefit. My hon. Friend deployed the case against the Secretary of State, who seems to have an unhealthy prejudice against child benefit. The right hon. Gentleman does not say to the House, "under my stewardship, child benefit will not be increased," because he knows that, if he did, in no time some of us would have him in the courts. He has a duty each year to decide whether child benefit should be increased, given the changes in circumstances during the previous 12 months. Legally, he cannot make such a statement, but he shows in everything else that he says and in every bit of body language at the Dispatch Box that he is intent on not increasing child benefit. I agree with my hon. Friend the Member for Livingston. We shall have an opportunity early in January to deploy, and win, the argument against Conservative Back Benchers.

If we have done our work and try to get Conservative Members to join us in the Division Lobby, and we fail, and if my hon. Friend the Member for Livingston is right about the prejudice on the Treasury Bench against increasing child benefit, we must accept the challenge. The Opposition and pressure groups outside must accept that challenge, or we will be presented every year with opportunities in the uprating or on Opposition Supply days to make a fuss, but it will only be gesture politics. We will know that the Government have no intention of moving down the line that we want. If we are not in business to perpetuate gesture politics, after January's debate we shall have to come up with new ideas and statements which do not just recite the old phrases that please us and some Conservative Members but take the argument into the enemy camp and challenge the enemy on its assumptions. If we fail to win the vote in January, we must start putting forward alternatives. My hon. Friend the Member for Livingston referred to the wall of resistance, which we will meet, to increasing child benefit.

As well as keeping child benefit, we should consider challenging the Government to reintroduce child tax allowances. People may say that that is an inconsistent position for me to hold. I favour abolishing all tax allowances and reducing the standard rate to between 12p and 15p in the pound. I am not, however, above a political or tactical manoeuvre, to score points and have a conversation with the electorate and, if successful, to ensure that the funds that exist in the form of a child tax allowance can be put back into the child benefit scheme by a future Government three years hence. Some will say that the group to lose out will be some of the most vulnerable, those who earn their poverty and do not earn enough to pay tax. It would not be impossible, however, to have a child tax scheme that allowed such people to opt for a cash payment. The majority of families could claim the tax allowance against their tax liabilities and those below the tax threshold could pick up a cash payment, just as happens with child benefit. I again emphasise that I am talking not about phasing out child benefit but about running the two schemes together. We shall face that challenge as an Opposition if we are serious about using the next three years to have a conversation with the electorate so that they trust us with the reins of Government after the votes are counted and do not return us yet again to the Opposition Benches.

As it will be a challenge to us, so, too, will it be a challenge to the pressure groups. We cannot expect them to trot out the same old arguments as though we live in the 1960s and 1970s. If my hon. Friend the Member for Livingston is right, as I believe he is, in describing the prejudice of the Secretary of State and other members of the Government against increasing child benefit during the life of this Government, they, too, need to put their thinking caps on and come up with proposals, which the Government may implement, which safeguard the child benefit scheme.

If there is one lesson that I have learnt from watching the Government's behaviour over 10 years it is that few Opposition Members can dislodge the Prime Minister when she has an idea in her head, although sometimes Conservative Members and supporters can do so. But when the Prime Minister puts the ball down, we can pick it up and run in a slightly different direction from the one she expected. If we are not to have three years of these sorts of debates, three years of exciting ourselves and rehearsing the same old arguments and three years of defeats for our constituents and poor families, we need not look over our shoulders, worrying about what the pressure groups will think. We must seek room to manoeuvre—the room allowed for us by the Government—and to secure victories.

I could not be more pleased not only by the quality of the speech of my hon. Friend the Member for Livingston but by the promise of a debate in the new year and the chance to put hon. Members "on the spot", if I may put it as gently as that. All of us must learn from the vote. If it goes our way, the Government will lose. If it does not, the challenge will be presented to all of us on the Opposition Benches and to pressure groups: what will we do for the remaining three years of the Parliament? Will we trot out the same old case, or will we think of something new so that, at the end of that period, we shall have delivered something to the people whom we represent?

5.57 pm

Mrs. Gillian Shephard (Norfolk, South-West)

I should like to make a few comments on hon. Members' observations on child benefit. We should emphasise that it remains a universal benefit to all families and will have to be reviewed in the autumn, as my hon. Friend the Minister said. My hon. Friend said also that there should be a judicious mixture of universal and means-tested benefits. We need to remind ourselves that, if the benefit were uprated in line with inflation, it would cost £200 million. We should ask ourselves whether it is right to continue to uprate the benefit while paying it to all families, including the super-rich, whom the Opposition have mentioned repeatedly in the context of tax cuts in last year's Budget.

