Social Security

HC Deb 12 November 1992 vol 213 cc1017-33

5.7 pm

The Secretary of State for Social Security (Mr. Peter Lilley)

With permission, I wish to make a statement on social security following directly from my right hon. Friend's autumn statement.

As my right hon. Friend the Chancellor has announced, spending on social security in each of the next three years will be £79.8 billion, £82.9 billion and £87 billion.

That is a gauge of the Government's commitment to the needy, the sick, the elderly and to families. Despite the intense pressure on the social security budget we will maintain support for those hit by the recession, we will focus additional support on the most needy. and we will keep our pledges to families and to the elderly.

I can today announce that all major benefits will be increased fully in line with inflation. Subject to parliamentary approval, benefit rates will therefore go up by 3.6 per cent. next April.

The basic retirement pension for a single person will increase by £1.95 a week to £56.10, and for a couple it will rise by £3.10 to £89.90. Unemployment benefit will increase by £1.55 for a single person and by £2.50 for a couple, and I propose to make no other changes to that benefit.

Child benefit will be £10 for the first child and £8.10 for each subsequent child. In addition to uprating all benefits, we will keep our promises to focus increased support on those in greatest need. Last month, the Government boosted the income support rates for pensioners, by £2 for a single pensioner and by £3 for a couple. From next April there will be a increase in the real value of income support. Thereafter, no one on income support will be required to contribute a minimum of 20 per cent of the local government taxation charge, as people have up to now, but the increase in basic income support levels introduced to match that liability will be maintained. That is worth on average £1.40 a week for a single person under 25, £1.60 for a single person over 25 and £2.80 for a couple.

That means that the disposable income of an unemployed couple on income support will actually increase by an average of £5.20 a week next April, and the disposable income of an average 80-year-old couple on income support will be £9.35 more than it was last April, taking their income support over £100 a week for the first time. The uprating itself will cost £2.5 billion next year and the real increase in disposable income for those on the income-related benefits is worth a further £1 billion.

It has been possible to meet these commitments in full only as a result of a searching scrutiny for savings in all my Department's programmes. My first priority has been to find savings that do not involve curtailing entitlement to benefit. I have therefore subjected my Department's running costs to rigorous examination, while maintaining my Department's full commitment to the citizens charter and enhancing capital spending, which will rise by £159 million over the next three years, bringing total capital expenditure to more than £1 billion in that period.

A major component of running costs is the payment of benefits by order book or giro. That is markedly more costly than payment through the banking system. I therefore propose to encourage more customers to accept payment of benefits directly into their bank or building society accounts. In addition, my Department will be working closely with the Post Office to improve efficiency and reduce theft and fraud involving order books and giros. This, along with fraud elsewhere in the system, can involve very substantial sums of money. I have already announced my determination to tackle fraud and abuse of benefits. Those who defraud the system have nothing in common with the vast majority of honest and genuine claimants, and every pound lost through fraud means less for those in real need.

I therefore plan to step up the fight against fraud. I am increasing our investment in fraud work by £10 million a year. This, aided by better use of our existing resources and new techniques, will have an expected return of £100 million a year. I am today laying the regulations withdrawing income support from those—be they new age travellers or others—who are not even actively seeking work. I will consult the local authority associations on a new initiative to encourage local authorities to stop fraudulent claims for housing and council tax benefits. By taking those measures, I hope that the total of fraud identified and stopped will increase to nearly £1 billion each year.

It is also necessary to look carefully at how well benefit spending is focused on those whom Parliament intended to help. There has been a significant increase in the numbers on invalidity benefit and in spending on it. There are now more than twice as many people drawing this benefit as in 1979, at a cost nearly two and a half times as great. By 1996 invalidity benefit will cost well over £7 billion a year. Against that background, I intend to tighten up the administrative and medical procedures for controlling this benefit. That will ensure that medical examinations are better targeted and that more effective action will be taken when people fail to attend for their examination or are found to be capable of work. Those changes are expected to reduce spending by £240 million over the survey period. A major research study into invalidity benefit was launched last year. Some results have been received, and others will be received during 1993. I shall consider those results carefully as they become available.

