`In section 63(3) of the 1986 Act, at the end there shall be added the following paragraph—
`(c) mentioned in subsection (1)(f) above:.—[Mrs. Beckett.]
§ Brought up, and read the First time.
§ Mr. Deputy Speaker
With this it will be convenient to take new clause 2—Social Security Act 1986—`In section 63(3) of the Social Security Act 1986 for "(c) or (d) above" there shall be substituted "(c), (d) or, in any Order having effect on or after 1st April 1990, (f), (child benefit), above".'
§ Mr. Deputy Speaker
Order. It has been pointed out that the hon. Gentleman's name is not on the new clause. Will an hon. Member whose name is on it move it formally?
§ Mr. Cook
I am happy to assure the House that I agree with the words of my hon. Friend.
I was paying tribute to the memory of Sir Brandon Rhys Williams, whose absence from these debates is much regretted by Opposition and Conservative Members, not simply by Conservative Members. There would be no more fitting tribute to the memory of the late Sir Brandon Rhys Williams than for the House to pass new clause 1 or new clause 2. Sir Brandon was indefatigable in his defence of child benefit and in his campaigns to secure regular and honest upratings of that benefit.
This is not the first occasion on which the House has had the opportunity to debate the freezing of child benefit. We did so most recently in January, on a Supply day motion tabled by the Opposition. On that occasion, a number of Conservative Members were good enough to say that they agreed with us on the issue, but could not vote for the motion because it was a Labour motion. I must confess that I am not entirely persuaded that that in itself is a good enough reason for not supporting a motion with which one agrees. However, that difficulty is now removed because those hon. Members have tabled their own new clause. It may be helpful to them—and make the evening more interesting for the Whips—if the vote at the end of the debate is on new clause 2 rather than on new clause 1. It may be for the convenience of the House for me to say now that we do not propose to press new clause 1 to a vote. I hope that that will also assist in keeping those on the Treasury Bench rather more on the edge of their seats than they might otherwise have been.
The regularity with which this issue has been debated must have at least the one essential function of convincing those on the Treasury Bench that the issue will not go away, but will return to harass them repeatedly until they accept the logic of the case or dispose more satisfactorily of it than they have in our previous debates on child benefit. Every year, the Secretary of State reviews whether child benefit should be uprated. We are assured that it is mere coincidence that in both years in which the present Secretary of State has carried out the review he has decided that it is appropriate to freeze child benefit. He dare not state that child benefit should be frozen as a general principle because he would be in breach of the law that obliges him to review annually the level of child benefit. That leaves him in a rather uncomfortable position. He is unable to attack the benefit openly and to state that he would wish it to wither away. But, because he cannot openly attack the benefit, he has some difficulty in justifying why he never thinks it right to uprate child benefit. His difficulty tonight is compounded because new clause 2 in particular clearly focuses not on what should happen this year, but on what should happen next year. If the Secretary of State invites us to reject new clause 2, he is inviting the House to leave open the possibility that next year he may choose again to freeze child benefit for the third successive year.
In so far as the Secretary of State has come near to justifying such a freeze in our previous debates, he has 684 done so on the basis that it is cheaper to control access to child support through the means test, hence the stress placed on family credit as a substitute for child benefit. With every successive debate, it is possible to evaluate more clearly whether family credit can be portrayed as a satisfactory and credible alternative to child benefit. We have continuing evidence that the number receiving family credit is far smaller than promised. The Government's initial estimate of those likely to claim family credit was 470,000. The Secretary of State will be aware that the number has never exceeded 255,000, and at the end of February the number was slightly lower than the November peak. The number of people on family credit has flattened out at half the level initially promised by Ministers when family credit was introduced in the House.
The Department of Social Security has made two responses to the rather meagre take-up. The first response —which is welcome—was the relaunch of family credit a fortnight ago, on which the Secretary of State is spending £7 million. We wish the relaunch well and hope that it will be successful. However, I hope that he will forgive us for pointing out that family credit is becoming one of the most advertised benefits. Even if the right hon. Gentleman's wildest hopes are fulfilled and the relaunch succeeds by driving up take-up by, for example, one third, it will mean that the Department is spending £100 for every new claimant for family credit. That is a large administrative overhead and I am bound to say that it contrasts badly with the administrative overheads for child benefit.
Nobody suggests that child benefit needs a relaunch. No one is proposing a £7 million recruitment campaign to recruit claimants for child benefit. On the contrary, for minimal effort, child benefit obtains a 98 per cent. take-up. That figure turns not on packaging and advertising but on the nature of the benefit. Child benefit scores high because it is well known, easily understood and simple to claim and because it is universal so there is no sense of social stigma attached to claiming it. For all those reasons, the take-up of child benefit will always be far higher than anything that can be achieved by any means-tested benefit.
The other response from Ministers to the low take-up of family credit was less elevated. Confronted with a problem, the Government changed the figures, as they so frequently do. The new figures produced by the Secretary of State a month ago knock a quarter of a million off the estimate of those eligible for family credit. That has the convenient consequence that it has increased the percentage take-up of family credit without its being necessary for one extra person to claim it. Overnight, the take-up figure has soared from 35 to 50 per cent.
The Secretary of State will recall that he announced those figures on 17 March. On 6 April, I asked whether he would deposit in the Library the working papers on which the revised figures were based. Last Monday, he told the House that the figures had been deposited in the Library. When I checked, I found that the papers had not yet been deposited. I pursued the matter and asked the right hon. Gentleman's office whether we could have the papers. I was told that arrangements would be made for a package to be sent to my office. When I opened the package, I discovered that it contained the market research carried out for the relaunch. It is singularly apt that, when we ask for the Government's statistical data, we are sent market research.
On Friday, I again asked where the working papers were. I was told that they had not been deposited in the 685 Library because they were not yet ready. These are the working papers on which a conclusion was apparently reached by the Secretary of State a month ago.
On my way to the Chamber today, I checked in the Library and discovered that three sheets dealing with the take-up of family credit had been deposited by the Department of Social Security this very afternoon. The Secretary of State will appreciate that I have not yet had time to go through the complex formulae. Of the three sheets, two deal with methodology and none provides the raw data. If the Secretary of State had those sheets in front of him when he announced the revised figures, he will know that the foundations for those revised figures look very shaky indeed.
§ Mr. Favell
Is the Labour party in favour of abolishing family credit and spreading benefit thinly among everyone entitled to child benefit? If so, surely the poor will suffer.
§ Mr. Cook
We are most certainly not in favour of abolishing family credit. We are most anxious that all the 470,000 who we were promised would get family credit should get it, for the good and simple reason that, as the hon. Gentleman would recall if he had attended the debates in 1985 and 1986, Ministers repeatedly promised that family credit would compensate families with children for cuts in housing benefit and the loss of entitlement to free school meals. Those families have suffered the cuts but a quarter of a million of them are not receiving the family credit which we were promised would provide the compensation. We very much hope that the campaign launched by the Secretary of State will succeed and that he will find the remaining quarter of a million, but in the meantime, given the Government's pathetic failure to match even their own target for the take-up of family credit, they cannot seriously argue that family credit is an adequate substitute for child benefit. After all, the increase in take-up was achieved without a single extra person claiming.
The net result of all this is that, in the past 18 months during which we have been debating the uprating of child benefit, the only thing that has happened to alter the debate one way or the other is that it has become absolutely clear, beyond argument, that family credit cannot possibly be paraded as a substitute for child benefit. Family credit goes to only one quarter of families—one twentieth of those who receive child benefit. Not only does child benefit go to many more families with children; it goes to many more families living in poverty. For a start, it goes to the 250,000 families who, even on the revised figures, are poor enough to qualify for family credit, but do not receive it. Each of those families gets child benefit and it is the only support that they have for their children.
§ Dame Elaine Kellett-Bowman
The hon. Gentleman referred to those in poverty. Does he have any recent data suggesting that, as we discovered some time ago, there is a remarkable number of women from quite wealthy families whose only income is child benefit? Their husbands pay the bills, the rates, and the butcher but they do not give them any money in their hands. Those women at least get child benefit.
§ Mr. Cook
The hon. Member for Lancaster (Dame E. Kellett-Bowman) is absolutely right. During our previous 686 debate I read to the House a moving letter from the wife of a man whose earnings were well above average who said that she depended on child benefit because it was the only income on which her husband could not get his hands. The hon. Lady has led us to the reasons why child benefit is so superior to family credit and why it is so important.
First, child benefit puts money in the hands of the mother. It redistributes purchasing power in favour of children because it goes to the parent who is most likely to be responsible for feeding and clothing the children. Secondly, it puts money in the hands of just about every mother. It has a take-up rate as close to 100 per cent. as one could hope to achieve.
Thirdly, child benefit does not fall as income increases. The Government persist in representing that feature of child benefit as its major weakness. In fact, it is its great strength. Child benefit represents an important ladder out of the poverty trap. It will be impossible for child benefit to fulfil its role as a ladder out of the poverty trap if the Government substitute for it a means-tested benefit confined to those who are already in the poverty trap.
There is a fourth reason why child benefit remains a correct and appropriate way—the best way—of combating poverty among children: it is reliable and consistent. It does not fluctuate with all the other exigencies that can affect families in our society.
The Secretary of State has referred to child benefit as a benefit of the past. That is an odd way to talk about a benefit that was introduced only a decade ago especially as, in one critical respect, child benefit is more relevant than ever. Child benefit provides a guaranteed income. It provides stability in mothers' budgets, in sharp contrast to the dramatic changes in their circumstances that have become commonplace in modern society.
The Government have created what they like to call a flexible labour market. By that they mean that many on the labour market are stuck in a revolving door— bouts of work alternating with bouts of unemployment. Child benefit provides a stable constant support in meeting the expenses connected with children and smooths the transitions that affect those 4 million households who move in and out of employment and part-time employment each year. The expenses incurred in feeding and clothing children do not vary according to whether the head of the household is in or out of work, receiving overtime or in reduced short-time work. That flexible labour market requires an inflexible, constant, reliable child benefit that matches the constant nature of expenses on children.
Let me come to the clearest reason why child benefit should be uprated. Child benefit, logically, might be better regarded not as a cash benefit but as a tax allowance. After all, it replaced a tax allowance. It is the only recognition in the benefits and tax system of the additional cost to the taxpayer who has children. The hon. Member for Lancaster referred to those apparently wealthy and comfortable households in which the father may fail) to turn adequate income over to the mother.
There is another matter in relation to wealthy and comfortable households. Since the Government came to office, they have made it a point of pride annually to uprate tax allowances, frequently well in excess of the rate of inflation. When they do so, no Minister or Conservative Back Bencher complains about increases in such tax allowances on the basis that they apply indiscriminately to wealthy and comfortably off families—indeed, they 687 provide a marginal advantage which is even greater to wealthier families. I again ask the question that Opposition Members have put on the past three occasions on which the House debated child benefit and to which I have not yet received a reply: how can the Government come to a judgment which, in its order of priorities, decides that the married man's tax allowance should go up by 22 per cent. in real terms—that is what has happened over the past decade—while the value of child benefit has gone down by more than 12 per cent. over the same decade? By what extraordinary feat of mental gymnastics can Ministers persuade themselves that the cost of maintaining a wife has gone up by one fifth and that the cost of maintaining a child has gone down by one eighth? Where are the data to support such an extraordinary double standard? If they exist, could they also be deposited in the Library?
For all those reasons, Ministers are wrong to resist the uprating of child benefit. For all those reasons, I hope that Conservative Members will vote with us tonight, to press on the Government the case for uprating child benefit next April. I appreciate that the difficulty in their joining us in the Lobby is that they are not supposed to do so. They are supposed to support and stand by the party with which they were elected.
There is one obvious reason why Conservative Members should not feel that compunction on this issue. That reason is to be found in the manifesto on which all Conservative Members stood at the last general election. That manifesto contained a pledge that child benefit will continue to be paid as at present. There was no rider in that manifesto that it would continue to be paid as at present at a frozen level. [Interruption.] I heard an hon. Gentleman say that it has continued to be paid as at present. I should be interested to know whether, in his election address to his constituents at the last election, the hon. Gentleman spelt out that the manifesto meant that it would be a frozen child benefit at a single figure of £7.25. If the hon. Gentleman did state such a clear footnote in his election address, I assure him that I shall exculpate him from any need to vote with the Opposition tonight for the uprating of child benefit.
For all other Conservative Members who may not have put any such saving clause into their election addresses, any honest, simple and candid reading of their manifesto means that they should vote with us tonight and, next year, provide for an honest uprating of the benefit that goes to 7 million mothers and 12 million children.
§ Mr. Raison
The hon. Member for Livingston (Mr. Cook) spoke trenchantly about new clause 1. I wish to speak about new clause 2, which would automatically index-link child benefit in the same way in which retirement and other benefits are automatically uprated each year. It will not apply in the current financial year. We accept that we are now too far into the new financial year for that to be possible. Nor does it make up for past failures to uprate child benefit—for the fact that child benefit has lost 12 per cent. of its value since it was introduced in 1979. As the hon. Gentleman said, that is in sharp contrast with income tax allowances which went up during that period.
We simply ask that, in future, the money that is already in the public expenditure projections for the uprating of 688 child benefit should be used for that purpose. This year, the cost of uprating is estimated to be about £200 million. I repeat that it was allowed for in the present public expenditure projections, and it is allowed for in the public expenditure projections for next year. We do not even ask for new, additional money from the Government.
My right hon. and hon. Friends and I have tried to put new clause 2 in terms which are as easy as possible for the Government. As I said, we are not insisting on anything this year. We are trying to establish the principle which was inherent in our manifesto commitment that there should be a regular uprating of child benefit, and that we will achieve the statutory status for it. I hope that my right hon. Friend the Secretary of State will accept our new clause. My right hon. and hon. Friends and I intend to vote for it.
Why do we feel so strongly about this matter? The hon. Member for Livingston was right to say that we should regard child benefit as a tax allowance rather than a benefit. My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) has often made that point. There is no doubt that child benefit has descended from the historical tradition of tax relief for those with children. That tradition dates back to the late 18th century. There was a period during the 19th century when it was dropped, but it has had long standing in our history, and it would be wrong to forget that. In racehorse terms, the origin of child benefit is "by family allowance, out of child tax allowance."
People object that child benefit is not targeted. That is the principal objection that we are likely to hear from hon. Members who support the Government in this matter. However, tax relief on pensions, mortgages, and on married couples' and personal allowances is not targeted. The Government are proposing to introduce tax relief for health insurance for the over-60s. Again, there is no intention of targeting it. My right hon. Friend should state why we should treat child benefit selectively—that is clearly the direction in which we are moving—when many other major sources of support for large sections of our community are not selective or targeted.
§ Mr. Frank Field
Is not the right hon. Gentleman being unusually generous to the Minister? Those tax allowances are targeted. They are targeted in inverse proportion to people's needs. The richer one is, the higher one's rate of tax, and the more valuable are one's tax allowances.