Of course child benefit is much valued and needed by many families, but hon. Members must recall some of the media publicity which was given at the time of the last debate on this subject, about a month ago, to those receiving the benefit who said that they did not need it, that they were spending their benefit on antiques, ski holidays or gymkhana fees. Of course, those are anecdotal examples and represent a minority, but surely they mean that we should look at the system again. The debate after the recess will perhaps give such an opportunity.

Before the introduction of family credit, child benefit was undoubtedly a lifeline for the poorest families and a useful addition to the family budget for those on middle incomes. But this debate is taking place when the average take-home pay of a man with two children has increased by 30 per cent. since 1979 and when prosperity levels have been transformed in areas with good employment prospects. Given that fact, there is more than ever a sound reason for giving most help to families with children who need it most, via income support and family credit.

Next year, in addition to the £5 billion that will go to the neediest families, there will be an extra £70 million through, for example, a combination of child allowance, income support and housing benefit, and also help through the exceptional cold weather payment scheme which will be extended to families with children between the ages of two and five. That will help a further 500,000 families.

But the debate is not about whether we should have child benefit or give help to the poorest families through income support and family credit, but rather whether in today's circumstances of increasing prosperity in large areas of the country we should continue to pay a universal perk to all families, even the super-rich. That debate should be pursued.

The "save child benefit" lobby claims, validly in my opinion, that the sheer permanence and ease of child benefit particularly helps the poorest families, a feature of whose lives is fluctuation of income and circumstances week by week. There are still far too many delays, errors and sheer complexities in claiming income support and family credit, and their take-up, although much improved, needs to be improved still further. I hope that the computer programme outlined yesterday and now well under way, and the Department's efforts to improve the take-up of all benefits, will improve the benefit system's responsiveness to families in real need.

A recent publication of tables showing the interaction of tax and benefits illustrates that the systems can no longer interact to create a combined deduction of 100 per cent. or more, which was clearly a ridiculous situation. But, as has already been said, attention must now be paid to the fact that, as the tables also illustrate, crossing a national insurance contribution threshold can sometimes mean the same thing.

Finally, it must be obvious to everyone that the real solution for families with children must lie in the continued strengthening of the country's economy and, in particular for families with children, the continued reduction in unemployment rates. We have seen recently that we have the lowest unemployment figures in the EEC. That strengthening of the economy, together with the judicious mixture mentioned by my hon. Friend the Minister, should provide the right sort of help to families who need it.

6.2 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I am grateful for the opportunity to take part in the debate. Since being elected to the House I have spent some time taking part in debates such as this, but this one has a slightly different flavour from the others. The difficulty about debating important subjects based on uprating statements is that we tend to be bedevilled by technical detail and quantities of money that may or may not be needed. Therefore, it is not easy to discuss some of the interesting points that the hon. Member for Birkenhead (Mr. Field) raised. I have always felt that to be a matter for regret.

I greeted with enthusiasm the announcement of a debate made by the hon. Member for Livingston (Mr. Cook). He made an expert and interesting speech which will repay study when it is printed in the Official Report. I exhort the hon. Gentleman to make the motion that he plans to put before the House as broad as possible to enable us to have a wide-ranging debate. There is a need for that, although I understand that the hon. Gentleman's main intention is to try to get his hands on the vote for child benefit and in that regard, too, I would encourage him. One thing that has come out of today's debate—it does not always happen—is that there is a cross-current of opinion between the Government and Opposition Benches on the future of child benefit and whether the argument about universality versus selectivity has been won or lost in the Government's mind.

I hope that the Government will say something about what is in their mind for child benefit in the longer term. I too know, as the hon. Member for Birkenhead said, that there are legal difficulties because the Secretary of State has a statutory duty to look at the situation afresh each year, making it difficult for him to make blanket political statements in the House. But it also makes it fiendishly difficult for those of us who take a genuine interest in some of these detailed questions to make assumptions and judgments about what is in the Government's mind for the future. I hope that the Government will find some way of telling us whether it is their genuine intention to freeze child benefit or universal benefits generally for the foreseeable future. It is right that we should know that. However, I fully understand the difficulties that the Secretary of State may have in being as explicit.

The whole question of universality has gone by default, and that is a mistake on the part of Opposition Members. The hon. Member for Livingston said that if these benefits had been treated as child allowances they would have suffered an entirely different fate at the hands of this Administration, and that is true. Selectivity inevitably leads to the familiar and well-rehearsed problems of poverty traps, means testing and take-up rates. Worrying developments have accrued from the new system introduced in April. Some of the reforms have simplified the system—one of the Government's key objectives. The social security staff who operate the system are finding it easier. It must also be recognised that some of the new levels for child credits, income support and the family credit system are making an impact once the problem of take-up is resolved. It would be foolish not to recognise that. However, there are severe and substantial problems in some other areas which relate directly to the problem of selective benefits in general.

