HC Deb 07 February 1990 vol 166 cc890-937 3.40 pm
The Secretary of State for Social Security (Mr. Tony Newton)

I beg to move,

That the draft Social Security (Contributions)(Re-rating) Order 1990, which was laid before this House on 18th January, be approved.

I understand, Mr. Speaker, that it will be convenient also to consider the following motions:

That the draft Social Security Benefits Up-rating Order 1990, which was laid before this House on 18th January, be approved.

That the draft Statutory Sick Pay (Rate of Payment) Regulations 1990, which were laid before this House on 18th January, be approved.

That the draft Guaranteed Minimum Pensions Increase Order 1990, which was laid before this House on 18th January, be approved.

I imagine that the main interest of the House, and therefore the main focus of the debate, is likely to be on what is in the uprating order, and in at least one respect what is not in it. But first I should outline the purpose and content of the other three instruments.

I take first the contributions re-rating order, conscious, in the wake of having been mildly rebuked by a distinguished observer of our proceedings for a certain want of jollity during Question Time earlier this week, that the scope for bringing jollity to the discussion of national insurance contributions is limited indeed. The order is concerned with the national insurance contributions which determine people's entitlement to pensions and other important contributory benefits, and which are the source of finance for over half of what is spent in this country each year on social security.

It is rather odd that the House devotes so much less time to discussing those contributions than to matters of taxation, given that there are many people for whom national insurance contributions are larger than any tax liability they may have and that the total paid in such contributions amounts to about two thirds of the total collected in income tax.

The most notable feature of the re-rating order is that, for the seventh year in succession, it makes no increase in the main rates, the class 1 rates paid by employed people and their employers. As the House will be aware, however, there are boundaries for contribution liability, known in the jargon of the trade as the lower earnings limit—LEL—and the upper earnings limit—UEL—and those will change as usual. The LEL applies to both the employer's and employee's share of contributions; the UEL to the employee's share only. The order itself does not set those two earnings limits; that is done by a set of regulations to be laid after the benefits uprating order has been approved. But I should remind the House that the LEL, which is linked by law to the nearest pound below the retirement pension rate, will be £46 a week and that the UEL, for which there is somewhat greater flexibility, will be £350 a week.

The House will recall that in 1985 we reduced the contribution rates paid by lower paid workers and their employers to help those workers and to reduce employment costs. The reduced contribution rates will significantly cut the impact of contributions on people with lower earnings without affecting their benefit entitlement in any way. From 5 October 1989, we built on that process by further restructuring the employee's element of class 1 contributions, again without affecting benefit entitlement. People who earn less than the lower earnings limit will still pay no contributions but will pay an initial entry fee, as it might be called, of 2 per cent., charged on earnings at the lower earnings limit. The standard 9 per cent. is charged on that part of any earnings that exceed the lower but not the upper earnings limit.

The effect of the 1985 and October 1989 changes taken together was to reduce contributions of every contributor by just over £3 per week, which clearly was of particular help to the lower-paid. I very much welcome that, as I am sure do all right hon. and hon. Members. Although the order makes no further change to the rates, the effect of the increase in the lower earnings limit will be to reduce most employees' contributions by 21p per week, or by 15p per week if they are in contracted-out employment.

The effect of raising the upper earnings limit is that those having earnings of £350 per week or more will pay an extra £2.04 per week, or £1.60 per week if they are contracted out.

Employers' contributions, which have a somewhat different structure, were not affected by last October's changes. However, as on previous occasions, the re-rating order provides that the earnings limit below which they pay lower contribution rates will be increased roughly in line with inflation, rounded to the nearest £5. From April, employers' contributions will be at 5 per cent. in respect of employees earning between the lower earnings limit and £79.99 per week; 7 per cent. for those earning between £80 and £124.99; 9 per cent. between £125 and £174.99 per week; and 10.45 per cent. for those earning more than £175 per week.

Mr. Tony Banks (Newham, North-West)

I am trying to follow the Secretary of State, but he is reading his brief very closely and I should not be surprised if the people at the receiving end of all that information could not understand it. I cannot pretend that I do. I shall put to the right hon. Gentleman a point made to me by those representing welfare rights in Newham, who say that, although a person earning £84 per week in 1989–90 would receive £52 per week statutory sick pay, that same person claiming after April will receive only £39.25, unless he or she receives a pay rise of 49 per cent., taking their income to £125. If that is so, the new arrangement represents a real cut for people at lower income levels.

Mr. Newton

Having considerable experience of the subject myself, I sympathise with the hon. Gentleman's difficulty in understanding the complexities of national insurance contributions. However, they have relatively little to do with the point that he makes. I shall deal shortly with the Statutory Sick Pay (Rate of Payment) Regulations 1990, which are in the batch before the House this afternoon, when the answer to the hon. Gentleman's question will become clear. Meanwhile, I have little alternative but to plough on through the complexities of the Social Security (Contributions) (Re-rating) Order 1990 as briefly as I can.

In 1990–91, class 1 contributions, which are the ordinary contributions that most people make, are expected to yield £32 billion. As is the case with contributions made in all classes, that revenue will be apportioned between the national insurance fund and the National Health Service. Self-employed people pay national insurance contributions in two portions—the flat-rate class 2 contribution and the profits-related class 4 contribution. We do not propose any change to the class 4 rate, which will remain at 6.3 per cent. in the coming year. The profits limit for class 4 contributions, which determine the level of profits on which contributions are payable, will increase in the normal way and broadly in line with the earnings limit for class 1 contributions, to £5,450 and £18,200 respectively.

The upper profits limit is exactly 52 times the class 1 upper earnings limit. We propose also to increase the class 2 contribution by 30p to £4.55 per week from next April. The class 2 rate is broadly linked to the class 1 lower earnings limit, and its increase reflects the proposed rise in that limit.

In somewhat different terms, the result of all this is that self-employed people with profits at or below the present lower limit of £16,900 will pay about £25 less in class 4 contributions per year. Those with profits above the proposed upper limit of £18,200 will pay about £57 more. Self-employed people are expected to contribute about £1,200 million overall in contributions in 1990–91.

Finally, certain categories of people—for example, those who are not gainfully employed or receiving contributions credits, such as people who retired before the age of 60—can pay class 3 contributions if they wish; they are voluntary contributions. We propose to increase class 3 contributions by 30p, making them £4.45 a week.

Before leaving this tangled question of national insurance, I should note that, as usual, the Government Actuary's report on the effect of our proposals on the national insurance fund has been laid with the re-rating and uprating orders. Having referred to the report at some length in my speech on Second Reading of the Social Security Bill on 22 January, I shall merely remind the House now of what I consider to be its essential points.

The expected balance of the fund in the present year, at 34 per cent., is more than twice the Government Actuary's recommended minimum. Although, in 1990–91, expenditure is likely to exceed income, the balance is expected to remain at 25 per cent., which is well above the minimum. While a problem could have been foreseen had that trend continued in subsequent years, it should be overcome by the proposals in the Social Security Bill to transfer from the national insurance fund to the Consolidated Fund payment of industrial injuries benefits, statutory sick pay and statutory maternity pay. Since none of those is a national insurance benefit in the ordinary sense, as they do not depend on a contribution record, in my view, as the House knows, that is a sensible move in any case.

I now turn to the draft Statutory Sick Pay (Rate of Payment) Regulations. Those regulations were referred to the Social Security Advisory Committee, and its report, together with my response, is also before the House. There are three main elements in the regulations. The first is to increase the lower rate of statutory sick pay by £3 a week, to £39.25, an increase of rather more than simply matching inflation would have required. That will improve the position of low-paid workers who experience short-term sickness. That has been widely welcomed, as has the knock-on effect of a modest real increase in the entitlement of more than 200,000 women receiving statutory maternity pay, since the SMP rate is the same as the lower SSP rate.

As is the way of the world, comment has tended to ignore that aspect of the proposal and to concentrate on the other two elements of the regulations, which are the more limited increase of 40p, bringing the higher SSP rate to £52.50, and the increase from £84 to £125—that directly relates to the point that the hon. Member for Newham, North-West (Mr. Banks) raised—in the weekly earnings limit, above which the higher rate is payable. The concerns that have been expressed, and which he reflected, on the latter proposal are fairly reflected in the Social Security Advisory Committee's report, but for the reasons set out in my formal response the Government do not believe that those concerns are justified and they therefore do not intend to depart from the proposals, which have been conceived as a whole. Therefore, it would have been necessary to reconsider also the position on the real increase in the lower rate of SSP and SMP, which has been generally welcomed.

In commending this order to the House and, at the same time, commenting on the point that the hon. Gentleman raised, I shall simply ask hon. Members to bear in mind three matters. First, since 91 per cent. of employees are now covered by occupational sick pay schemes, and 83 per cent. of those schemes in the private sector now top up SSP to full pay and most of the rest to at least half pay, very few employees are likely to be affected in practice in the way that the hon. Gentleman's constituents have suggested. There will be a change in the balance of what they receive—between what the State provides through SSP and what the employer provides through an occupational sick pay scheme—without affecting the individual. We expect that in practice very few employees will be affected.

Mr. Tony Banks

I am grateful to the Secretary of State for his patience in taking me through this highly complicated point, which I now understand better. Although he says that very few employees will be affected, has he any estimates? This matter has been raised with me by people in Newham, and I should not like anybody in Newham to lose under the provisions which have just been announced. Has the Secretary of State any estimate of the numbers involved, and what will he do if examples are brought to his attention of people who are manifestly losing out?

Mr. Newton

I shall make three points in response to the hon. Gentleman. First, if he investigates the circumstances of everyone in Newham, as I am sure he does assiduously as a Member of Parliament, he will certainly find a fair number who are likely to gain. They will be either quite low-paid workers who will be helped by the increase in the lower rate of SSP, or women having babies who will be helped by the small real increase in the rate of SMP.

Secondly, I cannot give the hon. Gentleman a detailed figure of the sort he requires. Many of the theoretical effects will happen only if someone is sick. We think that about 290,000 spells of sickness might theoretically be effected. However, to know who is going to be sick and relate that statistic to the occupational sick pay scheme which they may or may not be in is a task that would be beyond even my Department's excellent statisticians.

Thirdly, even at the present rate, somebody with substantial numbers of dependants would be likely to need—as they would be entirely entitled to if they were on only SSP—some topping up from income support or housing benefit. That remains open under the new arrangements in precisely the same way as it does at present.

The £125 dividing line, apart from the slight administrative advantage for employers of alignment with the dividing line which also exists in relation to contribution payments—the point that the hon. Member for Newham, North-West (Mr. Banks) noticed earlier—does no more than restore the balance of numbers between those receiving the standard rate of SSP and the lower SSP rates to where it was when the SSP scheme started in 1983.

While the proposal undoubtedly means that employers will bear a slightly greater proportion of the costs of short-term sickness, the actual amount involved—about £80 million—is small in relation to total labour costs in the economy of more than £250,000 million. Overall, I have no doubt that this relatively modest restructuring is a sensible and reasonable one, taking account of the many pressures for social security expenditure in sectors for which only the state can provide.

You, Mr. Deputy Speaker, will be glad to hear that I need address the third instrument only briefly—

Mr. Tim Smith (Beaconsfield)

What information has my right hon. Friend the Secretary of State about the 9 per cent. who are not covered by occupational sick pay schemes? Does not common sense suggest that they are more likely to be part-time, and therefore low-paid, people, who will benefit, not lose, from this change in the arrangements?

Mr. Newton

Common sense suggests that, as I implied when I originally announced this in my original uprating statement. That is one reason why I would expect many people to be helped by what I have done with the lower rate of SSP, which is likely to be disproportionately helpful to those lower-paid and part-time workers who may not be in occupational sick pay schemes.

If only to take the opportunity to encourage more employers to do this, I must say that one encouraging factor is that employers generally are tending to extend their occupational schemes to part-time as well as full-time employees. Not least because of its effect on so many married women, that is something that I welcome and would wish to encourage.

As for the Guaranteed Minimum Pensions Increase Order 1990, in line with my statutory duty under the Social Security Act 1986, the order obliges occupational pension schemes that are contracted out of the state earnings-related pension scheme to provide post-award increases in guaranteed minimum pensions, earned in the tax year 1988–89, of 3 per cent. from 6 April this year.

The main uprating order follows the announcement that I made to the House in October about the generality of social security benefits rates that will be payable from 9 April 1990. It provides for an increase in retirement pensions, and in virtually all other benefits that are not income related, of 7.6 per cent. That is the increase in retail prices that took place between September 1988 and September 1989. As for income-related benefits, the order provides for a general increase of 5.2 per cent., which is the increase in retail prices, other than housing costs, over the same period. That difference, as is now well understood, reflects the fact that for people on income support there is generally direct assistance with housing costs, either through the payment of their mortgage interest, or some part of it, or through housing benefit.

Rather than rehearse all the many benefit rates to which those general increases give rise, which are set out in the order, it will be more helpful to concentrate on the ways in which its provisions depart from the general pattern that I have just outlined. They are quite numerous. On the one hand, the rate of child benefit remains unchanged. On the other hand, there is an extensive range of specific improvements that go well beyond the basic uprating percentages. They are closely associated with a number of important extensions of benefit coverage that we are making in other ways, especially for disabled people and their carers.

The House will recall what I said about child benefit in my uprating statement. The requirement is to review the level of child benefit each year, taking account of all relevant considerations. Having done so, I came to the conclusion that other claims should, on this occasion, be given priority over those of a general increase in that benefit, particularly since such an increase of itself does nothing to improve the relative position of those who are least well off—the families on income support or family credit.

I do not intend to repeat everything that I said on that occasion, but I shall make one observation which I hope hon. Members will bear in mind. Targeting—or whatever word we want to use—is not simply a matter of increasing benefits that pay regard to people's exact financial circumstances—the income-related benefits—rather than those which do not. It also involves making judgments about the needs of different groups at a particular time and the relative weight of their claims to any additional resources that can be made available.

The incomes of people in work, which include the great majority of families with children, have been rising fast. Over the past year alone, the take-home pay of a married man on average earnings, including the effect of the £3-a-week reduction in national insurance contributions, has risen by about £20 a week. In the numerous cases where both partners are working, the overall increase in family income will have been even more.

Against that background, I do not think that it was unreasonable to judge that the prior claims at this time lie in other quarters: families with children who are out of work or in low-paid jobs, the less well-off pensioners and—very much not least—disabled people, their carers and families with disabled children. It is on those groups that we focused additional help, both in the measures that we implemented last October and, in this order and in what we are doing in other ways.

