HC Deb 21 October 1991 vol 196 cc639-57 3.34 pm
The Secretary of State for Social Security (Mr. Tony Newton)

With permission, Mr. Speaker, I wish to make a statement about the uprating of social security benefits. This will take place for most benefits, as is now the normal practice, in the first full week of the tax year—that is, the week beginning 6 April. The statutory instruments to implement my proposals, applying to both Great Britain and Northern Ireland, will in due course be laid before both Houses for debate and a full schedule of the new benefit rules is being placed in the Vote Office.

I will, as usual, deal first with the main national insurance benefits, including in particular the retirement pension which now goes to some 10 million people. The bases for the uprating will be the latest available information about the increase in the retail prices index over the past year: that is to say, the rise of 4.1 per cent. in the 12 months to September.

Our firm and continuing commitment is to increase the pension fully in line with prices. Next April, therefore, the basic pension will go up by £2.15 a week for a single person, from £52.00 to £54.15, and by £3.45 a week for a couple, from £83.25 to £86.70. This will increase expenditure on retirement pensions by around £1 billion.

Public service pensions will also be increased across the board by 4.1 per cent. as will war widows' pensions and war disablement pensions. I am glad to be able to tell the House on behalf of my right hon. Friend the Secretary of State for Defence that the special Ministry of Defence payment to the pre-1973 war widows will similarly go up from £44.36 to £46.18 a week. This special payment will, of course, remain tax-free and continue to be disregarded in calculating entitlement to income-related benefits.

All other national insurance benefits will be increased by 4.1 per cent. taking unemployment benefit, for example, for a single person from £41.40 to £43.10 and from £66.95 to £69.70 for a couple. Maternity allowance and lower rate statutory maternity pay, both of which were increased in real terms in the last uprating, will be increased from £40.60 to £42.25 and from £44.50 to £46.30 respectively.

National insurance sickness benefit will go from £39.60 to £41.20 for a single person and from £64.10 to £66.70 for a couple. As the House knows, however, most short-term sickness is now covered by statutory sick pay administered by employers, in which a number of changes were made last year. The new arrangements, including the special provisions for small employers, appear to be working well and I do not propose to disturb them except to increase the lower rate of SSP, which goes to employees currently earning between £52 and £185 per week. This will be increased by the retail prices index, from £43.50 to £45.30. The higher rate, which goes to the better-paid employees, of whom the great majority are in any case covered by occupational sick pay schemes, will remain at £52.50, since I judge that the cash required to increase it can more sensibly be used to improve the position of sick and disabled people in other ways.

I turn next to the income-related benefits—income support, housing benefit and community charge benefit. By convention, since the main housing costs of income support claimants are met separately and directly, these benefits have been uprated by an index which seeks to exclude such housing costs.

As the House is aware, since these benefits were uprated last year, there has been a £140 reduction in the community charge, which in turn has meant a reduction of £28—over 50p a week—in the amount which those on income support are expected to meet from what was included in their benefit for that purpose. There is therefore a strong case for adjusting benefit rates accordingly to produce an expenditure saving of £200 million. I do not propose to do that.

I have, however, concluded that it would be right in these circumstances to align the calculation of what is called the Rossi index more exactly than at present with the items the costs of which people are expected to meet from their benefit. This entails including within it not only 20 per cent. of community charge, but certain miscellaneous housing costs, and water rates, which have not previously been covered in the calculation. This will put the index on a more logical basis for the future— indeed, the inclusion of water rates also responds directly to a number of representations that we have received from welfare rights bodies and others.

The result is to produce an uprating index of 7 per cent., nearly 3 percentage points higher than the full RPI. Other things being equal, that would entail a small reduction in the cost of the uprating, by comparison with the use of the previous less comprehensive calculation. But that will not in fact happen, because I propose to devote rather more than the sum involved to an additional increase in the income support premiums for pensioners who are disabled or who are over 80. Those premiums will be increased, over and above the 7 per cent., by £1 a week for a single pensioner and £1.50 for a couple, contributing to overall increases in income support for this group of £5.10 a week, from £58.10 to £63.20 for a single person, and of £7.70 a week, from £88.45 to £96.15 for a couple. The cost will he £60 million.

Nearly 600,000 pensioners will gain to the full extent through income support, and over 400,000 will gain through increases in housing benefit and community charge benefit. It will thus build further on the series of measures that we have taken in recent years to give extra help to the less well-off pensioners and especially those who are older which have already increased the pensioner premiums by some £300 million in real terms in the past two years.

All other income support rates will go up by 7 per cent. Thus, benefit for a single person over 25 will increase from £39.65 to £42.45; for a couple with two children aged 10 and 12 from £104.55 to £111.85; and for a pensioner couple aged under 74 from £83.15 to £88.95.

Before leaving the income-related benefits, there are three further issues to which I should refer. The first are called the non-dependant deductions in housing benefit and income support for housing costs—that is to say, the contribution expected from the income of a non-dependant, living in the household of a claimant, in calculating the householders' benefit. Here I have received representations that these deductions, however reasonable in concept, are at too high a level for those on lower incomes. I shall therefore shortly be consulting the Social Security Advisory Committee and the local authority associations on a proposed restructuring of the deductions from next April.

Its effect would be to reduce the contribution expected from anyone whose income is below £130 a week— including a reduction of over a quarter, from £5.70 to £4, in that applying to a non-dependant who is not in full-time work or whose income is below £65—but to expect a somewhat larger contribution than at present, £18 instead of £13.50, from those in full-time work with incomes over £130 a week. While giving what I believe will be widely seen as a fairer and more sensible structure and once again helping the least well-off, these proposals would reduce benefit expenditure by about £50 million.