We often forget that one of the principal reasons for the original Beveridge report was the importance of the horizontal distribution of income throughout the lifetime of a Parliament. There were periods that could easily be marked as times when extra finance was necessary. Starting a family is an obvious one to choose. Therefore, the Beveridge plan was an attempt to try to redistribute money along those lines. That is an incontrovertible argument which is as true now as it was then. That should be borne in mind in addition to all the other arguments about cheaper administration.

If we are to start on a great debate about the relative merits of universality versus selectivity, the Government will have to take into account other available tax reliefs such as mortgage tax relief and pension tax relief, because they are an important part of the argument. There is a value in universal benefits that goes beyond their financial impact and that is part of the social cement; part of the collective provision that we all accept in other areas which prevents social division. There is a host of arguments that we should have an opportunity to deploy in the House in their wider context, not necessarily within the technical detail of an uprating statement such as we are debating tonight.

Today's debate has been focused, understandably, on child benefit, but I am also worried about the position of some pensioners. There has been the usual barney about whether the last Labour Government paid more or less than what the present Government are paying. That is all very instructive, but I have heard it before. Leaving aside such banter, I believe that there are substantial problems for pensioners who rely exclusively on state pensions, particularly the more elderly. The Government have recognised those problems and have put £200 million into the system. Although I do not think that that goes far enough, it is none the less a step in the right direction, and as such I welcome it.

If the Government are to tell us their view on the continued universality of child benefit, they will also have to address the question of the general increase in wealth. We need to bridge a gap, particularly for those exclusively on state pensions. Of course we need to price-protect the increases, but we must protect a particular generation of pensioners before people can start claiming state earnings-related pension in 20, 30 or perhaps 40 years' time. I shall be all right when I retire, but the present generation of pensioners are suffering and will continue to suffer. Their suffering must indeed worsen in relative terms, because, if the Government and the Chancellor are to be believed, the country's general wealth is increasing quite fast. Pensions are being increased in accordance with the increase in prices, but that does not give pensioners the opportunity to share in the general increase in wealth that is available to everyone who happens to be in work rather than relying on a price-protected benefit.

Having announced a £200 million increase, the Government will be forced to come back year in, year out to deal with the problem—which I accept will disappear when SERPS comes into effect substantially. The problem should not be minimised. It does the Government no good to beat their chests about what they are achieving for the average income of the average pensioner. It is cold kale to pensioners in my constituency and others, who are at the sharp end and are forced to live on a state retirement pension and nothing else, to hear what the average income increase has been over the past five or 10 years.

The social security advisory committee has recognised the problem and I support its views. I do not go so far as to say that £5 billion is needed so that we can put all the money back into pensioners' pockets immediately; that would be an unreasonable request. From time to time, however, in appropriate circumstances, there must be an uprating that goes beyond what the retail prices index demands. Otherwise, pensioners will find themselves inexorably losing out on the country's general wealth creation.

I saw a worrying leader in The Guardian recently—around the end of last month—which mentioned a sudden inexplicable drop in the number of people claiming benefits. Have the Government any explanation? They may say that the unemployment figures have fallen. Of course we cannot obtain as detailed and accurate statistics as we used to under the old 1983 system of data and statistics provision.

I am also worried about staff requirements. I am worried by some of the conclusions of the Moodie report, by what the National Audit Office has said about the conditions in which staff work and by the comments of the Public Accounts Committee in its statement last month. Nevertheless, if the motion is pushed to the vote, which I understand is now less likely to happen, I shall support the Government as far as they go—on the strict understanding that it is only because they have given more money to elderly pensioners.

6.14 pm

Mr. Michael Jack (Fylde)

I pay tribute to the thoughtful comments of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who spoke with care and compassion—as have other hon. Members on both sides of the House.

So far we have not heard much about how the massive increase in Government expenditure associated with the upratings is to be paid for. I understand that £1 in every £3 of the Government's expenditure goes into social security; when the Labour party was in government the proportion was £1 in £4. We have heard the Government criticised for not spending the substantial revenues that the Chancellor appears to have at his disposal on matters identified by Opposition Members. The Chancellor has, I think quite cleverly, pointed to a strategy of repaying debt, reducing the cost of servicing that debt and thus enabling us to fund social security expenditure prudently.

Some 25 per cent. of my constituents are pensioners, and they warmly welcome the upgrading. But, while everyone clearly benefits, some people are left in some form of need. I welcome one part of the upgrading statement, and some comments by Ministers have been important in underpinning the position of the basic state pension in our benefit structure. There is a view that as people have more occupational pensions the state pension becomes less important, but I believe that the state pension is crucial because it is ultimately an insurance against life's chances. Someone in a good job may be ill and thus unable to realise his full income potential. His occupational pension would necessarily fall away, but the state pension would be there to guarantee at least some income for working people who run into difficulties

We have heard comments about income support and family credit, and the hon. Member for Roxburgh and Berwickshire mentioned the Beveridge report. Beveridge stated: The third principle is that social security must be achieved by co-operation between the State and the individual. The State should offer security for service and contribution. The State in organising security should not stifle incentive, opportunity, responsibility". The report spoke of "encouragement for voluntary action", and the uprating of family credit plays up to that. It means that families will be supported to the tune of some £5 billion a year. A family earning up to £9,000, with two children aged 12 and 14, could receive help via family credit.