Mr. John Battle (Leeds, West)

I am sure that the Secretary of State accepts that one of the primary causes of the classic poverty trap is those on low pay who are not earning the average wage of £258 a week, according to the Department's latest figures. Does not child benefit cut through the poverty trap because it is not means-tested? It reaches, therefore, precisely those families who cannot claim other benefits but whose take-home pay is too low to qualify either for tax concessions or for other benefits. Does not the Secretary of State accept that it breaks helpfully and progressively through the poverty trap?

Mr. Newton

I do not accept the full implication of that. As the House knows from what I have said on numerous occasions, the more effective way of tackling that problem is the one that we adopted with the move from family income supplement to family credit, a significantly more generous benefit than its predecessor. I refer also to the efforts that we are making to channel amounts averaging £27 a week in family credit to low-paid working families with children.

At the same time, we made changes that constituted an important aspect of the reforms introduced in 1988. Although they did not eliminate—I would not pretend that they did—the problem of high marginal rates of withdrawal associated with income-related benefits, they certainly mitigated those effects and, above all, virtually reduced to nil the number of people who could make themselves worse off by increasing their incomes. The hon. Gentleman is student enough in this area to know that we are discussing intractable problems. I do not want to over-simplify; I am sure that he does not want to, either. I do not entirely agree with his point, and I emphasise what we have sought to do by means of family credit.

Mr. Michael Meacher (Oldham, West)

If the argument is about better targeting for the low-paid, why are the Government making cuts that amount, in the case of child benefit over the past three years, to £250 million, of which only £70 million—about 28 per cent.—will go to families in respect of family credit? Is not the right hon. Gentleman being a little dishonest by trying to pretend that the argument is not really about cuts?

Mr. Newton

I am not being dishonest. It has just become apparent that the hon. Gentleman must have switched off during the past few minutes when I was talking about what I understood by targeting.

Targeting is not merely a matter of picking out some money that has been going in one universal direction and deciding to add an income-related direction as well. We look more broadly at the various groups in the population and consider where it is necessary to direct extra help——

Mr. Meacher

That is a diversion.

Mr. Newton

I do not think so. I have made it clear that one aspect that has been in the Government's mind is the extent to which there has been a rapid and considerable increase in the standard of living, real incomes and cash incomes of the great majority of those in work, who include the great majority of families with children.

Against this background, we thought that priority should be given not only to low-income families with children, including those out of work, but to people in other parts of society, not least to many pensioners and disabled people who do not share directly and immediately in the growth in employment incomes either. That is a much broader point and I should be surprised if, at the end of the day, the hon. Gentleman disagreed with it.

I want now to cover as briefly as I can the many improvements contained in the uprating order. In income support we are increasing the premium for families with dependent children from £6.50 to £7.35, which is 50p more than inflation. We are increasing the adult disability premium from £13.70 to £15.40, which is a pound more than inflation. We are increasing the child disability premium from £6.50 to £15.40, which more than doubles it. We are adding more than £100 million to the income support limits for people in residential care and nursing homes, virtually all of which will rise by £10 a week as a result. At the same time, we are increasing the personal expenses allowance for long-term hospital patients by more than £3, to £11.75 a week. These improvements all come into effect in April.

Then, in October—it is October rather than April only for practical reasons—we shall introduce a new carers' premium into income support, for those receiving invalid care allowance, at a rate of £10 a week. In housing benefit and community charge benefit, all these increases in the income support premiums carry through into the starting points for calculating benefit, thus giving additional help to yet more families with children, disabled people and carers.

In addition, we are making a number of other improvements aimed particularly at assisting those lone parents who are working or who wish to do so. The lone parent premium in those benefits is being increased by nearly 13 per cent. from £8.60 to £9.70 a week, and the amount that lone parents can earn without affecting their entitlement to them is being increased by two thirds from £15 to £25 a week.

In family credit, the adult credit is being increased by £1 a week beyond what inflation would have required to £36.35, which we hope and expect will reinforce our efforts to maximise the effectiveness of that benefit in helping low-income families in work.

In the social fund, we are increasing the maternity payment from £85 to £100, and doubling from £500 to £1,000 the amount of capital that people over 60 may have without affecting their entitlement.

Apart from those improvements in income-related benefits, the order also provides for a number of beneficial changes in other aspects of the benefit system. For those receiving invalid care allowance, it increases the amount that they can earn without affecting their entitlement from £12 to £20 a week. For those receiving invalidity benefit or severe disablement allowance, it increases what they can earn under what is called the therapeutic earnings limit from £28.50 to £35, to improve encouragement for rehabilitation into employment.

Not least—this will be particularly welcomed on the Conservative Benches—the order provides for a significant increase in the help given to the older war widows through the war pensions scheme, with a real increase in age allowances to all over 65, and a particularly large increase, from £15.30 to £20, for those over 80. It also doubles, from £5 to £10, the amount of war widows and other war pensions which is disregarded for the purposes of income-related benefits.

Those increases in the DSS war pension scheme are separate from what my right hon. Friend the Secretary of State for Defence announced on 11 December when he said that he would be making a special £40 a week payment to the pre-1973 war widows. Those extra payments will also come into effect in April and they will be entirely disregarded in calculating income-related benefits.

While concentrating on the changes contained in the order, it is right that I should also remind the House briefly of a number of other changes which are being, or will be, brought about by other mechanisms but which are very much part of the context in which the order is brought before the House.

Last October we abolished the pensioners' earnings rule and made substantial increases in the income support and housing benefit premiums for disabled pensioners and those over 75. We are preparing, and will shortly lay, regulations to extend attendance allowance to disabled babies under two and to extend mobility allowance to those who are deaf and blind.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I hear on the grapevine that there may be some difficulties in the implementation date for the welcome extension of the mobility allowance to the deaf and blind. Is there any suggestion that the improvement will not be made in April as expected?

Mr. Newton

The hon. Gentleman will have seen me hastily consulting my right hon. Friend the Minister for Social Security, but all I can say is that the grapevine on which he heard that does not appear to have extended to Ministers in the DSS. Should it turn out that he is ahead of us in learning of those difficulties, I shall do my best to ensure that they are overcome, but I have not yet had any such difficulties brought to my attention.

Dame Elaine Kellett-Bowman (Lancaster)

In the unlikely event of the grapevine being correct, will that extension be backdated?

Mr. Newton

I had better seek further advice to establish the merits or otherwise of the point that has been made before commenting further. I shall go no further than to say that my instinct is that if there proved to be some hiccup in the implementation of a proposal that is among those that are dearest to my heart in all these, I would look carefully at the possibility that my hon. Friend suggests.

Ms. Dawn Primarolo (Bristol, South)

While the Minister is investigating that hiccup, may I mention another possible hiccup with regard to war widows? A constituent of mine aged 81 in a nursing home will, I am told, have all of the £40 announced by the Secretary of State for Defence clawed back in her nursing home costs. Therefore, it will not be disregarded but will be taken into account in her income support when calculating her contribution to the nursing home costs.

Mr. Newton

It might be sensible if the hon. Lady sent me details of the case.

Mr. Paul Flynn (Newport, West)

She is right.

Mr. Newton

The hon. Gentleman might just listen, because the possibilities are not quite as simple as he thinks.

I have made it clear that our intention is to regulate to make sure that total payments are disregarded for the purpose of all income-related benefits. I wish to see the details of the case to which the hon. Lady referred, because it is not unknown, when a home learns that the income of a resident has increased, for it to increase its charge to that person. Clearly that would not be susceptible to action through the social security regulations. It might be susceptible to some form of intervention by my right hon. Friend the Secretary of State for Health or by the local authority. I hope that the hon. Lady and the hon. Member for Newport, West (Mr. Flynn) understand that I need to consider that case. I cannot give an off-the-cuff answer.

Mr. Timothy Raison (Aylesbury)

We read in the newspapers this morning that Wrens in the Royal Navy are to starting flying combat aircraft. Does the provision cover war widowers as well as war widows?

Mr. Newton

That was a very helpful question, not least because it is primarily one for my right hon. Friend the Secretary of State for Defence. I shall ensure that his attention is drawn to it.

I was referring to the mobility allowance for those who are both deaf and blind when I was subject to something of a barrage of queries and interventions. I was about to say that the Social Security Bill, which is now in Committee, in the able hands of my right hon. Friend the Minister for Social Security and my hon. Friend the Under-Secretary of State, extends attendance allowance to the terminally ill without the six-month waiting period and provides for the addition of invalidity allowance to severe disablement allowances later this year. We are preparing later legislation to introduce the proposed new disability allowance and the disability employment credit.

Last week we referred to the Social Security Advisory Committee draft regulations, all of which we hope to make by April, which make further beneficial changes, many of them fairly small and technical, to income-related benefits. I shall mention just one of them. As announced by my hon. Friend the Under-Secretary of State in a parliamentary answer last week, we intend to double to £10 a week the current disregard for charitable and voluntary payments made to people receiving an income-related benefit, and to disregard completely any regular charitable or voluntary payment intended and used for an item other than certain accommodation costs met by benefit, food, ordinary clothing or footwear and household fuel.

We have been pressed hard by many voluntary and charitable bodies to make that change. It will allow charities, voluntary bodies and relatives to give more help to people, where they wish, without affecting their entitlement to income-related benefits.

It is conventional to end the opening speech in a debate such as this with some reference to money. The money involved is vast. The increase in social security expenditure between 1989–90 and 1990–91, most of it arising from this order, is £3 billion. It takes the total social security expenditure next year to well over £55 billion. As I said in my uprating statement, that is over £1 billion each week. No less important than the amounts involved is what we are doing with it, and the people whom we seek to help.

Taken together, the changes to which I have referred mean that in a comparatively short time we shall have brought about a real improvement in the position of nearly 3 million of the least well-off pensioners, 850,000 disabled people and carers, 1.5 million low-income families with children, including nearly 100,000 lone parents, and about 50,000 war widows. All those people have a particular claim to our concern as a community. We are pleased as a Government to be able to respond to that concern with this wide range of new steps to help, and I have no doubt that the House will be pleased to endorse those that are contained in this order.

4.19 pm
Mr. Michael Meacher (Oldham, West)

Although the Secretary of State treated us to an array of minor changes across a whole range of marginal benefits, this debate on the uprating orders is, in effect, a debate about the overall adequacy or otherwise of the income of the poorest quarter of the population. Although market capitalism is dominated by the driving forces of money and wealth, the House never debates how that money is distributed throughout the nation.

I have often thought that many of the most important events or processes in our society are never debated when they happen, which is when it really matters, whether they relate to internment in Northern Ireland, competition and credit control in the City, the internationalisation of the capital markets or the accountability of the security services. In the same way, the House never debates the distribution of income and wealth, although it is at the heart of our economic system. I suppose that today's debate is the nearest proxy that we shall get to that, and I intend to treat it in that vein.

My first point, therefore——

Mr. Tim Smith


Mr. Meacher

It is a little early, so if the hon. Gentleman will allow me to make a few points, I shall gladly give way to him then.

Mr. Smith

I have a helpful suggestion.

Mr. Meacher

Well, I shall take the hon. Gentleman at his word, which may be a bit risky.

Mr. Smith

I simply wanted to suggest that if these are such important subjects for debate, the Opposition might occasionally choose some of them for their Supply days.

Mr. Meacher

A number of those issues arose when the Opposition were the Tory party. However, I was not seeking to make a partisan point—[HON. MEMBERS: "Oh."] Well, I am sorry, I am not seeking to make a party political point but a much—[Laughter.] The hon. Member for Taunton (Mr. Nicholson) should contain himself and try to think a little more reflectively about what I have said. I am simply making the point that many issues in our society are not properly debated in the House. The system of income and wealth, which is absolutely critical in a market system, is rarely debated. This afternoon's debate is an opportunity to take that further, and I shall do so.

My first point, therefore, is that the share of national resources that is allocated to the poor has been declining not increasing, and will further decrease this year as a result of the Secretary of State's uprating of 25 October last year. The right hon. Gentleman likes to say—he says this in every debate and he said it again today—that total social security expenditure is now running at about £1 billion per week, but what he does not say is that the total expenditure has declined from 11.5 per cent. of gross domestic product in 1984–85—the middle of the 1980s—to only 9.7 per cent. now.

Part of the reason for that is, of course, the decline in unemployment, but the major reason is that, as one of their first acts in 1979, the Government deliberately broke the link between benefits and earnings. As a result, the quarter of the population which is long-term dependent on benefits has fallen further and further behind the living standards of the rest of our society. The right hon. Gentleman should be concerned that the Department of Social Security now gets a lesser share of national resources than in 1980, although there are 3 million more people on income support, nearly twice as many people unemployed and nearly 1 million more pensioners.

Clearly, this squeezing of the lowest-income quarter of the population will be taken a great deal further year by year as long as this Government remain in power. That is obvious from the techniques of what I sometimes think of as the Tory demolition contractors, which are now all too apparent, and are manifested, yet again, in the orders.

First, the Government strip out any earnings-related supplement so that only the basic minimum benefit is provided. That was done to unemployment benefit in 1982 and to invalidity benefit a month ago. The savings to the Government have been enormous. Of course, the other side of the coin is the loss to those entitled to benefit. In the case of invalidity benefit, Government savings will rise to a staggering £1.3 billion per year by 2025.

Secondly, the Government break any pension link with earnings so that poor families cannot keep up with rising living standards. Again, the savings to the Government from that device over the past decade have been colossal, as much as £20 billion, enough to fund the entire Government programme of tax cuts since 1979.

Thirdly, they chop universal benefit. That is why child benefit is being frozen for the third year running, leaving it to wither on the vine until the Government have the honesty and decency to admit that their ultimate intention is to do away with it altogether.

Fourthly, the Government start means-testing contributory benefits. That is why the former Chancellor of the Exchequer toyed publicly with the idea of shifting to means-tested pensions. That is why the former Secretary of State for Social Security, the right hon. Gentleman's predecessor, made a stab at abolishing SERPS before he was forced by the public furore to be content with merely vandalising it.

Fifthly, the Government privatise wherever possible. Sickness benefit and maternity benefit have both been handed over to the private sector. Now SERPS is being partially privatised by the encouragement to contract out into personal pensions, with the usual bribe, at public expense, if people satisfy Tory ideology.

With friends like that, the welfare state does not need enemies. It was for those reasons that John Hills, who is widely recognised as a specialist in these matters, in his comprehensive study of taxes and benefits over the past decade, found last year: Overall, the bottom half of the population has lost £6.6 billion of which £5.6 billion has gone to the top 10 per cent. That is the reality behind the Secretary of State's smooth reassurances today. We have had 10 years of steady dismantling—an erosion here, a whittling away there, a whole series of minor and inexpensive improvements, which the right hon. Gentleman rattled off again today. Those things are held up to disguise major cuts. There is a constant reshuffling of the pack, but always with the same or fewer cards.

