HC Deb 03 April 1990 vol 170 cc1111-7
Mr. Flynn

I beg to move amendment No. 7, in page 5, line 33, leave out clause 4.

Clause 4 proposes to abolish the earnings-related invalidity pension provided under the Social Security Pensions Act 1975. The White Paper "The Way Ahead" deliberately concealed the true extent of the losses that the long-term sick will suffer. It admits that by the end of the century, 10 years from now, they will be losing £350 million a year—money that the White Paper claims will be spent on other benefits for the sick and the disabled. However, it says nothing about the enormously greater losses that will build up over 20 or 30 years—and those are legitimate advance periods for the consideration of social security.

The truth about those losses emerged only in reply to parliamentary questions. The Minister was forced to admit that, by the year 2025–26, the long-term sick would be losing not only £350 million a year but £1,825 million —more than five times as much. Some of that will be replaced by means-tested benefits, but the net loss will be £1,300 million. According to the Government's figures, only a quarter of that additional sum will be used to pay for the other changes in disability benefits. The other quarters will be a straight cut in spending on the long-term sick and disabled.

It is hard to know how the Government can possibly justify that cut. Exposed before us is the gulf between reality and rhetoric. Even Ministers have not had the gall to suggest that invalidity benefit is too generous in relation to the needs of the long-term sick. The basic rate for the coming year is only £46.90, to which is added an age-related allowance varying from nil to a maximum of £10 a week. The earnings-related pension scheme, when it is fully mature, will add less than 20 per cent. of an individual's earnings, so that, even in the next century, very few people will receive more than half their previous earnings during long-term sickness.

It should be remembered that those benefit levels were not inherited, in the mythology of the Conservative party, from a profligate Labour Government. What is being cut now is a system that has already suffered a great deal. It is all that is left after the savage cuts already inflicted by the Government. The basic benefit has been frozen since 1980, when the link with average earnings was broken. The earnings-related addition was cut by more than one third by the Social Security Act 1986. The Opposition tabled an amendment to that aimed specifically at mitigating its effects on the value of earnings-related invalidity benefit. The then Under-Secretary, who now rejoices in the role of Chancellor of the Exchequer, gave the reply: The proposals that we have put forward are reasonable, affordable and fair as between pensioner, taxpayer and national insurance payer."—[Official Report, Standing Committee B; 25 February 1986, c. 401.]

The Minister was asked in Committee why, if they were affordable then, they are not affordable now. If they were fair between pensioner, taxpayer and national insurance payer three years ago, why has the position changed? There was no answer from the Minister, but the change is the fact that the Minister is looking for money and is scratching around everywhere to fund the Government's much-vaunted new scheme to help the disabled. That is what has suddenly transformed the position.

The Government have produced another argument for the massive reduction in benefits for the long-term sick —the growth of long-term occupational sick pay schemes. The evidence on which they base that is a weighty report by IFF Research Ltd. and published by the Department in 1988.

The report contains a great deal of information, from which the Government have selected one figure to support their case. It is that the coverage of long-term occupational sick pay schemes has risen to nearly 60 per cent. In Committee I quoted, I believe, nearly every conclusion in that report. I was rather unfairly accused by the Minister of quoting selectively because, having re-read the report, I still can find no other conclusions. I will not repeat them all tonight.

The 60 per cent. coverage does not mean that six out of 10 people suffering from long-term illness receive sick pay from their employers—far from it. The IFF Research report shows that only 4 per cent. of private sector firms in hazardous industries—construction, mining and quarrying—have a long-term sick pay scheme, and another 3 per cent. say that they might make discretionary payments if the employees are lucky. The other 93 per cent. accept no responsibility at all for long-term sickness.

The report also shows that over one third of the schemes exclude recent employees, generally for the first six to 12 months, when accidents are most likely to occur, and 43 per cent. of large firms' sick pay schemes exclude manual workers altogether. Even for those theoretically covered, entitlement to long-term sick pay often depends on the cause of sickness. There is a great deal of picking and choosing in this matter and a very wide range of exclusions, ranging from drug or alcohol abuse to sporting injuries.