This, however, helps me to make much more substantial increases than would otherwise have been possible in the second area on which I need to touch—the income support limits for residential care and nursing homes. Unlike other income support rates, these include provision for housing costs. But I intend to make increases significantly greater than inflation, raising support in this field by nearly £200 million, or some £80 million more than would come from simply uprating the limits in line with the retail prices index.

After the very large increases made last year in the limits for nursing homes, I have concluded in the light of the available evidence and the representations made to me that the right course is a general increase in virtually all the limits of £15 a week, thus giving a proportionately larger increase this year to people in residential care homes. For the residential care limits in two categories—those for the very dependent elderly and for the mentally handicapped, who between them cover almost 40 per cent. of all residential care home cases—I propose an increase of £20.

In only one case do I propose an increase below £15, which is in respect of the limit sometimes known as the terminal illness limit for nursing homes. Originally intended primarily to give additional help to hospices, it has not proved very effective for that purpose, since many hospices do not make charges and there is therefore no basis on which their patients can claim the special rates of income support. As a basis for distinguishing between nursing homes, it has become increasingly artificial and difficult to operate. I therefore think it right to make only a £5 increase in this limit, thus narrowing the gap between it and other nursing home limits, and to steer additional help to hospices in two other ways.

One is to make changes in the rules for attendance allowance and from next April also the new disability living allowance, which will give more than £2 million of additional benefit to people in voluntary hospices. The other is to make available from the social security budget a further £1 million towards the direct funding of hospices as part of the Government's commitment to increase their contribution to the movement. This sum will be made available through the Department of Health. I believe that these moves will be widely welcomed.

With that one exception to which I have referred, all limits will increase by more than 5 per cent., with the limit for the very dependent elderly in residential care homes going up by about 10 per cent.—making a total increase in this very important category, covering about a third of all elderly people in residential care homes, of 32 per cent. in three years. The Greater London additions for both residential and nursing homes will also be increased to £25 and £35 a week respectively.

Finally in relation to the income-related benefits, I should tell the House that the additional resources for the social fund which my right hon. Friend the Minister of State announced in August, increasing this year's grants budget by some £10 million and the loans budget by some £30 million, will be fully carried through into provision for 1992–93, when the budget for the two elements together will be almost £300 million—30 per cent. higher than the budget initially made available in 1991–92. That is, of course, in addition to the greatly improved arrangements for cold weather payments, which are outside the budget and which, should the need arise, will be made automatically. Some 400,000 more people than previously would be eligible for payments.

I turn now to families with children. As I said in my statement this time last year, child benefit is and will remain a strong element in our policies for family support. That has been underlined by the further increase which has taken place this month, announced by my right hon. Friend the Chancellor of the Exchequer in his Budget, together with the undertaking that the benefit would in future be increased in line with prices.

After having reviewed the benefit levels in accordance with my statutory duty, I have decided that the right course for next April is to increase each of the rates which have just come into payment by the full 4.1 per cent. RPI increase for the whole year to September, even though they will have been at their present level for only six months. This will raise the payment for the eldest eligible child by 40p to£9.65 and the rate for other children by 30p to £7.80. One-parent benefit will also rise, by 25p to £5.85 per week.

At the same time, we shall continue with our policies to give greater help to low-income families with children, including not least those in work whose earnings are modest. That too, has been underlined by the increases in income support and family credit made in parallel with this month's child benefit increase. The relevant benefit rates, including the family premium and the age-related amounts for children, will all be increased in April by 7 per cent.

On the latest figures, family credit is now going to a record 356,000 families, 30,000 more than a year earlier, at an average level of more than £30 a week. That gathering success will be further reinforced next April by reducing from 24 to 16 the number of hours of work needed to qualify, which we expect to enable another 30,000 families to benefit immediately and a further 35,000 in due course. I shall shortly be consulting the Social Security Advisory Committee on proposals designed to ensure a smooth transition to those new arrangements and more generally to improve the speed and accuracy with which claims are processed.

While those changes will help families of all kinds, they are likely to be of particular help to lone parents who wish to work, who already account for more than one third of those helped by family credit. We have already improved the earnings disregard in housing benefit and community charge benefit. The introduction of the £15 maintenance disregard in those benefits next April will mean that lone parents receiving maintenance will still be better off in work on family credit with earnings up to £50 below what they would need at present.

The changes in family credit, together with the new maintenance disregard, will increase expenditure next year by some £70 million. That will mean that since 1988 we have made available some £600 million extra in real terms through the income-related benefits to improving the position of less well-off families with children.

I come now to benefits for sick and disabled people, to whose needs we have consistently sought to give special attention both in promoting and improving existing benefits and in developing new ones.

All the main disability benefits will go up by the 4.1 per cent. increase in the RPI, thus raising invalidity benefit in line with the retirement pension, and both severe disablement allowance and invalid care allowance from £31.25 to £32.55. The invalidity allowances payable with invalidity benefit, and since December 1990 the similar additions payable with severe disablement allowance, will also be appropriately increased.

The main disability premiums in income support, including the greatly enhanced premium for disabled children introduced 18 months ago, will, of course, rise by 7 per cent., so that, for example, the benefit for a family with a disabled child of 12 will increase from £107.60 to £115.10 a week.

Apart from the strategic improvements in benefits for disabled people, to which I will come in a moment, I have a number of detailed changes to make which will be of significant benefit to those affected. The residence qualifications for severe disablement allowance wall be brought into line with those for comparable benefits, making it easier for people coming or returning to this country to qualify. Families with children under 16 who receive social security help with care costs will, when the child has to go into hospital, keep that help for up to 12 weeks instead of four. The earnings limit for invalid care allowance will be further increased from £30 to £40.