§ Mr. Raison
Not all. Somebody receiving help with his pension in the form of tax relief gets more if he has a large pension. It seems to fly in the face of all reason that we should restrict child benefit on the basis of income. As I have already elicited from my right hon. Friend, his new and welcome measure on the abolition of the earnings rule is in no sense targeted. It will apply to everybody. Why should the Government pick out this form of help to a significant group in the population—the help which, through child benefit, goes to those with children?
Bearing in mind the lives of our constituents and what is going on in our country today, there is no doubt that the bringing up of children can entail significant costs. Of course, for most people it brings great pleasure and happiness—I do not want to play that down for one 689 minute—but it also brings great financial burdens. Those burdens fall on those who are just above the level of selective benefits—the not-quite-poor, as some hon. Members have called them. Conservative Members must remember that there are many people in this country whose incomes are just above the level of means-tested benefits, and they do not find life particularly easy financially. It would be a great error to think that such burdens do not hit them. The hon. Member for Livingston forcefully made the point that, to a great extent, the burden of bringing up children—not only the actual work but the financial cost—is borne by mothers and that child benefit is paid to mothers.
Those with a taste for history will recall the battles fought at the end of the war to establish family allowance, in which the great aunt of my hon. Friend the Member for Lewes (Mr. Rathbone) played such a heroic part. Other Conservative ladies such as Mrs. Cazalet Keir were also involved in those battles. They fought to establish the principle that the benefit should go to the person who really needed it—the mother. To forget that would be to fly in the face of a tradition long held within the Conservative party and widely shared by many important women's bodies outside the Conservative party. I understand that the majority of the Women's National Commission has come down in favour of uprating child benefit. The Save the Children Fund, the National Children's Bureau, Barnardo's, the Children's Society, the National Children's Home, family service units, family welfare associations and many others have joined us in the conviction that it is absolutely essential to uprate child benefit.
We must accept that we are living in what in some ways is a radically changing social climate. There are things in that climate which make bringing up children more difficult than it has been. We are all aware from our constituency surgeries that there has been a rather tragic increase in the proportion of cases where a family breakdown is at the heart of the problem. We are all aware that there has been a substantial growth in the number of one-parent families in this country. Those people particularly need the certainty of child benefit. Today there is more pressure and more need for women to go out to work. That incurs certain costs, and an enlarged child benefit would provide a better way of helping those people than any other form of benefit. The certainty of child benefit is one of its most valuable features. People know that family benefit will come to them. It does not involve the delay that occurs when establishing a claim to selective benefit.
We must ask ourselves a profound question: do we want to see more and more people pushed into some kind of means-tested support? The community charge will be accompanied by a massive system of rebates. I believe that something like 10 million people will receive rebates under the community charge. The policies for rented housing will have the same kind of effect, and the number of people claiming housing benefit will clearly rise.
Obviously no one is against income support or family credit. It is absolutely right that we should recognise that child benefit cannot do the whole job. One would very much hope that if we can allow child benefit to grow in the way that the late Sir Brandon Rhys Williams advocated in his posthumously published pamphlet "Stepping-stones to 690 Independence", and as the basis for a tax credit scheme, we can get to grips with a very difficult social problem in a way which has not been possible so far.
An advantage of child benefit is that it offers one of the biggest "Stepping-stones to Independence" to which Sir Brandon referred. My right hon. Friend the Secretary of State has often said that he wants to get us away from the dependency culture. I do not believe that scrubbing child benefit will do that. The dependency culture is expressed by the reliance on the means-tested benefits to which I have just referred. We are all aware of the great problems with the take-up of family credit and many of us will have seen the advertisements on television intended to encourage people to collect their family credit.
Another argument that the Government have often put forward is that child benefit does not help the really poor —those on family credit and income support. Perhaps it is true as things stand that if there is an increase in child benefit they will not receive its direct effect. However, as I understand it, there is nothing in the Social Security Act 1986 to prevent those on other benefits from receiving the full increase from child benefit. The fact that they do not receive the full increase is simply a reflection of the orders and regulations with which the Government implement the Social Security Act 1986. They could perfectly well say that we should put up child benefit to allow everyone to gain from it. Meanwhile we have to face the fact that the decision not to uprate child benefit this year has moved some 30,000 families with 60,000 children on to income-related benefits. Is that really the tendency that the Conservative party wants to support?
Some people say that child benefit should be taxed and, of course, that has attractions. Family allowances were taxed in days gone by. However, there is a technical problem today. The absolutely justified separation of a husband and wife's taxes, which will be introduced next year, will make it virtually impossible to tax child benefit. Who would we tax? Would we tax the husband who does not receive the benefit or the wife who receives it but whose income will normally be much lower? The latter policy would not be well received, although in many cases the wife might not reach the level to be liable to pay tax. Similarly, husbands would not be very enthusiastic about being taxed on a benefit which they do not receive. That would certainly be novel.
Another argument is that those paying the higher rate —40 per cent.—should perhaps not receive child benefit. I can see a case for that, but there are practical problems. I cannot help but think back to our debates on the community charge and the amendment in favour of a banded system and the vigour with which the Government claimed that it was completely impractical to have a system by which those on the 40 per cent. rate should pay a higher community charge because very often over 18 months or two years it was difficult to know exactly what level people were on. If that criticism applied for a banded community charge, it would apply with child benefit.
The practical and moral arguments point strongly in favour of continuing child benefit. We are talking about the possibility that the Government may decide between now and the next election to drop child benefit as part of our social security apparatus. That would be a disastrous policy.
We know that child benefit cannot be ended during this Parliament. I remind my right hon. Friend the Secretary of State that in 1985 a very comprehensive review of social 691 security came down firmly in favour of child benefit. I have a battery of quotes from my right hon. and hon. Friends in favour of child benefit and I will not embarrass them by quoting from them today. All sorts of groups firmly believe that child benefit is right and must be uprated. Those are not loony groups, but include bodies such as the women's institutes.
We know that child benefit can help to restrain inflationary wage pressure. After all, the existence of a large number of children is likely to cause working people to demand higher pay. If some of the burden of higher costs can be borne by child benefit, the pressure will be lessened.
As the hon. Member for Livingston has reminded us, child benefit helps to offset the poverty or employment trap. Above all, child benefit embodies the positive symbol of that active family policy to which the Conservative party is committed. That is a commitment to the job of raising children decently in a world where it is not always very easy to do that. However, that is only part of the job, and many other factors come into play. If we abandon child benefit we will turn our backs on a great tradition. If we keep child benefit but do not uprate it and simply allow it to wither on the vine, that will be almost as bad as abandoning it.
I urge my right hon. Friend the Secretary of State to accept new clause 2. If he cannot do that, I urge right hon. and hon. Members to support it in the Lobby.
§ Mr. Menzies Campbell (Fife, North-East)
I begin by apologising for the absence of my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood). He set out to be here for the proper time, but unhappily has not been able to enlist the co-operation of British Rail. He will join us as soon as he possibly can. Unfortunately, he is delayed on a train somewhere between London and the north.
I am a poor substitute for my hon. Friend the Member for Roxburgh and Berwickshire in that I do not possess his detailed knowledge of the labyrinthine complexities of social security legislation. However, I feel that that may not be such an obstacle this evening. We are concerned more with a matter of principle than of complexity. The arguments for and against have been well rehearsed, but, if I may respectfully say so, it seems to me that those marshalled by the hon. Member for Livingston (Mr. Cook), who opened the debate, were overwhelming in their quality.
It may help if I indicate briefly some of the reasons why I and my hon. Friends will be supporting whichever of the two new clauses is pushed to a vote. In the first place, as has been pointed out, child benefit was introduced to take the place of the old child tax allowances. Secondly, the combination of tax cuts in recent Budgets and the freezing of child benefit has resulted in money being taken from those with children and given to those without children. As has been pointed out, the level of child benefit has fallen by 12 per cent. in real terms since 1979, during which period the married man's tax allowance has increased by 22 per cent., and the single person's by 19 per cent., after taking account of statutory indexing.
Of course, the great majority of families affected by the level of child benefit fall neither into the category of the rich nor into the category of the poor. Indeed, many of 692 those families will find the effect of a freeze to be very considerable—indeed, disproportionate. In these circumstances, it seems that the arguments in favour of uprating child benefit are overwhelming, not least because the permanence of the benefit, and the ease of access to it, undoubtedly help poorer families, many of whom have great problems, in the management of their finances. These people may be subject to great fluctuation in income and in circumstances, week by week.
It is easy to argue that one of the most significant features of child benefit is that it is paid direct to wives. There is a feeling among some of us that we may be intruding on private grief when we hear the debate among Tory Members as to what their manifesto actually said. I suspect that the capacity of the textual analyst really ought not to concern this debate. This is a debate about principle, and not about what was said, or is understood to have been said, in the Government's manifesto. There is little doubt that the vast majority of people in this country understood that the Government's proposals necessarily involved the uprating of child benefit year on year. It is for that reason, and because of the merits of the case for uprating, that my hon. Friends and I will certainly support whichever of the two new clauses is put to the vote.
§ Mr. John Maples (Lewisham, West)
The debate on this subject has become something of an annual event, and some Members seem to make very much the same speech year after year. I am afraid that my speech will be no exception.
As the debate goes on, in its wider context, it is clear that my side of the argument is winning. While that may not be apparent in the present attendance in the House —I do not think that I have ever felt quite so outnumbered on my own Benches—outside the House, in the wider debate in the country among people who think about tax and social security policy, the Government are winning. Essentially, it boils down to an argument about means-tested benefit versus universal benefit.
Opening the debate, the hon. Member for Livingston (Mr. Cook) made an eloquent plea for universal benefits. One knows that that is part of Socialist policy, and has been for a very long time. Of course, the other side of that case, about which the hon. Gentleman did not tell us, is that universal benefits mean higher rates of taxation. On the whole, I am in favour of lower taxation and means-tested benefits, and of paying the price of the kind of poverty trap that one ends up with, rather than of having high rates of taxation and universal benefits. I do not believe that it is the business of the Government to try to help people who are in a position to help themselves, but I do believe that it is the Government's job to help those who are not in a position to help themselves.
§ Mr. Tony Marlow (Northampton, North)
In which case, could my hon. Friend tell the House whether he is or is not in favour of the old system of child tax allowance, because that allowed people to keep more of their own income?
§ Mr. Maples
My hon. Friend has intervened very early in my speech. I was going to come to the question of tax allowances, but, as he has raised it, I shall deal with it now. Paradoxically, if we had kept the system of child tax allowances, of which my hon. Friend is apparently in favour, their value would have fallen by one third since 1979. The reason is that taxes have been reduced from 35 693 to 25 per cent. The attraction of child tax allowances under the last Labour Government was based on the fact that the rates of income tax then were so high. If we had perpetuated that system, the value of those tax allowances would have fallen by about £90 in today's money.
§ Mr. Jim Lester (Broxtowe)
Adopting the logic of my hon. Friend's argument against universal benefits and in favour of targeted, means-tested, benefits, how does he explain tax benefits for pensions, tax benefits in respect of married women's earned income, and the various untargeted global benefits that are paid freely to people with mortgages? By the logic of my hon. Friend's argument, those should also be withdrawn. According to what he says, we should means test those people directly and, thereby, reduce tax a great deal more.
§ Mr. Maples
There is a good deal in what my hon. Friend says. It is an attractive argument. Indeed, in the past, I have argued that we should try to reduce rates and remove allowances and deductions. But there is a fundamental difference between not paying tax and receiving social security benefits, and anybody who does not realise that is missing a terribly important point in the debate. I do not believe that it is the job of the state to take money from people in tax and give it back to them in social security benefits.
§ Mr. Maples
I wonder if I may be allowed to get a little further into my argument. I have dealt only with the first heading in my notes.
I was surprised that my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) should intervene to suggest that it was part of Conservative policy to regulate financial affairs between husbands and wives. That has certainly never been part of my notion of Conservative policy. In fact, I do not think that it is any business of the state either. I do not think that it is the business of the state to take money from working husbands and give it back to their wives.
§ Mr. Maples
Perhaps the hon. Lady will allow me to finish this point.
In any case, there are two intervening transactions. The first concerns the cost of collecting the tax, which is generally 2 to 2.5 per cent. The other concerns the cost of administering child benefit. I do not know what its level is, but it is probably 1 or 2 per cent. In other words, probably between 4 per cent. and 5 per cent. is lost in the process of taking money out of the pockets of husbands and giving it back to their wives. I cannot see that that is part of Conservative philosophy or that it is any business of the state.
§ Mrs. Beckett
I am following the hon. Gentleman's argument with interest. As I understand him, he is saying that the state should not take a view as to how income is shared, distributed and used within the family. Am I right, however, in thinking that he voted for non-dependant deduction in the case of housing benefit, which takes money from the family on the basis of a contribution of teenage children to housing costs?
§ Mr. Maples
I certainly did. There is a very powerful argument for that. If a teenager earns £70 a week, to assume that he is making no contribution to the family's rent is simply flying in the face of reality. He almost certainly is making such a contribution. But this is something totally different: taking money from the husband in tax and giving it back to his wife. As I see it, that is no business of the state.
Another general point that I think is missed here is that we are spending £4.5 billion of public money on the administration of this benefit—taking it in taxation, and giving it back to wives in the form of child benefit. The cost of administration and collection in the middle has to be borne. That is unfair, because very often it conies from people who do not have children and whose income is low, and goes to people who do have children and whose income is high. Increases do not benefit those on the lowest incomes. I believe—and this is perhaps a fundamental point—that it does not achieve its main objective.
An increase in child benefit would be of absolutely no help to families on income support or family credit. Family credit now applies a long way up the income scale. At 1988–89 rates, a family with two children under the age of 11 could have received family credit up to an income of £7,500 a year. In 1989–90 the income figure would be more than £8,000 a year. If those two children were 14 and 16, the family could have continued in 1988–89 to receive family credit up to an income level of £9,000 a year, which in 1989–90 money is £9,700. But a family with two children aged 14 and 16, earning below £9,700 a year, would not benefit by one penny piece from an increase in child benefit. That is a fundamental point.
Presumably those are the families whom we regard as needing help. Families trying to bring up children on incomes of £7,000, £8,000 or £9,000 a year certainly need help, and if there were any proposal to remove that help I should certainly vote against it. But what is proposed in the new clauses would be of absolutely no benefit to those families. Every penny they gained in increased child benefit would be lost either in income support or in family credit. It is of no use to people at the low end of the income scale whom we are supposed to be helping.
§ Mr. Robin Squire (Hornchurch)
Will my hon. Friend bear in mind that for poorer families and even not-so-poor families, particularly if the wage earner is unemployed or ill, child benefit is relevant? It is not just a case of saying that it cannot benefit them. It can benefit people in those specific circumstances.