When long-term sick pay is paid, it is limited in both its amount and its duration, and only 12 per cent. of schemes provide full basic pay. Even in the public sector, which has been the pacemaker in this field, as in so many others, two out of three schemes have a time limit on them. It may indeed be true that 60 per cent. of employees work for employers with some kind of long-term sick pay arrangement, but it seems very clear that most of the 60 per cent., if they fall sick, will get no long-term sick pay at all. The rest may get something, depending on the reason for their illness.

Dame Elaine Kellett-Bowman (Lancaster)

Is the hon. Gentleman saying that people who have deliberately misused themselves by drug or alcohol abuse ought to be getting that sort of thing from their employers?

Mr. Flynn

I am saying that there should be universal benefits. That has been the principle behind the social security system in this country and in every other country. One could equally argue, and I think that it has been argued in some barbarous circles, that people who are ill as a result of drug abuse should not be treated, although we make different judgments for acceptable drugs, such as alcohol and cigarettes. We have a pension scheme, and we are not in a position to make judgments on how people fell into ill health. That would be treading on very dangerous ground. We need a highly effective scheme, which must cover those who are in it for all eventualities.

The case I quoted showed one of the defects of many occupational schemes, but the hon. Lady is unfair if she is considering that rather than all the others. We know that the occupational schemes are inferior in many ways, and I quoted a long list. We certainly cannot make a judgment on people because of the way in which they acquired their illness. I believe that hon. Members of all parties would find that an intolerable course of action.

So, while it may be true that 60 per cent. of employees work for employers with some kind of long-term sick pay arrangement, it seems clear that most of that 60 per cent., if they fall sick, will get no long-term sick pay at all. The rest may get something, depending on the reason for the illness, but it will not be any substitute for the invalidity benefit that they will lose if clause 4 is enacted.

We are arguing that there is now a universal benefit that is paid without prejudice, and the excuse being given for withdrawing it is that occupational pay schemes are widespread. The occupational pay schemes are woefully inadequate in many directions.

8.15 pm
Mr. Scott

The amendment would delete clause 4. The hon. Member for Newport, West (Mr. Flynn) sought to argue that the Government proposals to curtail entitlement to additional pension with invalidity benefit after 1991 should not be proceeded with despite the fact that, as I explained in Committee more than once, they form an important part of our package for the new provision for disabled people in our society.

I acknowledge, of course, that if the savings are projected into the next century they look pretty massive, but by the time one gets there all sorts of other arguments will no doubt have entered into the dispute across the Floor of the House. It is undeniable also that those savings, having been acquired through this provision, which I shall justify in a moment, will give whoever has my job at that time some scope for manoeuvre. Certainly, within the economy overall, there will be room for manoeuvre and for the redeployment of those sums of money.

Unless I misheard the hon. Gentleman, he suggested that in some way the Government were intending to cut the overall provision in the area of disability. He knows as well as I do that every year from now to the end of the century there will be extra resources above those previously announced in this area, peaking at some £300 million. In my judgment, the extra money will be put into this provision in a much better structured and balanced manner than at the moment.

The hon. Gentleman gave quite a lot of figures and I will begin my response by giving a few of my own. Since 1979 the number of people entitled to invalidity benefit has almost doubled—from 600,000 to just under 1.2 million —and expenditure has risen in cash terms from £840 million to £3.8 billion. Moreover, if we take spending over the whole range of social security benefits payable to the long-term sick and disabled, as I said on the earlier amendment, it has increased by some £4 billion in real terms. That is a pretty substantial record and the whole house should recognise that. We can all speculate about what has led to the tremendous increase in the take-up of invalidity benefit over that period, but this is not perhaps the time to go into that, unless other hon. Members wish to intervene and make a point.

On invalidity benefit, the current average payment of additional pension is £9 a week, with a maximum of some £41 a week. As I said in Committee, this costs some £450 million a year and it is estimated that, if we went on in the same way, by 1998 the average weekly payment of additional pension would rise to £21 a week, with a maximum of £84, and the annual cost would rise to a staggering £1.6 billion. All this is on top of the basic invalidity pension and the invalidity allowance.

So, in considering the future structure of benefits available for the disabled, we needed to consider whether continued expenditure on this scale was a sensible use of available resources when set against other priorities in provision for disabled people. Our conclusion was that it was not, for two main reasons.