Exactly the same techniques are apparent in the uprating that we are debating. Clearly the Government have broken their promise that the poor would not lose under the poll tax when it is introduced in two months' time. There is a shortfall between the 20 per cent. of the poll tax that everyone, however poor, will be made to pay and the extra income support that is supposed to compensate. Let us take a local authority charging exactly what the Government claim will be the average poll tax—Kingswood in Avon. A couple there on income support will have to find £39 a year to make up the shortfall out of what is supposed to be the minimum income necessary for basic living expenses.

In the Prime Minister's constituency, in the London borough of Barnet, a similar couple will need to find an extra £55 a year, more than £1 a week. In neighbouring Haringey, a couple on the income support poverty line will be made no less than £151 a year worse off by the poll tax. I have the entire list of local authorities. The figures are large everywhere. Even those losses are likely to be exceeded in the event because they are based on the Government's published poll tax figures, which everyone knows are laughable under-estimates. The true figure could well turn out to be 25 per cent. higher, or more. The real point, however—I cannot emphasise it strongly enough—is that the very poorest people in our society should not have to pay poll tax at all.

Mr. Edward Leigh (Gainsborough and Horncastle)

Just to confirm the point, does the hon. Gentleman consider that there should be no relation between what someone on income support pays and the expenditure of his local council, and that no pressure whatever should be put on that local council to keep spending down to essential levels?

Mr. Meacher

I certainly do not think that people living on £35, £40 or £45 a week should be made to suffer in any way, whatever their local authority does. We have a ballot box. It is perfectly possible for the people in the borough to vote out a local authority if it acts in a way contrary to their general interest.

Mr. Leigh


Mr. Meacher

I do not want to get into a general discussion of the poll tax. I just make the point that the hon. Gentleman is very unwise if he believes that the poorest people should be targeted—if I may use a Government word in a slightly different way—in order to punish local authorities. We totally repudiate that view.

Mr. Jeremy Corbyn (Islington, North)

I noticed that while my hon. Friend was talking, Conservative Members were muttering, "Haringey?" and asking, "Who runs Haringey?" I am a former member of Haringey borough council. I am not ashamed of it, because I, while I was a member, and subsequent members of the authority did our best to provide a high and satisfactory level of social services, housing development, community development and recreational facilities, for which the borough was penalised by the Tory Government and continue to be penalised by them. It is now vilified for the level of poll tax that will be set for the proportion of expenditure that the authority itself controls. The high poll tax in inner and other London boroughs comes about solely because of the Government's past treatment of inner London local authorities and inner urban areas throughout the country.

Does my hon. Friend agree with me on those points?

Mr. Meacher

My hon. Friend is right: the basic reason for high expenditure in poor areas in inner London is unquestionably, first, the acute level of social need, and secondly, the sharp cuts in rate support grant by the Government, from about 61 per cent. to about 47 per cent. However, I do not wish to enter into a wider discussion of the poll tax. It is not appropriate now. I simply make the important point that the poorest in our society should not be targeted for penalties under that tax.

Not only are the Government failing to protect poor tenants—although that is certainly true—but they are turning a blind eye to the rip-off that landlords will make out of the poll tax. There is at present no obligation on a landlord to reduce the rent that he charges at the changeover from rates to poll tax, even though that rent includes a rates element that will soon be defunct. I want to quote one case given to me by a citizens advice bureau, which makes the point: Client is a pensioner living in very poor standard private rented house (outside toilet, only one tap, no bath.) The client has paid a weekly rent which has included rates and water rates. Now had a letter from landlord saying she must pay these separately and had a bill from Yorkshire Water. Landlord has not made any corresponding reduction in the 'rent' she pays.

We have consistently urged the Government to introduce legislation to outlaw that practice, but the Government have refused. They have not even sent a letter, or asked local authorities to send a letter, to all private tenants to warn them that they may be double-charged. That abuse has already netted some £40 million for landlords in Scotland in the past year, and it is expected that landlords in London will pick up a £90 million bonanza in the coming year because of that loophole. Since there are nearly a million private tenants on housing benefit, the total rip-off to landlords at the expense of tenants may turn out to be over £400 million.

It is extraordinary that the Minister of State can be so lax about this malpractice when his own borough of Kensington and Chelsea has the highest percentage of private tenants of any local authority—29 per cent.—rising in south Chelsea, I believe, to 39 per cent., and also the highest number of houses in multiple occupation, where undoubtedly the worst abuses will occur. I beg the right hon. Gentleman to reconsider that issue, as it is crucial that he acts to prevent that abuse from hitting some of the poorest tenants and other poor people in our society.

The Government like to pride themselves on being the party of the family, yet two of their actions—or, perhaps, omissions—in the orders strike at the heart of the family. The Government have not protected the poorest against the poll tax—as I have said—and, by freezing child benefit for the third year running, they have refused to find even an extra 50p for the family budget. That is not just mean but plainly dishonourable.

In its 1987 manifesto, the Tory party promised: Child benefit will continue to be paid as now, and direct to the mother.

Four months later, the Government froze it, and it has remained frozen ever since despite the pantomime of a yearly review. The Government have now cut the real value of child benefit by a fifth. The Secretary of State now has the distinction of reducing total family benefits for the average family to the lowest level in the EEC, except for Ireland, Greece, Spain and Portugal. In Britain, weekly family benefits for a couple with three children under 12 are £21.75, whereas in France they are £43.30—almost exactly twice as high.

After listening to what the right hon. Gentleman said today, I must say that one of the more pitiful sights on these occasions is to watch him being forced to dismiss child benefit and to expound on the merits of family credit or diverting to other needy groups, when he knows perfectly well that other needy groups—which I shall come to in a moment—have not had the uncovenanted increase that he pretends.

The right hon. Gentleman knows as well as anyone that family credit is riddled with defects. Child benefit has a virtual 100 per cent. take-up, whereas family credit achieves only 50 per cent. The Government formerly talked of targeting—now the word focusing is all the rage—but that focused benefit reaches only half of those for whom it is intended. Child benefit is cheap and easy to administer, but family credit is much more expensive and difficult. The last round of advertising recruited claimants to family credit at a cost of about £120 for every additional applicant.

As my hon. Friend the Member for Leeds, West (Mr. Battle) said in an intervention, child benefit does not contribute to the poverty trap, whereas family credit does, despite the Secretary of State's lengthy answer—and as do all means-tested benefits. I do not know whether it makes the right hon. Gentleman squirm to be forced by the Prime Minister to argue for things that he does not believe in, but it makes me squirm to have to listen to him being so dishonest.

Mr. Robert G. Hughes (Harrow, West)

The hon. Gentleman sought to make a comparison between this country and our European neighbours. Does he agree that the picture that he painted looks less convincing when one adds what he forgot to mention—that no other European country has anything like family credit?

Mr. Meacher

Family credit goes to about 340,000 people. There are 12 million children in this country and there are similar totals in receipt of the equivalent of child benefit in those other countries. Family credit is a drop in the ocean. If the hon. Gentleman believes that that makes any difference to the overall question of the amount of money that societies in different parts of Europe are prepared to give to all families, he should reconsider.

Mr. David Nicholson (Taunton)

Will the hon. Gentleman take into account the fact, that, in Germany, Italy and Greece, child benefit arrangements are means-tested and that other countries do not have the same universal arrangement as ours? Does the Labour party plan to means-test child benefit?

Mr. Meacher

No, we certainly do not, because it is unwise and we do not accept it. The levels of the means-tested benefits that the hon. Gentleman mentions are substantially higher than those in this country, so I suspect that the average family in those countries still gets considerably more than the average family in this country.

We also strongly object to the downgrading of statutory sick pay. I use the term "downgrading" deliberately. This further chipping away at an already eroded benefit is typical of the Government's emasculation of the benefit structure. As the Secretary of State fully explained, employees now get the full statutory sick pay rate as long as their earnings are over £84 per week. From April they will get it only if their earnings are over £125 a week.

To sugar the pill for the low-paid—that is the most euphemistic phrase that I can think of—the lower rate of sick pay is to be increased by a magnificent 25p a week more than is needed to compensate for inflation. The Secretary of State made enormous play of that, but I suspect—I do not want to be patronising—that he would hardly stoop in the street to pick up such a paltry sum.

This act of unstinting and abundant magnanimity has to be balanced by more than equivalent cuts elsewhere in the sick pay uprating. Hence, the higher rate is being cut to the tune of £3.55 a week less than the amount that is needed to compensate for inflation. The right hon. Gentleman did not make that clear. The handling of the net effect of all those manoeuvres is characteristic of the Government. The Secretary of State parades the extra 25p as if it were generosity beyond the dreams of avarice, but the Government are clawing back £70 million to £80 million per year out of the whole shabby contrivance.

The Government's excuse for the change is that, since statutory sick pay started in 1983, the earnings threshold for the higher rate has been raised only in line with prices and not with earnings, so a much bigger rise in the threshold is now justified. That is fine. That means that the Government are at last coming round to the belated recognition that the logical basis for uprating earnings-replacement benefits is an index of average earnings rather than prices. The trouble is that under this Government, logic is partisan, selective and always rather self-interested.

The Government are using the earnings link to raise the threshold in order to disqualify hundreds of thousands of workers from the higher rate of statutory sick pay. However, when it comes to the earnings link for the uprating of pensions so that millions of pensioners will qualify for higher pensions, the Government do not want to know. Logic is fine for the Government as long as it leads to cuts.

Mr. Tim Smith

Let us be quite clear about Labour policy. Can the hon. Gentleman confirm that the logic of his argument would be to increase the starting point for the payment of national insurance contributions by the increase in earnings, thus increasing it at a faster rate than over the past 10 years? That would disqualify more low-paid people from benefit.

Mr. Meacher

Not at all. It is right that in general we should link contributions and benefits to earnings as far as it is possible to do so. We have certainly made a fundamental commitment, of which the hon. Gentleman is well aware. We believe that pensioners ought to maintain their share of rising living standards. National insurance contributions, which are a percentage of incomes, are based on buoyant income. That is why there is such a large surplus in the national insurance fund. We support that general principle as a means of ensuring that people in need maintain their share of the community's rising living standards.

When we take the fiddle on statutory sick pay into account, it becomes possible to net out the whole balance of expenditure over this benefit uprating. The Government are currently increasing expenditure on disability and carers' benefits by £100 million. They are helping low-income families with the five new measures that the Secretary of State announced in the uprating statement, which was repeated today, and that will cost £70 million. They are providing a small number of concessions for pensioners, which will cost £15 million. The total is £185 million.

I readily acknowledge that the Government are also spending £100 million on raising income support levels for people in residential care and nursing homes. The Secretary of State slipped over the point that that does riot anywhere near match the rise in inflation and could thus be construed as a cut in real terms. It still leaves a problematic gap between benefits and charges of up to £50 a week, and it is usually treated separately from the benefits uprating. For that reason, I do not include it here, and I think that that is right.

On the debit side, the Government are saving £250 million on child benefit and, as I have said, a further £70 million to £80 million on statutory sick pay. That gives total savings of about £325 million. Despite all the paraphernalia of minuscule extras with which the right hon. Gentleman sought to adorn his uprating statement and with which he regaled us, the stark truth behind the orders is that, overall, the Government are not giving the poorest quarter of the population any extra money at all. They are relieving a very large part of the population of about £140 million. We all know the old adage: I fear the Greeks even when they bring gifts. That takes on a new meaning under the Government. When the Government or the Secretary of State give us something, we would be well advised to count our fingers afterwards.

Mr. Newton

In the course of the past few minutes, the hon. Gentleman appears to have slipped into a proposition based on the assumption that all recipients of child benefit are among the poorest people in the population. If he does not think that, he could not justify his last sentence. However, we know that a surprisingly large part of any payment of child benefit goes to those with earnings of over £20,000 a year. Secondly, he has totally ignored the major increases in benefits for older and more disabled pensioners, which were made last October, and he has ignored the abolition of the earnings rule, both of which lead to significantly greater expenditure in the forthcoming year than in the present year. The cost is £600 million in a full year, and it was £300 million last year. Another £300 million has to be found this year. To be fair, the hon. Gentleman should take that into account in his presentation of these matters.

Mr. Meacher

I shall deal shortly with disability benefits and the earnings rule. I certainly acknowledge the right hon. Gentleman's point, but I made the same point to him, that I suspect that the great majority of the benefit does not go to the lowest quarter of the population that we are considering.

The cuts and the dismantling of the social security underpinning of our society do not stop here. I pay the right hon. Gentleman the compliment of saying that he is something of a master magician. He specialises in two tricks, one of which is the constant recycling of old money and endless exercises in the redistribution of poverty so that one group's gain is another's loss. However, it is called the provision of new money. The other trick is to flash a whole array of cards announcing trivial increases in marginal benefits before the bemused eyes of his onlookers while keeping the joker firmly tucked up his sleeve. The right hon. Gentleman did that today. In this case, the joker in the pack is the Government's sudden and unilateral abolition of the additional pension to invalidity benefit.

In his statement on disability benefit—for which, I might say, disabled people have waited 10 years—the right hon. Gentleman took us all round the houses about how he was going to do this, that and all the other to improve the lot of the disabled. But about the abolition of the earnings-related pension he kept very mum indeed. We can now see exactly why. He bragged about how he was increasing expenditure on disability benefit by £300 million a year by 1993, but he did not tell us that the figure would then fall steadily to nil by the year 2000 and would continue to fall steeply over the following 25 years. So, overall, the Government are making a colossal saving at the expense of disabled people.

The answer that the Minister of State gave me a fortnight ago—in Hansard of 26 January—shows clearly that over the first quarter of the next century the Government will rake off a staggering £9 billion by way of reductions in disability benefits. The disabled people's organisations have certainly made clear their intense disappointment with the Government's review, but even they had not anticipated that what was called a review could turn into ransacking and plunder on such a scale.

The last issue that I want to raise concerns pensioners. I want to repeat the central point about this uprating order: if the Government had not peremptorily ended Labour's link with earnings, a single pensioner, in two months' time, would be getting a pension of exactly £60 a week. As it is, he or she will get only £46.90—£13.10 less per week than Labour provided for. Similarly, a married couple would be getting a basic pension of no less than £95.80, whereas they will actually get £75.10—a full £20.70 less. I accept, of course, that there is in Britain one person over 60 who thinks that pensioners are getting a very good deal, but, of course, the Prime Minister does not actually have to live on the old-age pension.