I have also looked at two aspects of war disablement pensions. Officers receive more compensation for a given disability than other ranks. There is no reason why they should. I therefore intend to abolish rank differentials for disablement pensions, by moving everyone up to the rate for officers. That will benefit nearly 200,000 war disablement pensioners who will gain by up to £5 a week.

This will be made possible by the second change, which is to bring the rules for noise-induced hearing loss more into line with the industrial injuries scheme. As under that scheme, awards will no longer be made to those whose noise-induced hearing loss is assessed at less than 20 per cent. disablement. But I can assure the House that no existing war pensioner will suffer a reduction in the cash that he or she is currently receiving. These proposals will now be discussed with the Central Advisory Committee on War Pensions.

I also intend to introduce two minor savings measures. I propose to increase the top rate non-dependant deduction in housing benefit and income support, but to freeze the three lower rates. I propose also to freeze the higher rate of statutory sick pay, as most employees who benefit from it are covered by occupational sick pay schemes. These enable me to make a number of modest, but worthwhile, improvements. I plan to increase by £10 per week all but one of the income support limits for those with preserved rights in residential care and nursing homes. I plan to extend the severe disability premium to those sharing a household with a blind person. I am increasing the amount that carers may earn without affecting their benefit. I am giving £1 million to help hospices and more money to help severely disabled drivers.

We are also introducing improvements in the benefit arrangements for orphans. I believe that those measures will he widely welcomed.

I now turn to the social fund. By using loans, we can help far more people with a given amount of money than if it were given as grants. Improved repayments of these loans enabled me last week to announce an extra £8 million for the social fund discretionary budget for the current year. Together with a further injection of cash, that means that I now expect next year's budget to be up 12 per cent., at £340 million. That is a 50 per cent. increase in two years.

In accordance with my statutory duty, I have carried out a review of national insurance contributions. The national insurance fund is obviously affected by the state of the economy. However, the Government do not propose to make changes to national insurance contributions for next year other than normal adjustments for inflation. That reflects our determination to minimise the burdens on employers and employees. Instead, we intend to seek powers to keep the national insurance fund in balance by drawing as necessary on a new, limited, Treasury grant. That grant will give us useful flexibility in managing the fund during a downturn in the economic cycle. I intend to introduce a Bill shortly to make provision for the grant. The Bill will also provide for the new age-related addition for personal pensions. Personal pensions have proved outstandingly popular. This addition will remove a potential distortion. It fulfils our manifesto commitment and it will ensure the continued success of personal pensions.

Fuller details of the uprating, national insurance and other measures have been given in two written replies to my hon. Friends the Members for Hertfordshire, West (Mr. Jones) and for Tiverton (Mr. Browning). Those replies are available with the autumn statement briefing in the Vote Office and will be published in the Official Report.

My right hon. Friend the Chancellor has set out a tough and realistic programme for public expenditure as a whole. Within that total I have sought to make savings, particularly by bearing down on operating costs and fraud. I have sought to curb programmes that might otherwise pre-empt the resources needed to sustain recovery in the longer term. As a result, we have been able to protect benefits for those hit by the chill wind of world recession, to channel increased support to the most needy and to keep the pledges that we made in April. I commend our plans to the House.

Mr. Donald Dewar (Glasgow, Garscadden)

Let me begin by welcoming the general uprating of benefits by 3.6 per cent. It is not so much a cause for satisfaction as a cause for relief when measured against the rumours that were allowed to run.

Let me also register my personal relief that the Secretary of State has not acted in the spirit of his speech to the Tory party conference, in which there was so much talk of subsidised scroungers and the something-for-nothing society. To say that the preservation of the status quo is presented to look like progress is, I think, to make a fair comment on the Government's record.