First—I apologise to the House for repeating this, but I must emphasise it very strongly and I believe it personally very strongly—a major aim in the proposals set out in our paper, "The Way Ahead", is to provide more help for those disabled at birth or early in life. The whole House ought to agree with that objective. If we allowed additional pension to grow as alarmingly as I have outlined, we would be further widening the gap between those who have been able to work and those who have not.

Secondly, as the hon. Member for Newport, West agreed, occupational sick pay cover is growing. I agree with him that it is uneven at present, but nobody can doubt that its coverage is extending at a steady rate. Coverage has tripled in the last 15 years, and there was no dispute about that in Committee.

As I emphasised in Committee, the tighter employment situation in which we shall find ourselves in the coming few decades will make employers more willing to offer packages including provision for long-term sickness and disability to attract people into their work forces. Indeed, that will put extra bargaining weapons in the hands of trade unions negotiating packages for their members in large-scale enterprises. They should find it easier to negotiate this type of provision because in the coming years there will be great competition for skills. We can therefore look forward to seeing that uneven provision evened out and further extended in the years ahead, and that will be a good development.

Those are the two main reasons which led us to make our proposals in "The Way Ahead" for the curtailment of additional pension for invalidity benefit and the introduction as a consequence of the two new benefits—the disability allowance and the disability employment credit. They will make for better balanced provision in future. The clause does not affect existing rights to additional pension. All the rights built up in the years up to and including the 1990–91 tax year will be preserved, whenever the claim for invalidity pension is made, however far in the future that may be. Moreover, such additional pension will continue to be subject to revaluation uprating in exactly the same way as at present.

That all means that, even with the provisions in clause 4, the cost of additional pension will still grow from the present £450 million to £1.3 billion in the next 10 years. The provisions in clause 4 are consistent with the Government's overall strategy for future provision for disabled people. I urge the House to reject the amendment.

Mr. Battle

The Minister put a gloss on his remarks to emphasise the positive side of what the Government are doing. His phrase "uneven development" may be nearer the truth. On the economic side, his analysis suggests that there will be competition for much-needed skills in the work force in future, but at the same time there could continue to develop—it is developing now—a low-wage economy, with more part-time, temporary and low-paid work. Let us be clear that there is uneven development in the employment sector.

The Minister said that there had been an alarming growth in the degree of invalidity pension. Let us remember that the basic benefit has been frozen since 1980, when the link with average earnings was broken. The earnings-related addition was cut by over a third by the Social Security Act 1986, so the Government cannot claim a gloriously progressive record on this issue.

We have waited a long time for the publication of "The Way Ahead." We had to press to get it, having been told that it would represent a proper survey of the needs of the long-term sick and disabled. We now have the proposals in the new integrated package, which appear to be fine. But part of the Government's strategy seems to involve deciding on a strategy, putting it to the Treasury and then resolving—if they discover that it will cost Government Departments, in particular the Department of Social Security, too much—to look to local authorities as a means of funding that package. That has happened in the past—for example, with housing benefit—and many would say that the social fund notion has involved shifting expenditure to the local level.

The Minister said that local authorities would be putting this package together in conjunction with the Government. On this of all days, we must wonder whether it will turn out to be a capped budget to prevent local expenses from escalating, the whole thing being partly controlled from the centre.

Mr. Scott

I fear that I may be losing the thread of the hon. Gentleman's argument. Is he talking about the community care arrangements? He cannot be talking about the additional pension when referring to local arrangements. Or is he perhaps referring to my previous remarks about the independent living fund?

Mr. Battle

I am questioning the whole structure of the scheme being planned by the Government. The ILF comes into it, but I am particularly concerned with disability benefit because the Minister said that there could be a gap before the introduction of the new benefit for disabled people. We must be sure that whatever emerges during that time will be adequate. Will the cost be borne by local authorities, controlled from the centre—like housing benefit, which is then repaid—or will there be a different budgeting arrangement? At present, central Government control the budget for benefits. I foresee a time when the integration of disabled benefit will mean the burden being pushed to the local level. In other words, local authorities could be expected to pick up the tab, thereby saving central Government the cost.