It is not as if the Government did not have the funds to give more help to pensioners if they wanted to do so. Last April, the cumulative total in the national insurance fund was touching £10 billion. In 1988–89 alone, it grew by £2.25 billion. Yet, instead of paying higher pensions—which are desperately needed, as more than half of all pensioners live on, or only very slightly above, the poverty line—the Government are currently trying to reduce the surplus by giving money back to people in work. Indeed, the cost to the national insurance fund of the 2 per cent. bribe to personal pension schemes is already £1.5 billion over budget. If the Government had so chosen, that sum could have been used, instead, to double the pension increase that we are debating under the order.

Sir George Young (Ealing, Acton)

I am sure that the hon. Gentleman does not wish to mislead pensioners, who may be following the debate. In the first year of any Labour Administration, would the link be restored?

Mr. Meacher

Indeed. I am very glad that the hon. Gentleman understands what we have been saying repeatedly. I am very glad that he is now tuned in. We have said that we shall restore the link. There is no question of retrospective payments. [HON. MEMBERS: "Ah."] Of course there is no question of retrospective payments. There can be no question of retrospective payments. However, we have said that we would restore the link with earnings, so that, over a 10-year period, pensioners would get an extra amount of the magnitude about which I have been talking.

Sir George Young

Will the hon. Gentleman give way?

Mr. Meacher

No, not again.

The Government say that they believe in targeting, but it is now becoming all too clear that what they mean is targeting their friends in the City for bonuses for privatised schemes, at the expense of pensioners, who are being given the meanest possible increase that the Government can get away with.

I began my speech by saying that the debate was about the share of national resources allotted to the poorest quarter of the population. I think that it will be widely accepted that in this country there is a majority view that the divide between rich and poor is now too wide and should be reduced. It is because the Government have repeatedly and deliberately widened that divide, and have no intention whatever of closing it, that we shall vote against the orders.

4.55 pm
Mr. Timothy Raison (Aylesbury)

At the beginning of his speech, the hon. Member for Oldham, West (Mr. Meacher) made one point on which I should like to comment. He said that the House is not really very good at discussing strategic issues. Some of his examples were a bit far-fetched, but I think that we suffer from the fact that we do not discuss taxation and public expenditure together anything like as much as we should. That has particular relevance and force in the context of the subject about which the House will not be surprised to hear I intend to speak—child benefit. The history of child benefit is that it is a replacement both for a social security benefit and for a tax allowance. I shall come back to that.

In his opening speech, my right hon. Friend made a number of points with which I am entirely happy. The uprating that he is introducing is useful in many respects. He is a Secretary of State for Social Security who cares deeply about what he is doing, and he is held in very high regard by the House. Having said that, however, I must say that I think he is wrong in respect of child benefit. Every year, in the public expenditure plans, we make provision for an uprating of child benefit in the following year. Every year, the Secretary of State is required to review the level of child benefit. Every year for the last three years, this review has taken place, and every year for the last three years the result has been no uprating. I am bound to say that, with each year, our election pledge to continue to pay child benefit as at present sounds a little more hollow. It is time that we changed this policy.

We have debated child benefit so often in the last few years that I do not intend to run through all the arguments—I will simply itemise them. There is the fact of the poor take-up of family credit, as against child benefit; there is the fact that child benefit does not lead to the poverty trap in the way that selective benefits do; there is the fact that it goes directly to the mother; there is the simplicity and certainty of child benefit, as opposed to the complexity and uncertainty of means-tested benefits; there is the history of child benefit; there is the long tradition of help in this country for all those who bring up the children; and, as I have said already, there is the fact that when it was brought in, it was intended very clearly as a replacement not only for a benefit but for a tax allowance.

All this is familiar, but it is very important. Of course, as always, we come back to the argument: why provide a universal benefit and not be selective? This rings false when we look at tax allowances, which are the other half of the equation. After all, we provide tax relief on mortgages—the main effect of which is probably to push up the price of houses—for everybody, regardless of income. We provide tax relief on pensions contributions for everybody, regardless of income. We have now actually brought in a benefit by which we provide tax relief on private health insurance for people over 60, regardless of income.

In all these cases, it may even be argued that the richer one is, the greater the benefit in tax allowances. I do not think that it is possible to continue to argue that there is something wrong with the unselective nature of child benefit while at the same time continuing to accept, and even to introduce, a new tax allowance that provides specific help for those with private health insurance. I do not think that that is sustainable.

I have some sympathy with the view that some of these tax allowances should be cut. However, that is not the Government's position. The Government have brought in a new allowance, yet they say, at least by implication, that we have to think in terms of pruning child benefit in real terms. I do not think that that is on. The one certainty is that bringing up children involves additional cost. That has always been recognised in this country. I realise, of course, that child benefit goes to some people who certainly do not need it, but its advantages are so great that that is a price worth paying.

What about this year's review? After all, the Secretary of State is required, each year, to look at the special circumstances of the year ahead. Let me again say that the money for an uprating was allocated in the public expenditure round for this year, so there is no question of an additional call on public resources. There are special reasons why there should be an uprating this year. I believe that it should he automatic, but in the present situation we have to look at the special circumstances—the relevant considerations—as the Act requires.

Some of this is political but some of it, much more importantly, is a matter of basic concern for our fellow citizens. The first special reason for an uprating is that it would offset the impact of the community charge, particularly on those people who are just above the rebate level. These are the people in my constituency who have been paying rates of £300 to £400 but who, as a couple, will face a community charge of £700 to £800 a year. There is transitional relief but that will be of no more than limited help in these cases. Many people will be affected, and they are beginning to come to our surgeries and to write us letters because of their special circumstances.

The House will recall, how, in 1988, we had to face up to the consequences of the Social Security Act 1986 and its effect on housing benefit. Hon. Members will recall the flood of letters that we received then and the flood of people who came to our surgeries saying, in particular, that the capital limit for housing benefit introduced in that Act was causing considerable problems. I should like my right hon. Friend the Minister for Social Security to let us know what will happen to transitional payments on housing benefit from April 1990. As well as that, we can recall the fact that, under pressure, the Government had to give way and, quite rightly, make concessions.

I believe that the Government will be faced with a much greater storm as a consequence of the community charge than they experienced as a consequence of that Act. The Government will have to make concessions. The simplest way to do that would be to recognise that the people who will have most difficulty as a result of the community charge, in the categories which I have mentioned, will be those who have to pay the cost of bringing up children. If we can do something to meet that cost by, even at this late stage, uprating child benefit, we would have a useful measure and something that would be entirely inside the terms of the Act.

The Government are clearly worried about wage pressure. My right hon. Friend the Chancellor of the Exchequer and others are making clear their concern about this. An increase in child benefit would do something—not everything: I am not trying to exaggerate —to help to head off the problem of wage pressure.

Furthermore, there is a growing campaign for tax relief on child care costs. I do not agree that there should be such tax relief, because I think that it would be unfair if the women who go out to work derived benefit not only from the income from that work but from tax relief, while mothers who stay at home to look after their children get nothing at all. That would be unfair. The simple answer to this is to approach it in a different way—by an increase in child benefit, which goes equally to the mother who goes out to work and to the mother who stays at home to look after her children. That would be neutral, which is as it should be.

Mr. Corbyn

Is there not the serious problem of a shortage of pre-school child care places? As a result, many private nurseries charge exorbitant fees, which people are forced to pay because there is no other way to have their children looked after. They naturally look to tax relief to offset that cost whereas a better solution would be larger and better statutory state provision of pre-school facilities for small children, who benefit from it in. many ways.

Mr. Raison

That is a whole new topic. As it happens, I was Chairman of the Select Committee on Education, Science and Arts when it produced a report advocating a substantial expansion of nursery education, so I agree with the hon. Gentleman, but I do not want to go down that path.

I have given the reasons why I believe that child benefit should go up. It is true that the additional child benefits resulting from one year's uprating would not offset all the needs about which I have spoken. However, it would more do so if we had uprated child benefit every year, and it would more do so now if we were to uprate child benefit in a way that includes an element for catching up on our failure to uprate it in the past.

Increasingly, I believe that we could go much further, again if we are willing to look at the tax and benefits systems together. As the House knows, the taxation of husband and wife is about to be separated—on the whole, an admirable measure. There is to be a married couple's allowance and a similar allowance for unmarried couples who have children. I thought it would be interesting to ask what the cost to the Exchequer of these allowances will be.

My right hon. Friend the Chancellor of the Exchequer replied: The direct revenue cost of the married couple's allowance in a full year at 1990–91 levels of income is estimated to be £5 billion. If the allowance were to be given only to married couples where either the husband or wife was a 65 or over, there would be a saving of about £4.5 billion."—[Official Report, 20 December 1989; Vol. 164, c. 241.] In other words, the married couple's allowance is absorbing just about the amount of money that it costs to provide child benefit in any one year. We should seriously consider the possibility of scrapping these allowances and doubling child benefit. That could be done without any net cost to the Exchequer.

It so happens that I am a strong believer in conventional, traditional, orthodox marriage, and in itself I like the idea of the married couple's allowance. On the other hand, if I look at the real problems in society, I find it impossible to deny that those who have children clearly have costs that do not arise simply from the fact of being married. Therefore, I put it seriously to my right hon. Friend the Secretary of State, as I would, if he were here, to my right hon. Friend the Chancellor of the Exchequer, that they should look at the different ways in which we are providing help to families. They should take this opportunity to see whether, by scrapping the married couple's allowances, we could double child benefit, which would have enormous advantages. Nobody can say anything about targeting, because the married couple's allowance, like all the other tax allowances, is non-targeted.

Mr. Christopher Hawkins (High Peak)

I agree with everything that my right hon. Friend has said, except his last point. The danger of getting rid of a tax allowance and turning it into child benefit is that the Government would continue to freeze it. The irony of the present problem is that, if child benefit had remained a tax allowance, we would have increased it by more than the rate of inflation and said what a good thing that was because it was part of our overall strategy of reducing taxation. However, because we converted a tax allowance into a benefit, it is a bad thing to increase it in line with inflation.

Mr. Raison

My hon. Friend has a strong point. The answer is that the arrangement about which I am talking would have to be statutorily compulsory, and the trouble about child benefit, as we know, is that it has been optional. We would have to have a firm guarantee, by some means or another—perhaps something like the Rooker-Wise amendment—that this would be an automatic process, and that would meet my hon. Friend's point.

By this approach, we could have a real means to help those with children. Many of our other anxieties would disappear. I have already mentioned child care, but in this way we could also provide help for single parents without having an allowance that is seen by some as an incentive to become single parents. Many other advantages would flow from this, and nobody could argue that we were abandoning a system of targeted benefits in favour of untargeted benefits.

I appreciate that such a change would have substantial consequences, and I do not expect the Minister, when replying, to say that the Government accept all that I have said. But they should at least take note of the fundamental changes that I have outlined. While many complications may be involved, we must get away from the annual refusal to uprate child benefit. It does the children and our party no good. I hope that my right hon. Friend has enough wisdom and understanding to appreciate that the policy we are pursuing is wrong, and that he will make sure that we change it.

5.10 pm
Mr. Archy Kirkwood (Roxburgh and Berwickshire)

It is a pleasure to speak following the right hon. Member for Aylesbury (Mr. Raison) who made a powerful and impassioned speech, the majority of which I supported wholeheartedly. He has a notable record as a champion of child benefit and did that cause much justice in the way that he deployed his case.

Today, I think for the first time, the Secretary of State came up with what could be described as a relevant consideration. I have complained to his predecessors that child benefit has been frozen willy-nilly and without the semblance of an argument to justify that course. I was confused by the right hon. Gentleman's argument today: although I recognised the sense of his case generally, he seemed to suggest that, because average earnings have been increasing and money is therefore available to the average family with children, that is a relevant reason for freezing child benefit this year.

I suspect that there will be few years in the near-to-middle future when that will not be the case. In other words, if it is a relevant consideration now, and if it applies next year, child benefit will remain frozen for years to come. If so, the right hon. Gentleman should say so. It would be more honest of the Government to admit that, rather than continue with annual charades and uprating statements seeking to defend the freezing of child benefit. I endorse everything that the right hon. Member for Aylesbury said about that, and I will not rehearse again the important positive arguments that he adduced in favour of child benefit.

I wish to deal principally with the effects that the uprating will have on the elderly. Last March, there was an uprating of 5.9 per cent. The year-on-year inflation increase was 7.6 per cent. last September, and that is the figure that we are now discussing for basic increases in the state pension. Considering the monthly inflation increases that have occurred since April of last year—some monthly increases have reached 8.3 per cent.—and looking ahead, not even a 7.6 per cent. increase will measure up to the real increases in inflation that basic state pensioners will have to face after April. That is why it is inevitable, for at least another 12 months, that pensioners who rely for their income on the state pension will see their standard of living eroding.

The right hon. Gentleman cannot, in all conscience, allow that to happen year after year. There is a respectable argument for considering going back to the link with earnings. I would not go as far as the hon. Member for Oldham, West (Mr. Meacher) in that respect. The inexorable erosion of the standard of living of pensioners cannot be countenanced by the Government, who will have to do what they were forced to do last October, and I welcomed the one-off payment which they gave and which did not affect transitional relief. That was a payment of £2.50 or £3.50 to certain retired people who were in particularly straitened financial circumstances.

The Government will have to take that action with monotonous regularity unless they recognise the ongoing real needs of pensioners. The Social Security Advisory Committee pointed out to the Government years ago that they would occasionally—not every year—have to redress the balance between earnings and price increases if they were to be anything like fair to pensioners who struggled for their day-to-day existence on the basic state pension.

The increases to which the Secretary of State refers regularly in respect of pensioners with occupational pensions are welcome, and in the next century there will not be a problem if things go according to plan. That, too, is to be welcomed. But nearly 60 per cent. of present-day pensioners rely for more than 75 per cent. of their income on state benefit. The right hon. Gentleman cannot ignore that, or he will be ignoring generations of pensioners, between now and 10 or 20 years hence, who will suffer terribly unless the Government do something for them.

I am disappointed that the Government have not found a way to extend mobility allowance beyond retirement age. The age cut-off point is now 66. If the Government feel that it would be too expensive to do that immediately, they should accept that in cases where the payment of mobility allowance to people over retirement age would prevent them from having to be institutionalised—a precedent exists for taking such action with social fund community care grants—limited change could be made as a first step. All sorts of improvements could be made, but we should be opposed to having age discrimination built subliminally into the benefits system.

Some of the changes that the Secretary of State announced are imaginative, but there is force in the argument that he has been engaging in some sleight of hand by moving the money around, rather than trying to argue the case for more funds from the Treasury. I am not privy to the inside negotiations that he conducts with the Treasury, but a strong case exists for improving matters for the elderly and needy. and I hope that he is arguing strongly on their behalf privately, if he is not doing so publicly.