As the hon. Member for Roxburgh and Berwickshire pointed out, we have heard a certain amount of banter across the House about who did what. Pensioners, however, greatly value the present Government's contribution in respect of inflation. They know that an uprating of 5.9 per cent. will be, by and large, the rate of inflation over the 12-month period. What the Opposition's argument has missed out is the dynamic effect. It is all right uprating and catching up in 12 months' time, but when the Labour party was in government and inflation reached double figures there was no catching up in the intermediate period. That was when the real value of pensions disappeared. Labour also contributed to a reduction in pensioner income by changing from the historical to the forecast method. But I do not want to get stuck in too sterile an argument. Some wider issues to do with pensions can also be raised.

We should remember that the Government have a large commitment to those who are coming into pension—people who contribute to their occupational pensions and are coming up to retirement. About £10.7 billion worth of tax-based assistance goes to people who are saving through pensions. So when we discuss the Government's commitment to pensioners we cannot ignore that other side of the equation.

I want to talk for a moment about pensioners' incomes. It is interesting to discover that 150,000 married couples and single pensioners over the age of 65 pay higher rate tax, so that sort of income has spread a long way up the spectrum.

Mr. Kirkwood

They are only a tiny minority.

Mr. Jack

Perhaps, but about 50,000 of them pay capital gains tax. They represent the leading edge of the spread of wealth. However, I lake the Opposition's point that, to counter-balance this, 1.9 million pensioner tax units have occupational pensions of less than £1,000 a year. That shows that there is a management problem and that, welcome as the uprating of pensions is, we have to manage the gap between some who depend only on state benefits and others who are extremely well off. I would encourage debate about that.

My mother, who lives in a rest home, sold her house and lives on the income she receives and on attendance allowance. In spite of all that, she ends up paying tax. She receives a small occupational pension of £1,500 from my father's estate, and ends up paying £9.95 a month in tax, Although my hon. Friend the Minister is not responsible for Treasury matters, I implore him to suggest to the Treasury that we may be able to help pensioners by removing them from the tax bracket in which they now find themselves. That is rather a sore point.

My hon. Friend the Minister has shown compassion in his dealings. I know from my dealings with pensioners that one of the problems with the uprating statement is that it cannot, by definition, deal with some anomalies that have arisen because of the changes in social security arrangements. I shall not go though a litany of cases, but I ask my hon. Friend to honour his pledge in the foreseeable future and to knock off some of the rough edges that have become evident as we have become used to the new system. Some pensioners require help; others have considerable wealth at their disposal.

I want to put the uprating into another context. We must never forget that people who work pay for those benefits. Today, 2.3 national insurance payers per beneficiary bear the burden of our social security system; by the end of the century that will have dropped to 1.8. The Government are right to get to grips with the problem of what we spend this large sum on, so that the burden may be properly borne in future.

Much as I support my hon. Friend's announcement about Motability, and much as I support the enormous amount of work that he has done to help the disabled, my plea is that he will examine the cases put forward to him which involve the relationship between income support, the transitional arrangements and the other benefits that go with them. I do not want my hon. Friend's fine record to be marred by a series of cases of people losing benefit because of changes in other benefits.

The benefit uprating statement is to be warmly welcomed. It clearly shows the Government's commitment to helping those in need, and it forms a useful platform from which to go forward and make further improvements.

6.25 pm

Mr. Jack Ashley (Stoke-on-Trent, South)

The hon. Member for Fylde (Mr. Jack) diplomatically said that the Minister had a fine record, but asked him to look at the problems of the disabled. I am glad that plea was made. The hon. Member for Fylde mentioned rough edges; disabled people get a rough deal from this uprating. It is deplorable that the Government should add to the heavy burdens of disabled people by today's tardy uprating.

Income is a major problem for almost all disabled people. I suggest three requirements. First, basic needs should be met, regardless of what else happens, such as changes in a person's disability or in the Government. Secondly, additional costs should be covered. Thirdly, there should be a basic income good enough to live on.

The Government have failed disabled people on those three counts and the uprating has done nothing to change that. Social security benefits are crucial for disabled people. Most of them have been affected by the 1988 changes. The citizens advice bureaux surveyed people on social security and concluded: The overriding impression of the April changeover has been the distress and lack of understanding caused by administrative confusion and poor communications. Not all those surveyed were disabled, but it is very likely that the elderly disabled were amongst those most distressed and finding greatest difficulty understanding the blows that were hitting them. That is a strong statement.