Notwithstanding the Secretary of State's complacency, will he recognise that, for many, life on benefit is anything but easy? Last year, income support was uprated by 7 per cent.; this year, the uprating is 3.6 per cent. Does the Secretary of State accept that, whatever the technical reasons for the change in the Rossi index, many will feel a cold wind blowing in the new year? Retrospective indexing is, of course, a comforting method when inflation is falling, but now, with the emergence of a very different picture, does the Secretary of State recognise that he is leaving pensioners' living standards vulnerable to rising inflation in the coming year?

The underlying rate of inflation in the year to September was 4 per cent. Is that not a better estimate of pensioners' costs, given that most of them do not have mortgages? Does the right hon. Gentleman accept that bonfires will not be lit following the news that a married person's pension is to rise from £86.70 to £89.90?

I hope that the Secretary of State has noted and studied the Rowntreee report, by Professor Jonathan Bradshaw, which was published earlier this week. The report underlined the difficulty of making ends meet at current income support levels. Does the right hon. Gentleman accept that there is little room for comfort when—according to the report's findings—a couple with two children under 11, living in a council house, need an extra £36 per week to fund an austere low-cost budget? There are no signs that this Minister and this Government have any visible or active commitment to tackling the problems of poverty.

I note that the Secretary of State intends to cut £240 million from invalidity benefit expenditure over the survey period. A few minutes ago, one of my hon. Friends asked the Chancellor a question that I shall now ask the Secretary of State. Is he, in effect, challenging the professional judgment of general practitioners, and does that imply that there will be new instructions on certification by doctors? If so, will the right hon. Gentleman give details? If not, exactly what kind of changes is he contemplating?

Will the Secretary of State now come clean about the hidden agenda in connection with invalidity benefit? Are there plans for legislation to reduce average payments of the benefit, and to bring it into tax? Would that not mean that an additional 70,000 people whose only income is invalidity benefit would have to pay tax?

Mr. Nigel Evans (Ribble Valley)

That is a scare story.

Mr. Dewar

I shall be delighted if the Secretary of State tells us that it is a story without foundation, and rules it out. I shall wait with interest to see whether he does so.

I note that the Secretary of State is laying regulations to withdraw income support when it is held that a claimant is not actively seeking work. Those changes will not only affect new age travellers, as Ministers often imply; they will affect all applicants for unemployment benefit. Will the Secretary of State tell me what advice on the matter, and on that specific proposal, was given by the Social Security Advisory Committee?

I welcome the changes in war disablement pensions to put other ranks on a footing with officers, which constitutes a rare appearance of the classless society in the Government's work. Does the Secretary of State accept, however, that there will be some disquiet at the news that the changes are to be funded at the expense of those claiming for hearing loss as a result of service?

There will also be a welcome for the changes affecting income support levels for residential care and nursing homes. The Secretary of State should note, however, that we shall want to look closely at the increase in the top-rate non-dependant deduction in housing benefit. Is that not a disincentive for children to stay with their families, at a time when homelessness is growing—and is certainly one of the most common causes of benefit overpayment and, on occasion, of fraudulent claims?

I welcome the extension of the severe disability premium to those who share a household with a blind person; but will the Secretary of State give a categorical assurance that that is not the end of the story? It would be very sad if it were to be the final concession, and if all other carers living with the person cared for were to be permanently excluded from the premium. As one of my hon. Friends suggested earlier, should not the criterion be disability rather than loneliness?

May I ask the Secretary of State to look again at the social fund? I recognise his reluctance to retreat, but the social fund is arbitrary in operation and often unjust in outcome. Will the right hon. Gentleman recognise the need to review the cash-limited nature of the fund?

The significant figures in today's statement are the projected spending totals for the next three years, which are to rise to a formidable £87 billion in 1995–96. Will the Secretary of State acknowledge that, under current policies, expenditure on benefits will continue to rise for the worst of reasons—the rise in unemployment? Given that every 100,000 added to the unemployment total costs the right hon. Gentleman's Department £330 million this year, what room will there be for any real improvement in living standards for the people on benefit who are included in those totals?