Mr. Matthew Taylor (Truro)

My hon. Friend makes an important point about the mobility allowance. In rural areas such as Cornwall, pensioners who are capable of looking after themselves and living alone, but who are unable to do so because they are not mobile, are isolated without such an allowance. They find the cut-off point hard to understand, and I cannot justify it to them when they come to my surgery.

Mr. Kirkwood

My hon. Friend makes a helpful intervention. He and I, along with many Conservative Members, represent rural constituencies and are well aware of the problem.

We must take note of the increased fees that are having to be paid for residential accommodation for the elderly. I welcome, as far as it goes, the £100 million improvement that has been made, but I fear that difficulty will arise. I also appreciate that it is not the normal category of expenditure that we consider when uprating statements are made.

It appears that the Government have changed their policy of positive discrimination in favour of the behaviourally disturbed elderly patients in residential homes as opposed to the simply frail elderly. In the last four or five years, the increased payments made in the dementia category—the really severely behaviourally disturbed elderly—have suffered and the positive discrimination that such cases enjoyed in 1986 has been eroded to the point where the payments available after April from the DHSS to meet fees will be equal as between the frail elderly and the behaviourally disturbed elderly.

I have been conducting a lengthy and worrying correspondence with a constituent of mine who runs a good bona fide residential home for elderly demented people. That constituent is having great difficulty in trying to make ends meet and provide the level of service that he is anxious to maintain and would maintain if he could get a sensible level of support from the Department. Over the past four or five years, far from enjoying the £50 increase to which the Department said that he was entitled, he received only a £20 increase in weekly fees. Meanwhile, he has incurred extra employment costs because of Whitley Council increases and the need to employ the more highly qualified staff required for psychiatric patients. The Department should consider carefully that category of fees and the limits for that category of patient.

The community charge has been in operation in Scotland for almost one year. The hon. Member for Oldham, West (Mr. Meacher) made the point that the Government will be obliged sooner or later to reconsider the support given to claimants liable to community charge when it is introduced in England and Wales in April. The one-off compensation payment of £1.15 in income support rates for 1989–90 is significantly less than the amount for which many claimants paying above-average levels of poll tax will be liable after April. When that compensation was first given, an income support clawback of 50p was made that has never been made good.

It should be possible to identify a separate amount to compensate claimants for poll tax contributions, which should be increased by the average rise in poll tax each year. One hundred per cent. rebates should be given to all income support claimants liable to poll tax. If the Government set their face against that, there is an unanswerable case for increasing the 20 per cent. contribution element by the average annual increase in poll tax payments.

As I read the figures, the social fund has effectively been frozen, for the third year in succession, at £205 million—which shows a degree of bad faith on the part of the Government. The social fund was bruited as an experiment that would be progressive, flexible, and capable of overcoming the anomalies introduced by the 1988 changes, which were themselves the consequence of the Social Security Act 1986. To leave the sum at the level proposed for next year would be a huge mistake and a great shame. Figures for December 1989 show that 56 per cent. of people requesting community charge grants and 40 per cent. of claimants for budget and loan facilities from the social fund were refused. There is a vast potential for the social fund to meet, but its effective freezing for the third successive year is a retrograde step.

The £20 million saving made in the 1988–89 Budget should be made good in 1990–91 and community care grants uprated regularly in line with inflation. For a variety of reasons, the proposed increases in pensions and benefits do not deserve support. They fail to meet the needs of the current generation of retired people who rely on the basic state pension as their principal source of income. Nor will they provide assistance to those struggling to cope with a 20 per cent. contribution to their poll tax or families relying on child benefit to make ends meet. Such improvements as have been made will be at the expense of other claimant groups. For those reasons, I urge the House to reject the orders.

5.24 pm
Mr. David Nicholson (Taunton)

The answer that the hon. Member for Oldham, West (Mr. Meacher) might have given to the question asked by my hon. Friend the Member for Beaconsfield (Mr. Smith) was that the Opposition have not proposed debates about the distribution of income and wealth on their Supply days because those responsible for purging and purifying the Labour party would not like that or allow it to be done.

I welcome the largely constructive approach taken by the hon. Member for Roxburgh and Berwickshire (Mr. KirkWood), although I regret his call to right hon. and hon. Members to vote against the orders. I hope that my right hon. Friends the Secretary of State and the Minister for Social Security will consider the hon. Gentleman's remarks about mobility allowance and the fees paid to nursing homes.

I welcome the positive way in which the hon. Gentleman responded to the interesting speech of my right hon. Friend the Member for Aylesbury (Mr. Raison). From it, there does appear to be new thinking in the House, and, I am told, outside it, in the child benefit lobby. Although I have not until now been sympathetic to many of that lobby's arguments, my right hon. Friend the Member for Aylesbury addressed himself to new circumstances imposed by the community charge and other factors, and I hope that his proposal will be carefully considered.

A critical letter that I received from one of my constituents complains that the Government are adopting a social policy of "Victorian laissez-faire". I question how that can be squared with an increase in social security expenditure of 36 per cent. in real terms since 1979, with more than £1 billion per week in social security benefits in the coming year, and with total expenditure on cash benefits for the long-term sick and disabled doubling in real terms what it was in the last year of the previous Labour Government. Those are extraordinary achievements purely in resource terms, and do not justify the criticism of Opposition Members. I also praise, as I have before in private, my right hon. Friend the Secretary of State for the considerable skill that he has shown in the few months that he has held his present office, in using those resources in an imaginative and intelligent way.

When I intervened in the speech of the hon. Member for Oldham, West in respect of European comparisons, he made the point in response that levels of child support in the countries I mentioned were very much higher than in this country. I wonder, for example, whether that is true of Greece. In France, Germany and the Irish Republic, there is no guarantee of annual uprating of child benefit, and in Italy and Portugal, eligibility is linked to insurance status. France does not pay benefit for the first child. Opposition Members should be careful before arguing that this country is behind in the European family.

Mr. Battle

I invite the hon. Gentleman to spell out France's policy on child benefit. Does he not agree that it introduced family support because of its declining population? France's benefits are well ahead of those of this country, and have been for many years.

Mr. Nicholson

I hear what the hon. Gentleman says, and I hope that we can explore that point in future debates.

I have welcomed before, and welcome again, my right hon. Friend's imaginative proposals for giving more support to those who care for the disabled, which will benefit 30,000 carers. That is a positive improvement.

The deal for pensioners has always dominated social security debates, and is important to my constituents and to those of many other right hon. and hon. Members. There is a considerable difference in philosophy between the Government and the Labour party, which says, "Let's promise to raise the universal pension by a very large amount, by keeping it in line with earnings." When Labour was in government before, we discovered that that could not be done all the time, and that this effort had a horrifying effect on our economy in terms of spending, taxation and borrowing. The present Government guarantee a minimum, which my right hon. Friend the Secretary of State has managed to improve this past year with the benefits paid to poorer pensioners. Above that minimum, pensioners are now benefiting from their own savings and enterprise in their working lives.

Pensioners' total net income, which is something that we must always consider rather than simply the value of pensions, grew by 23 per cent. above inflation between 1979 and 1986. That is as much every year as in all the five years of the last Labour Government. Between 1979 and 1986, pensioners' incomes grew twice as fast as those of the population as a whole, and that is an important factor.

We must bear in mind the fact that in 1979 only 60 per cent. of pensioners had savings incomes. In 1986, the figure was 70 per cent., and among recently retired pensioners in 1986 the figure was 85 per cent., so it is increasing all the time. According to the latest figures, 50 per cent. of all pensioners and 70 per cent. of recently retired pensioners have occupational pension which helps them to cope.

Approximately half of all pensioners own their own homes—44 per cent. own them outright and 4 per cent. own them with a mortgage. Let us consider how the capital value of those homes has increased all over the country, but particularly in the south. It is another matter for debate, because the price increases have caused considerable difficulty in those areas, but we need to consider more imaginatively how income-poor retired people can draw upon the considerable capital values locked up in their homes. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) tried to carry an amendment two years ago, and I hope that more can be done in that issue.

I move on to comparisons with pensions in Europe. There has been a lot of propaganda on this subject. We have all received in our mail allegations that British pensioners are the poorest in Europe. However, there are significant variations between pension arrangements in European countries. For example, in France the pension is half the average earnings in theory, but in practice only one third of French pensioners receive a minimum pension which is designed as a safety net. Only the United Kingdom provides a separate pension for a wife who has not worked.

The comparisons that have been made by the Opposition omit to mention the role played by occupational pension schemes, which are rare in the rest of Europe. Also, in several European countries pensioners are charged for the use of health and social services, but in Britain those services are free of right to every pensioner.

Mrs. Dorothy Rhodes is president of Pensioners' Voice, which has lobbied strongly on the subject, and she concedes: I have been one who has spoken loudly in support of parity with Europe, but during the past year I have been to Pensioners Congresses in Italy and Greece and, having spoken at length to those who actually receive the Euro pensions…discover that in many cases the actual cash received in relation to the cost of living is often lower than that in the United Kingdom. I am revising my opinion; for in no way can our Federation ask for an equality that would disadvantage our own people. That is an important concession and we should remember it when we pursue the argument about comparisons with Europe.

Every hon. Member who has spoken in the debate has mentioned that we are on the threshold of the new community charge regime. The hon. Member for Oldham, West mentioned double charging by private landlords. There are not many private landlords in my constituency—I wish that there were more, because it would help with the housing situation. I hope that my right hon. Friend the Minister will respond to that remark and give his attention to it, because it is a problem and an abuse and it is used as a criticism of our arrangements for the community charge.

The hon. Member for Oldham, West also alleged a failure to increase family support to meet the community charge level in local authorities which were keeping to the Government's spending guidelines. I am not arguing that income support should increase to a level such as that in Haringey or Islington. I am sorry to see that the hon. Member for Islington, North (Mr. Corbyn) is no longer in his place, because he intervened on this subject. I do not think that anyone would argue that, because all voters, including pensioners, must recognise that they have to pay for Labour extravagance in those areas. [Interruption.]

I am making a point that I think Opposition Members will recognise is fair, because the hon. Member for Oldham, West mentioned Kingswood, which is near my constituency, and I hope that my right hon. Friend the Minister will respond to that because it is an important point.

On the subject of the community charge, I shall quote what I wrote in my local newspaper recently. It is no bad thing for hon. Members to say to the Government and to the Opposition in this House what they are saying to their constituents outside it. I said: My constituents (and I) have a right to be angry—but with the Department of the Environment, not the County Council at the huge discrepancy between the final figure, whatever it is, and all the figures previously forecast. We think that the figure for the community charge in my area is going to be near £350. The reason I mention this is that the elderly and families on low incomes are told all the time to plan ahead and to budget. They do plan ahead. They listen with care to the figures that my hon. Friends and I have given them as to what we thought the community charge would be. We were guided by the figures that the Department of the Environment issued year after year.

Mr. Leigh

That was rash.

Mr. Nicholson

My hon. Friend says that that was a rash thing to do, and perhaps I should take his advice and not believe the Government's statistics, but I think we would be in bad trouble if we had to believe the statistics that the hon. Member for Oldham, West uses all the time.

On 17 November 1987, the estimate for the community charge in my constituency, based on 1987–88 spending, was £187. On 23 June 1988, my right hon. Friend the Minister for Agriculture, Fisheries and Food, as he now is, estimated that the figure, again based on current spending for 1988–89—I am not talking about Government targets or assessments—was £212. Finally, on 19 July 1989, my right hon. Friend the Secretary of State for Trade and Industry, as he now is, produced a table which again illustrated the impact of the community charge, if it had been implemented last year, giving a figure of £253. I fear that those figures are way below the amount that we are going to have to pay, and I think that that chiefly reflects an unsatisfactory grant settlement.

Over the coming months, I shall make efforts—and I think that many of my hon. Friends will join me—to help my elderly constituents and families on low incomes with the community charge in two ways. First, we shall carefully examine local government spending, make comparisons with other local authorities, see where local authorities managed to come up with a charge which is lower, what they have done and what efficiencies they have introduced. I think that we will benefit from the work of the Audit Commission because it has a powerful role in these matters. And we shall try to get the total spending by local authorities down wherever we can. I am sure that Labour-controlled local authorities have a major role to play in that.

Secondly, we shall try to obtain a better grant from central Government by next year—I do not think there is much to be done for this year. I think that is particularly valid for Conservative-controlled local authorities, so that we can move closer to the figures that the Department forecast for the charge.

I make no apology for raising this subject during a debate on social security because the beneficiaries of social security—the elderly on limited incomes and poorer families—are very concerned about it, and I am sure that that will be reflected in my surgery and in my mail box during the next few weeks.

On this side, we all praise Ministers in the Department of Social Security for what they have done to obtain and use resources. They should look to one or two Ministers in other Government Departments for co-operation in dealing with these problems. But we certainly want more sense and reason from Labour-controlled local authorities in meeting the need to help people in vulnerable positions.

5.40 pm
Ms. Dawn Primarolo (Bristol, South)

I shall make two points to the hon. Member for Taunton (Mr. Nicholson), the first by way of advice: beware Ministers bearing tables quoting poll tax figures; do not make press statements until the final figure is announced. Secondly, when he goes to the Minister to negotiate a better grant settlement for his local authority, we should like to add a few more local authorities to give him a rather long list. I am sure that he will be prepared to argue for Avon county council, a hung council, run by the Tories, in which Kingswood is based.

Mr. Raison


Ms. Primarolo

I have not started yet.

Mr. Raison

I thank the hon. Lady for allowing me to interrupt so early. Any local authority wanting to increase its revenue support grant next year might note that one factor which contributes to the size of the needs element in the revenue support grant is the number of false fire alarms. Therefore, if one stimulates many false fire alarms, the needs element goes out.

Ms. Primarolo

I am grateful to the right hon. Gentleman for that little tip, which I shall pass on to the local authority in Avon.

To return to the instruments that we are discussing tonight, when there is a massive redistribution of income through cuts in income tax for the top scale of those who pay the tax, little is said by the Government, although there is a massive loss of income to the Exchequer. When pensioners, the disabled, single parents and those on benefits are given a 50p a week or 25p a week increase, we are supposed to congratulate the Government on their generorsity to those people.

When we have debates on social security in this House, a little puzzle always goes through my mind: how is it that the Government keep telling us that they are spending so much more money which people in need are receiving, yet the people themselves are not getting any more disposable income—in fact, they often end up with less money? I have finally come to the conclusion that, if the social security system is set in the context of the 1989 reforms that the Government have undertaken over a period, what has been set up is a much meaner system all round.