A number of possibilities for simplification of the war pensions scheme are currently under discussion with representative bodies, in a joint effort to improve the working of the scheme. While I do not intend to make decisions on most of the issues involved until those discussions have been concluded, I have decided to add the war pensioners dependency allowance into the basic war pension for all disablement pensioners, which is not only a helpful simplification, but will give small gains to some 50,000 people. This group of small improvements involves a total additional cost of about £4.5 million.

I am also able to inform the House of our plans for further substantial increases in resources for the independent living fund, which is providing assistance to more than 10,000 severely disabled people. The provision for next year will rise by some 40 per cent. adding more than £20 million to this year's level of £54 million. That will ensure that the fund continues to play an important role in helping people with disabilities to live independent-ly in the community in the run-up to the full implementation of community care.

Although not strictly an uprating matter, I should also take this opportunity to tell the House, following consultation with the Social Security Advisory Committee, that I am today laying revised regulations to re-establish the original policy intention underlying the income support severe disability premium, whose purpose is to give extra help to severely disabled people living independently of their families, but which has, in some cases, been extended well beyond that by the creation of artificial tenancy arrangements within one household. While accepting that the regulation re-establishes the clear policy intention when the premium was introduced., the committee has asked that steps should be taken to ensure that no disabled person should lose an already established entitlement. I gladly accept that. In those cases, appropriate protection will he provided at an additional cost of £5 million, compared with the proposal originally referred to the committee.

From next April, mobility allowance and attendance allowance for those under 65 will be replaced by the new single extra costs benefit—disability living allowance, or DLA. Those entitled to them will be automatically transferred to the new benefit and the relevant rates will be set at 4.1 per cent. above those of the existing allowances. Thus the higher mobility component of DLA will be £30.30—£1.20 above the current mobility allowance—and the two upper rates of the care component will be set at £43.35 and £28.95, £1.70 and £1.15 a week respectively above the current attendance allowance rates. Attendance allowance itself will be similarly increased for those over 65, for whom it continues.

At the same time, two new tiers of DLA will be introduced, giving help with care or mobility costs—or both—for the first time to some 300,000 people for whom the existing benefits do not cater. Among the gainers will be 10,000 severely mentally handicapped people with serious behavioural problems, who cannot at present get help with their mobility costs and who will qualify for the top rate of the mobility component.

The new lower rates of disability living allowance will be set not at the £10 a week on which discussion of the new structure was based, but at £11.55, which in effect applies this year's and last year's uprating to the original figure. For those on the lowest incomes, receipt of even one of the lower rates of DLA will bring entitlement to the disability premium in the income-related benefits. Thus, those on income support will be nearly £30 a week better off.

In April, we shall also introduce the new disability working allowance, helping up to 50,000 disabled people who wish to work but have limited earning capacity, by enabling them to top up those earnings with benefit. The rates governing its assessment are set out in the schedule to my statement. They will mean, for example, that a single person could earn as much as nearly £100 a week, while still being entitled to some disability working allowance, and with it the disability premium in housing and community charge benefit, together with the reassurance which disabled people have been seeking of a much extended linking period back to their old incapacity benefit, should they be unable to continue working.

The new disability benefits mark a further important stage in a programme which, in the past two years, has already included real increases in the disability premiums both for adults and children, the introduction of a carer's premium and of additional payments with severe disablement allowance, the extension of mobility allowance to the deaf-blind, and the extension of attendance allowance to severely disabled babies and the terminally ill.

Overall, by 1993–94, the better part of 1 million disabled people will be gaining from this programme, either through real increases in existing benefits or entitlement to new ones, to a total of some £300 million. With earlier changes and the massive expansion that has taken place in the coverage of mobility allowance, attendance allowance and invalid care allowance, it will mean that, next year, expenditure on benefits for disabled people and carers will be no less than two and a half times greater than in 1979.

Despite the difficult circumstances, we have been able to commit ourselves to the uprating that I have outlined today, at a cost of over £3 billion. We have honoured and confirmed our pledge to retirement pensioners. We are doing more for those who are older and least well-off, more for families with children, and more for disabled people. Those are our priorities, and I believe that they will be widely endorsed.

Mr. Michael Meacher (Oldham, West)

Is the right hon. Gentleman aware that pensioners will be bitterly disappointed by the statement? Not only is £2 a week a miserly increase but, contrary to the Government's promise, the increase does not protect pensioners against inflation. Is he aware that the RPI has fallen to 4.1 per cent. largely because of the cuts in mortgage rates, but as almost no pensioners have mortgages, the relevant inflation index for pensioners is the underlying rate excluding mortgages, which is 5.7 per cent.? Is he aware that his announcement today short-changes pensioners by nearly £1 a week? Is not, £2 a week increase for pensioners an insult? It is not even enough for a pound of sausages and a couple of loaves, while workers on average pay are receiving increases of more than £20 a week and some executives, increases of more than £2,000 a week.

The Prime Minister talks of a society with the power to choose. By giving pensioners an increase of £2 a week, is he not giving them the obligation to go without? If the Chancellor can afford to spend nearly £2 billion by cutting income tax by a further 1p in the Budget, as he keeps hinting, is it not time that pensioners were given priority —as Labour now proposes, with £5 and £8 a week increases, and the restoration of the pension link with earnings—instead of having to be at the end of the queue, as they always are under this Government?

Will the right hon. Gentleman admit that, if the Government had not broken Labour's pension link with earnings, thereby cutting pensioners out of rising living standards for the past 11 years, he would be announcing —[Interruption.] Conservative Members may try to shout me down, but they will not stop pensioners learning the truth about this statement.

If the Government had not broken the link 11 years ago, would not the right hon. Gentleman now be announcing a single pension of £70 a week instead of £54, and one of £111 a week for a married couple, instead of £86? Will the right hon. Gentleman admit that he is saving £450 million this year alone at the expense of pensioners by refusing to uprate the pension in line with earnings—three times as much as the total pre-election sweetener for pensioners announced today?