§ Mr. Maples
My hon. Friend knows more about the workings of the social security system than I do, and he may be right. In effect, he is criticising the way family credit operates and if his criticism is valid, perhaps it should operate to provide a more regular stream of income. The non-indexation of child benefit has reduced it from £835 to £725. The £725 continues to be paid, so is a regular income.
I was saying that people on low incomes do not benefit from the increases. There is another side to that which presents paradoxes. It is that everybody else pays more in tax than they receive in child benefit. Anyone with two children who earns £7,100 a year pays income tax of £'751 and receives child benefit of £754—£3 more. If we uprate that to this year's tax rates, the answer might be slightly 695 different. Anybody with one or two children who earns more than £7,100 pays more income tax than he receives in child benefit.
Is it the business of the state to organise that sort of transfer through the tax and social security system? I do not believe that it is. The way to help those people, if they need help, is through tax reductions. The consistent theme of the Government's tax policy is to reduce the basic rate of tax. That is untargeted and goes to everybody, but those on incomes who can afford to take care of children should do so. Whether or not they have children is a free choice. If their incomes are insufficient, the social security system should make it up. It is not for the tax and social security system to differentiate between people and to decide how they are taxed and how social security is spent when they can make those decisions themselves.
There are one or two other fundamental misunderstandings about child benefit. Forty per cent. of the recipients of child benefit have incomes in excess of £15,000 a year—substantially above the national average. A further paradox is that people on low incomes without children are subsidising people on high incomes with children. Why should a single shop assistant earning £100 a week pay tax to subsidise someone earning £20,000 a year? I cannot see that that is fair in any way.
Another point that is lost sight of is that the world has come a long way since 1979. People's disposable income has risen substantially. We know that the income of someone on average earnings has risen by 29 per cent., but that percentage is not usually translated into pounds per week. Somebody on average earnings is, in today's money, £46 a week better off than 10 years ago. Somebody on three quarters of average earnings is £34 a week better off and someone on half of average earnings is £22 a week better off.
§ Mr. Maples
I shall finish this point. Against that we are setting a non-indexation of child benefit of just over £1 a week. People at all levels of earnings—I agree that there is a different set of criteria for people out of work—are considerably better off in terms of take-home pay and disposable income than they were 10 years ago.
When people have such increases in their disposable income the necessity for the state to provide for them is demonstrably diminished. It is right that we should expect people to use part of the increase in their disposable income to pay for items which perhaps 10 or 15 years ago they could not afford and which it was right for the state to help them with. To suggest that there is some moral compulsion on the Government to pay an extra £1.10 a week per child to somebody whose disposable income has risen by £34 a week during the past 10 years is difficult to swallow.
We are taking about increases in disposable incomes at low levels of earnings. In 1988–89 half of average earnings was £130 a week gross. The increase in the disposable element of that is £22 a week, so on earnings well below the family credit ceiling people have had increases of £20 to £30 a week in their disposable income. That sets in a much more realistic context the non-indexation of child benefit which amounts to £1.10 a week. Put in that context the sum is insignificant.
§ Mr. Marlow
I am grateful to my hon. Friend for his generosity. If I may say so, he is playing games with statistics. He is talking about disposable incomes and he said that 40 per cent. of recipients of child benefit are on incomes of £15,000 a year. Let us look at disposable income. Can my hon. Friend tell the House what the disposable income is, after mortgage payments, of his constituents who are earning between £15,000 and £20,000 a year? He will find that it is not very great.
§ Mr. Maples
I am reluctant to take issue in such sharp terms with a good and hon. Friend. If he thinks that it is the business of our tax and social security system to funnel taxpayers' money to people earning more than £15,000 a year, I am amazed. Last year average earnings were £13,200 a year, so we are talking about people on 120 per cent. of average earnings. We cannot help people who earn more than the average. It is arithmetically impossible. We cannot take money from everybody and give back more to everybody. All we can do is take money from people earning more than the average and give it to people earning less than the average. Even the hon. Member for Livingston would not go further than to suggest that he could make everybody equal. He certainly could not improve everybody's lot.
The crux of my argument is the need for a means-tested system which is generous and operates reasonably and sensibly to help people who cannot afford to bring up children on their income. Family credit goes a long way up the income scale. In this tax year it will go to nearly £10,000 a year of pre-tax income for those with two children aged 14 and 16. That is about 70 per cent. of average earnings, which is about what average male manual earnings have been for a long time. A system that goes to that level is reasonably generous. Clearly, it could be more generous. If it is suggested that means-tested benefits should go further up the income scale than 70 per cent. of average earnings, we are getting into dangerous territory. It is almost what my hon. Friend the Member for Northampton, North (Mr. Marlow) was suggesting: to help everybody, above and below average earnings. Obviously we cannot do that. There is no point going beyond whatever average earnings happen to be.
A means-tested system that pays benefits to people earning £10,000 a year with two children is reasonably generous. I understand that the average payment to recipients of family credit is about £25 a week. Sixty per cent. of recipients—nearly two thirds—receive benefit of more than £20 a week. There must be a withdrawal rate and I understand that that is the criticism of the system. The trade-off between universal and means-tested benefits is that a means-tested benefit must have a withdrawal rate. To compare means-tested benefits with the hightest rate of tax is a fallacy because they are not the same. To receive benefit at the expense of other taxpayers, which is withdrawn as one gets better off, is fundamentally different from paying more money in income tax as one earns more money. One is a benefit and the other is a liability where people are paying tax. It is axiomatic that we cannot have a means-tested benefits system that does not have a withdrawal rate or, what would be worse, some sort of precipice-type cut-off.
The social security system reforms of the past two or three years mean that means-tested benefits are now based on after-tax income. In retrospect that is an incredibly simple and obvious reform. It escapes me why none of us 697 came to that conclusion before. It has made a fundamental difference as the rates of withdrawal can never exceed 100 per cent. I realise, however, that once one adds together housing benefit and family credit one can achieve high rates of withdrawal. It would be nice to be able to make those more moderate, but the only way of doing that would he to extend the benefit even further up the income scale to those earning more than the 70 per cent. of average earnings.
My right hon. Friend the Minister is obviously in a much better position than I am to respond to the specific criticisms of the hon. Member for Livingston about the statistics for take-up. The take-up rate is usualy quoted in terms of the percentage of eligible individuals taking up benefit. Some of those are entitled to very small amounts of benefit. The percentage of the eligible money that is taken up is much higher. I believe that I am right in saying that about 65 per cent. of the money available is being taken up, while it is taken up by only 50 per cent. of the individuals. That appears to show that those who are not taking up benefit are those who, on the whole, are entitled to relatively small payments and have relatively low entitlements.
However, those who are entitled to relatively large payments under the family credit system are taking up their entitlements. I welcome my right hon. Friend's efforts to encourage more people to take up family credit. I do not believe that any stigma should be attached to it. I do not accept that there is some sort of stigma attached to family credit that is not attached to child benefit because one does not have to ask for child benefit. There is no stigma, because, for example, employees can have family credit paid through their wage packets. One does not have to obtain a Department of Social Security book and collect it from the Post Office every week. I hope that more people will take up family credit because it is far more effective than uprating child benefit in helping people who need help.
We have a crazy system of redistributing £4.5 billion —some 1 per cent. of our GDP—by recycling it through the tax and social security system. We have a system where those in real need—those on family credit or income support—would not be helped by either of the new clauses or by any uprating of child benefit. We should continue to move, as I believe we are, to a system of letting people who are able to look after themselves do so. The state should not be an unwelcome intervener in their financial affairs.
I do not believe that anyone coming down from Mars today, who was asked to deal with the difficulties of low-income families bringing up children, would reinvent the child benefit system. I find my second proposition even harder to believe than my first, which is that the cost of uprating the child benefit by £1.10—which has been under-indexed—would be in excess of £600 million a year. If the Government said to my right hon. Friend the Member for Aylesbury (Mr. Raison) or the hon. Member for Birkenhead (Mr. Field), "We have £600 million this year to spend on helping families with low incomes to bring up children", I do not believe that they would choose to scatter that money by paying £1.10 per week for each child. They would choose to target it. They do not like the word, but, if they were presented with the money and the option, that would be their choice.
698 I say to some of my right hon. and hon. Friends that I hope that they will take account of the way in which the world has moved on in the past 10 years and the extent to which disposable incomes have risen substantially at all income levels. It is time that we stopped taxing middle-income people so that we can give them benefits. We should continue with the system of giving tax cuts to those who are capable of looking after their own affairs and giving generous help, through the social security system, to those who are not.
§ Mr. Alice Mahon (Halifax)
Having listened to the speech of the hon. Member for Lewisham, West (Mr. Maples), I feel depressed. If that is the attitude of Tory Members I certainly do not hold out any hope that either of the two new clauses will be passed. The hon. Gentleman's attitude reflects his lack of any real life experience of bringing up a family on low income. I was also deeply shocked by his complete lack of understanding about the position in which many women find themselves. The hon. Gentleman would not give way to an Opposition Member, possibly because he knew that we would point that out. There was an absolute lack of understanding of the fact that the majority of children are brought up in a family by the mother. Even in families of middle incomes, husbands often do not pass their incomes to the women. My husband worked very hard, but he was still not well paid, so I have experience of bringing up children on a low income. I am possibly one of the minority who can pass on experience of the fact that that income in the middle of the week—I drew it on a Tuesday—was a lifeline. When one is on a small income, if one needs an extra pair of shoes, is running out of food or has a bill coming in, child benefit is useful. The hon. Gentleman's lack of understanding of how an awful lot of people budget and manage their incomes beggars belief.
Late in the 1980s the Child Poverty Action Group carried out a survey that showed that one in five children lived on or below the poverty line. I found that a distressing survey and I felt deeply ashamed that I lived in a wealthy country which could produce such statistics. After that survey, all informed opinion pointed out that the freezing of child benefit would make the position for many children considerably worse.
I believe that it is worth emphasising the values of child benefit over and over again, and I hope that my hon. Friends will do the same. The money goes to the mother. The take-up rate is 98 per cent. The hon. Member for Lewisham, West did not put forward any argument to diminish the importance that people in receipt of child benefit place upon it. It does not affect the poverty trap and it is cheap to administer. The mother knows the value of child benefit, because often it is her only income.
I hope that common sense, compassion and care will prevail in this short debate on child benefit. Looking at the suits around me and considering the lack of any kind of experience of most hon. Members, I do not feel too positive about the outcome of the debate. If the Government persist in freezing over and over again what is a universally accepted valuable benefit, with the intention of allowing it to wither on the vine, they will go down in history as the Government who took us back to the Dickensian state of the 19th century and before, when we had ragged children as the norm rather than the exception. I hope that hon. Members will vote for the new clauses.
§ Sir Ian Gilmour (Chesham and Amersham)
I wish to speak in support of new clause 2. As my right hon. Friend the Member for Aylesbury (Mr. Raison) made his argument so effectively, I shall not need to detain the House for long.
As the hon. Member for Halifax (Mrs. Mahon) said, child benefit has a number of considerable advantages and has a 98 per cent. take-up. It is paid to the women, to which my hon. Friend the Member for Lewisham, West (Mr. Maples) objected. He did not give much reason for that. It seemed just neo liberal dogma that the state should not do such things. The fact is that the overwhelming majority prefer it paid in that way. Until recently, if not still, the Conservative women's organisation was in favour of such method of payment. I do not believe that some sort of dogma about what the state should or should not do should interfere with what most people want and what many people believe is sensible and right. As my right hon. Friend the Member for Aylesbury said, it loosens up the poverty and unemployment traps, and it is fair. Since the days of William Pitt, it has been generally realised that it is more expensive to have children than not. If William Pitt had been here this afternoon and heard my hon. Friend the Member for Lewisham, West, he would have thought that he was the man from Mars and would have rubbed his eyes and ears with astonishment at what my hon. Friend said.
Against the formidable arguments in favour of child benefit the Government have two. One is that it costs a lot of money, and the second is that benefits should be targeted, but, in fact, it does not cost a lot. It is worth comparing child benefit with expenditure on other allowances. Child benefit costs £4.5 billion, the single person's income tax allowance costs £9 billion, the married man's income tax allowance costs £14 billion, the wife's earned income allowance costs £3.5 billion, the mortgage interest rate relief costs £6.5 billion and private pensions cost £10 billion. Against all those figures I do not believe that £4.5 billion for children is excessive. Furthermore, as my right hon. Friend the Member for Aylesbury has said, child benefit is the only benefit that the Government and my hon. Friend the Member for Lewisham, West favour targeting. All the other benefits are universal, so why should the Government and my hon. Friend pick on children? Why should they be the first to go to the wall? Therefore, the Government's first argument is not right. Child benefit is not relatively expensive.
The Government's second argument is that it is more important to give money to the really poor, but there are several answers to that argument. As I understand it, only one third of the money that is saved by not uprating child benefit is going to the really poor this year; the remaining two thirds is not being paid out. Even if the Government's argument was right, why should money for the really poor be paid at the expense of other families with children? Above all, why should it be paid at the expense of the nearly poor? If the Government feel the need to help the really poor—I am glad that they do—why should not that money come out of general taxation rather than from child benefit?
It is well known that targeting does not work. I welcome my right hon. Friend's new campaign—or relaunch—and I hope that it will be successful. The figures suggest that things are getting better, but no one pretends that there will be anything like such a big take-up of the new benefits as there is of child benefit.
700 It is slightly misleading to say that child benefit does not help the really poor or that, conversely, not putting it up does not hurt them. That is a source of argument between my hon. Friend the Minister of State and myself. During our previous debate on this subject I said that, by not putting up child benefit, the Government would hitsome of the least well-off people".When my hon. Friend wound up the debate he said:It is not true that, by not uprating child benefit, we shall hit the least well-off."—[Official Report, 18 January 1989; Vol. 145, c. 365, 384.]I wrote to my hon. Friend after that debate to point out that I believed that he had misled the House, inadvertently of course, and that he had got it wrong. He wrote me a letter back of, I am sure he would agree, remarkable ambiguity and obfuscation. I wrote two more letters to my hon. Friend, but he did not reply; he is a busy man. It is, however, worth analysing what he said, not because he misquoted me—that happens to all of us, but my hon. Friend could have admitted it—but because I had said that "some" of the least well off would be hit, while he said that it was not true that the Government would hit the least well-off. It is true, however, that not uprating hits some of the least well off.
My hon. Friend's answer was based on at least three false assumptions. First, because of the take-up of the means-tested benefits some of the least well-off do not take up the benefits and therefore they are hit by child benefit not being uprated. Secondly, entitlement is too restricted and there is too much red tape on means-tested benefit.