Even so-called acts of generosity—such as the Government finally giving the war widows their increase—are transferred into people's lives as further cuts. I shall give the example of one of my constituents whom I mentioned in an earlier intervention and about whom I shall write to the Minister. Her name is Mrs. Bidwell. She is 81 years old, and suffers from Parkinson's disease and a number of other illnesses. She is in a private residential nursing home. Her daughter called to see me; she is allowed to earn £40 a week under the new regulations because her husband is in receipt of invalidity benefit.

Mrs. Bidwell now pays £270 a week to the private nursing home. She has to be in a private home because there are no other types of nursing home in our area. The nursing home charge went up to £295 a week from 1 February, and at present there is no increase in her income support to compensate for the increase in nursing home charges, so she has lost her £40 and is now £2 a week worse off. When the Government increase income support by £10 on 1 April, her net loss will be £32. Therefore, of the £40 that she was given—supposedly disregarded—she has only £8 a week left, with which she has to buy all her extras such as toiletries.

Naturally, Mrs. Bidwell's daughter was extremely upset and distressed when she called to see me. She felt that it was outrageous that her father, who had been killed, as she said, fighting for this country, and her mother, who had struggled all her life raising five children, had finally won justice in the form of the £40 a week rise only to have it taken away because it was still included in the calculations for income support. I should be grateful if the Minister would write to me about this.

That example highlights another point about the Government's policy. Such people are worse off because the Government have allowed the privatisation of nursing homes, which are now able to charge whatever they like. As the Minister said, the Government have no control over those increases.

Clearly, under the benefits system, the Government are robbing Peter to pay Paul. When extra benefits are given, they are clawed back from other parts of the benefits system. My case work load shows, as I am sure those of many hon. Members do, that claimants from all the priority groups identified in the 1989 social security reform —pensioners, single parents and those leaving institutions to settle in the community to try to establish a normal life—are in extreme need. Those people are being refused grants and loans because of insufficient funds in the local office.

The social fund manager in Bristol, South confirmed yesterday that, despite January's top-up of £8,000 on the grant budget and £25,000 into the loans budget for this financial year, there was to be no change in the policy which rules out a category of claimants from qualifying from that fund. Those who have been ruled out are families under exceptional stress. No one in the Bristol, South office area who comes in that category will be considered for loan or social fund grants. The local office policy is to rule out claims for grants or loans from families under exceptional stress, even though that is one of the priority groups in the social fund manual. Therefore, single-parent familes are being singled out for exclusion from cash. That is the opposite of the undertaking and promises that have been given in this Chamber.

From my case load, it is clear that discretion in the discretionary system operates to exclude the needy from help in order to allow the DSS managers to balance their puny budgets. From the claimant's point of view, there is no discretion or flexibility, merely interminable bureaucracy leading to closed doors. I shall give a couple of examples of such treatment.

A single mother on income support and her two children—one aged two years and the other four months—spent two months in bed-and-breakfast accommodation and were then housed in unfurnished accommodation. She applied for a community care grant of £940 for essential furniture. There is nothing in the house—not even floor coverings. In her letter she said: My daughter and I are sleeping on the floor"— bare floorboards— with borrowed blankets from a neighbour. I am very depressed and cannot look after or care for myself and my children in these conditions—we have nowhere to store our clothes and no means of cooking our food. The grant was refused because there are no exceptional circumstances", to quote directly from the social fund officer's decision in October 1989.

The demands on the budget at the time were so great that these circumstances were considered unexceptional enough for the claim to be disallowed. I dread to think what an exceptional claim in Bristol, South is. If those circumstances are so unexceptional in the welfare state, exactly whose welfare is the state protecting? I suspect that the state is looking after people with money who are getting tax cuts.

One of my constituents who was re-establishing himself in the community after a long period in prison secured the promise of employment, which was vital to him, on a construction site, provided that he had his own tools. He applied for a community care grant. Those grants, we are told, are aimed at priority categories. His application was refused. It was not even considered, because the rules stipulate that such items are specifically excluded.

A woman who was born in 1908 was recently hospitalised after she suffered a stroke that disabled her last summer. She needs constant day and night care. Her daughter is on income support. She could not afford the daily bus fares—which worked out at £15.40 a fortnight—to visit her mother in hospital. She visited the hospital daily because she was being trained by the staff to care for her mother.

They applied for a community care grant, both for the fares and for the additional items that they need at home. The old lady is incontinent. Their grant application was refused because the circumstances were unexceptional. Bus fares are paid only for the parents of sick children. Once again, both claimants were told that they were not in the exceptional need categories. Time and again we are told that the benefit system is targeting the needy, but time and time again the needy are told that their circumstances are unexceptional.

A Bristol-based charity wrote to all the advice-giving agencies asking that the number of applications made to its charitable fund for help for those in exceptional need but who had been refused grants and loans from the social fund should be reduced because its funds were running out. The Government are breaking up the decision-making process, thus reducing the amount of money that is paid to people in need. They try to convince us that they are giving them more money, but that is not true. At one time, we could be proud of our welfare state. How can we be proud of a welfare state that describes the needs of those people as unexceptional? How bad do people's living conditions and their poverty have to be before the welfare state recognises that they need support?

5.54 pm
Mr. Robert G. Hughes (Harrow, West)

I listened with care to the harrowing constituency cases that the hon. Member for Bristol, South (Ms. Primarolo) drew to our attention. I am sure that she will concede, however, that it is difficult to understand all the facts surrounding constituency cases until we have all the details. I therefore cannot comment on the cases that she has drawn to our attention.

The hon. Lady's sincerity and depth of knowledge compares favourably with what was said by the only other Labour speaker in the debate so far, the hon. Member for Oldham, West (Mr. Meacher). His insincerity and vagueness went down extremely badly on Conservative Benches—and perhaps on Labour Benches as well. He told us that he wanted to talk about poverty and relative incomes. He did neither. Perhaps he thought that it was sufficient to mention them and then to move on to something else.

The hon. Gentleman said that he would outline the Labour party's policy. We should have known better than that. All he did was to add to the interminable list of areas where the Labour party's policy is, to put it at its kindest, far from clear. It is also deliberately transparent. Over £1 billion a week is spent on social security. We have to ask whether that is sufficient. The Labour party has a duty to the House and to the electorate to say what it would spend. Perhaps we shall be told later what the size of the Labour party's social security budget would be this year, if it were in office. I think that I can guaranteee that we shall not receive an answer to that question, since the Labour party has not bothered to answer all the other questions that it has been asked.

Under this Government, the social security budget has increased in real terms by 36 per cent. since 1979. That is far better than the Labour party's record when it was last in government. Whether it would be found to be better than the record of the next Labour Government, should there ever be one, we do not know.

Mr. Eddie Loyden (Liverpool, Garston)

Does not the hon. Gentleman agree that people are living below the poverty line and that bandying figures about will not change that fact?

Mr. Hughes

I shall deal with the figures during my speech. The Labour party wants people to look at its social policy through rose-tinted spectacles. It does not want them to look at the figures. If the Labour party cares about the problems that face the poor, it must tell us what a Labour Government would spend; otherwise, it cannot be taken seriously.

Is the £1 billion that is being spent each week on social security going to those who are most in need? My right hon. Friend the Secretary of State gave a number of examples of additional money being specifically targeted on those who are most in need. I shall give two other most important examples of people who will be most grateful for additional help from the Government.

The first is the extra £100 million a year to help 500,000 disabled people and their carers. Those people particularly needed extra money and they will get it as a result of the uprating. Secondly, those of us with young children know that they can be a great expense, but people with severely disabled babies must face enormous extra expenses. The fact that families with severely disabled babies whom one parent stays at home to look after can receive an extra £65 a week under the uprating is a matter on which the Government are to be congratulated.

The hon. Member for Oldham, West pretended to answer one question, but in fact he did not. He told us that the Labour party will restore the link with earnings. He told us how the pensioners and other groups have been robbed by the Government because of their failure to keep the link with earnings. But he failed to tell the House that the reason why the Labour party made the link with earnings, as opposed to a link with inflation, was that that was the cheaper option. The Labour Government had so lost control of the economy, and inflation was so high, that that was the only option that they could afford.

If, as the hon. Member for Oldham, West said, the link with earnings would be restored—he hedged his comments about with some weasel words—he must answer a further question. If a Labour Government lost control of inflation, as they undoubtedly would because their policies point in that direction, would they restore the link between the cost of living and the annual upratings? Would they use the best method or the cheapest method?

The Labour party uses statistics to disguise and distort reality instead of telling us the truth—

Mr. Battle

I want to get the record straight, since the hon. Gentleman has talked about distortions. Did not the Labour Government offer a link either with earnings or with inflation, whichever was the higher? That is the truth.

Mr. Hughes

No, it is not. History shows that that is false; otherwise, pensioners' incomes would not have fallen so far behind the cost of living under the Labour Government, who stole their £10 Christmas bonus and took away many other things from them. The Labour party cannot preach on this subject, as it allowed pensioners' incomes to fall behind the cost of living.

The Opposition use a number of statistics when discussing the incomes of poorer people, but they use them to distort. Why did they not tell us that between 1981 and 1985 the living standards of the bottom 10 per cent. increased by 8.3 per cent., against an average 6.4 per cent.? Why did not the Opposition tell us that real take-home pay for those on half average male earnings has risen in 10 years by 28.7 per cent.? Between 1973 and 1979 it rose by a pitiful 2.4 per cent.

Why did not the Opposition tell us that, for many of the poorer people in society, tax reductions have an enormous impact? Why did they not congratulate the Government on the fact that the personal allowance increase has taken 1.7 million of the poorest paid people out of paying tax altogether? The answer to all those questions is: because it is uncomfortable for the Opposition.

We can never be satisfied that all those who are most in need are being helped. I would never suggest that they were. A problem mentioned by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), in an honest and reasonable speech, and by the hon. Member for Bristol, South, related to those living in private homes for the elderly. What I want to say applies also to elderly people living in some of the homes run by housing associations. We would all accept that many, if not most, of those homes are run to high standards, but the money available does not cover their running costs. As a member of a committee of a housing association, I know that the money that we receive from the DSS does not cover our running costs, so we are running at a loss on some of the people whom we want to keep in the homes. That problem must be dealt with.

I want to discuss two issues connected with housing—first, housing benefits. I hope that all hon. Members agree that it is no criticism of anyone to say that housing benefits have hardly been mentioned in the debate, and for a good reason. If one discusses housing benefits in terms of their relationship to any of the rented sectors, my right hon. Friend the Minister of State will rightly reply that they are a matter for the Department of the Environment; but if one raises the subject of housing benefits with a Department of the Environment Minister, he will reply that it is a matter for the Department of Social Security. It is thus impossible to debate whether the figures in the upratings are reasonable or unreasonable, sufficient or insufficient, because they have to do with housing policy.

I firmly believe that housing benefits must be returned to the Department of the Environment. The only reason why they have not been returned so far is the opposition of civil servants in the Department. They do not want them back; one told me once that they did not want the bother of them. However, most of us recognise that housing benefits are important and we believe that they would be better administered alongside housing policy. As such, that would be better done by the DOE.

I want finally to mention a group who may see little or nothing from the upratings—the visible homeless. They are not a problem; they are a series of interrelated problems needing a variety of solutions. Such solutions will help many vulnerable people who cannot cope with society. Many of those whom I am discussing, who sleep on the roadside and in shop doorways, could not cope in a house or flat. Many of them would even reject a conventional hostel.

I should like to suggest an additional form of help as part of the pattern of provision. I propose minimalist hospitals funded by the Government and run by the voluntary sector. People could crash out and get a meal in them, and most importantly, they would have access to psychiatric and counselling help. Without such provision, many people will inevitably continue to sleep rough, whatever other solutions the Government come up with.

We must face the problem honestly: many of those whom I am talking about will still prefer to sleep in the streets. Near where I live there is a lady who has lived by the side of the road for 25 years. She has a bed in a mental hospital around the corner and she goes there when it is very cold and for her meals. It is precisely such people, and young people who find themselves in the same position, who need specific but non-threatening help. I hope that the Government will turn their attention to that in their welcome reappraisal of the help that they give the homeless.

6.10 pm
Mr. Clifford Forsythe (Antrim, South)

I welcome some parts of the uprating—for instance, the extra help for poorer families—but I hope that there will be greater take-up of family credit in future. Until now, the take-up has not been good enough, and I hope that some effort will be devoted to publicising the benefit.

I also welcome the extra help for the disabled and their carers, although I have a feeling that the improvement is being paid for by the freezing of child benefits and the cutting of statutory sick pay.

It is disappointing that benefits in general have not been uprated in line with inflation. The most obvious example of that is the freezing of child benefit, which concerns many people. The right hon. Member for Aylesbury (Mr. Raison) made an excellent speech in which he put the case for child benefit very well. I hope that Ministers listened to it.

It is said that child benefit will eventually be phased out, but if it is, the Government will have cause to regret that at the next election, leaving aside high interest rates and the community charge.

The social fund has also effectively been frozen for the third year at around £205 million, despite numerous reports of more and more claimants being turned down for grants or loans for urgent needs. The full effects of the way in which the social fund operates are only now becoming clear. Unfortunately, they will become clearer as time goes on.

Those effects were concealed when the social fund was introduced because an applicant who genuinely required help through force of circumstances could, or perhaps one should say were forced to, take a loan instead of a grant. That loan had to be repaid, reducing the applicant's income. If a further problem befell one—for example, if a cooker needed to be repaired quickly—a further loan had to be made resulting in higher payments. Such applicants may eventually be unable to apply for an emergency loan because they have exceeded the amount of weekly payments that they are rightly allowed by DSS rules. That is a continuing situation that can only get worse.

Unfortunately, it is at that stage that the sad part of the story begins. Such people then turn to the only source of cash available— the moneylenders. People who, for the best of reasons, need finance but cannot obtain it from the social fund, either because of high repayments on previous essential loans or because no money is available in the fund, then approach loan sharks. Such people will then be worse off than they were in the beginning. High interest charges and intimidating collecting methods become their fate.

It is not unusual for people in such a position to hand over their benefit books in order to obtain a loan. The debtor is then allowed to take the book to cash a weekly order, which he then uses to pay the required amount of money to the lender who then retains the book for the future. That, sadly, is one of the bad results of the social fund which is there to help people. The situation can only get worse.

Support levels for people in nursing or residential homes do not match the rate of inflation. They certainly do not match their needs. Yet more and more such homes are being required as a result of Government policy in other areas, bringing people into the community who then end up in such homes.

Retirement pensions are uprated in line with inflation, but I am disappointed that they are not being increased in line with average earnings. The pensioners of today once created the country's wealth. It is a disgrace that they are now being treated so shabbily.