The nature of the transitional payment has not been fully understood by some disabled people. Many of them do not realise that a transitional payment means that they will get no increases in 1989 to cope with inflation. Some of them will not receive increases for many years. The most severely disabled people face a period of declining real income—a terrible thing.

A major disaster for disabled people has been the replacement of the familiar, understood and targeted additional cost payment with the simplistic disability premiums. Disability is an individual matter and the additional cost payments were related to individuals, which was important. Premiums are group payments. The Government were warned by my right hon. and hon. Friends that these payments would be inappropriate, and so they are. They are based on averages and so cannot be adequate for the worst cases.

The disastrous consequences were concealed last April by the provision of transitional payments; but unfortunately for the Government, and even more unfortunately for severely disabled people, sharp increases in mortgage payments have shredded these transitional payments coverages. A glaring example is that of the disabled owner-occupier with a rising mortgage bill who has received no additional cash in hand to pay for it. All that has happened is that the part of the money labelled income support has increased and the part labelled transitional payment has decreased.

Disabled people with rising rents do not have their transitional payments squeezed and that is as it should be. The treatment of owner-occupiers is anomalous and unjustified and it is hitting and hurting. The Minister must bear responsibility for that.

Ministers have claimed that many people are better off as a result of the 1988 changes. That was only because of the transitional payments and there is no doubt that those have turned out to be a Government confidence trick. Regulation after regulation has meant blow after blow for those people. A few days in hospital or a temporary change of circumstances can lead to the end of transitional protection. Whatever the change, it makes disabled people worse off and none of the changes can make the disabled man or woman better off. For disabled people, there is no Santa Claus in the Government and the House should recognise that.

The issue of disability costs is a nightmare for disabled people and a challenge to the Government, but before the Government act they must look again at the survey findings of the Office of Population Censuses and Surveys which show that additional costs are £6.10 a week on average. That figure must not be allowed to become part of the accepted disablement fact file. The Disablement Income Group was astonished by that and the detailed critique that it produced must be taken into account by Ministers.

The Government—and the Minister of State in particular—while accepting that 6 million people have been identified as disabled, have tried to whitewash the importance of that by saying that a significant proportion are only slightly disabled. The Minister said that at his press conference. If the Minister is right, he must acknowledge that the low figure of £6.10 for average additional costs arises because those who were surveyed include many slightly disabled people with low additional costs. The logic is impeccable. Severely disabled people who have higher additional costs—in some cases, very high additional costs—are not covered. The Minister must accept that.

In his speech this afternoon, the Minister praised the independent living fund. Surely he blushed when he did that because the figures reveal the reality. Only £125,000 has been paid to a mere 355 people. On my estimate, that is about £353 each on average. Five hundred and seventy-four people have been rejected and 1,574 people are being considered. The social security changes took place nine months ago. As a safety net, the independent living fund is too late and too full of holes.

What matters basically to disabled people is how much money there is for normal living and the OPCS survey revealed just how badly disabled people fare. In 1985, when the survey was carried out, the average non-pensioner disabled couple, after allowing for additional costs, received just £91.70 a week compared with £136.50 for a non-disabled couple of working age. For pensioners, the gap was smaller, but still significant. It was £83.70 compared with £93.70 and, at that level, £10 is a fortune. Those stark figures reveal the tough, harsh and hard life led by disabled people, with their reliance on social security. The Government have failed to honour their promises and have failed disabled people. It is a sad, sorry and shameful record.

6.34 pm

Mr. Michael Irvine (Ipswich)

I am sure that all hon. Members, irrespective of party, are anxious to do their best for pensioners in need. They are, after all, the generation that saw us through the second world war and preserved our national freedom. It is right that we should make proper provision for those pensioners who need support. How best to do that? The Opposition call for more—and they call for more across the board. It is far more difficult and far more complicated than that.

I am inclined to think that my hon. Friend the Minister was right when, in his opening speech, he called for a judicious mix of across-the-board benefits and selective, targeted benefits. I have no doubt that it is right for the Government to maintain the basic state retirement pension in real terms. The question is, what should be done with the extra money beyond that which becomes available? If the extra money is squandered in across-the-board benefits, it means that less money is available for those who really need it.

Pensioners are a disparate lot. Sadly, there are those who are in real need, but there are also many well-to-do pensioners. There are many who have paid off their mortgages, who have received substantial lump sums on retirement and who benefit from quite substantial occupational pension schemes. If we pay across-the-board benefits, the inevitable effect will be that money and benefits go to many who do not really need them. It follows that less is available to help those who really do need them. I have no doubt that the extra money should be targeted, but I agree that targeting is not as easy as it seems at first sight. There are dangers and difficulties about targeting, which have to be avoided.