Recently someone wrote to me whose husband is a theatre technician without regular work. The family is ineligible for family credit because the work is too irregular and is ineligible for income support because of the earnings rule. Those people are hit, and my hon. Friend the Member for Lewisham, West should bear such cases in mind. As a result of that letter I tabled a question and my hon. Friend the Under-Secretary of State admitted that there were a number of people in such circumstances.
The second assumption is that means-tested benefit, if it is claimed, will go where it is meant to go. That is true of family credit, but that is not necessarily true of income support. That benefit may stick with the husband and never reach the wife. The third assumption, to which my hon. Friend the Member for Broxtowe (Mr. Lester) has drawn attention, is that money is all that matters. Security, however, is equally important. The great advantage of child benefit is that the recipient knows that she will get it, but that is not the case of people who zoom in and out of eligibility for means-tested benefits.
Apart from all the other disadvantages of not uprating child benefit, it is clear that the Government have hit some of the least well-off by their actions. That is why I deeply regret their actions of the past two years, which I believe have been shameful.
Children in Britain from two-parent families are more likely to be poor than similar children in any other comparable country. That is not true of children from a one-parent family, which I welcome, but the first fact is shameful. The Government should deal with it straight away. At the very least they should accept new clause 2, and after that I hope that they will make up for the upratings that they have missed in previous years.
§ Mr. John Battle (Leeds, West)
The last time we debated this issue was 18 January. At that time the Secretary of State tried to convince the House that child benefit went to too many people who did not really need it. That was the core of his defence for arguing that it needed to be targeted. No doubt I have anticipated the right hon. Gentleman's reply to this debate. In January he came out with the rather surprising assertion:Conservative Members have pointed out many times in the past that 70 per cent. of the families who stand to gain from child benefit have incomes above average earnings.That statement was echoed today because of the emphasis given to average earnings. We should handle the computation by average earnings extremely carefully.
As the hon. Member for Lewisham, West (Mr. Maples) said, it is not commonly known that the average earnings figure in January, when we last debated this issue, was £258 per week. Many of the people that I represent get nowhere near that figure as part of their weekly income. I look somewhat askance at the idea that they are somehow pulled into the average.
In today's edition of the Financial Times an article reminds us that the wages of Britain's managers have gone up substantially. Surely such increases pull up average earnings without necessarily suggesting that those earning below that figure have had any increase in wages. Such people's income could be decreasing, although those at the top find that their incomes are increasing. That is the difficulty of computation by average.
As a result of the Secretary of State's claim that70 per cent. of the families who stand to gain from child benefit have incomes above average earnings"—[Official Report, 18 January 1989; Vol. 145, c. 361.]I tabled a question asking him to spell out exactly who are the 70 per cent. who receive the benefit. That percentage is a striking figure as it suggests that many people are on above-average wages, especially as the benefit is given to those with families. The reply I received modified the earlier statement as it said that the 70 per cent. mentioned did not include those on means-tested benefits.
I went to the statistical section of the Library and asked it if it could help me with the 70 per cent. figure. On its computation it found that 48 per cent. of potential recipients have above average earnings. It also said that even if those 1.5 million families who are so poor that they claim means-tested benefits were taken out of the calculations, at best only 60 per cent. were on above average wages.
The hon. Member for Northampton, North (Mr. Marlow) intervened earlier to say that gains represent the favourite figures. I believe that the quality of the official information available to the House and to the country is crucial when we are making decisions about the benefit and taxation system. Such information means that people are plain about where they stand.
It seems to me, to give it the best interpretation possible, that the Secretary of State has really tried to create the impression that those who receive the child benefit do not really need it because they are doing so well, yet when we consider the individual incomes of people we can see that that is manifestly not the case. What I am saying has been graphically demonstrated already by the right hon. Member for Aylesbury (Mr. Raison). This Government occasionally apparently operate on the principle that the truth is a matter of presentation rather 702 than of facts or information. Sometimes we receive a form of statistical fiction that reduces people to and computes them as an average rather than relating to their real circumstances and the incomes on which they have to live.
In fact, the element of child benefit is absolutely vital to the income support of the poorest section of the population. The failure to uprate the child benefit actually pushes poor people into means-tested poverty. I asked a question about how many more people would be pushed into needing means-tested benefit because the child benefit was not upgraded. The Minister replied that there was an estimated increase in those claiming family credit, a s a result of not uprating child benefit, of between 20,000 and 25,000 families, so that about 80,000 people in our society are affected. If the effect of the shift from child benefit to family credit is interpreted in the amounts of money that the Department of Social Security is actually paying out, also revealed is the fact that a reduced sum is paid out: by the Department to those on the lowest income, be they on family credit or child benefit, or a combination of both.
I asked the Secretary of State how much extra spending on family credit was attributable to the freeze in child benefit. He replied that when the 1989 uprating was announced it was estimated that the total cost of the family credit uprating would be £128 million, of which £23 million was directly attributable to the 45p added to the child benefit rates as compensation for the child benefit standstill. By parliamentary question, I pressed the matter further by asking what would have been the cost last year of uprating child benefit in line with earnings. The reply was that it would have been £260 million for the financial year 1988–89, net of savings on other benefits.
From that answer it is clear that the amount saved by the failure to uprate was 10 times the amount offered back in the assistance to family credit. It does not take a mathematical genius to deduce that a large sum has been taken out of the system of income support to the poorest people, either through the family credit system or child benefit. The scale of the cut in income as a result of freezing the child benefit has meant real hardship for families.
It is worth reminding the Minister that, for those who receive the lowest 10 per cent. of income, one fifth of that income is child benefit. Since that benefit has, in effect, been cut four times since 1979, it is also true that the overall level of benefits has been reducing.
Although some Conservative Members say that the problem is solved by tax cuts, they do not acknowledge that many people now receive such low pay that they do not pay tax, being totally dependent on the benefit system. In that sense, tax cuts cannot redistribute income in the way that Labour Members like to see happen. It is surprising to hear some Conservative Members say that the Government should not even be involved in the principle of redistributing income. We should remember that the number of families living in poverty in what still is a relatively wealthy country is a reflection of the Government's policies.
Other hon. Members have given positive reasons to support the payment of child benefit: it is more efficient to administer as a universal benefit; its rate of take-up is very high; the payment of the benefit is prompt, reliable and regular; it is paid to the mother; and people know where they are with their income from week to week. Child benefit is a vital form of regular income support to the poorest; it is a major element in family budgeting.
703 An issue that still hangs over from previous debates, haunting them, as it haunts this debate, is the quality of the official information given in the debates and in answer to our questions. The Government continue to misrepresent the facts so that they can make cuts in social security spending. It should be said in this House and outside that the price of such reductions is paid by the poorest members of our society.
The Secretary of State for Social Security has assured us previously that he does not intend to let child benefit wither away by never uprating it again, but he must prove what he says. It is up to him to demonstrate that he will not let it wither away. One way in which he could do that would be to accept the new clauses.
§ Mrs. Gillian Shephard (Norfolk, South-West)
The aim of both new clauses is to commit the Government now to uprating child benefit in line with inflation and to be effective from April 1990. The aim is seductive in its limitation and obviously chosen for that purpose, but I believe that it should be resisted. Changing circumstances have benefited the vast majority of people in work in this country, particularly the increase in prosperity of the average working man over the past 10 years. Significant tax cuts have also contributed, with improved employment prospects for many people in large areas of the country. This situation surely means that the Government should review child benefit, as they are statutorily committed to do, and not have the outcome of that review pre-empted, as the new clauses seek to do.
I believe that such an aim was held when child benefits were first introduced. When she was Secretary of State for Social Services, Barbara Castle said that the benefit was a tax-free supplement and therefore not a major means of support to families whose major source of income was earnings. She said that indexation was inappropriate, and that she thought Parliament would wish to be flexible about the emphasis it put on different factors of family support in future. In other words, the aim when the benefit was introduced was that it should be reviewed in the light of changing circumstances, and that is what the Government are committed to doing.
§ Sir Ian Gilmour
That may be what the Government said at the time, but is my hon. Friend also aware that the then Conservative Opposition were in favour of upgrading the benefit twice a year?
§ Mrs. Shephard
My right hon. Friend would know much more about that than I. It has certainly been the consistent aim of this Government's social security policies that the benefit should go to those in the greatest need. I maintain that, by definition, that aim cannot be fulfilled by the universality of child benefit. It seems curious that anybody purporting to argue for fairness, justice and an equitable use of taxpayers' money could possibly support a benefit which pays nearly £1 billion to 1.25 million families earning £20,000 or more a year. Yet the benefit does not provide anything to people on family credit and income support.
§ Mr. Marlow
As my hon. Friend is aware, child benefit partly replaced the child tax allowance. Would my hon. Friend like to see the child tax return? That would probably satisfy some of the concerns.
§ Mrs. Shephard
I am arguing that the Government should review their policy of uprating at the appropriate time, which is next autumn, in the light of the circumstances pertaining then, and in line with the original intention. I am not, as my hon. Friend appears to be, arguing for a thorough-going change of the system.
§ 6 pm
§ Mr. Simon Hughes (Southwark and Bermondsey)
The hon. Lady started her speech by saying that the average income has risen over the past 10 years, as it has. If we are to review what social security payments should be made, should we not also remind ourselves that the gap between the most well-paid and the least well-paid has increased substantially in the same 10 years? Therefore, the relative benefit to the poorest of a fixed rate benefit such as child benefit is much more substantial and much more needed now than it was 10 years ago.
§ Mrs. Shephard
The system of family credit and income support, targeted as it is, is much more effective in helping people at the bottom of the income scale than a universal benefit such as child benefit.
§ Mrs. Margaret Ewing (Moray)
Surely the argument against income support is that its take-up rate is only 40 per cent., whereas a universal benefit reaches 100 per cent.
§ Mrs. Shephard
I am going on to tackle that point. The hon. Lady is right to point out that the take-up of family credit has perhaps been disappointing, but my right hon. Friend the Secretary of State last week announced both a thorough-going publicity campaign to bring family credit to the notice of all those who might benefit from it and, much more significantly, a simpler form on which to make the claim. The original form was difficult to understand and use. The combination of these two initiatives will increase the take-up significantly.
The combination of the changing circumstances that I have outlined and the effective and vigorous campaign now mounted by the Government over the take-up of family credit gives credibility to the Government in their aim to review the situation in the autumn. It will then be possible to make a judgment about the changing circumstances and about the effectiveness of the take-up of family credit. I support that aim; and these new clauses, which would pre-empt that review, should be resisted.
§ Mrs. Margaret Ewing
I shall endeavour to be brief and I shall not follow the line adopted by many others of going through a series of complex statistics, because I feel that many of them have not added to the debate but have rather detracted from the basic principles that underpin our comments and the way in which we vote. My hon. Friends in the Scottish Nationalist party and Plaid Cymru will be supporting both the new clauses.
Targeting tends to dominate our debates on social security payments and how we allocate benefits. One of the tragedies is that, basically, no one disagrees with the concept of targeting benefit on to the people who most need it. However, the problem is that targeting has failed miserably. It can be effective only if we have a much more progressive taxation system. Comparing this debate with what happened in the Budgets last year and this year shows that the Government are bringing in a regressive taxation system that benefits the rich and penalises the poor. Until we can have a progressive taxation system, we 705 have to look to the continuation of universal benefits to ensure that benefits reach those on the lower incomes who most desperately need the assistance that we can give them.
In my intervention in the speech of the hon. Member for Norfolk, South-West (Mrs. Shephard) I said that family credit has a take-up level of only 40 per cent. It is all very well for the Government to argue that there is now a massive advertising campaign to encourage people to take up this benefit, but it has been in existence for some time, and there are many reasons why people do not pursue it. One of the main reasons is that it is means tested and people have to go through a complex procedure to obtain it. All the monitoring of how the family credit system is working shows that the means-testing aspect is one of the key reasons for the low take-up.
I have no faith that the advertising campaign will have the impact that hon. Member for Norfolk, South-West suggested. If she believes that there should be additional assistance to people in the lower income groups, she should be supporting the new clauses, if for no other reason than that the Government should take account of the reality in which so many of our constituents live.
The hon. Member for Lewisham, West (Mr. Maples) said that there is no moral compulsion on the Government to increase child benefit. However, I believe that there is, not least because the Government made it clear in their manifesto that they intended to continue to pay child benefit. While we may go into the niceties of their language, those of us who read the manifesto understood it to mean a regular uprating of child benefit. That commitment was widely welcomed. The other moral compulsion is that the Tory party claims to be the party that supports families. The continuation and uprating of child benefit is a major aspect of supporting family life in the United Kingdom.
I support the arguments advanced by the right hon. Member for Aylesbury (Mr. Raison). He referred to the community charge rebate system and to the fact that the Government anticipate that a large number of people in the poorer income groups will be eligible for such a rebate. It is well seen that he does not represent a Scottish constituency because those of us who do know that many of the poorest families, irrespective of the fact that they may have had the largest rebate made available to them on the community charge, are worse off than they ever were. For many of the families this is compounded by the freezing of child benefit. More and more of them are forced into the poverty trap by a whole series of measures introduced by the Government.
Women Members of Parliament should speak not only for their constituents but for women throughout the whole of the United Kingdom when arguing for the uprating of this benefit. One of the sadnesses of my life is that I am not a mother, but I do not begrudge paying my tax if it will be targeted on children. I come from a happy family home. We had to budget carefully and tightly. I remember how important the family allowance was to my parents, who ensured that my brother and I had the opportunities that they wanted for us. If having 41 women Members of Parliament is a major advance for women, all 41 of us should be in the same Lobby tonight, fighting for the women of the United Kingdom to ensure that they have the opportunity to bring up their children on the level of 706 income that we would wish them to have. Therefore, I urge all women Members of Parliament to support these new clauses.
§ Mr. Tim Rathbone (Lewes)
I am pleased to follow the hon. Member for Moray (Mrs. Ewing), who was advocating action within this House, by her party, for the benefit of this nation as a whole. I hope that we hear many more arguments from that corner of that Bench on that subject along that theme.
I support my right hon. Friend the Member for Aylesbury (Mr. Raison) who spoke to new clause 2 admirably. I remind my hon. Friend the Member for Lewisham, West (Mr. Maples) of the way in which, only in 1975, child benefit was introduced with all-party support. It was welcomed as an implementation of the requirementto make relief in cases where there are a number of children a matter of right and a matter of honour.That was stated categorically by William Pitt 200 years ago, as my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) pointed out. Conservative Members have welcomed child benefit, particularly as a partial implementation of the Conservative Government's Green Paper initiative for a full tax credit scheme, which grew out of some of the thinking and studies of my late hon. Friend, Sir Brandon Rhys Williams, who contributed so much to arguments in this sphere and who we miss most particularly today. My right hon. and hon. Friends argued in favour of the inclusion of child benefit in annual uprating reviews so that it would at least be kept in line with inflation.
