HC Deb 19 July 1989 vol 157 cc436-40

Lords amendments considered.

Lords amendment: No. 1, after clause 4, insert the following new clause—Increase for child benefit. In section 63(2) of the Social Security Act 1986, after paragraph (a) there shall be inserted the following paragraph— '(aa) which increases the sum specified by virtue of section 5(1) of the Child Benefit Act 1975 by a percentage not less than the percentage by which the sum prescribed for the purposes of section 21(6)(a) above in respect of a child aged less than 11 years is increased by the up-rating order; and'.

Mr. Speaker

This amendment involves privilege.

9.46 pm
The Secretary of State for Social Security (Mr. John Moore)

I beg to move, That this House doth disagree with the Lords in the said amendment.

The issue is not a new one for the House. We discussed it on 18 January on an Opposition Supply Day, on 24 April on Report and on 11 July on Report on the Finance Bill. In every case, the substance of the issue was debated and the House sustained the Government's decision by a large majority. Little new has emerged since then except for something in regard to family credit, to which I shall refer later, but the arguments have moved in favour of the Government. As succinctly as I can, because I do not want to detain the House unnecessarily, I shall explain the reasons for the decision that the Government took, to show why I shall urge the House to reject the Lords amendment.

I imagine that I shall take the hon. Member for Livingston (Mr. Cook) with me when I say that I shall not spend too much of our limited time on the Lords amendment itself, because I assume that the House will agree that in many ways it is a stalking horse for the same child benefit debate, and I understand that. Essentially, as one of my noble Friends described it, they are seeking to impose a statutory duty based on the exercise of discretion. For example, if this year we follow the provisions of the Lords amendment, and for the under-11s we were able to secure an increase of 20.7 per cent., extended across the whole of the child benefit range that would result in a public expenditure cost of £675 million. In many ways, the remarks of Tony Lynes, who occasionally is drawn to the attention of the House, in the New Statesman and Society this week was interesting. He pointed out the fallacy behind the amendment, which would prevent the Government from helping the poorest.

I shall remind the House of what I have said many times, first about what child benefit was supposed to be. I am not talking about what, perfectly honourably, many hon. Members on both sides of the House would like child benefit to be or about what many people think that it should have been when it was first introduced. I am talking about what child benefit was when it was created in the 1975 statute and what Governments of both political persuasions have sought to enact since. Therefore, I shall go back to the quotation that I have given many times from the debate on 13 May 1975 when the late Alec Jones, when discussing why he did not think it appropriate to have an annual index of the review of child benefit, said: We do not propose that there should be anything similar to 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, and the benefit will simply form a tax-free addition to their earned income. In this it is totally unlike benefits such as pensions which form the main source of income of those who receive them … 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; Vol. 892, c. 400–1.] On a later date, the then Mrs. Castle said: 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 child benefit is a tax-free supplement to families whose major 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. … A statutory duty is placed on the Secretary of State to examine the rate in the light of the overall social and economic policies."—[Official Report, 7 July 1975; Vol. 895, c. 238.] I shall not labour the point as I have made it many times in previous debates.

Mr. Jeff Rooker (Birmingham, Perry Barr)

I shall not labour the point either. It is all very well quoting 1975, but that was before the House, during the Report stage of the Finance Bill 1977, accepted statutory indexation of personal tax allowances. Those speeches in 1975 would not have been made and those briefs would not have been written in the light of the change of policy agreed by the House in 1977.

Mr. Moore

I disagree with the hon. Member but——

Mr. Rooker

The Secretary of State knows that.

Mr. Moore

If the hon. Gentleman would be as courteous as he used to be and allow me to answer his point, rather than constantly interrupt me, I should be happy to do so. I was trying to illustrate the distinction that was clearly drawn between child benefit as introduced and other forms of then indexed benefit. There was a substantive debate then. I will be happy to go on, to illustrate why I think that is the case.

Mr. Tony Marlow (Northampton, North)

I hope that my right hon. Friend can reassure me and many of my colleagues. Does he agree that families with children have obviously got greater family commitments than those without children and that this should be taken account of within the tax and benefits system? All families, at whatever level of income, have got greater commitments. My right hon. Friend has said, and he has read out, that when this benefit was introduced, it was stated at the time that it should be, as a result of inflation, increased from time to time. Will my right hon. Friend tell the House that he agrees that child benefit should be increased from time to time?

Mr. Moore

I have said that the nature of the statutory duty is clear. One of the confusions that has entered the debate is that people seem to assume that child benefit is a substitute for family credit. It is not. Child benefit, as my right hon. Friend the Minister for Social Security has said on many occasions, and precisely, is still part and parcel of the overall help that is given to families with children. That parcel includes child benefit, which is not means tested, and other forms of benefit. It is a package. I shall illustrate the character of the package and the way that the combination works.