Take-up is one such difficulty. Family credit is an example of that, because far too few families are taking advantage of family credit, which was introduced especially to assist them. The other major disadvantage, apart from take-up failure, is the danger of creating a poverty trap.

A more constructive approach should be adopted to see how far those two difficulties can be overcome. We should be looking for a way of targeting benefits and, at the same time, overcoming the difficulties and drawbacks. Leaving aside the argument about targeted benefits as opposed to universal benefits, far more time should be spent on th e task of ensuring a better take-up of targeted benefits and on introducing further improvements in the taper system, which has proved so useful in overcoming the poverty trap. We should approach the matter along those constructive lines.

Many Opposition Members—I exempt specifically the hon. Member for Birkenhead (Mr. Field)—see the matter in black and white. They believe that universal benefits are the only way forward and they call for more without realising that there is more to it than that. The Government who do the best for pensioners will be the Government who keep inflation under control and who generate the prosperity and economic growth to provide the wherewithal to improve pensions. The Government will do best for pensioners if they give extra benefits to the pensioners who need them most.

6.39 pm

Mrs. Margaret Beckett (Derby, South)

We should have had a roll of drums when the Minister rose to speak today. Increasingly, the uprating statement serves the function of a magician's cloak. It is flashed before our wondering eyes, as the Minister makes dramatic gestures and mumbles incomprehensible incantations in which a few mystical words can be heard—words like "targeting" and "dependency". His Back Benchers, who know precisely when to cheer, although perhaps not precisely what to cheer, give tongue. Then, with a confident smirk, the magician finally whisks away his cloak. The stage is empty; the great illusion is complete; the welfare state has quietly disappeared and the amazed members of the audience turn to each other and say, "How did he do that? I did not see it go." [HON. MEMBERS: "Here he comes."] I welcome the Minister of State back to the Chamber.

We are here to puncture the great illusion and to tell the House how the trick is done, and before it is completely finished. Like many tricks, it requires the audience to suspend their disbelief. Let us begin by dispensing with the idea that we misunderstand the extent of the Government's generosity. We understand it only too well. We understand that the Government follow assiduously in the footsteps of their famous supporter, Jeffrey Archer, who wrote "Not a Penny More, Not a Penny Less."

The Government who tell us that they have lavished £1,800 million on increased national insurance benefits—although only £1,500 million is in increased benefits and not for increased numbers—are the same Government who made a profit last year of £3,000 million from national insurance contributions. That was money raised in contributions—some hon. Members have drawn attention to this—over and above that paid out in increased national insurance benefit. Twice as much money went to the Treasury as went into the pockets of pensioners, widows or the sick. Moreover, the same Government will clear a further £2,000 million and more this year from increased national insurance contributions—almost £1,000 million more than they will pay in national insurance benefit increases. That is quite apart from the running total of about £6,000 million that they clear every year because of the break of the link between pensions and earnings.

We are talking not about an increase but about a redistribution of benefits, and many of those benefits are frozen. Sadly, the majority of Conservative Back Benchers—there are some most honourable exceptions—applaud the second freezing of child benefit in cash terms because the benefit goes to the wealthy. We know, however, that they are the same Back Benchers who cheered and waved their Order Papers when the Government gave £4,000 million almost exclusively to the wealthy in the Budget.

The hon. Member for Norfolk, South-West (Mrs. Shephard) referred to the extra £200 million on child benefit as a universal perk. With great respect, I remind her that she and her hon. Friends voted for inheritance reliefs in the Budget for just 2,000 already wealthy people. That was not a universal perk but it was a perk that was rather well worth having. Does the hon. Lady really believe that that money is better going to those 2,000 people than to 12 million children? Today, I read in the press that top management salaries have increased by 30 per cent. this year. Will those who object so strongly to such people getting £7.25 a week in child benefit have anything to say about them getting £500 a week in extra salary? I very much doubt it.

I have not the slightest doubt that the Conservative Back Benchers who call for the means-testing of child benefit would applaud means-testing of the basic pension, the Christmas bonus or any other benefits for pensioners, with the same enthusiasm and for the same reasons. They object to universal benefits, clawed back in tax from those who do not need them, because they tie up resources which, freed to pay for tax cuts, could be targeted exclusively to their friends and supporters.

In July 1980 we were told the Government intended to uprate child benefit each year to maintain its value. In 1984, the then Secretary of State drew attention to what he called the need for "rough equality of treatment" between tax allowances and child benefit. It has become very rough indeed. As my hon. Friend the Member for Livingston (Mr. Cook) pointed out, child benefit has fallen by 7 per cent. in real terms since 1979, while tax allowances have substantially increased.