I am glad to have had the opportunity to point out some of the concerns that I and my right hon. Friends have about uprating. But other hon. Members hope to catch your eye, Mr. Deputy Speaker, so I shall conclude my remarks and hope that they will deal with some of my other worries.

6.14 pm
Mr. Tim Smith (Beaconsfield)

The hon. Member for Oldham, West (Mr. Meacher) said that he wanted a broad debate on incomes, benefits and poverty generally, but he proceeded to make a narrowly based speech. He talked only about state provision. Whether one considers the position of pensioners, those who are at work and become sick, or families, it is not good enough to look only at what the state provides. One must look at a broader picture, but the hon. Gentleman failed to do so.

The hon. Gentleman also complained about the cut in invalidity benefit at the very moment when the Public Accounts Committee is considering why expenditure on that benefit is rising so fast and the number of claimants has risen so rapidly.

The hon. Gentleman might have recognised that the 1980s were a decade when the average income of most pensioners rose more rapidly than ever before. That was not due to state provision alone. The position of pensioners improved because of private sector provision—occupational pensions.

As my hon. Friend the Member for Taunton (Mr. Nicholson) said, European comparisons no longer stand up to close examination because at the end of the 1980s the pensioner is much better off than he has ever been before. Of course there are exceptions to that, and that is why my right hon. Friend the Secretary of State was right, last October, to give extra benefis to those in most need.

The Government have the right approach to social security benefits. It is right to give the extra cash that is available to those who are most in need. That is why I welcome this series of orders. In particular, I welcome the new carers' premium and I especially welcome the fact that the attendance allowance is to be extended to babies under two. The abolition of the earnings rule last October was most welcome, as is the substantial improvement to be made in April by the Department of Social Security and the Ministry of Defence to the war widows' pensions.

On child benefit, too, it is right to look at the overall position of families. My right hon. Friend the Secretary of State gave the House an interesting piece of information. He told the House that, over the past 12 months, the average net income of a working man had increased by more than £20 a week. It is that that we need to look at when we consider child benefit.

If we compare the Government's record in just the past 12 months with the previous Labour Government's record, we can see why the policy announced by the hon. Member for Oldham, West is such a fraud. We all know that, if we have the misfortune to have another Labour Government, it is most unlikely that earnings will rise in the way that they did during the 1980s. Earnings will probably only just keep pace with prices, as they did under the previous Labour Government. Since there is no question of retrospection in the Opposition's proposal, it amounts to no more than a confidence trick.

When child benefit has been reviewed each autumn recently the Government have been right to say that the appropriate policy is to freeze it and to devote the extra resources to other benefits. But I also agree with my right hon. Friend the Member for Aylesbury, (Mr. Raison) that we need to come up with something better by the next election and to have a clearer policy. He suggested one alternative, which was to double child benefit and abolish the married man's tax allowance. He thought that the Government were inconsistent in introducing new tax allowances while at the same time freezing benefits.

Up to a point, I agree. I even took the trouble to come here last week to explain to the Treasury why I thought it was wrong to introduce a new tax relief for private health premiums. The Department should look carefully at my right hon. Friend's proposal, but other possibilities could be examined.

For example, it has been suggested that we could have a higher benefit for children under five and a lower benefit for children over five on the ground that it is during that first period that the mother is less likely to be at work, so it is then that the family is most likely to be in need of help. Against that, it could be argued that children get progressively more expensive, as I believe to be the case. That would suggest that the benefit should be the other way round.

It would be sensible to have a proper debate about how to proceed. It is not sensible simply to index-link child benefit year in, year out, when so many families that receive it do not need it. We need to come up with something better. I hope that my right hon. and hon. Friends in the Department will consider that and try to come up with something better. Subject to that, I welcome these orders.

6.19 pm
Mr. John Battle (Leeds, West)

As an introduction, I shall make a few remarks about the context of the debate. We are being asked to approve an uprating on the same day as we read that some right hon. Members fare very well indeed. I refer to the second, or what in all justice should be called the third, job of the right hon. Member for Blaby (Mr. Lawson), the former Chancellor of the Exchequer. Let us not forget that his Budget last March and previous Budgets set the structural arrangements for this uprating and for previous arrangements for people on low pay and in poverty. I agree with the right hon. Member for Aylesbury (Mr. Raison) that we always have the difficulty that we cannot discuss tax and benefit arrangements in the same debate and relate one to the other.

We now hear that the right hon. Member for Blaby has been offered another job at £40,000 a year, working as an non-executive director of GPA, the world's biggest aircraft leasing company based in Shannon, County Clare. That is on top of the job that he has already been offered at £100,000 a year, working two days a week for Barclays.

That focuses our attention on part-time work, which is a crucial issue in this debate. The right hon. Gentleman may well have spare time to write his memoirs and fit in political activities with doing those two jobs, but it is a shocking contrast with the 9 million people in part-time, temporary and low-paid work who make up the bulk of people in poverty, because low pay is the primary cause of poverty.

Today, the working party set up by Sir Gordon Borrie, the Director General of Fair Trading, reported that more than 200,000 households were in severe debt difficulty and that a further 500,000 people were having difficulty in coping with the debts that they had incurred. I hazard a guess that many people with such debts are precisely those who are on much less than the average wage. I am tempted to believe that most people with such debts are on low pay or low benefits.

I do not have time for a part-time job because I fill all my time responding to the inquiries of constituents who find it hard to get by on low incomes, low benefits and low pensions. I shall quote an example from the Department of Social Security agency benefits unit: Mr. Garnett's requirements have been calculated at £75.60, comprising of a personal allowance of £54.80 for a couple, a £19.50 disability premium as Mr. Garnett is in receipt of invalidity benefit, plus £1.14 a week housing costs. The latter consists of rent and general rates less housing benefit and the statutory 20 per cent. deduction of the gross rates. There is also a £12.50 deduction in respect of non-dependents. (Mr. and Mrs. Garnett's daughter Denise lives with them)…The comparison between Mr. Garnett's resources of £75.60 and his requirements of £75.44 resulted in an excess figure of £0.16. On this basis they are not entitled to help with prescription charges and are deemed able to meet the first £0.48 of any other NHS charges…I am sorry that this reply may be disappointing for Mr. and Mrs. Garnett but I hope you feel the explanation helpful. It is more than disappointing when people are trying to survive on incomes which are below half or even a third of the average wage.

In another case, Mrs. Whiteley has an income of £49.31. Her needs are £46.10. She is not eligible for income support and the extra £2.50 that she received last October makes no real difference to her income.

Mr. and Mrs. Stanley wrote to me to say: We are not destitute, but over the last 12 months the cost of living has risen so much. Every week the cost of different items, especially food, it is frightening to think of what is to come and new clothes are a non-entity.

The future looks very grim, I dread to think what next year will bring, what with the poll tax and increases are expected on electricity etc…My Wife and myself know how things are worsening from the fact that the small luxuries that we used to enjoy, such as a visit to the theatre and an occasional evening meal, to celebrate a birthday or anniversary are now a thing of the past. They are hardly living on the average income or even half the average income, yet they are being denied some of the things that we take for granted as ways of participating in society.

Today I received a letter from someone who was worried about residential nursing homes. I ask the Minister to consider this issue. I tabled a parliamentary question asking why personal expense allowances, in particular the pocket money part of the board and lodging allowance, are being reduced to top up fees paid to private residential establishments. That pocket money is being absorbed. I hope that the Minister will suggest that that money will not be absorbed and that people will not have their pocket money withdrawn to cover increasing costs. Although the order suggests that there will be an increase of £10 a week, it will not match increases in inflation or needs. There will be a shortfall in the provision for the true cost of care. Many people will have to pay a huge shortfall out of their own pocket. The shortfall should not come from the personal expenses allowance.

I do not have time to speak about the knock-on effects on rents. The hon. Member for Harrow, West (Mr. Hughes) said that he had noted that only one Labour Back-Bench Member had been called so far. May I assure him that there is plenty of scope to talk about housing benefit.

At the turn of the century, Seeborne Rowntree, in his study of York, identified one of the primary causes of poverty as the fact that people have to spend almost a third of their income on housing costs—either on rents or to purchase their home. I should like the Government to tell us what market rent levels should be, because it is the policy of the Department of the Environment to push up rents to market levels which will absorb more than a third of people's incomes and effectively price them out of their housing.

I hope never again to hear Conservative Members make comments such as those which the hon. Member for Welwyn Hatfield (Mr. Evans) made on 24 January. He suggested: The long term homeless have turned their back on society. He continued with a little slip: Young offenders should be the responsibility of their parents, not of this Government. The Government have done quite enough for the homeless. I hope that they will spend no more money on them."—[Official Report, 24 January 1990; Vol. 165, c. 879.] I invite the Minister to repudiate that remark, and to dissociate himself and the Government from those ill-informed remarks. Not least, the Minister should not associate himself with the suggestion that anyone who is homeless is also a young offender. That criminalises the victims of homelessness and blames them for their plight.

In an intervention, I mentioned child benefit. I hope that the Minister will accept that raising means-tested benefits is not adequate compensation for failing to maintain a non-means tested benefit which could cut through the poverty trap.

The Secretary of State has shifted from using the word "targeting" to "focusing". I suggest that the Government have bifocal vision. They see through one lens the larger image of tax cuts and those who do well. Then they look through the other lens and see a smaller image where they are reducing benefits. As my hon. Friend the Member for Oldham, West (Mr. Meacher) said, it is clear that money is being taken from the poor and redistributed to the rich. In booming Britain, it is not enough to tell us about average wages. It may be that those who are at the top are doing well, but those at the bottom are paying the price because their incomes are going down. It is possible for that to happen even when the average is rising.

We have a new Secretary of State for Social Security and a new Chancellor of the Exchequer. Already the new Chancellor is rejecting the policies and direction of his predecessor. I hope that the Secretary of State for Social Security will say, "Now that we have a new Chancellor of the Exchequer with new policies, why should we accept the uprating statements of his predecessor?" I urge him to take that statement back to the Chancellor and ask him to look at it again to see whether the Treasury could be more generous to those in need rather than insisting that the House divide on it tonight. If we have to divide on it, I urge hon. Members to vote against it.

6.29 pm
Mr. Edward Leigh (Gainsborough and Horncastle)

I am grateful to the hon. Member for Leeds, West (Mr. Battle) for allowing me three or four minutes in which to speak at the end of this interesting debate.

I have always thought that there is something rather artificial about these debates, and to listen to the hon. Member for Oldham, West (Mr. Meacher), one would think that when looking at the Treasury Bench, one was looking at Scrooge before his conversion. That image sits unkindly on the shoulders of my right hon. Friends the Secretary of State and the Minister for Social Security, and does not accord with the facts.

I do not want to repeat what has already been said, but we have a social security budget of £55 billion, and in 1992–93 it is forecast that it will be 4 per cent. above inflation, running up to £63 billion. Therefore, the argument that we may have to address is not that the Government have been less than generous, but that we must now establish where we are going. That is why I wanted two or three minutes in the debate to put down one or two markers.

The Government have won the argument against economic collectivism. Indeed, that argument is being won right across Europe and not only in this country, but we have not yet won the argument on social collectivism, and we must now address that problem in time for the general election. After all, we have a Government who are courageous enough to address the difficult subject of the reform of the National Health Service—I applaud what the Government are doing—and I believe that we have a Government who will be courageous enough also to address the problem of a social collectivist society.

That is a difficult problem to address, and nowhere is it more difficult than in the conundrum of child benefit. On the one hand, we have a universal benefit, which is universally taken up, does not add to the poverty trap, and which we should all like to keep; on the other hand, it is given to all members of society regardless of wealth.

In addressing that problem, perhaps we should think in terms of combining the two structures of taxation and benefits. I hesitate to say this to my distinguished colleagues on the Treasury Bench, but perhaps the Department of Social Security should become part of the Treasury.

When I talk of the two systems being combined, I am not talking of a tax-credit system or of a system of minimum income guarantees. However, as my right hon. Friend the Member for Chingford (Mr. Tebbit) argued in The Times earlier this week, perhaps we could use a combined taxation and social security system to try to encourage people to invest not only in bricks and mortar, but in social security provision, pension care, health and education. It is an exciting prospect and one to which the Government must look if we are to solve the problem of how we can cope politically with a social security budget that is now running at £1 billion a week.

Finally—I know that this is a courageous remark, but it must be made—I am not questioning that we have a commitment to provide all those who are now of working age with a state pension that will keep pace with prices, but we must remember that the state pension now accounts for £28 billion out of the total budget. Perhaps we should use the taxation and benefit system to give people more incentives and to encourage future generations to provide for their own future.

If we are to be honest with people, we cannot continue to tell young people that the state can provide for them. I stress that I am not talking about people in middle age or those coming up to old age, and I am certainly not talking about old-age pensioners. Perhaps we should have the courage now to encourage young people, through the taxation and social security systems, to invest in their own future.

As a society, it is easy to be generous with other people's money. However, those societies that are most collectivist are often the most barren in personal generosity. The taxation and social security system must encourage personal generosity. We must escape from our dependency society, which creates two nations. If we had the courage to address those problems, I believe that we could make considerable progress and seek to end the ratchet effect of an increasingly collectivist society.

6.33 pm
Mr. Paul Flynn (Newport, West)

It is a pleasure to reply to this informative and worthwhile debate, in which we have heard creative ideas and constructive arguments from hon. Members of all parties. I deal first with the final points of the hon. Member for Gainsborough and Horncastle (Mr. Leigh), who seems to have swallowed the myth of Government generosity as a result of the £55 billion figure. Although that figure is impressive in itself, it represents only 9.7 per cent. of our gross domestic product, whereas as recently as three years ago the social security budget accounted for 11.5 per cent. Therefore, with an aging population and growing demands for more expensive medicines, we are spending less on such services as a proportion of our national wealth.

The hon. Members for Beaconsfield (Mr. Smith) and for Taunton (Mr. Nicholson) made useful contributions about the great difficulty of making comparisons with our fellow members of the European Community. Although they are real, there is no question about the selectivity of the figures quoted by the hon. Member for Taunton, which did not help the argument. The European Commission has made a serious attempt to make objective and valid comparisons. It took as its standard the amount paid to each new pensioner who had worked for an average wage in manufacturing industry and it compared the figures for each country in two ways.

First, the cash amounts were converted into European currency units by using a standard rate of exchange called the purchasing power standard, which takes full account of the cost of living in each country. The pension was thus related to what it would buy locally. The United Kingdom came badly out of that comparison because, on that basis, the British pension is £55, which is barely half the £104 paid in Luxembourg and the £101 paid in the Netherlands. In that comparison, Britain was beaten into bottom place only by Ireland.