Mr. Frank Field (Birkenhead)

I am grateful to the Secretary of State for reminding us of what Labour Ministers said about child benefit. Will he also remind the House that he is quoting the same people who tried to rat on the benefit, and that had there not been a leak of child benefit papers from the Cabinet, the child benefit scheme would not now exist. Would it not be appropriate to draw on sources other than that group of people to support his case?

Mr. Moore

I recognise in many instances the role of the hon. Gentleman outside the House as well as inside it. I was doing what I thought was my duty, which was to remind the House of the background to the nature of my statutory duty, which is the duty of all Governments.

I shall move on because I wish to be relatively brief.

Mr. Marlow

Will my right hon. Friend give way?

Mr. Moore

No. I have given way excessively—and courteously, I trust.

I shall move on from the nature of the history of child benefit and the statutory duty upon the Secretary of State to remind the House that in an earlier debate on these matters I drew attention to what child benefit had replaced. I shall take up the points that have been made by the hon. Member for Birkenhead (Mr. Field). It replaced family and child tax allowances, neither of which were expected to, or did, rise each year.

To ensure that the record is correct for the hon. Member for Birkenhead, in the article that he wrote, he took the period 1946 to 1970, but then added to that the period from 1970 to 1972, which actually changed the data. During that period, for two thirds of children in the basic category for all those under the age of 11, the real value declined. I shall send the hon. Gentleman the details because, being a serious person, he would no doubt wish to see them. The two allowances that child benefit replaced had different characteristics, but the one that they shared with child benefit was that they were not expected automatically to be indexed.

What was at the back of my statutory duty that made me take the decisions I did this year? I had to recognise the nature of the whole character of the economy, what happens to families in other parts of the social security and benefits system, as well as the overall pattern of earnings. It would be improper for me to ignore the radical reductions in taxation, under which 80 per cent. of families with children benefit. It would be improper for me to ignore the fact that for the year in question when I made my judgment, when I considered whether to increase child benefit by 45p, families on typical male average earnings had had a £20 per week gain in income after tax during the previous year. I have to put all those into the balance in addition to the other improvements in living standards.

The Opposition and some of my right hon. and hon. Friends have argued their case from different angles. I respect many of their arguments. I pick out the eloquent speech of my hon. Friend the Member for Ealing, Acton (Sir G. Young) during Report on the Finance Bill recently. He put his points extremely well and very quietly, as he always does. Hon. Members argue about horizontal equity, but I think that they tend to be over-conscious of—I dare not say obsessed with—child benefit to the exclusion of the overall pattern of the Government's help and support for families with children.

I am always grateful to the hon. Member for Birkenhead; I found his piece in The Guardian today fascinating. For those who do not have The Guardian as their daily read, I shall quote what he said: The Opposition and the poverty lobby will need to get their facts together. I shall not remind the House what the hon. Gentleman said about the Leader of the Opposition, although it was no doubt flattering— Gesture politics here is the litany so often heard that child benefit is the only way of increasing family income. It is in that context that it is essential that the Opposition and my right hon. and hon. Friends understand the pattern of improvement over the last decade—rightly in my judgment—in help for families with children. We have secured a massive increase in the overall pattern of support—the horizontal equity mentioned by my hon. Friends—of about 27.3 per cent. As a society, we are spending £9 billion-plus in that area.

I do not think that my hon. Friends need to be reminded of this, but the Opposition do. If they are obsessed with just one part of support for families with children——

Mr. Frank Field

I am not.

Mr. Moore

I do not mean the hon. Gentleman, I mean the Opposition generally. We should recall their appalling record when they were last in office. I specifically remind them about the relative position of child tax and of family allowances and child benefit, the process of which was changed during their time in office.

The last time that I stood at this Dispatch Box, I reminded the House that their real value for young children has been higher throughout the term of this Government's period in office that at any time during the last Labour Administration, except when Labour uprated benefits in its last month in office. I shall place the figures on the record. They reveal that spending in real terms on family allowance and child tax allowance in 1974–75 totalled £5,758 million. In 1978–79, the figure fell in real terms by 14 per cent. to £4,875 million, which is not a record of which Labour can be proud.

10 pm

Mr. Christopher Hawkins (High Peak)

My right hon. Friend says that child benefit should not be looked upon as the only means of helping those with children and of achieving horizontal equity. What help other than child benefit is given to people with children who have medium or high levels of income?

It being Ten o'clock, the debate stood adjourned.