Child benefit replaced child tax allowance, which replaced the family allowance. If child tax allowance had continued, it is inconceivable that it would not have been increased as other tax allowances have increased. The same argument applies to child benefit.
Much of the discussion this afternoon has centred on the pros and cons of means testing and targeting, as with family credit, versus universality, as with child benefit. My hon. Friend the Member for Lewisham, West made a careful analysis of that, and the thrust of his argument was supported by my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard).
I shall make five points which cut through to the truth. I hope to puncture some of the misleading statements that have been made and, with all due deference to my hon. Friend the Member for Lewisham, West, the misleading claims that he made.
First, it is misleading to claim that richer people gain a greater reward from universal child benefit. Child benefit is a cost to middle and high income earners without children. It is a benefit to middle and low income families with children and it does not make much difference to richer families with two or three children, or to poorer familes without children. The only real anomaly lies with richer families with four or more children but, for heaven's sake, it must be better to use overall taxation policy to establish tax takes from them than to do away with child benefit for all.
Secondly, as right hon. and hon. Members on both sides of the House have pointed out, universal benefits are far cheaper to administer than family credit, which, I understand, still costs £3.80 for each £100 of benefit, compared with £1.40 for basic retirement income or £1.90 707 for child benefit. Moreover, that cost does not include the extraordinary, but welcome, £7 million promotion cost for family credit, which is not needed for child benefit.
Thirdly, targeting is surely a means of getting benefit to those who need it, not just aiming them in the right direction. Child benefit has a 98 per cent. take-up. In other words, it does not arrive with 2 per cent. of people who should get it, but we do not know where that 2 per cent. falls. Family credit reaches only 50 per cent. of eligible employees—253,000 people—and 24,000 or so self-employed people. That means that 253,000 employees' families and an unknown number of self-employed people who should be getting it are not. That is a translation of percentages into people, and the picture is quite horrific.
Fourthly, means-tested benefits create poverty traps, disincentives to work and incentives to dependency, and they erode pride and independence. Universal benefits do not, as my right hon. Friend the Member for Chesham and Amersham ably demonstrated. They are also more secure sources of income in the hands of the people who need it most—the parents of the child.
Fifthly, universality is valuable per se because it is a mark of a civilised society. It applies to Government services, whether they be street lighting or the police, and it applies to many Government benefits such as pensions. Why should it not apply in the same civilised way to benefits for children?
In the absence of a better, more benign, more efficient and more effective form of family assistance, child benefit should be uprated in line with inflation and linked to tax allowances not frozen to death.
The last remaining question has to be, "Can the country afford it?" Although it is included in the public expenditure projections, as my right hon. Friend the Member for Aylesbury said, that question has still to be answered. Whatever the cost, it is not a fresh burden. Rather, it is a transfer of purchasing power from people who, because of their larger income or smaller families, can afford luxuries to those who, because of their family size and circumstances, may go short of basic necessities.
To some extent, child benefit involves a redistribution of wealth—but only in a small way—both vertically and horizontally. Vertically, the redistribution is between the better off and the less well off; horizontally, the redistribution is between people on each level of income according to whether they have children to support.
§ Mr. John Marshall (Hendon, South)
My hon. Friend talks of redistribution through child benefit. Does he accept that 500,000 recipients of the benefit pay tax at 40 per cent.? What is redistributive about people on a lower income paying tax to finance higher child benefit?
§ Mr. Rathbone
If my hon. Friend reads Hansard, he will see that I touched on that earlier in my speech.
The point that I have just been making was made by my great aunt, Eleanor Rathbone, who was the hon. Member for the Combined English Universities 55 years ago. We were reminded of that truth 15 months ago by our much revered late colleague Sir Brandon Rhys Williams. Child benefit is part of a consistent Conservative policy towards families of which we as a party and the Prime Minister and all of the Cabinet can justifiably be proud.
708 The country has responded, and wants to continue to respond, to bold and generous leadership. Where can that be truer than in maintaining and developing the wellbeing of our greatest asset—our children? There is no better investment. There is no greater reward. I urge my right hon. and hon. Friends on the Front Bench to accept new clause 2. If they do not, I urge all right hon. and hon. Members to support it in the Lobby so that child benefit can again be the properly valued investment that, in present circumstances, only it can be.
§ Mr. Frank Field
I support new clauses I and 2. It gives me great pleasure to follow the hon. Member for Lewes (Mr. Rathbone) and, in a sense, his great aunt and the arguments that hon. Members on both sides of the House have presented in favour of increasing child benefit.
I have no intention of taking the time of the House by going over ground that has already been covered. Others have ably made the case for the new clauses. For two reasons I want to pick up on something that the hon. Member for Lewisham, West (Mr. Maples) said. First, he introduced a new note into our debate. If Eleanor Rathbone were here today, or if we could have a seance with her, she would say that we should be taking note of that change.
The debate is moving, and was neatly summarised by the hon. Member for Lewes. Those of us who support child benefit have to take into account the new element of rising living standards, and decide whether they have risen to such a degree that the proponents of a universal benefit have to re-think their position. I hope that no Opposition Members will deny the rise in living standards. It is why the Government win elections. People do not elect Ministers because they are better looking or more able than Labour Front Bench Members—as a group they are not. They elect them because the majority of people realise that the trough that is put before them is bigger than it was before and they are worried that if we touched down on the Treasury Bench that trough would either shrink or be removed entirely. Our case against the Government is that, at a time of record living standards since the industrial revolution, one group has been deliberately excluded and we cannot support the emergence of an underclass without conceding what the electorate has known for three elections—that living standards have been rising at a record pace. Therefore, we have to take on board that new element.
I shall address the dilemma by answering the question that the hon. Member for Lewisham, West asked the right hon. Member for Aylesbury (Mr. Raison)—if we had £600 million, would we put it towards a universal increase in child benefit to make up the shortfall that has occurred under the present Government? I would do that without any hesitation but perhaps for different reasons than have been put forward so far.
I would fit a big increase in child benefit into a policy of taxation and incentives for those at the bottom of society as well as for those at the top. Despite the Government's rhetoric about freedom, and despite what the Prime Minister says about disengaging from the nanny state, she runs an enormous nanny state. Our tax system bribes people to undertake certain forms of expenditure to such a degree that half all personal income is exempted from taxation by way of tax allowances. I want the Labour party to be committed to a policy of phasing out all those tax allowances and introducing a standard rate of taxation 709 of between 12p and 15p in the pound. That policy would entail some losers. Child benefit has a crucial role to play, as one of the groups that will lose out will be low-paid workers with children. Such a taxation system would get rid of the nanny state that the Prime Minister supports so firmly, but if we are so keen on cutting tax rates at every level, there have to be some measures of compensation. It would not be a burden, as the hon. Member for Lewisham, West was suggesting, because such a reduction in taxation together with a significant increase in child benefit would be building floors—creating a society in which people could build through their own efforts without being penalised.
Maybe not in our minds, but in the minds of most of our constituents, there is a difference between claiming a benefit but losing it as one's income rises and paying tax. People make that distinction, but it is not the relevant point. Most of our constituents are also aware that the overlap between taxes and benefits creates major disincentives for those at the bottom of the scale. If we are keen on creating incentives for those at the bottom, as we have been for those at the top, we need a massive increase in child benefit accompanying other major reductions in taxation which will not benefit one penny those who are poorest. It would he foolish and deceitful for Opposition Members to claim that we can move people away from dependency on welfare without going through a very difficult, choppy and unpopular period. The only way in which we can lift people free of means-tested assistance is to phase out the benefits and provide no help whatsoever —in other words, punish—or to increase universal provision such as child benefit. Those who are claiming means-tested assistance would lose that benefit as we increase child benefit. That would be unpopular, but if we are ever to get millions of low-income families out of the nightmare of dependency on state welfare, we have to go through that phase.
My view is very simple. I do not think that the hon. Member for Lewisham, West was right to say that he is winning the argument in the Chamber. He is losing the argument in the Chamber, but he may win the vote. If he wins the vote tonight, Opposition Members and Conservative Members who are friends of child benefit must face reality—the Secretary of State cannot stand up and tell us that he is opposed to child benefit and that only over his dead body will there be an increase in child benefit. If he does, he knows that he cannot fulfil the terms laid upon him by the Child Benefit Act to review the benefit impartially each year.
§ Mr. Favell
May I repeat the question that I put to the hon. Member for Livingston (Mr. Cook)? As I understand it, the hon. Member for Birkenhead (Mr. Field) is arguing for universal benefits for all. Is he in favour of abolishing family credit?
§ Mr. Field
My argument makes it irrelevant. The increase in child benefit that I propose would lift most people free of claiming family credit. It would not abolish family credit but it would make it irrelevant.
The Secretary of State cannot get up and say what he really thinks about child benefit, therefore we have to use and interpret his political body language. It is clear that he has a deep hostility to child benefit. I will bet anybody any 710 amount of money that while the right hon. Gentleman is Secretary of State for Social Security there will be no increase in child benefit.
Are we to gather the clans and debate child benefit two or three times a year and go away satisfied, or are we to take the argument into the Government's camp? Such an opportunity will arise because when the Finance Bill returns to the Floor of the House I shall table an amendment to reintroduce child tax allowance. Of course the value of child tax allowance will have fallen because the basic rate of tax has been cut since 1979, at least nominally. But had child tax allowance been continued and increased in line with married man's tax allowance, the tax burden would not have been shifted from childless people and single people to those with children because we have not increased child benefit. That is why the reintroduction of child tax allowance is relevant.
If we are concerned about delivering resources to families with children, under this Government we have no choice but to take that route. Some would say that that was selling out child benefit. I repeat that I probably owe my place here to the work that I did with an organisation campaigning for child benefit. I am mindful of that, but I organised and helped that campaign on child benefit because I was interested in delivering to families real resources rather than token gestures.
We have a simple choice. If we are defeated tonight, either we can concede defeat and rejoice that we have put up another good fight, or we can become serious politicians about delivering resources to families with children. The only option that we have under this Government is to reintroduce child tax allowance. There will be life after Thatcherism, despite what the Prime Minister maintains, and another Government would have the opportunity to use resources committed to child tax allowance and convert them back into child benefit. There would not have to be the unhappy scramble of lobbying the Treasury for sufficient resources—£600 million according to the hon. Member for Lewisham, West—to make up the shortfall that has occurred under the present Government.
§ Mr. Moore
I always listen with enormous care to the hon. Member for Birkenhead (Mr. Field). I know that he would not wish to give the House inaccurate information. I do not think that he has seen the written question tabled by my hon. Friend the Member for Hornchurch (Mr. Squire) and answered on Thursday 20 April. It asks specifically if one can take into account the role of tax changes between 1978–79 and 1989–90 and the impact that the changes had on families without children to discover the amount by which one would have to increase child benefit to achieve the same impact. I am sure that he would want the House to know—he is honourable in such matters, especially in the way that he is putting his point —that one would have to reduce child benefit in the cases referred to by my hon. Friend the Member for Hornchurch, who is not unknown as being a supporter of child benefit.
§ Mr. Field
It is a terrific advantage that I have not seen that parliamentary answer. I shall come back to it on another day. I am sure that the Secretary of State would not want to stop me in mid-flow as I am about to complete my comments.
711 If we are defeated in the Division on the new clauses —I hope that we will not be—I hope that the seriousness with which we put our arguments will have been noted. We will be equally serious about amending the Finance Bill as the only opportunity under this Government to get resources to families with children is by reintroducing child tax allowances. I hope that the strength of our rhetoric will be matched by the voting during the Report stage of the Finance Bill.
§ Mr. Simon Burns (Chelmsford)
It is always a daunting prospect to follow the hon. Member for Birkenhead (Mr. Field) who is an acknowledged authority on social security. He made one point with which I can agree in principle, although not in practice. He said that positive efforts should be made to help children, rather than mere gimmicks. I suspect that the difference between the hon. Member for Birkenhead and myself would be in interpreting the principle. We should put the debate on child benefit in the context of the fact that between 1974 and 1979 the real-terms value of income support benefits for the family fell by 7 per cent., whereas in the last decade it has increased by 27 per cent. I think that I am right in saying that the hon. Member for Birkenhead, in a previous life with the Child Poverty Action Group, was critical of the Labour Government and their record on providing financial help to families.
I part company with the hon. Gentleman on how one gives the maximum amount of financial help to the most genuinely needy children.
§ Mrs. Beckett
I do not want to distract the hon. Gentleman from the thrust of his argument, but I should put it on record that the figures he has quoted are a peculiar and motley collection of statistics. They include support given to carers of elderly people, not merely children. Also, they primarily reflect the number of people dependent on benefits because of the increase in unemployment.
§ Mr. Burns
I was talking about family support. I did not target my comments specifically at children. I am sure that the hon. Member for Derby, South (Mrs. Beckett) finds the figures somewhat curious because they do not support her argument. They put fairly and squarely the real-terms support that the Government have given to the family over the past decade.
I find the present child benefit arrangements extraordinary because—I speak as a parent of a young child, so my wife benefits from the system—6.7 million families in Britain with 12 million children receive £7.25 tax free every week. Of the £4.5 billion—10 per cent. of the social security budget—spent on child benefit, £1 billion goes to 1.25 million families earning over £20,000 a year. I cannot understand, taking it to its logical conclusion, why the wife of a Member of Parliament or a Cabinet Minister should receive the same tax-free sum as the most genuinely needy members of society. I would be happy, as would my wife, for that money to be targeted towards those genuinely in need, because it would be of much more financial help to them.
§ Mr. Christopher Hawkins (High Peak)
On that argument, would my hon. Friend get rid of the single 712 person's allowance on the ground that it is worth more to higher rate taxpayers? Would he abolish the married person's allowance, the business expansion scheme and mortgage interest tax relief on the ground that they are worth more to higher rate taxpayers?
§ Mr. Burns
I shall answer it in my own way.
We are discussing the way to target the maximum amount of resources to the most needy in society. I believe that child benefit for families such as mine is unfair and is not the best way to use resources. That is why my right hon. Friend the Secretary of State was right to freeze child benefit for two years and, in the uprating this year, to target the money to the child allowance part of the other benefits. If hon. Members study the figures they will see that, over and above the uprating, he is increasing by 50p per child the amount available in income support and housing benefit.
§ Mr. Jeremy Corbyn (Islington, North)
I am glad that the hon. Gentleman has found his tongue after his long silence in Committee. Will he acknowledge that the position of children in Britain has become worse as a result of the policies pursued by the Secretary of State and that the failure to uprate child benefit has compounded the problem? Does he agree that even the change in the more recent announcements does not compensate for the loss? Will he recognise that child benefit is intended to benefit children? He has not yet mentioned children. He has talked about tax rates for adults. We are talking about a benefit directed towards children universally. Surely even he must accept that that is a good thing and a benefit to the nation's children.