The right hon. Gentleman claims that he is concentrating extra resources on the poorest. He is not. Will he confirm that the 7 per cent. increase for those on income support that he announced today is less than the rate of inflation for people whose housing costs are wholly met from other sources? Is he aware that the poorest pensioners of all are the 900,000 living below the income support level who will get only the 4.1 per cent. increase, which will not even keep up with the true rate of pensioner inflation?

We welcome the £15 a week increase in DSS payments to those in private residential homes, but has the right hon. Gentleman noticed that the latest survey by Price Waterhouse—the same company that the Government used a year ago—shows that the average shortfall in DSS payments is not £15 or £20 a week as he announced today, but more than £60 a week? Will he confirm that the Government, having pushed nearly 200,000 frail, elderly residents who are on income support into private homes, are still nowhere near meeting the charge imposed by the homes, so both the residents and their families continue to face anxiety and the threat of eviction?

Does the right hon. Gentleman accept that the increase in child benefit that he has announced goes no way to restoring the cut in its real value in the three-year freeze since 1987? Will he confirm that the shortfall is still more than £2 a week per child for the second child and subsequent children; and that since this is the last uprating before the election, it means that only Labour will now make good the substantial cuts from these Tory years?

The most noteworthy aspect of this statement, despite its extreme length, is its omissions. Why did the right hon. Gentleman say nothing about the young homeless, deprived of all benefit by him and reported by many citizens advice bureaux to be starving? Or does he regard them, like Sir Bernard Ingham, as "a blot" on the domestic and tourist landscape; or like the Minister for Housing and Planning, who described them the other day as people you trip over on your way to the opera?

Mr. Robert G. Hughes (Harrow, West)


Mr. Meacher

It is indeed disgraceful—for once I can agree with the hon. Gentleman.

Will not the right hon. Gentleman create more young homeless by the £50 million increase in the non-dependent deductions that he has announced? Why has he said nothing about the unemployed, whose benefits have been cut by £1.5 billion a year since 1979 and whose unemployment benefit is as a result only one third of the level paid to unemployed people in France of Germany? If the right hon. Gentleman is really interested in assisting the poorest, why has he offered no new money for the social fund, applications to which, due to sharply rising unemployment, have risen fast recently, but refusals of which are rising even faster?

Why has the right. hon. Gentleman said nothing about ending the payment of 20 per cent. of the poll tax by the poorest in our society? Even today there was the announcement of an ingenious new way of funding the£140 reduction in the poll tax by cutting—

Mr. John Marshall (Hendon, South)


Mr. Meacher

Perhaps the hon. Gentleman does not understand this, but it is being done by cutting the Rossi index for the very poorest.

After this statement, more than 10 million people will still be forced to try to cope at the new income support level of £42.50 a week, one seventh of the average wage. Does the right hon. Gentleman really believe that that is sufficient for one sixth of the population to feed, heat and clothe themselves for months and sometimes years on end? The Prime Minister is producing not a classless society but a "couldn't care less society", and this statement will confirm our status as the poverty capital of Europe.

Mr. Newton

The hon. Member for Oldham, West (Mr. Meacher) has been rather more restrained than usual when reacting to my statements, but I cannot honestly say that he has been more sensible. It is quite clear that we have put more resources into the social fund and that they are being fully carried through next year.

The hon. Gentleman's point about the young homeless in relation to non-dependant deductions is manifestly absurd because I made it plain that increased deductions were to be expected only from those earning more than £130 a week.

I have listened to the hon. Gentleman's endless attempts to make something out of child benefit, but I must remind him that we have put £600 million more into helping less well-off families, and expenditure on families with children is now higher than if, over the past three years, we had increased child benefit alone.

I do not know whether the hon. Gentleman has yet had a chance to look at the Price Waterhouse survey, but when he has examined it he will see that, taking regional variations into account, the report does not substantiate his suggestion that much more is needed than the new rates that I announced today.

What the hon. Gentleman says about pensioners would be rather more credible if he had said last year, when we made an increase of almost 11 per cent., much of which was associated with the rise in mortgage rates, that we had given a real increase to pensioners. As always, of course, the hon. Gentleman tries to have his cake and eat it. He should know that, if pensions had been uprated only in line with the pensioner price index, which seeks to measure pensioners' costs specifically, the increases over recent years would have been a great deal less than those that we have made in line with the retail prices index.

The hon. Gentleman asked me to confirm some figures, which no doubt he has carefully calculated, about what would have happened if we had pursued Labour's policies in respect of uprating. If we had pursued those policies, pensioners would now be a great deal worse off. We have already seen pensioners' incomes increasing generally far faster under this Government than under the previous Government. If the hon. Gentleman wants confirmation of the risks that pensioners would face if we went along with the inflationary tactics of the hon. Gentleman., he should look no further than to the activities of the shadow Chancellor and shadow Chief Secretary, who go round the country saying that the hon. Gentleman's promises in this area are not promises at all.

Mrs. Marion Roe (Broxbourne)

I congratulate my right hon. Friend on the excellent package of benefit increases, especially the increases in child benefit. Will he confirm that the full inflation uprating means that there will be three increases in child benefit within the space of a year?

Mr. Newton

Yes, I can confirm that, and I am pleased to have been able to announce this further increase which, as I said, uprates a six-month benefit rate by a full year's inflation.

Mr. Simon Hughes (Southwark and Bermondsey)

Many things in the statement are welcome, especially the assistance for people in residential and nursing homes, for the over-80s, for families with children and for those who are mentally ill or in long-term categories of sickness or disability. The disappointments in the right hon. Gentleman's statement, and therefore the evidence of his failure to win the battle with the Treasury, relate to those on income support, who will still have to pay 20 per cent. of their poll tax, and pensioners. Although the Secretary of State rightly says that last year pensioners got more than the cost of living increase, this year they will receive significantly less—about 3 per cent. less across the board —and in relation to basic pensions they will not have a guarantee of a full pension, irrespective of contribution for the country as a whole. The great failure is that pensioners are the victims of the statement.