Clause 4 enables the Government to make savings. "The Way Ahead" concealed the extent to which the long-term sick would suffer as a result—

Mr. Scott

I interrupt the hon. Gentleman in the hope that I can help him while his line of argument is fresh in my mind. There is no intention that the general run of disability benefits should be provided other than centrally, but obviously there are elements of provision, of which community care is one, where a local judgment is likely to be more flexible and responsive to the needs of individuals than any centrally run system could be. But to suggest that we are pushing it off on to local authorities cannot be right.

A clear part of the commitment to community care policies is not only that the Department in which I am a Minister will transfer the reserves that are saved on the existing provision for residential care from our budget, and from our assumptions for an uprated budget—those will be transferred year by year via the Department of Health, presumably through the Department of the Environment, to local authorities so that they have the resources—but that the Secretary of State for Health will be seeking to provide extra resources to enable those policies for care in the community to operate effectively. So long as that provision is properly made and that transfer of resources is properly done—I am confident that that will happen—those decisions are better made at a local level than centrally.

Mr. Battle

I am grateful to the Minister for that intervention and I take it in good faith that that is his intention. We support the assessment of need being made locally, but we wish to be assured that the necessary funds will be underwritten. After all, a few hours ago in the Chamber the Secretary of State for the Environment capped the budgets of local authorities so that they could not meet their assessed needs.

Dame Elaine Kellett-Bowman

Excess needs, not assessed needs.

Mr. Battle

I am grateful to the hon. Lady for that clarification. When the standard spending assessment was fixed for my city, we needed a meeting with the Secretary of State because the figure was reduced by the Government, as they had not taken into account the needs outlined at local level. In other words, the assessment at local level was overridden by the Government.

We must be assured that the funds will be available. The Minister said that resources from his Department and from the Department of Health would be transferred to local authorities. I hope that the right hon. Gentleman will not be saying at some future date that local authority budgets will be capped in such a way that they will not be able to provide for the needs that have been assessed locally.

Otherwise, we feel that, as has happened with local housing, the service level and the policy of providing service will pass to local government but resources to fulfil those commitments will not be given, so the local authorities cannot undertake the job. That would be a most cynical move, in this area of all areas. Therefore, I welcome the comments that the Minister has made in his intervention, but I hope that his colleagues in other Departments will be able to give such clear assurances.

8.30 pm
Mr. Flynn

The answer that the Minister gave was unsatisfactory. He again made a point, as he did in Committee, about how much extra spending will take place. He took me to task for suggesting that there would be a decrease. As the Minister knows, it is difficult to make an objective judgment about what will happen in future. Our reason for suggesting that there would be a decrease was the Government's unrealistic assumption about the growth of wages. It all depends who has the most accurate crystal ball that will give us the clearest picture of the future.

We suggest that what destroys the Government's case about extra spending is their ludicrous proposal that average earnings will increase by a mere couple of per cent. We shall continue to disagree with the Government on those issues and about what is likely to happen in the future. The purpose of tabling the last two amendments was to underline that the Government are not increasing spending on the disabled. They are recycling the money spent on the disabled just as much as they are ring-fencing housing payments to tenants on council estates.

The Government's philosophy is that, if there has to be an increase, there must be a complementary decrease in spending somewhere else. Today, we are trying to expose what is taking place to the House. We are trying to show that this is not an act of generosity. We are an aging population and we are more aware of disability than ever before. The disabled are keenly aware of all the awards and allowances that are made.

As the Minister said, we could talk at great length about why there has been an increase in the amount of money claimed by the disabled. We all welcome that increase without any reservations. However, we are looking forward to a more ambitious and generous reaction from the Government. We did not expect them to come up with this Bill. Although the Bill contains good things that we could welcome, we hope that those good things will be financed by new money and not by taking money from people with other problems.

Mr. Scott

As the hon. Member for Newport, West (Mr. Flynn) knows, public expenditure figures are published on a three-year cycle. It is already clear that we will have extra provision above the public expenditure survey three-year period for the long-term sick and disabled. I said earlier in the debate that extra resources will be put in in each and every year to the end of the century. Looking beyond that, one is moving into crystal ball territory.

Extra resources are being committed and the Government's commitment and their record on providing extra resources for the disabled far exceeds that of previous Governments. We can be proud of what we are doing for the long-term sick and disabled in this country.

Mr. Flynn

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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