§ Mr. Burns
I welcome the first part of the hon. Gentleman's intervention because it was made in complete ignorance. I think that I am right in saying that in the Committee on the Social Security Bill he failed to attend at the start of each of our morning sittings. If you look at the record you will see that you attended far fewer sittings than I did and that I contributed to the debates.
§ Madam Deputy Speaker (Miss Betty Boothroyd)
Order. Will the hon. Gentleman speak through the Chair?
§ Mr. Burns
I am sorry.
One has to look at the argument about children through the parents' tax position. The money is being given to the mother to spend on the children. My original point—I do not want to make a long speech—is that the current arrangement in which nearly one quarter of those in receipt of child benefit earn incomes in excess of £20,000 is wrong. The money could be better targeted by increasing other benefits so that those in genuine need benefit rather than rich families being given an extra tax-free allowance that would be worth more to them than the poorest families.
I shall support my right hon. Friend the Secretary of State in the Lobby tonight.
§ Mr. Thomas Graham (Renfrew, West and Inverclyde)
The hon. Member for Lewisham, West (Mr. Maples) mentioned average wages. I was an engineer for 20 years 713 in Scotland, but I never earned an average wage. I worked for a well-known firm in Scotland, but I never earned an average wage of £250. Highly skilled engineers at that well-known firm still do not earn that much. Many people in my constituency make £86 a week, if they are lucky. I live in Linwood—every hon. Member is aware of the closure of the car factory—where there is still vast unemployment. Many wives rely on child benefit and would love the Government to show care and compassion by agreeing to uprate child benefit.
Over 2.25 million children are living at or below the poverty level. The mothers of those kids are desperate and would prefer to receive child benefit every week rather than queue up, be means tested and plead and beg for money for their children. Child benefit should be a right, and tonight the Government have a golden opportunity to agree.
Since the Government took office in 1979, there have been 20 cuts in benefit for the family and yet the Tory party claims to be the party of the family. The Government offer the family despair and destruction and they do not care whether our children have as decent a future as children in other nations. Britain has the lowest level of public funding for child care in Europe, yet in its manifesto the Tory party claims to be the party of the family, which is a travesty of the truth.
Over the past 10 years, child benefit has fallen by 27 per cent. It is unbelievable and ridiculous that we are allowing mothers and children to suffer. Conservative Members must not forget that there are not many people walking the streets of Glasgow and Strathclyde—where there is massive unemployment and poverty—wearing designer clothes or fashion suits from Savile row. They queue up at jumble sales and secondhand shops and buy their furniture secondhand.
The Government have a golden opportunity to redress some of the imbalances and injustices that have occurred since they took office, such as the massive cuts in social security and the punishing of the poor and needy. Conservative Members have an opportunity to ensure that child benefit is uprated. It is a good benefit and has a high take-up rate. They should stand up and be counted so that the children and the poor and needy have some extra in their pockets this week.
§ Mrs. Marion Roe (Broxbourne)
The question whether child benefit should be automatically uprated understandably raises strong emotions. As the hon. Member for Livingston (Mr. Cook) said, child benefit has been around for almost a decade and a half. It is a universal benefit, so there is no problem claiming it and it makes a useful contribution to the income of every family with children. However, the fact that child benefit is simple, universal and easy to claim does not constitute a reason for unfailingly increasing its value in line with inflation every year.
If one is to rely on targeting benefits, it is essential that the help reaches those who need it. Conservative Members who regard uprating child benefit as an expensive and imprecise way of helping families in genuine need must be reassured that take-up levels of family credit will rise and that my right hon. Friend the Secretary of State will take whatever steps are necessary to inform those who are eligible of their rights.
714 It amuses me that at a time when the Labour party is on the verge of unveiling its repackaged tax policy and when phrases such as "fair" and "relevant" rates of tax are all the rage among Labour Front Bench spokesmen, the hon. Member for Livingston is supporting an uprating of benefit that is unfair and unrelated to income.
I fully support the argument of my hon. Friend the Member for Lewisham, West (Mr. Maples), so I shall not waste the House's time by repeating the case that he made, but it hardly seems fair that millions of working people on modest incomes should be paying taxes to fund the £1 billion cost of child benefit for 1.25 million families who are earning more than £20,000 a year. Where is the fairness in that? If the Labour party believes that people on higher income should pay higher rates of tax, why does it not follow through the logic of its argument by accepting that those same people on high income simply do not need increased child benefit? The fact that three quarters of the families who benefit from increases in child benefit have incomes above male average earnings is eloquent testimony to the utterly indiscriminate nature of child benefit.
We have all heard stories of how well-to-do, middle-class families spend their child benefit on extravagant luxuries and sometimes items that have no connection with their children. On any objective analysis, millions of parents in receipt of child benefit have no need for that money. Undoubtedly they are grateful for it, but, none the less, they regard it as a windfall, a bonus or an extra.
I do not believe that the Government should distribute huge amounts of taxpayers' money to those who do not need it. It is curious to see the Labour party defending a system that gives an awful lot of money to an awful lot of people who would not think twice before spending the equivalent of a month's child benefit on a meal out or a couple of compact discs.
Not only does child benefit go to those who are perfectly able to look after themselves and their children, but, to make things worse, increases in child benefit have no impact on the incomes of those in real need—the people on income-related benefits. Given that child benefit already costs the nation £4.5 billion a year, we should be absolutely convinced that benefits will go to those in need before supporting proposals to index link child benefit each and every year.
I see no evidence that uprating child benefit is a cost-effective way of helping those families that need help most. The fact that some people do not claim the income-related benefits to which they are entitled is not a reason for putting even more cash into universal benefits. Far better results for many more families in real need can be achieved simply by making a greater effort to promote income support and family credit. I very much hope that the Government's social policy will follow that course.
§ Mr. Cyril D. Townsend (Bexleyheath)
I am a stranger to social security debates. I take the view, as do a number of my colleagues, that normally just a few dozen hon. Members on both sides of the House understand the more obscure points of social security and, alack, they are riot saying what they are thinking; they are merely saying what they have been told to say.
This debate is significant. It marks where we are as a Government and where we are tending in social terms. I remember hearing, when in opposition, my Front-Bench 715 colleagues explaining to the House how important this new child benefit would be. Above all, we were told, at last something would be done about the poverty trap, which we were all busily discussing at the time. We were told that it would be a simple system, that there would be a high take-up rate, and that it would be easy to administer. It was a time of considerable inflation, at levels far greater than today. No doubt my right hon. and learned Friend the present Secretary of State for Health had that in mind when, speaking in Committee on the Child Benefit Bill in 1975, he introduced an amendment for the statutory uprating of child benefit every six months in line with inflation. His words are worth remembering:I cannot see how a reputable case can be raised against that proposal."—[Official Report, Standing Committee A, 24 June 1975; c. 150.]To catch the flavour of those days, I point out that my right hon. Friend the then Leader of the Opposition wrote a letter in February 1978 to the National Council for One Parent Families, saying:We are impatient to implement the child benefit scheme fully. This measure will do more than any other single benefit to help families in caring for their children".A number of things have changed since that letter was written, one of which has been pointed out by the hon. Member for Birkenhead (Mr. Field). In 1987, he wrote a letter to The Times, saying:If we leave to one side how poverty is defined, there is general agreement across the political spectrum that, over recent years, there has been a significant increase in the numbers on low incomes. Child benefit directly relates a family's income to the size of its responsibilities.We are faced as a country with a growing problem of poverty in our inner cities. The family credit way forward is not a working option. To start with, the form on family credit—I do not have the latest document but the one that I have from my social security office has 15 pages—is a Becher's brook of a form, and we should do better. It is not good enough. The take-up rate is only 50 per cent.
We can take any other walk of life. Suppose that we were told that a shop was open for only 50 per cent. of normal shop hours or that a train service was only half operating. They would not be taken seriously and would not be seen to be going concerns. Family credit falls into that category.
There is one personal point which, surprisingly, has not come up before in this debate. We are talking about index linking. I think that it is recognised that index linking is the norm. We have a row about pensions—should they be based on historic rates of inflation or forecasts of inflation —and the Government are winning that hands down, but no one is saying, "How terrible it is that they are index linked". In personal terms, every right hon. and hon. Member has his parliamentary salary, car allowance and London allowance index linked. All those who will vote against the new clause tabled by my right hon. Friend the Member for Aylesbury (Mr. Raison) and his colleagues will be saying, "What applies to me in 1989 does not apply to those mothers in my constituency who are struggling to bring up families. Other factors have crept into the argument. The situation is entirely different."
We have heard about those well-heeled ladies who are worried that they are getting child benefit when they do not need it. Letters from them have not been filling my postbag. If they did, I would say to them, "This benefit 716 must be physically collected." I have sometimes collected it on behalf of my wife. One has to go to the post office, perhaps on a wet and windy day, stand in a queue and collect it. I would say, "If you are well-heeled and you and your children do not need child benefit, stay at home shampooing the dog or watching EastEnders. Do not waste time". I am told that the great system quietly puts the money aside and it goes back into the common wheal, and no time and effort are wasted by the bureaucracy finding out why Mrs. Jones has failed to collect her benefit. There is, therefore, an easy solution.
This is a serious debate. The family is under great strain in this country and throughout the western world, and I need not enlarge upon that point. The divorce rate, the number of children in care and child poverty are up. Here we have a system that does something about the poverty trap. If we are genuine in our belief that the family is the basic social unit of our society, is it not incredible that we are allowing the financial support for it to diminish over the years? My right hon. Friends must reply to this point: how can we claim to be looking after families when, year by year, we have singled out child benefit to be reduced?
There is also the wider point of where we are tending to go as a Government and a party. What has been the point of running our economy more efficiently and getting greater wealth rippling out through society if we are not prepared as a nation and a Parliament to tackle those pools of poverty that disgrace our cities, if we are not prepared to take note of how many people are homeless in Greater London, sleeping in miserable cardboard boxes, and if we are not prepared to notice that poor families in our towns, cities and constituencies are suffering and we are supposed to represent them?
Winston Churchill had a good phrase. He used to talk about bringing in the rear guard, meaning, in social security terms, looking after those who have fallen behind. If year by year we cut child benefit, or, worse, if in the next Parliament we chop it off altogether, we are not bringing in that rear guard—it will fall further behind and become increasingly isolated and vulnerable.
§ Mr. Marlow
If I may, let me take the House back to the eloquent, if in my belief mistaken, speech of my hon. Friend the Member for Lewisham, West (Mr. Maples). He seemed to be saying that it was wrong to give benefits to those who were earning more than, say, £15,000 a year. He is an intelligent and civilised man and I expect that he would accept that that is to a certain extent simplistic. He almost suggested that there is a zero sum and that there are those in our society who are financially givers and that there are those who are takers. It is not like that at all. The reality is that we are all givers—we are all taxpayers.
I believe that the basis of the case of those of us who support new clause 2 is that even for those who are on more than £15,000 a year—which is hardly the wealthy in this day and age and many have very large mortgage commitments—we would like the net take by the state, that is, net of allowances and benefits, to be less from those with children than from those without children. Knowing what a civilised man my hon. Friend is, I would expect him to support that objective.
Let us suppose that two young people set up home and decide to settle down together. There are two mouths and two incomes. A child is born. There are three mouths and, 717 most typically, one income. Is this the time to freeze or—if I may interpret—to reduce still further their relative financial situation? I believe that it is not, and I think that my hon. Friend will believe that it is not. Housing costs are at an all time high and young couples, some of whom in my hon. Friend's terms are relatively wealthy, have stretched their finances to the limit to get on the housing ladder. Rising interest rates have seen those costs rise still higher—higher than they would have feared and higher than they would have imagined. No one would start a family in order to acquire, or for the sole purpose of acquiring, child benefit, but given the massive financial and other pressures which today discourage young people from having children, it would seem to me to be the politics of bedlam to make life even more difficult. I imagine that it is hardly part of the Government's policy that the race should begin to die out.
I wish to concentrate on one aspect of child benefit and that is the part of child benefit that replaces child tax allowance. I do not know whether my hon. Friend the Member for Lewisham, West or my hon. Friend the Member for Norfolk, South-West (Mrs. Shephard)—who is not here at the moment—are against child tax allowance. I asked them the question. I know that there were a lot of Members who wanted to speak and perhaps they felt that it was not appropriate to answer it at that time. Let me try to sell them the concept of child tax allowance—let me even try to sell it to my right hon. Friend the Secretary of State.
When we had child tax allowance, it was universally approved and universally acceptable. There might have been people who were against the family allowance, there might have been people who said, "Why give money to people just because they have children?", but nobody was against the child tax allowance.
Why should we return to it? First, it allows people to keep more of their own income—a philosophy that is very close to the Government's heart. Secondly, it takes people out of tax, which is particularly important for wage earners seeking to support large families. It is a powerful incentive against dependence—if I may say so, pure Thatcherism. Maybe I have sold it to my hon. Friends, maybe not. If I am trying to sell it to the Government, let me try a more machiavellian approach. At a stroke, by reintroducing child tax allowance, we would reduce the amount of money taken in tax and, at the same time, reduce Government expenditure. I am offering to the Government, overnight, the ability significantly to reduce Government expenditure as a proportion of gross national product. They should grasp that opportunity with both hands.
Child tax allowance was—as child benefit is—the only fiscal measure that recognised the additional burden of families with children at all levels of income. As I intend to support new clause 2 later this evening, I shall probably be in trouble with the Whips—not much, because they are a fairly civilised bunch—but as I am known to be ambitious let me try to curry favour with them at the same time.
May I quote my hon. Friend the Member for Watford (Mr. Garel-Jones)? He said, quite rightly:Child benefit was introduced to take the place of the old child tax allowance … They were there to achieve some sort of equity at all income levels for families with children as compared to families without children."—[Official Report, 3 February 1981; Vol. 998, c. 204.]718 He was right then in 1981. Although he has taken the Trappist vows, let me encourage him by saying that the point he made then is equally valid now. It is particularly valid for the very large numbers of near poor. The Government's policy is targeting. In general, I support that policy, particularly if it hits the right target. But we have a problem with the near poor, especially those who are seeking to maintain their independence, be they elderly or be they families. The problem is that every time we miss the target, we hit the finances of the near poor.
On the Government's own terms, let us look at the argument behind this debate—targeting. If child benefit is frozen, it is decreased. As hon. Members have already said, we are transferring resources from those with children to those without children. Is that what the Government want from targeting? The married man's tax allowance, as has been said, has increased by some 22 per cent. in real terms since 1979.
My hon. Friend the Member for Lewisham, West said that tax rates have been reduced. That is true. My hon. Friend is, no doubt, very proud of that and I am sure that my hon. Friend will go along with me and be quite modest about it and say that, of course, the married man's tax allowance has not increased by 22 per cent. in reality because there has been an 8 per cent. reduction in levels of taxation and it has therefore only increased by 14 per cent. That is not bad—it is an increase. But child benefit has gone down by 12 per cent. and, as I have said before, benefits and allowances are two sides of the same coin.