Mr. Newton

I need hardly say that I do not share the hon. Gentleman's view; nor will many people when they have had the opportunity to study what I said in more detail. I have put another £60 million into real increases for the older, less well-off pensioners, about £70 million into helping less well-off families with children, and about £80 million above the RPI into the area of residential care and nursing homes. That will help rather more than 200,000 less well-off pensioners. The new levels of disability benefit, which will take benefit to people who do not get anything at all at the moment to help with costs, are worth £120 million. I do not regard that as defeat, and I do not think that other people will, either.

Mr. Andrew Bowden (Brighton, Kemptown)

Is my right hon. Friend aware that these increases will be widely welcomed throughout the country? Will he emphasise to the House that, under the policies of the last Labour Government, the savings of millions of pensioners were crucified by a 26 per cent. rate of inflation? If Labour returns to office, precisely the same thing will happen again. Will my right hon. Friend turn his attention to the residential care allowance, especially in the south-east? We have special problems because our expenses and costs are much higher than those in most other parts of the country.

Mr. Newton

I am grateful for the first part of my hon. Friend's question. I know that he takes a strong and continuing interest in this subject, which is a great credit to him. On his latter point, I cannot at this stage undertake to introduce yet another complicated regional arrange-ment into the residential care and nursing home limits. My hon. Friend will have noticed that I increased the Greater London allowance, although I realise that that does not quite meet the point that he was making, as I increased it for nursing homes last year. I hope, too, that he will not overlook the importance of the increase that I made for the dependent elderly—a 32 per cent. increase over three years —which will help about one third of those in residential care homes.

Mr. John Battle (Leeds, West)

Is the Minister aware that on 24 June this year, the European Council of Ministers agreed that VAT would be increased by up to 9 per cent. on fuels and some food items? Would that not, at a stroke, completely wipe out in the next financial year the increases for pensioners that he has announced today?

Mr. Newton

The hon. Gentleman will be aware that these matters are under discussion in another place and go well beyond what I am in a position to comment on in the House today. He will also know that increases in prices, of whatever kind, are faithfully reflected in the indexes that we use, and shall continue to use, to uprate social security benefits.

Mr. John Hannam (Exeter)

I congratulate my right hon. Friend on producing an extremely generous uprating of benefit in such difficult times. In particular, I welcome the £100 million extra for disabled people. He has increased the independent living fund by 40 per cent. Will he ensure that that excellent source of funding for severely disabled people continues?

Mr. Newton

My hon. Friend knows better than anybody, given his strong interest in the interests of disabled people, what our commitments have been in respect of helping them to live independently. I, too, welcome the further increases in resources that I have been able to announce this afternoon, especially that in the independent living fund.

Mr. Dafydd Wigley (Caernarfon)

I welcome the changes in disability benefits as far as they go, but may I press the Minister on one aspect of the water charges element? As he will know, I welcome the involvement of this element in income support, and it is a move for which many of us have pressed. However, does he accept that the position of the single pensioner is invidious? For example, the one who saw me last week, with a water charge of £220 on a single-bedroomed house, will have an increase in her water charges of RPI plus X, which will erode her pension by 50p immediately. She will not be helped by the announcement that the Secretary of State made today, because she is not on income support. Therefore, will he consider extending what he is doing for income support to all pensioners?

Mr. Newton

The dispute over the index used for income support has been over the fact that, until my announcement this afternoon, it did not include water rates. It follows that water rates are included in the retail prices index, which has been used for uprating pensions generally.

Mr. Patrick Nicholls (Teignbridge)

Bearing in mind the promise that we heard today from the hon. Member for Oldham, West (Mr. Meacher) to restore an earnings link to retirement pensions, may I ask my right hon. Friend to take this opportunity to remind the House that, although the last Labour Government introduced an earnings link, they were so strapped for cash that they were unable to implement the proposal? Is it not bare-faced cheek for the hon. Member for Oldham, West to pretend that it would not be the same again?

Mr. Newton

I am grateful to my hon. Friend for reminding the House that the last Labour Government found a way of, in effect, leaving out six months' inflation so as to save what would probably now be about £1 billion, largely at the expense of pensioners.

Mr. Tom Clarke (Monklands, West)

Does not the Secretary of State feel at least embarrassed that he has confirmed in his statement, yet again, that the Government have refused to implement the community care sections of the National Health Service and Community Care Act 1990 for at least another three years? Does he realise that even the marginal improvments in benefit that he has announced for people in private residential homes should mean that we have arm's-length inspections to ensure that minimum standards prevail? Why is he prepared to accept the absence of value for money, of inspection and of any strategy for community care?

Mr. Newton

The hon. Gentleman, to whom I also pay tribute for the interest that he takes in such matters, knows of the various steps being taken to introduce a more independent element into the registration of residential care homes through new arrangements within local authorities. He will also be aware of all the steps taken towards the introduction of what I believe will be improved community care arrangements in 1993. Some of what I have announced this afternoon will underpin them, but, more generally, the arrangements will help disabled people who may not be covered by community care in the sense in which the hon. Gentleman means it but who nevertheless need the assistance of the social security system.

Sir David Price (Eastleigh)

Is my right hon. Friend aware that those of us who take a particular interest in the cause of the severely disabled are pleased that he was able to do so much more for the independent living fund, on which some of us have been pressing him for a long time? In view of his obvious confidence in the independent living fund, what is its future?