Child benefit remains the best way of lifting families out of the poverty trap. Increases in means-tested benefits trap more families into dependence. As always, when cuts are made, it is the poor who get £70 million of the savings in child benefit while the Treasury pockets twice as much.

Child benefit is not the only indicator of the Government's long-term intentions. The Chancellor was kind enough a few weeks ago to draw our attention to the difference between pledged benefits, which are at least frozen in real terms and stand still in line with prices, and unpledged benefits which, like child benefit, can be frozen in cash terms without changing the law.

The widows' payment is now worth almost £600 less than the uprated benefit it replaced, and it is frozen again this year. The lone parent premium on housing benefit is frozen. The earnings rule for pensioners—I am sure that Conservative Members remember that the Government were going to abolish it in 1979—has been frozen. The earnings rule for the spouses of the retired or disabled has been frozen as has that for carers. The occupational pension level that wipes out entitlements to unemployment benefit has been frozen. The hon. Member for Fylde (Mr. Jack) mentioned the need for incentives, but all the earnings disregards have been frozen.

The maternity payment from the social fund, specifically targeted only on the poorest mothers, was first cut in half, as compared with what the poorest used to get, and was then frozen at £85—£85 to meet the whole cost of having a child, for which two years ago a mother in the same circumstances could have obtained perhaps £180. Not a penny more is available in supplementary grants. Most of the benefits that I have cited are not just frozen this year; they have been frozen for five years or so, representing a steady erosion of their value.

The poorest unemployed—those on income support—have had their living standards cut. That is especially true of those who are childless because their basic benefit has not even been increased in line with inflation, as the Government admit.

Those whom the law does protect—the pensioners—have had their staple income frozen in real terms. They are standing still at best, while those in work forge ahead. The House should consider the long-term impact of that standstill, and I pay tribute to those Conservative Members who have begun to do that. If the pension of 1948 had been uprated only in line with prices, the basic pension today would be just over £18 a week for a single person and nearly £33 a week for a couple. That is less than half the basic pension today, and 2.3 million get only that basic pension. On average, a single pensioner spends about £15 a week on food—hardly an extravagant figure—so pensioners would have about £3 left for fuel and all other expenses if previous Governments had pursued this Government's policy.

We know that the Government prefer to talk only about pensioners with extra savings or extra pensions, which we welcome and applaud and which we did much to foster. But the Government are steadily whittling away the foundation of retirement incomes—the basic pension. The Minister accused us of being obsessed with the basic pension, but it is the Government who described the basic pension as the "main source" of income for most pensioners. The 30, 40 and 50-year-olds who put money aside for extra independence in retirement are putting back what the Government are taking away. They are running to stand still.

We can guess what the Minister will say: he will say that we exaggerate. He will say that we are mean-spirited not to welcome the extra money going into benefit. He will gloss over, if he mentions at all, the fact that the Treasury pocketed twice as much in national insurance contributions as the Government paid out in increased national insurance benefits.

As we are talking about the Government's generosity, let me remind the Minister of an answer that he gave me on 15 November. I asked him just how much of the real increase in social security expenditure since 1979 was due to benefit upratings in excess of pricing increases. Of the nine years, he was able to identify three in which such increases had taken place. In 1980, supplementary benefit child scale rates were amalgamated and the uprating exceeded inflation by about £3—a sum that I accept was worth having. In 1981, mobility allowance went up by a princely 70p and in 1983 one-parent benefit went up by 25 whole pence more than the increase in prices. The Government have increased benefits by more than the rise in prices only three times in nine years.

I have no doubt that the Under-Secretary of State will tell us that, although the Chancellor of the Exchequer claims that we are more prosperous and successful than ever, that prosperity cannot be shared with pensioners, the low-paid, widows, the sick and the unemployed without it being imperilled. He will deploy all the clever phrases devised by a Government who can cut housing benefit transitional protection of £2.50 by .2 and call it an erosion factor. But he and the Government know that this uprating statement is just another swirl of the magician's cloak and that backstage the demolition men are hard at work.

6.50 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Peter Lloyd)

This combined debate on uprating and re-rating has enabled hon. Members to raise a wide range of issues, but it has left me little time to respond to each point.

Before I mention some of the general points that have been made I wish to re-emphasise the Government's impressive record. Since 1979 spending on social security has risen by one third in real terms. That is not magic, as the hon. Member for Derby, South (Mrs. Beckett) described it. She wrapped herself in the magician's cloak instead of examining the figures in detail. That figure includes a 24 per cent. increase in spending on the elderly and a 90 per cent. increase in spending on the sick and disabled. Of course, a considerable amount of that is explained by the fact that the benefits go wider—more people are receiving them. But they must be paid for, and they can he paid for only by a successful economy. Those impressive figures mean that more people are being helped, and many of them are being helped much more than they were under the Labour Government. Spending next year will increase by 7 per cent. over this year, so we are continuing to find additional resources. But we are determined to ensure that the extra money goes where it is most needed.