The second comparison involved calculating the pension as an average of manufacturing earnings in each country after taking account of tax. The figure of 100 was used as the base for the ratios. On that basis, the best countries in Europe paid 90 per cent. of average earnings, while Britain came bottom, along with Ireland, paying 46 per cent. I do not ask the Government to accept those figures, although they were produced independently by the European Commission which does not have an axe to grind. However, I have used parliamentary questions to ask the Government to carry out the same calculations themselves.

Sadly, the reply has been that the figures cannot be given except at disproportionate cost. That is an unfair answer. If they want to make a comparison, the Government should match the figures from the European Community. The truth is understood by our pensioners—not only by the ones who have been on holiday to Greece—that, especially in relation to West Germany and to France, they have fallen behind their European counterparts in many ways.

If we want proof of the way in which the Government present their figures, we need only to consider the thoughtful speech of the right hon. Member for Aylesbury (Mr. Raison), who, like his hon. Friend the Member for Gainsborough and Horncastle, referred to the European tradition and to how we should set an example to the newly democratised countries in Europe. I hope that those right hon. and hon. Members saw a telling programme a few weeks ago on Channel 4 in which a Conservative Member was rash enough to explain how to write a manifesto to aspirant Members of Parliament from Hungary and Poland.

I shall not identify that hon. Member because I am a kindly person, but he said, "In the Conservative manifesto of 1987 we made a promise about child benefit, saying that it would be paid as now and direct to the mother. Of course, when we come up against a problem, we can look back to the manifesto and if we want to pay the benefit, we can pay it, but if we do not want to pay it—if we want to freeze it—we can freeze it, because the sentence was ambiguous." There is the truth of the Government's duplicity in this matter.

The minor calamity of the national insurance scheme has hardly been mentioned in the debate. The scheme has been plundered and pillaged by the Government during the past 10 years. They have jacked up the contributions from 6.5 per cent. to 9 per cent. and have held down the benefits. The Government have had a particularly bad year this year. I can remember the Minister of State describing the buoyant state of the national insurance scheme last year. He said that we were heading for a surplus of more than £2 billion on the year—and, indeed, the Government achieved that.

On that basis, we as a Parliament decided for the first time since 1911 to withdraw the Treasury supplement. It was significant that in 1911 Lloyd George sold the idea by saying, "You'll get 9d. for 4d." The Government contribution has been more or less the same for a long time. Even in 1979 it was paid at the rate of 18 per cent. If it were still at the same level, the Government contribution to the national insurance scheme would be £5.3 billion. That would go directly to pensions. When hon. Members ask where the money comes from, let them remember that figure.

What has happened this year? We were promised that there would be a surplus on the scheme of £519 million. A few weeks ago, we were told that there is a deficit of over £900 million, an error of £1.5 billion. The Treasury supplement has gone, but the deficit is also caused by the large take-up of personal pensions. Nearly 4 million people have taken up the bribe offered by the Government on personal pension schemes and their contributions have been denied to the national insurance scheme.

Therefore, the genuine rises that pensioners should have had have turned up in the profit sheets of insurance companies. It was no coincidence that, on the very day it was announced that the national insurance scheme had lost £1 billion, the Prudential announced a 26 per cent. increase in business, including 250,000 new personal pension schemes. So we are targeting the scheme to give to the richest pensioners of the day after tomorrow by robbing the poorest pensioners of today.

The Secretary of State gift-wrapped the changes to be made in the statutory sick pay scheme. It was an interesting performance. He said that he was criticised by someone—a sketch writer, I presume—for not being jovial enough at the Dispatch Box. I was once unkind enough to accuse the Minister of State, when his jovial mask had slipped, of wearing the guilty look of a vulture that had stolen the wrong eyeball—a description borrowed from America. I think that that is a suitable demeanour for Ministers who are carrying out the wretched task of dismantling the welfare state and spreading misery.

What is behind the extraordinary decision on the statutory sick pay scheme? The Secretary of State mentioned that it had been considered by the Social Security Advisory Committee. Indeed it was, and the committee disagreed with it. The Government announced their decision in October but did not put the details out for consideration until late in December, just about Christmas. Opinions were received from 13 prestigious groups and individuals. The view was unanimous: they all said that it was wrong. However, we are going back to the old eastern European strategy. There is not so much a consensus as a Ceausensus, as Mr. Ceausescu would have understood it. The Government ignored all the opinion that came in and have gone ahead with their scheme.

The Secretary of State mentioned several times the increase in benefit. It is an increase of 25p for a small group. At the other end there is a cut of £3.55. One point is very important. The Minister made light of the fact that it is a cut of between £70 million and £80 million, but there will be a severe cut for 2 to 3 per cent. of workers, the disabled, who will find it difficult to get employment because their employers will have to pay the full cost. There will be a great additional burden for people in that position. It makes a mockery of the Government's claims about helping the disabled.

Behind the changes in statutory sick pay introduced by the Government is another part of the strategy of reducing the panoply of the welfare state. One wonders why the Government go on in this way. My great fear is that the myriad of small cuts here and there—little deceptions in the Health Service and elsewhere—mean that we are going down precisely the same road as they did in America in the late 1970s and early 1980s. The British Government are adopting the same philosophy as America. As all who have visited America know, there are 3 million casualties of the collapsed welfare state. There are 3 million walking wounded, many with histories of mental illness, living on the streets—the homeless, the shunned, the despised, the tent people.

We have a social fund that is not delivering. Terrible cases are brought up week after week—a boy who was told that he could not have a loan because he could eat in soup kitchens; a pregnant mother who was told that she could not have a loan for a bed two days before her baby was due because she could sleep on the floor; a disabled husband and wife who were told that they did not need a grant for a cooker because they could go out to eat. That is the reality of Britain today. Anyone who walks the streets of London sees a growing army of despised and homeless. Bush has called America's homeless America's shame. What is being created now will become known as Thatcher's shame.

6.45 pm
The Minister for Social Security (Mr. Nicholas Scott)

As the hon. Member for Newport, West (Mr. Flynn) ended with an American analogy, I am inclined to refer to his speech by using the words of a former mayor of New York who said of an opponent's speech that however it was sliced, it was still baloney. The hon. Member for Leeds, West (Mr. Battle), for Oldham, West (Mr. Meacher) and for Newport, West portrayed the present state of the social security system in a totally distorted and perverse manner.

My hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) entered robustly into the lists. The ratchet that he described was a phrase invented, I think, by my noble Friend Lord Joseph. I think that the ratchet has been moving rapidly in the opposite direction for the past 10 years. We are not moving toward the collectivist society that Lord Joseph envisaged when he invented that concept.

Before dealing with the detailed points raised in the debate, I want to correct some of the apparent misunderstandings on the Opposition Front and Back Benches about the Government's record on social security. It is easy for Opposition Members to forget that, since 1979, spending on benefits has risen by 36 per cent. Spending on the elderly is up by 24 per cent. ; spending on the long-term sick and disabled—a group in which I take a particular interest—has almost doubled; spending on working families with children is double the spending through its predecessor, family income supplement.

Ms. Clare Short (Birmingham, Ladywood)

That is not true.

Mr. Scott

It is true beyond peradventure. I cross swords with the hon. Lady in Committee twice a week. If she wants to intervene, she may, although she will understand that I have only 13 minutes left in which to reply to the debate.

Ms. Short

I shall be brief. This is a crucial question in the conflict between the two sides of the House. The question is how we share the economic growth that we have, year in, year out. The Government have not allowed the poor, the sick and the elderly to share in the economic growth. There has been marginal growth, but they have got worse and worse off.

Mr. Scott

What is true, and cannot be denied, is that at all levels people have benefited and have had improved standards under the Government. I do not resile for one moment from the fact that there has been more inequality. I believe that the competitive society, which includes extra rewards for those who do well, is the engine that enables us to provide the resources for the poorest. For Opposition Members, at least some of whom were members of a Government who failed manifestly to have sufficient economic resources to provide for the poor, to criticise us for a growth in inequality while we are still managing to provide resources to look after the poor, the sick and the elderly, is beyond the pale, as we used to say across the water—as the hon. Member for Antrim, South (Mr. Forsythe) will remember. We are certainly not seeking to starve the social security system of resources. The hon. Member for Leeds, West had some fun with the change of phrase from targeting to focusing. We are trying to make sure that the help available in the social security system goes to those who are in real need.

I should like to deal with a couple of points made by the hon. Member for Newport, West. It is not really the incentive that has created the problem within the national insurance fund—there were two other matters: the ordinary rebate was introduced for all contracted-out schemes some time ago and this was combined with the reduction in national insurance contributions, a move widely welcomed on both sides of the House when it was introduced.

Nor is it any good looking at European pension provision and trying to compare it with ours in the way that the hon. Member for Newport, West did.

Mr. Flynn


Mr. Scott

I am sorry, but I now have only 10 minutes.

We are concerned about total pensioner incomes. It is all very well to draw on some theoretical position in which people might find themselves in Germany or France if they had paid enough contributions, if their earnings had been at certain levels, and so on. It is the total income of pensioners that we are concerned with—and very few countries in the Community keep any data at all about the total income of their pensioners. The hon. Member for Oldham, West said recently that he would be the first to admit that it was difficult to make comparisons with Europe, not only on pensions but on other aspects of social welfare, and that any comparison must be significantly qualified.

It would be a help in discussing these matters to get away from European comparisons. It is clear to me that it is the total income and standard of living of retired people that matters to them rather than the level of the basic state pension. We have seen a tremendous growth in occupational coverage and in the income from savings of retired people, which have contributed substantially to their prosperity.

The hon. Member for Newport, West also went on to claim that the changes that we had made in statutory sick ply would somehow damage the prospects of the disabled and those with poor health records. All those allegations were made when statutory sick pay was introduced. None of them has turned out to be true, and I do not for one moment believe that the changes that we have made now will have that result.

I refer now to the hon. Member for Oldham, West. It is a debating point—I freely confess it to him before I make it—but he said that we had never had debates on the distribution of wealth and so on at the right time. We had an Opposition Supply day last week, when we had the chance of a proper debate. I do not know which part of the Opposition was responsible for managing to waste most of the day on discussions about identity cards for football supporters rather than—[Interruption.] We know what was going on among the Opposition——

Mr. Meacher

It is a bit rich for the Minister of State to try to make a political point about debates on the distribution of income and wealth. When we had an opportunity last week, what did the Government do? They spent 50 minutes on a footling statement on hill farming when there was nothing of any significance to debate—[Interruption.]—and then took 20 minutes on points of order to prevent my hon. Friend the Member for Livingston (Mr. Cook) from introducing a ten-minute Bill.

Mr. Scott

I detect a certain amount of agitation among hon. Members who have hill farmers in their constituencies, about the very proper contributions made on that issue. It was up to the Opposition business managers to decide how the remaining time was distributed, and they preferred to spend it debating identity cards rather than poverty, the subject that they had chosen for their earlier debate.

It is quite untrue that fewer resources are going into social security now than 10 years ago when we came to office, as the hon. Member for Oldham, West said. In 1978–79 social security took 9.5 per cent. of the gross domestic product; in the current financial year it is taking 10.2 per cent. of gross domestic product. As a percentage of public expenditure, which in many ways is a better guide to the priority given by successive Governments to social security over other matters, it has risen from 25 per cent. in 1978–79 to over 30 per cent. at present. It is therefore wrong to portray this as a reduction in the priority that we give to social security.

On inclusive rents, referred to by the hon. Member for Oldham, West, I hope that landlords will take account of the introduction of the community charge and the abolition of rates and reduce their rents. But it would be living in cloud cuckoo land to imagine that one could legislate to force the rents down in such a complicated area of housing, where there are inclusive rents and where many contracts entered into are not even signed but are simply verbal agreements to pay a particular rent. Many housing experts have agreed that that would be totally unworkable.

The hon. Member for Oldham, West might like to try it, but he would end up reducing the resources available for rent assistance to claimants on social security or housing benefit. That would be the inevitable outcome of the hon. Gentleman's attempts to trample into this area with his boots on. Our interest is in making sure that those claimants are able still to pay the rents to which they are committed not to damage the claimants at all. That has been our first priority.

The hon. Member for Oldham, West went on to say that we have somehow broken our promise over the compensation for community charge. That is absolutely wrong, and the figures that the hon. Gentleman gave are totally wrong. Income-related benefits were adjusted at the last uprating in April 1989 to include help towards the 20 per cent. contribution that income support beneficiaries will have to make. The amounts included £1.15 a week for single people of 18 to 24, £1.30 for single people of 25 and over and £2.30 for couples, and the amounts will be uprated from April as part of the overall benefit levels. The amounts included in benefit levels will be more than adequate to meet the average 20 per cent. contribution, if local authorities are able to keep their expenditure within appropriate levels—one of the main reasons for introducing the community charge in the first place.

The hon. Member for Oldham, West made great play of what he called the joker in the disability package—that is to say, that we would be stopping entitlement to increases in additional pension for purposes of invalidity benefit once the Social Security Bill had gone through. That is a sensible measure, for more than one reason. It will improve the balance of benefits between those who are in and out of work in the longer term. I believe that we were right in our disability package to try to shift the balance so that those who are disabled early in life or from birth have a more equitable provision of benefit compared with those who have enjoyed a whole working life and have been able to build up savings, contributory benefits and occupational pensions as a result.

Ms. Short

The Minister has taken from the elderly disabled to give to the young disabled.

Mr. Scott

I do not agree: I think that the balance is right. In the longer term, the savings which may accure from this measure might give my successors—I suppose I have to say—greater room for manoeuvre in negotiating improvements and in increasing benefits in the future. The hon. Member for Oldham, West, however, could not bring himself to admit that, even with the change that we propose in the legislation, the cost of additional pension will rise from £450 million now to over £1.3 billion by the turn of the century.

I have been unable to address several points made in the debate but I undertake, as I usually do, to read the debate in the Official Report—although I have listened to almost all of it—and to take careful account of all the contributions made. I simply add that Opposition Members ought to be more realistic in their attitude. It is all too easy for them to come up with recipes and prescriptions for spending more money; the fact is that when in government they were never able to produce the necessary resources.

From the low base that we inherited when we took office in 1979, this country's economic performance has been transformed and an increasing share of the resources, both of public expenditure and of gross domestic product, have been spent on those who need it most. It is a record of which we can be proud and which would never have been achieved by the Opposition.

Question put and agreed to.

Resolved, That the draft Social Security (Contributions) (Re-rating) Order 1990, which was laid before this House on 18th January, be approved.

Resolved, That the draft Social Security Benefits Up-rating Order 1990, which was laid before this House on 18th January, be approved.—[Mr. Newton.]