The question before the Government is that if they want to target—and we should want to target—why target by taking resources from those with more mouths to feed and give them to those with fewer mouths to feed? I am an easy man—a simple man, some might say. I have said that I intend to support new clause 2. However, if my right hon. Friend would undertake to the House that he Wll target—as a Conservative should target—and accept the new clause, or, if he will not accept it, will give some indication to the House that we will go back to the system of child tax allowances, I am sure that I and a lot of my hon. Friends would be satisfied.
§ Mr. Kenneth Hind (Lancashire, West)
I welcome the opportunity to say a few words about the new clause, I urge the House to reject it for a number of reasons.
We must have a flexible approach to the provision for families. We are faced with the fact that, whatever happens in terms of income or other changes, we have indexing and uprating. The hon. Member for Birkenhead (Mr. Field), who is not in his seat, pointed out that we are now enjoying record living standards. The situation has changed since the introduction of child allowances. When they were introduced, we were living in a high-tax society. We are now living in a much more prosperous and low-tax society, which calls for alternative ways of directing aid to the poorer families in our society.
There are two fundamental reasons for rejecting the new clause. First, no targeting is involved. The top 5 per cent. of earners receive the child allowance in exactly the same way as the bottom 5 per cent. My hon. Friend the Member for Bexleyheath (Mr. Townsend) says that the top 5 per cent. should stay at home and wash the dog. The fact is that they do not. They go out and obtain child allowance; 98 per cent. are claiming it, whether they need it or not. Members of Parliament who, like myself, have children have a disposable income of £300 a week and do 719 not need extra money in child allowances. Those on low incomes, on the other hand, genuinely need the money and we should target it to their benefit, as my right hon. Friend the Secretary of State is trying through family credit to target those who are worse off. That is what we should be doing, and I welcome the fact that my right hon. Friend is using the media very effectively to seek to encourage a better take-up. I hope that he will succeed.
§ Mr. Lester
At what level of income would my hon. Friend decide that he could do without his mortgage interest tax relief and his married man's allowance?
§ Mr. Hind
My hon. Friend makes a good point, and I shall go on to deal with that very question.
My hon. Friends who support the new clause believe that there is no alternative means of protecting the poor and worse-off families. There is an alternative. We should be turning back the pages of history and re-examining the proposals on tax credits in the 1972–73 Green Paper. If we work towards an integrated tax and benefits system, we shall be working towards a progressive method of aiding families with children, whereby those who are worse off get the most and those paying 40p in the pound in tax do not receive benefit. That is a proposal for the future, and the new tax reform proposals will help us to achieve that.
Under a tax credit system, a woman could be given the credit for her children, which would overcome one of the major objections. Child allowances should be paid to the mother. I commend those considerations to the House.
The new clause does not solve the problem; it is too rigid for the future and I shall vote against it.
§ Mr. Favell
Anyone listening to the debate might go away with two misconceptions. The first is that the debate is about the abolition of child benefit, which it is not. The Government are committed to retaining child benefit. The second misconception is that the inflation-proofing of child benefit—that is what it is all about—will somehow benefit the very poorest, which it will not. If the new clause is passed, 3 million children and 1.5 million families will be not one jot better off.
The thrust of the Government's social security proposals has been to target benefit on those in the most need. I shall be grateful if my right hon. Friend the Secretary of State will tell the House just what the Government have done for the very poorest.
§ Mr. Lester
I support all those who have spoken in favour of the new clause and congratulate my right hon. Friend the Member for Aylesbury (Mr. Raison) on the able way in which he introduced the subject. My hon. Friend the Member for Northampton, North (Mr. Marlow) hit the nail on the head: if child benefit were still a tax allowance, there would be no argument about indexation. It would have been indexed along with all the other tax allowances. It is because the House decided, in order to reach those who do not pay tax, to change to child benefit—which should be called child credit—that we have this argument every time.
My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) pointed out the variations in the amounts that go in tax allowances and in child benefit. Perhaps it would help if we renamed child benefit "child credit" and presented the Treasury with the fixed amount 720 of credt for the majority, which converts automatically into a fixed tax credit, and attributed to the budget of the Department of Social Security only the sums that went to people who do not pay tax. That might help people to understand that child benefit is a hybrid measure. Our argument is not with my right hon. Friend the Secretary of State; it is whether the element that goes to those who pay tax should be a tax allowance while the rest is added to my right hon. Friend's budget.
Another point that has not been made clear is that child benefit is a poverty-preventive benefit. It is all right to talk about those in need and about targeting the very needy, but the fact that child benefit is paid to many families—some with apparently high incomes—is poverty-preventive. In the London area in particular there are families on average incomes of about £11,000 a year who, because they have heavy mortgage payments, may have a net income that would bring them within family credit. Because they have a mortgage, however, they are not allowed to claim it. They may have a net income less than the maximum for income support, but, because they are in work, they are not allowed to claim income support. More than 60 per cent. of families with incomes of less than £15,000 a year benefit greatly from child benefit. I cannot believe that a benefit that is easy to understand, popular, fair, poverty-preventive, family-friendly, incentive-friendly, inflation-friendly and targeted to people who genuinely need it is withering on the vine in this way.
Denmark, which subjected child benefit to proof of need in 1977, removed the means test in 1987 largely because of the disincentive effect. Do not let us make the same mistake. I hope that all my hon. Friends will support the new clause.
§ Mr. Squire
It is no criticism of hon. Members on both sides of the Chamber to suggest that there is an element of predictability about the debate. I suspect that my speech will be subject to the same criticism. I echo those who have said how much we miss Sir Brandon Rhys Williams, who always made his mark in debates such as this. It is only fair to congratulate my hon. Friend the Member for Bexleyheath (Mr. Townsend) who, in a return to a subject in which he was notorious—if that is the right word—a few years ago, powerfully argued the case for uprating child benefit.
There are various issues that divide the Conservative party from time to time. We usually manage to find a compromise. On this issue, however, we seem to be having to struggle to find a compromise. Perhaps a tax allowance is the answer. Several of my hon. Friends have argued forcefully the case against the present system, essentially on the ground that they dislike the idea of people with higher incomes receiving the benefit. It does not seem to matter that only 5 per cent. of taxpayers pay the higher rate. It does not even seem to matter that, as we know from last year's figures, 60 per cent. of child benefit goes to those earning less than £15,000 per annum, which I do not necessarily regard as a high income. Presumably, my hon. Friends would support that take-up; we have not reached 60 per cent. take-up of family credit. In considering the direction of benefits, my hon. Friends who object to the uprating of child benefit should recognise that it reaches the poorest, even if it also reaches the richest.
721 More than one of my hon. Friends said how difficult it was for their wives, who seem to be forced to go along to claim child benefit. I realised that child benefit was a universal benefit, but I had no idea that it was compulsory. Clearly, things have advanced somewhat, and my hon. Friends' wives are being dragged, kicking and screaming, to the post office to claim the benefit—a horrible thought. They do not have to claim child benefit and, more seriously, if that is their concern we should change the arrangements through the tax system, not by messing around with the benefit system.
For reasons that some of my colleagues have advanced, child benefit remains the most effective way of tackling family poverty. With a take-up of about 98 per cent., it is the only income that many women receive in their own right. Most important—this point has not been stressed in the debate—it is worth the same, whether one is in or out of work. That means that, over the next decade, when we will wish to encourage many more people back into work, it will not have the negative effects of the poverty-employment trap whereby people lose money simply by coming off benefits, compared with what they might earn in employment.
There is a danger of family credit being viewed as a panacea. I unreservedly welcome the campaign that the Government have just announced. I wish to see a higher take-up. But that cannot solve the problem. We must welcome any reduction in the 250,000 families who are estimated to be eligible for family credit but are not currently receiving it. In their wildest, most optimistic moments, my right hon. Friend the Minister and his colleagues do not imagine that the take-up will remotely approach the present take-up for child benefit. Every family that is not receiving that benefit will lose out under a system of increasing family credit only.
An article in The Times of 25 March suggested, among other things, that the Government were considering stopping the payment of child benefit to better-off working mothers. I am the last person to suggest that The Times is invariably a paper of record. I hope that, in this case, the Ministers have been wrongly quoted. In the relief of poverty, particularly for single mothers, child benefit will be as critical in the 1990s as it has been during the 1980s. In the United States, an almost permanent under-class was created because of an almost total reliance on means-tested benefits. We want to avoid that. If we want to encourage people back to work, we must use the available weapons, and there is no better weapon than child benefit.
We talk a lot about the value of the family, but surely it should also have some cost to society and to the Government. It is not a phrase that should be trotted out when we want to say something about the family, but not backed up in any way by money. The intellectual argument for continuing to freeze child benefit is, presumably, that is should ultimately disappear or become relatively irrelevant. There is an intellectual argument for doing away with it. There is an intellectual argument for the case put forward by my hon. Friends who agree with me. There is no intellectual argument for freezing it as it is at present.
The first aims of any benefit system are to make receipt more certain and future escape from poverty more likely. That is the power of child benefit. It does that at present. That is why it is necessary and why I hope that hon. Members will support new clause 2.
§ Mr. Moore
I will try to move at a reasonable pace, because I appreciate that the House is anxious to move on. An awful lot of points have been made and I should like to address the three inter-related themes or sets of arguments that I have detected. The first surrounds those who misunderstand—some genuinely and some wilfully—the history and the purpose of child benefit. Then there is a set of arguments surrounding those—of course they had to be among the Opposition—who want to use the Government's decision this year to pervert the truth of the Government's outstanding record and their commitment to the family. The third strand of the debate surrounds those who, with their deep and long commitment to helping families with children, are worried that the present judicious mix of child benefit, the new income support and family credit structure may be a less effective way of targeting help than through higher universal child benefit. I shall try briefly to address those three arguments.
It is important to remind the House of the history, and, as the hon. Member for Birkenhead (Mr. Field) said, of what we are debating. We are debating a 1975 statute and I, as Secretary of State, have a beholden duty to the House and to the country to seek to put it into effect. I shall briefly discuss what it replaces. It has been a constant theme in the debate on child tax allowances and family allowances. It is also critical to remind hon. Members about what we never sought it to be.
My right hon. Friend the Member for Aylesbury (Mr. Raison), whose speeches I always enjoy, indelicately said that child benefit was introduced by Pitt and dropped out for a period during the 19th century. Pitt introduced CTAs in 1799, and they dropped out in 1805, not to reappear again until 1909. Ninety four out of 100 years is more than just a period. My right hon Friend legitimately asked us to go back to the beginning of the debate on child benefit. It is essential to do so. It lies at the back of the puzzlement of the hon. Member for Livingston (Mr. Cook). He continues to say that questions have not been answered about the nature and role of it.
I remind the House of the agreed basis upon which I, as Secretary of State, seek to put the arguments behind the introduction of child benefit. I will quote from the late Alec Jones in the debate in 1975, and I will also quote Mrs. Castle. She made it absolutely clear that the Social Security Act 1975 laid downformal provisions for annual review of benefits paid under that Act and requires uprating of those benefits in line with earnings or prices as appropriate. We do not propose that there should be anything similar for child benefit because it is a totally different kind of benefit, fulfilling a different purpose.In the first place it is a new kind of benefit—a hybrid, which amalgamates a social security benefit with a tax allowance. In the second place, most of the people receiving it will be people at work.She went on to state:It will be raised from time to time in the light of inflation and other developments. But just as neither family allowances nor child tax allowances are subject to the rigid pattern of upratings that has been evolved for social security benefits nor will their successor benefit be."—[Official Report, 13 May 1975, c. 330–400.]The position was made clear. At the conclusion of the debate, after our late hon. Friend, Sir Brandon Rhys Williams sought to intervene, Mrs. Castle went on to say:There is a difference between routine national insurance benefits and this new benefit. Indexation of the child benefit is inappropriate. National insurance benefits are major means of support when earning capacity is interrupted, but the chtld benefit is a tax-free supplement to families whose major 723 source of income is earnings. Clearly maintenance benefits must be capable of moving automatically in line with changes in the cost of living. The child benefit is in a different category."—[Official Report, 7 July 1975; Vol. 895, c. 238.] She went on precisely to describe what her statutory duty was, which is the duty that I seek to carry out.That is the background to the history of the introduction. What did it replace? My hon. Friend the Member for Broxstowe (Mr. Lester), the hon. and learned Member for Fife, North-East (Mr. Campbell), my right hon. Friend the Member for Aylesbury and my hon. Friend the Member for Lewes (Mr. Rathbone) said that, if it were a tax allowance, it would be inconceivable that it would not be annually increased. That is not what happened in practice. During the longest clear period straddling major parties from 1946 to 1970, child tax allowances went up, not 25 times in 25 years, but five times. Family allowance rose four times. There was no increase between 1963 and 1968. My right hon. and hon. Friends should take more pride in the fact that in eight out of 10 years since 1979 we have increased child benefit. However, no Governments have ever sought to suggest that child benefit reflects the cost of a child.
I hope that the hon. Member for Livingston will state the Opposition's view on this clearly. The hon. Member for Birkenhead has a consistent and coherent view and he has argued genuinely that child benefit should be much higher than it is now. He repeated his arguments tonight. There is a consistency in his arguments and their inter-relationship with the rest of the relief system. However, I have great difficulty understanding what the hon. Member for Livingston believes.
I want to refer to an excellent interview in "Poverty" magazine which appeared in autumn 1987. In that article the hon. Member for Livingston was asked about the taxation of child benefit. He said:At some future date, it may or may not be appropriate to tax child benefit … there is no case for taxing it until you get to a level which actually matches the cost of a child and we are a long way from that.On 18 January, the hon. Member for Livingston said thatAt a time when it reflects one third of that cost"—the cost, he said, of looking after a child—it appears utterly ludicrous to suggest that we lower its value by another quarter."—[Official Report, 18 January 1989; Vol. 145, c. 352.]Later in that debate, he changed that from one third to a quarter. We cannot debate different levels in that way. What is the official Opposition's position? If the hon. Member for Birkenhead is voicing the Labour party view or if that view is truly expressed by the hon. Member for Livingston, there will be an additional current expenditure cost of £9 billion to raise child benefit by tripling it and of £13.5 billion to raise it by quadrupling it. [Interruption.] The hon. Member for Livingston is interjecting now gently and in an amusing way. I want to remind him that earlier today he said:Child benefit should be a stable constant support for the expense of children.The Opposition cannot have it both ways. It is either a supplement based on the history of child benefit which we all recognise or, as the hon. Member for Birkenhead has said, if it is more than a supplement what extra expenditure 724 —substantive expenditure as opposed to making indexation permanent—would the hon. Member for Livingston desire?