We have honoured our pledge to maintain the real value of pensions. I acknowledge that we have not linked them with earnings, as the Labour Government did, but on two out of five occasions the Labour Government fell down on their pledge. We want to make a pledge that we can honour. The hon. Member for Livingston (Mr. Cook) was right to say that there was a 20 per cent. increase in state pensions under the Labour Government—[Horn. MEMBERS: "Hear, hear."] I hope that he and his colleagues who are cheering will be equally frank and admit that under this Government pensioner incomes have increased by 23 per cent.—an increase of 3 per cent. a year since 1979 as compared with 0.6 per cent. a year under Labour. It is clear from the figures that it is much better to be a pensioner under this Government than it was under the Labour Government.

Furthermore, there are fewer pensioners on low incomes. In 1979, 38 per cent. of pensioners were in the bottom 20 per cent. of incomes. By 1986, the proportion had dropped to 24 per cent. A statistic that will interest the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is that for pensioners' incomes compared with average earnings. In 1974, the figure was 55 per cent., in 1979 it had dropped to 53 per cent. and in 1986 it rose to 60 per cent.

Mr. Kirkwood

Will the Minister give figures for the proportion of average male earnings for those years?

Mr. Lloyd

That was the figure for average earnings. The Conservative Government have introduced the pensioner premium on income support, and next October we shall add £2.50 and £3.50 to the pensioner premium for older pensioners and the disabled.

The Opposition pour scorn on family credit as a targeted benefit, but their scorn is somewhat premature. Although the case load—260,000—is less than we had forecast, spending is up to forecast. We had intended to spend about £400 million. It is clear that the benefit is better targeted than we envisaged.

The figures show that the benefit reaches even more of the less well-off than we had hoped. We want to do even better. We are to have a take-up campaign on television because the benefit is not well enough known; it has not had enough time to establish itself fully. It will take a little longer than it should because the Opposition, instead of promoting it, have consistently decried it.

Mr. Robin Cook

The Minister has said it will take a little longer to reach the target. When do the Government expect to hit the target that they promised of 60 per cent. and 470,000 claimants?

Mr. Lloyd

The hon. Gentleman knows that I cannot predict the future, but I can tell him that we are on target with the amount of money paid out. I hope that the hon. Gentleman and his colleagues will take pleasure in that. it means that the money is reaching families who need it. I should have hoped that the hon. Gentleman would be sufficiently generous to show some satisfaction at that fact.

The Opposition have worked up considerable indignation about the freezing of child benefit. One would hardly credit it that the Labour Secretary of State who introduced child benefit in 1975, Mrs. Barbara Castle, emphatically did not plan for an annual uprating. She believed that consideration should be given each year to whether the money was best spent in that way or another. That is precisely what my right hon. Friend the Secretary of State has done. But we have not just left the matter there. We have transferred much of that money to those on lower incomes who need the help.

It is worth putting on record the fact that, on income support, the child rate for those aged under 11 has been increased by 9.3 per cent., for 11 to 15-year-olds by 7.8 per cent. and for 16 and 17-year-olds by 7.2 per cent. On family credit, child payments for under 11-year olds have been increased by 20.7 per cent., for 11 to 15-year-olds by 13.2 per cent. and for 16 to 17-year-olds by 11.2 per cent. That is additional money far above the rate of inflation which goes to the families who need it most. It is churlish of Opposition Members, who jeered the poor targeting of those benefits, not to express some satisfaction that this extra help is going where it is most needed.

Unlike those on income support, people at the family credit level have benefited from the high wage increases and tax reductions of the past year. I am amazed that the Opposition even considered voting against a measure that produces extra help for low-income families so as to enable 45p to be distributed each week to families well up the income scale who have done well from the tax reductions that the Opposition criticised.

There are several more points that I would wish to raise, but clearly there is not time to do so. These upratings bring the social security budget to well over £50 billion. They reflect the success of the Government's economic policies and their determination to use the extra resources that they have generated where they are most needed. We have fulfilled our promises to pensioners and others who receive long-term benefit, and we have also provided extra and welcome help to those families on low incomes. I commend both orders to the House.

Question put and agreed to.

Resolved, That the draft Social Security (Contributions and Allocation of Contributions) (Re-rating) Order 1988, which was laid before this House on 7th December, be approved.

It being Seven o'clock, MR. SPEAKER proceeded, pursuant to order [16 December], to put forthwith the Question on the remaining motion relating to social security.

Question agreed to.

Resolved, That the draft Social Security Benefits Up-rating Order 1988, which was laid before this House on 7th December, be approved.—[Mr. Alan Howarth.]