Mr. Newton

I think that my hon. Friend knows that we have made it clear that we intend to make arrangements for those covered by the independent living fund when the transition to community care takes place in 1993, but that thereafter, in general, it would be appropriate for new cases to look to the overall new arrangements for community care at local level.

Mr. Max Madden (Bradford, West)

Is the Secretary of State aware that most people will regard a 4p in the pound increase for pensioners as extremely mean, his silence on increasing the Christmas bonus frozen at £10 since 1972 as extremely miserly and his failure in Cabinet to abolish the 20 per cent. contribution to the poll tax by pensioners as extremely disappointing? Does he accept that the only way in which British pensioners will cease to be the poorest in Europe is to restore a link with earnings so that pensions can be increased by whichever amount increases most? That is Labour's policy and it is the best hope for British pensioners.

Mr. Newton

As I have said several times, if we adopted the European pensions policy so often urged on us, the first result would be that 2 million married women would lose the pensions that they currently receive on their husband's contributions. Secondly, I have not for a long time heard anyone from the Opposition have enough nerve to refer to the Christmas bonus, which for two years they did not pay at all.

Mr. David Nicholson (Taunton)

In addition to my right hon. Friend's help for people in nursing and residential homes and for those in hospices—his help for the latter will be widely welcomed by those in the hospice movement in my constituency—is he aware that his effective and caring targeting of help on the poorer pensioners will be widely welcomed? It is in sharp contrast to the extravagant promises made by the Opposition, which would lead to people being either conned or clobbered, or probably both. Will, he, however, ensure that the self-employed have full access to family credit because, as he will be aware, there are some difficulties in that respect?

Mr. Newton

I said in my statement that we are considering various ways in which to improve further the administration as well as the coverage of family credit. I shall certainly bear in mind my hon. Friend's point. I welcome his support for the additional measure that I was able to announce this afternoon for less well-off, older pensioners. That measure means that we have made a great deal of improvement, in one way or another, for less well-off pensioners for three years running.

Mr. Jeff Rooker (Birmingham, Perry Barr)

I support the comments made by the hon. Member for Eastleigh (Sir D. Price) about the independent living fund. Does.. the Secretary of State realise that his answer highlights the fact that there will he two classes of disabled people if and when he does what he proposes to the independent living fund? Some people will have the benefit protected and some will be pushed into the underfunded community care system. Surely it is only equitable to offer the massive benefits in new systems of helping people to stay independent to as wide a section of the community as possible. He must not run away from that.

May I ask the Secretary of State one more question so that we do not get confused? He said specifically that the figure given by my hon. Friend the Member for Oldham, West (Mr. Meacher) of an underfunding of pensions, if the earnings link was maintained, of £16 for a single person was not correct. Will he explain why it was not correct and, at the same time, offer the House the opportunity to say that it seems unfair that we cannot get a decent link for pensioners at 4.1 per cent. whereas we manage for ourselves a decent link with earnings of 6.5 per cent.? Why cannot we be linked with pensioners or why cannot pensioners be linked with us?

Mr. Newton

The hon. Gentleman will know—I hope that he will regard it as sensible—that one of the purposes of the new arrangements being introduced in April 1993 is to produce an across-the-board improvement in arrange-ments for community care. Although it could have been argued that the most sensible and logical course would be for everybody to move from the ILF into the new arrangements, which I believe will work well, we have said specifically that those covered by the ILF at the point of changeover—in the same way as we have for the residential care and nursing home limits—will continue to be covered by the existing arrangements. That is a sensible and practical step to ease the transition.

On pensioners, I do not think that I said that the hon. Member for Oldham, West had made a mistake in his mathematics. I have not had the opportunity to check. I did not seek to say that. I said that, if the Labour party's policies on the linking of those benefits had been pursued in the way in which the hon. Gentleman urges, we would have gone straight back to the problems that the Labour Government found—that they could not sustain those commitments. They ended up making pensioners worse off.

Miss Emma Nicholson (Torridge and Devon, West)

Does my right hon. Friend agree that it is not pensioners who are bitterly disappointed by his announcement today, but the Labour party? Its disappointment stems from the magnificence of the increase and the skill in deployment with which he has targeted it on the most needy members of our society. Does he find it especially shameful that the Opposition spokesmen cannot even honestly recognise and accept that we have spent two and half times more than they did in 1979 on that acutely disadvantaged group, the disabled? Is he not ashamed of the Labour party's response?

Mr. Newton

I thank my hon. Friend for her supportive remarks. It is a very remarkable achievement that, by a combination of an improved coverage of existing benefits and the many new steps that we have taken in the past three years, we have so massively increased the amount of support going to that group of severely disabled people.

Mr. Andrew F. Bennett (Denton and Reddish)

Although the support that the Government are giving to older pensioners through the extra income support is welcome, does the Secretary of State realise that there is a group of younger pensioners who have suffered a great deal as a result of the Government's policies? They are those put out of work in their fifties, supposedly to make this country's economy work again. In many cases, they have not worked from their middle fifties until their sixties. They are extremely hard up, because they have been on benefits for a long time. Is it not time that the Government targeted some help for them?

Mr. Newton

It will be within the hon. Gentleman's recollection that, although what I announced this afternoon is the premium increase directed to the over-eighties and the more severely disabled less well-off pensioners, last year I made the same sort of real increase in the income support premium for younger pensioners —those between 60 and 74. I thought that the balance this year pointed in the direction that I have announced.

Mr. Andrew MacKay (Berkshire, East)

Is my right hon. Friend aware that colleagues who represent south-east constituencies, who have had especially difficult hardship cases concerning the elderly in residential homes, will welcome the increase in the residential care allowance by £15 to £20 a week? May I underline what my hon. Friend the Member for Brighton, Kemptown (Mr. Bowden) said a moment ago? We still have special problems with the cost of residential care in the south-east. I know that it is difficult for my right hon. Friend to give a regional premium, but I ask him to undertake to look at that matter once more for us.