My hon. Friends the Members for Lewisham, West (Mr. Maples) and for Norfolk, South-West (Mrs. Shephard), in their excellent speeches, both questioned my statutory duty. I do not have the choice of looking at child benefit in isolation. I must rightly consider the relationship between child benefit and the economic and social patterns in our country. I want to remind the House of what has happened to the average male wage earner. I accept the limitations of considering him, but we have income support systems and family credit for people below the average wage level. The take home pay of the average male wage earner in 1987–88 rose per week by £18.86. To January 1989, the latest clear figures that I have to show the latest comparisons, the average male wage earner's increment has gone up by £20 per week. That is the pattern against which I must judge child benefit among other forms of help and assistance for families with children. I will not belabour the House with the pattern of change over the past 10 years which is equally relevant and would be equally successful.
§ Mr. Lester
When my right hon. Friend quotes those increases in net income, should he not also put against that the increase in net mortgage payments? We are really talking about the net disposable income after paying for accommodation rather than net take-home pay.
§ Mr. Moore
My hon. Friend the Member for Lewisham, West made those points clearly. I am not suggesting that other features have not occurred. When I try to make judgments, I must take into account the relevant factors as I am statutorily bound to do, as the hon. Member for Birkenhead constantly reminds me.
§ Mr. Robin Cook
It is perfectly proper for the Secretary of State to take account of those matters in reaching his decision on whether to uprate child benefit. However, he will be aware that the same figures about growth and take-home pay will be before the Chancellor of the Exchequer when he makes his decision about the married man's tax allowance. Why, over the past two years when he was confronted with those figures, did the Chancellor of the Exchequer think it appropriate to increase the married man's tax allowance, but the Secretary of State for Social Security thought it inappropriate to raise child benefit? Why should it be right to recognise the increased costs of sustaining a wife, but wrong to recognise the increased costs of sustaining a child?
§ Mr. Moore
The hon. Gentleman seems not to have listened to what I have been saying for the past five minutes. I have tried to show that it is impossible to compare the nature of child benefit with the whole of the tax and benefits system which is regarded as a fundamental feature of the way in which families should be supported. We must consider the way in which a family has seen its net benefits increase. For example, with a reduction in real terms in the overall tax level, the married man's allowance changes have not had quite the significance that the surface figures might suggest. Beyond that, we must take account of the relevant position of the family—its actual net disposable income. In that respect, I will not just consider average male earnings.
725 If we consider those on half average income, it is clear that over the past decade their net take home pay has risen by 25 per cent. That is not a bad comparison with the 4.2 per cent. it rose under Labour. We must compare those huge increases in net disposable income with this debate about a potential 45p increase for those who would benefit from entitlement.
My next point relates to the character of this debate. Some Opposition Members have sought to focus on an attempt to pervert the truth of the Government's astonishingly successful record in trying to improve the overall position of families with children. My hon. Friend the Member for Chelmsford (Mr. Burns) made a valid point about that. He reminded the House—which should not need reminding—of the relevant records over the past decade in comparison with the Labour Government's period of office. We must remember that family support is not simply child benefit.
The hon. Member for Renfrew, West and Inverclyde (Mr. Graham) made an emotional speech and I do not deny that emotion exists in these areas. However, he is trapped in the belief that child benefit is the only support structure for families with children.
§ Mr. Moore
With respect to my hon. Friend, it is not the only benefit which goes to women. The same applies, by statute, to family credit. There is similarly an option with income support.
We must consider the support structure provided by this Government over the past decade for families with children. There has been a staggering 27.3 per cent. increase in real terms in that respect in comparison with a reduction during the Labour Government's period of office of 7 per cent. The challenge by the hon. Member for Derby, South (Mrs. Beckett) was wrong. I draw her attention to the precise figures which have already appeared in Hansard. Unfortunately, I do not have the references for them at the moment.
§ Mr. Marlow
I am afraid that my right hon. Friend seems to be answering the questions that were put to him by producing a series of statistics which relate to a question which has not been put to him. Perhaps my right hon. Friend can strengthen his position by telling the House how much more generous we are in this country with our support for children than our European partners?
§ Mr. Moore
I could, but I was trying to make progress.
Perhaps I can correct the misapprehension created by the incorrect figures quoted by my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour). I am sure that he did not mean to create that impression. He quite rightly congratulated us on our help for one-parent families. For a two-parent family with one child aged under two, the United Kingdom stands ahead of every other member state in its child benefit payments. For a two-parent family with two children aged under six, the United Kingdom ranks third behind Belgium and Luxembourg. That is not a bad comparison. Perhaps the hon. Member for Derby, South would like me to pursue that point.
The relevant figures that I read out in regard to support for families with children are not due to increased unemployment. Neither unemployment benefit, supplementary benefit nor income support for the 726 unemployed is included. This is entirely consistent with the definition of "family", in the breakdown of expenditure by client group, that has appeared regularly in public expenditure White Papers over the past eight or nine years. For the benefit of the House, I repeat that that means one-parent benefit, family income supplement, family credit, child benefit or its equivalent, maternity grant and allowance, statutory maternity pay, supplementary benefit and housing benefit for lone parents, and additional personal tax allowance for lone parents. This touches in a very minor way on the elderly, because the figure includes benefits paid to lone parents and to people looking after elderly parents. In the data the two cannot be disaggregated, but the difference is likely to be very small indeed. It does not in any way deny the astonishing contrast in records of support for families with children.
However, it is astonishing, in detail, that the Opposition, as opposed to my right hon. and hon. Friends, can in any way question the specific in regard to child tax allowances, family allowances and family credit. I remind the House that the real value of child benefit has been higher throughout this Government's period of office than it was at any time during the Labour Administration, except when they increased it in their last month in office. I will not go into too much detail, because it might be quite painful to Opposition Members—[Interruption.] If the hon. Gentleman wants me to go into precise detail, I shall be only too delighted to do so.
I do not know how many Opposition Members who have not been here throughout the debate would like to be reminded of the situation. Clearly, some of them would. Well, I have plenty of time to do so. I might remind them, for example—[Interruption.] I can tell hon. Members who keep interrupting that I have lots more details of their appalling handling of government. For example, during the period 1976–77 to 1977–78, the equivalent of child benefit—family allowance—and in fact the whole of child tax allowances saw not just a reduction, in real terms, of £1.4 billion, but a cash reduction of nearly £300 million. That is the miserable record with which the Labour party thinks that it can challenge the Government.
Finally, I want to touch on areas that genuinely worry some of my right hon. and hon. Friends, who are concerned that the present mix of child benefit, the new income support system and family credit may be less effective in targeting help than simply increasing child benefit would be. First, I must remind my right hon. and hon. Friends that, as my hon. Friend the Member for Lewisham, West said, we have an entirely new structure. The hon. Member for Livingston, quite understandably, keeps trying to compare child benefit with family credit. In truth, it must be compared with the whole structure of income support and family credit. There, of course, we are talking about 1.4 million families in all, including only those currently in receipt of family credit, with nearly 3 million children. As my hon. Friend the Member for Broxbourne (Mrs. Rowe) said, none of those families benefit, in effect, from any increment in child benefit.
My right hon. Friend the Member for Aylesbury rightly asked why we did not use the new structure. That is precisely what has been done, last year and this year. The structure of new child premiums has enabled me, as Secretary of State, to give an additional £270 million to those specific families who have an entitlement but who would not see a direct benefit if I were simply to increase child benefit.
727 There was a great deal of debate about targeting. Our experience of targeting is not quite as difficult as right hon. and hon. Members seem to think. They seem to have forgotten the history—and I can give them only the data of the past pattern as opposed to the present position in regard to family credit. The hon. Member for Moray (Mrs. Ewing) seemed to think that targeting had failed. Our experience is that £9 of every £10 of means-tested benefit reaches those for whom it is intended. As my hon. Friend the Member for Lewisham, West said, the lone parents do not see it as demeaning. Indeed, they take up 97 per cent. of expenditure on their means-tested benefits.
As I said earlier, family credit goes to the mother. Contrary to what one or two hon. Members have said, all the research suggests that inhibition is caused not by the demeaning nature of means-testing, but by lack of knowledge of the character of family credit. As several right hon. and hon. Members have indicated, we are seeking to improve that knowledge.
The House will be delighted to know that in the first week of the new take-up campaign the number of new claims—not repeat claims—has tripled to over 20,000. That is before we have gone into the major street campaign. I remind the House that in the first year of family credit—unlike the 17 or so years of family income supplement—expenditure take-up is going at 65 per cent. There has been a very sizeable increase, to £422 million, in the amount of money actually being spent on families with children.
Those who argue that targeting child benefit is an effective way of reaching people must be reminded that, as one or two of my hon. Friends have said, £1 billion of actual child benefit money goes to families earning more than £20,000 a year. We are discussing the current child benefit situation, a situation that continues.
Bearing in mind the 25 per cent. of families, with 3 million children, on income support and family credit that will benefit in no way at all from an increase in child benefit, one wonders why it is such an excellent illustration of targeting. That does not, of course, take into account the 2.25 million children in families earning £20,000 a year.
In urging the House to reject the new clause, I ask hon. Members to remember the flexibility that has contributed to the Government's outstanding record of support for families. That is a record that, between 1979 and 1985, has raised the living standards of lone parents by 10 per cent.; of couples with children by 9 per cent.; and, in contrast, of couples without children, and single people without children, by 6 per cent.
The record is clear. Our economic success allows me to help with a judicious mixture of universal child benefit and targeted help through income support and family credit. Our record suggests that it is in the interests of families that we retain the flexibility in the present statute, and I urge the House to reject the new clauses.
§ Mrs. Beckett
Clearly the House is in a mood to bring this most interesting debate to an end, and I shall seek to be extremely brief.
When child benefit was introduced, it was generally agreed that it was the most fair and effective way not only of giving support to families with children, but of giving 728 support particularly to the poorest families with children because it tended to reduce the poverty trap. Indeed, this is the view that prevailed as recently as two years ago and lay behind the assurance given in the Conservative manifesto at the last election. That assurance was given against the background of the existence of family credit, for example, which was already on the statute book, and today child benefit remains what it has always been—one of the most popular benefits, with the highest take-up and the most efficient administration.
It is far from clear what all its opponents are really saying. Some seem to imply that there should be no form of child support at all, that those who choose to have children should simply maintain them to the full, without any support from society as a whole. Other hon. Members appeared to suggest that that support, where it is paid, should go only to the poorest families.
The hon. Member for Lewisham, West (Mr. Maples) asked why a constituent of his, a single taxpayer, should pay tax to help to fund child benefit. I will give him two reasons. The first is that, because of injustice, the chances are extremely high that that young person benefited from the payment of child benefit, and it is only fair that he should return to the pool what he himself received. The second reason, which may have rather more appeal to the hon. Gentleman than justice, is self interest. If we do not encourage people to have children and give them a reasonable degree of financial and other support, there will be no one to pay for that young woman's pension when she retires, because that is how our social security system works.
If the Government believe that there should be no form of child support, with due deference to my hon. Friend the Member for Birkenhead (Mr. Field) and remarks about the present duty on the Secretary of State, they have a duty to tell us that as soon as possible so that the parents of 12 million children know precisely where they stand. It is only right to put on record our belief that that signal would be as profound as it would be depressing. Moreover, it would be a signal not just of indifference but almost of hostility towards families.
The general approach has been that support should come, but only to the poorest. I remind Conservative Members who advocated that view what that might mean. As usual, they talked only of wealthy families who now receive child benefit and as if a means-tested system would be a reasonably generous one. Under the means-tested system of family credit, all help with rent or rate rebate is withdrawn at a gross income of £90 a week. If that model were to be followed for child benefit, no child support would be paid to any family with an income of more than £5,000 a year. That would be targeting all right. That would be means testing, but it would be means testing in the mould of that already followed by the Government.
The hon. Member for Lewisham, West said that benefit should be withdrawn at £9,000 or perhaps £10,000. If that is the policy of his party, let it be known, published and publicised as soon as possible. Let every family with an income of over £9,000 a year know that it will cease to receive any form of child support.
If child benefit were abolished and the money saved were put to fund a cut in the rate of tax, no two-child family with an income of less than £28,000 would be better off. That is the scale of the assistance which hon. Members seek to withdraw from families.
729 Hon. Gentlemen who argue for a means-tested benefit should look not only at those examples, but more widely at their Government's approach to the social security system. They should consider how the child addition to unemployment benefit was first frozen and then, when it declined in value, abolished; and how the number of those allowed free meals has declined—not those who need them but those who are permitted to take them.
There has never been an answer, not even in this debate, to the question, put over and over again, why the Government put into action policies which recognise the increase in the cost of maintaining a wife, yet apparently see a decrease in the cost of maintaining a child.
Most of all, hon. Gentlemen who argue that child benefit should be means tested should have learnt from the examples of this year. The money saved by freezing child benefit did not, even on the most generous interpretation—the Government's own—go to families in greatest need. A third of it went to families who were least well off and the rest went into the Treasury's coffers, despite the fact that those on the lowest incomes, whether on income support or family credit, are still worse off from the Government's net changes to the social security system. The call for a means-tested child benefit is a call for a mean child benefit indeed.
One other possibility that has been mentioned is the return of the child tax allowance. I pay deference to my hon. Friend the Member for Birkenhead and to the hon. Member for Northampton, North (Mr. Marlow), who appeared reluctantly drawn in this direction because of Government policy on child benefit. I cannot support a proposal which means that those who pay no tax get no benefit and help with the costs of raising a child or a proposal that, instead of giving the same to the Duchess of Westminster as every other mother, gives her substantially more. That proposition should not commend itself to the House.
Many in this House and outside it fear that the true source of the hostility to child benefit is the wish to see a cut in public expenditure. That may be unfair to Tory Members who support the Government on this matter and genuinely believe, however mistakenly, that they are supporting a policy to give help to those in most need. Even if that is hope triumphing over experience, hon. Gentlemen for whom that is genuinely the cause of their approach should look at the weight of the argument and the experience which goes against their belief. If they cannot vote with us tonight, they should at least abstain. If they are honest in their concern for children, particularly for children in the poorest families, and if they do not vote with us tonight, they will live to regret it; but the children will regret it most of all.
I believe that it would be for the convenience of the House if I were to withdraw new clause I so that we might vote on new clause 2. I shall ask leave to withdraw new clause 1.
§ Mr. Raison
With the leave of the House, may I say that my right hon. Friend the Secretary of State for Social Services has spoken with his usual courtesy. I do not believe that he has convinced those who have listened carefully that it can possibly make sense for the Government to allow child benefit and support for children to fade away at the same time as they continue with tax relief for earning pensioners, on mortgages and various forms of income tax, and now tax relief for those 730 over 60 who take out private health insurance—all on a completely universal, indiscriminate, non-targeted basis. Therefore, I urge the House to support new clause 2.
§ Motion and clause, by leave, withdrawn.