Mr. Newton

I can, of course, assure my hon. Friend that—as my statement made clear—we shall always continue to keep those matters under review. I cannot undertake this afternoon to introduce a regional premium of the kind that my hon. Friend suggests in advance of the move to community care. Having looked carefully at the figures, however, I believe that the increases that I have announced—particularly the larger increase for the very dependent elderly who are in residential care homes—will substantially ease the problem with which my hon. Friend is rightly concerned.

Mr. Gerald Bermingham (St. Helens, South)

Here we are, at the end of the 20th century. Does the Secretary of State agree that, no matter how the figures are fiddled and regardless of the percentage that is used, the elderly and infirm—the old pensioner and the handicapped person —and, indeed, the single-parent family will still be living in poverty? That is the reality of life for them, now and in April.

Mr. Newton

What I am conscious of is this. The figures suggest that pensioners' average net incomes have risen by some 30 per cent.—rather more, indeed—under the present Government. That is partly because their savings and occupational pensions have been worth more and partly because the average rate of inflation has been lower. I do not accept the hon. Gentleman's general proposition. What I do accept—and what I have now demonstrated in three successive annual uprating statements—is that for a sizeable group of less well-off pensioners we need to do more and that is exactly what I have done.

Mr. David Martin (Portsmouth, South)

May I add my welcome for the £15 uprating for private residential and nursing homes—a form of community care against which the Labour party carries on a relentless and unfair vendetta? May I also thank my right hon. Friend for listening to those of us who want the increases and for acting accordingly?

Mr. Newton

I am grateful to my hon. Friend. I have certainly listened very carefully to the representations that have been made. In the past week, while making my final decisions, I have met the representatives of a number of organisations—such as charitable and other bodies—and care home owners. I very much hope and expect that the large increases that I announced will be helpful to them.

Mr. Dick Douglas (Dunfermline, West)

Does the Secretary of State accept that there should be a direct link between growth in earnings and increases in pension payments and that that principle should be accepted by hon. Members on both sides of the House?

I especially welcome the attention paid by the right hon. Gentleman to hospices, but will he explain a little further? Will he ensure that people in hospices—I do not single out any group, but I am thinking particularly of people suffering from AIDS—are not disadvantaged in any way by his proposals?

I know that the right hon. Gentleman is not directly responsible for students, but will he take into consideration the large number of students who are not covered by the proposals, are being denied benefit and are suffering as a result of the Government's provisions?

Mr. Newton

The hon. Gentleman will know that the arrangements under which the student loans scheme was introduced, and the arrangements for access funds, include those about whom he expressed concern.

There are two changes relating to hospices. First, an extra £1 million in grant will be given directly to them; secondly, a change is to be made in attendance allowance and then in disability living allowance rules, which at present have the practical effect of making it impossible for many people in hospices either to continue to receive attendance allowance or to claim it for the first time. That problem will be overcome and the change will be worth just over £2 million to people in voluntary hospices.

Mr. Anthony Coombs (Wyre Forest)

The increased support for the mentally handicapped—not only in residential care, but in the community—is very welcome. Will my right hon. Friend confirm that, over the past 12 years, spending on long-term sick and disabled people has risen from £1,800 million to nearly £13,000 million? Does not that illustrate the Government's commitment to an especially vulnerable group?

Mr. Newton

Yes, it does. As I said in my statement, even when allowance is made for inflation that is an increase of some two and a half times in real terms— which, in my view, constitutes a remarkable record.

I share my hon. Friend's satisfaction with the various ways in which I have been able to steer additional help towards mentally handicapped people. Let me pay special tribute to my right hon. Friend the Minister for Social Security and Disabled People, not least in regard to the ingredient in the new disability living allowance, which will bring extra help to some 10,000 severely mentally handicapped people.

Mr. Harry Barnes (Derbyshire, North-East)

There is a mismatch between the start of the tax year—and hence the uprating of benefit—and the local government financial year. That means that council rent increases take place in advance of upratings. The practical consequence is that many people who can ill afford it lose in terms of benefit and related housing benefit provisions for at least a week or so. Will the Government end that fiddle?

Mr. Newton

Any mismatch between the benefit year and the tax year is very small this year given that we are talking about the week beginning 6 April for the uprating of social security benefits. If the hon. Gentleman wants me to look at the point in greater detail, I will.

Mr. Roger King (Birmingham, Northfield)

Has my right hon. Friend had a chance to reflect on his excellent proposals this afternoon, which included a worthwhile uprating for the basic pension, and on those presented by an alternative political party for a flat rate increase of £5 for a single pensioner and £8 for a couple, bearing in mind the fact that that political party advocates a standard minimum wage? Would not that have a disastrous impact on shop prices and make that party's proposed increase highly illusory?

Mr. Newton

There is no doubt that, no matter which of the various estimates one takes, the introduction of a national minimum wage would increase inflation to the disadvantage of pensioners and, more to the point, put a lot of people out of work.

Mr. William McKelvey (Kilmarnock and Loudoun)

I welcome the extent of the changes in the rates for nursing homes to £15 and £20 for disabled people, but will the Secretary of State take steps to stop the growing abuse of private nursing homes which are seizing people's personal allowances as part of the rent?

Mr. Newton

This point, as the hon. Gentleman will be aware, has arisen on several occasions. It is not a question of seizing anyone's benefit. The plain fact is that benefit is payable to people as individuals and it applies for residential care and the nursing home limit and personal expenses allowance. Only the individual can decide how to use that money.

Mr. Jacques Arnold (Gravesham)

Does my right hon. Friend agree that it is better to help less well-off families with the breadwinner in work than to make them unemployed through the imposition of a national minimum wage?

Mr. Newton

Yes, I do, and that is why I and my colleagues are proud of the introduction of family credit and of the success that it is becoming.

Mr. Terry Rooney (Bradford, North)

The Secretary of State mentioned in his statement the new-found benevolence for the elderly and the disabled. Why has he not tried to deal with the problem of women aged between 60 and 65 who are still disbarred from claiming invalid care allowance and who are dependent on moves in the European Court rather than on this Government?

Mr. Newton

I do not quite know what the hon. Gentleman means by a new-found benevolence, when for three years we have consistently been steering additional help to the groups to whom I have referred: low-income families with children, less well-off pensioners and, not least, disabled people. There is nothing new-found about that. It is a consistent programme which is bringing more help to the groups that we want to help.

Mr. Ian Bruce (South Dorset)

Will my right hon. Friend find time to produce figures for the benefit of Opposition Members to show the comparison between the incomes of pensioners in the United Kingdom and those in the rest of the European Community? Will he confirm that often when Opposition Members talk about "state" benefits, they are talking about private benefits from employers and trade union schemes in France and Germany? Will he also confirm that benefits in this country are 34 per cent. ahead for the average pensioner and that benefit is being increased for the poorest pensioners by nearly twice the rate of inflation to ensure that those pensioners receive the greatest benefit?

Mr. Newton

As I have now said several times, pensioners' average net incomes have been rising faster than those of the general population during the lifetime of the present Government. Quite apart from the point that I made about married women's pensions paid on their husbands' contributions, many of the comparisons with other European countries, of which the hon. Member for Oldham, West is so fond, totally ignore matters such as the fact that, in Germany, pensioners will be making health contributions which they would not have to make here.

Mr. Bob Cryer (Bradford, South)

Does the Secretary of State accept that the increase for pensioners is paltry and will be widely resented throughout the country? On the range of benefits, he knows full well that there is a tendency for administrative means to be used to err on the side of refusing benefits rather than granting them, if there is any sort of discretion. When he puts his statutory instruments before the House, will he state the full range of ministerial directions which accompany them? They should be part of the statutory instruments, and the right hon. Gentleman should not be producing extra legislative power without any authority of the House.

Mr. Newton

Whatever regulations we use to administer the social security system, there will obviously be a need for guidance. By and large, that guidance, unless there is a very good reason for not publishing it—for example, to prevent fraud—is publicly available. I would firmly resist the suggestion that, by back-door means—if that is what the hon. Gentleman meant—measures are adopted to prevent people from getting the benefit that they should get. That is simply not the case. On the contrary, considerable efforts have been made to ensure that benefit gets through to the people for whom it is intended. That is one reason why the extension of disability benefits and the increased expenditure on them have gone as far and as fast as they have.

Sir Jim Spicer (Dorset, West)

Does my right hon. Friend accept that all fair-minded people will warmly greet the package that he announced, which amounts to £3 billion? Within that total, the sum of £1 million for hospices might seem small, but that £1 million will act as a multiplier for many people in our voluntary sector, who will turn the sum into many millions of pounds. I thank him for that. As he passes that £1 million to the regional health authorities, will he make certain that Dorchester hospice, which will start work on 6 December, gets its fair share?

Mr. Newton

As I said in my statement, the mechanism will be a transfer to the Secretary of State for Health for distribution under the scheme that he already has for direct help to hospices. I should make it clear that the total amount of benefit that I expect to be gained by hospices arising from this afternoon's statement is not £1 million but £3 million. I certainly undertake to draw to my right hon. Friend's attention, as they say, my hon. Friend's plea on behalf of his local hospice.

Several Hon. Members


Mr. Speaker

Order. We have a busy day, but I shall allow questions to continue until 4.45 pm and then we will have to move on.

Mr. Harry Cohen (Leyton)

Has the Secretary of State noticed that fares in London and the south-east are due to rise by more than 8 per cent.? Why has he not taken that into account in setting the income support level? Does he realise that a five-day travel pass costs the equivalent of 35 per cent. of a single person's income support? Why does he not take that into account? Would he like to live on £28 a week for housing, poll tax, eating, heating and everything else?

Mr. Newton

The hon. Gentleman will realise that for many years it has been the practice to base upratings on the latest available information about what has happened to prices. That remains the sensible course. It is also worth making the point that it seems likely that, by next April, the rate of inflation will be lower than it is now.

Mr. Harry Ewing (Falkirk, East)

May I press the point that was made by my hon. Friends the Members for Monklands, West (Mr. Clarke) and for Kilmarnock and Loudoun (Mr. McKelvey) on the residential care and nursing home allowance? Does the Secretary of State accept that more than 90 per cent. of beneficiaries will not receive that benefit? It will go straight to the owners of residential homes and will make no difference at all to the pocket money that beneficiaries receive. Has not the time come for a royal commission on the operation of residential homes and nursing homes? When highly paid professional football players in Scotland are told by their financial advisers that the best investment is in one of those residential homes, it is time to worry. I wonder whether the Secretary of State shares my view.

Mr. Newton

The hon. Gentleman knows that the Government have made wide-ranging proposals, which are now building up towards implementation, to change the whole nature and basis of those arrangements in what he and I would regard as a more sensible direction from April 1993. What I have announced today is an increase in the income support limits within the present structure. That, too, is sensible.

Mr. Tony Banks (Newham, North-West)

How much money have the Government saved since the abolition of the single payment system? Is it not now running into hundreds of millions of pounds? Is not it grotesque that people who badly need loans are often judged as being unable to pay them back and so are refused? Is not that hypocrisy and injustice on the part of the Government?

Mr. Newton

The single payment system was unsustainable and had become increasingly open to abuse. Resources for the social fund have been substantially increased by what my right hon. Friend announced in August and what I am carrying through to next year.