The long-term outlook remains depressing. There is a price to be paid for the Government's mistakes. The Secretary of State pays out almost £1 in every £3 spent by Government. The tragedy is that it will not bring comfort and dignity to those at risk while this failed Administration use it to fund the cruel waste of the dole queues.

Mr. Lilley

Let me take an opportunity that I missed on a previous occasion, and welcome the hon. Member for Glasgow, Garscadden (Mr. Dewar) to his post, to which —as the whole House will agree—he will bring a high level of intelligence, integrity and diligence. I am particularly delighted to see my former pair sitting opposite me.

The hon. Gentleman gave my statement a rather grudging welcome, although it was a little more forthcoming than the response of the hon. Member for Dunfermline, East (Mr. Brown) to that of my right hon. Friend the Chancellor. The hon. Member for Dunfermline, East is made happy only by bad news, and it seems that the hon. Member for Garscadden and his colleagues are made rather gloomy by good news.

The hon. Gentleman's principal criticism of the Government's actions seems to be our failure to fulfil the "rumours" that he himself fostered and encouraged on every possible occasion. He also suggested, rather surprisingly, that my statement was out of tune with a speech that I had made to the Conservative party conference. I assure him that it was in no way out of tune with that speech. Then, I emphasised the importance of an attack on fraud, and made it clear that there was every difference in the world between the vast majority of claimants—who are honest and genuine people—and those who commit fraud. It is the Labour party that does not distinguish between the two.

Let me remind the hon. Gentleman of a paper that was submitted to the Labour party's national executive committee by his hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett). According to that paper, one of the disadvantages from which the Labour party suffered was the fact that it had linked itself with freeloaders. [Interruption.] I shall be happy to give chapter and verse later, if anyone cares to question that point.

The hon. Member for Garscadden said that income support had risen by only 3.6 per cent. I spelt out in some detail the implications of the extra £1 billion of resources that would be provided on top of that, allowing income support beneficiaries a rise in disposable income significantly larger than the original figure. That will mean a real improvement in standards of living, especially among the poorest pensioners.

The hon. Gentleman suggested that we move to a system of uprating based on prospective rather than retrospective inflation. I should have thought that, at a time of falling inflation, that would disadvantage most people, returning us to the days of a Labour Government who made precisely such a change and, in the process, cut the real value of pensions by 6 per cent.

The hon. Gentleman said that the Rowntree report spelt out an "austere low-cost budget"—a budget that allows the poorest only a video recorder, a camera and a television set; the report adds that they will not be able to afford a second television set for the children. According to the report, a modest budget requires an income of nearly £21,000 a year. As I recall, that is close to the income level at which the Labour party considered that a person was so rich that he should suffer a tax increase.

As for invalidity benefit, that is not a cut in entitlement. By tightening up our procedures and making better use of our medical resources, we hope to be able to save that amount over the period. For example, we shall cut out some of the procedures that require us to go twice to our own medical officers for the same piece of information. Medical officers will therefore be able to examine more cases and exercise tighter judgment. The opportunity has always been there to take the opinion both of general practitioners and of our medical officers. It is not unknown in the medical world to take a second opinion.

The taxation of invalidity benefit is a matter for my right hon. Friend the Chancellor of the Exchequer, as are all taxation matters. The hon. Gentleman knows that the literature that recipients of this benefit receive contains a statement that it has been our long-standing intention to bring that benefit into tax, but only when the difficulties in doing so can be overcome.

The hon. Gentleman referred to the effect of the regulation laid today on those who are actively seeking work and said that it would apply to all people. It will apply only to those without children. A number of other categories are excluded, including—following the advice of the advisory committee—pregnant women. They, too, will be excluded from the operation of this rule.

The hon. Gentleman described the social fund as arbitrary and unjust. I believe that it is a far better system and less arbitrary and less unjust than the single payment system that preceded it. It will not be possible to operate it without a cash limit. Were we to operate solely on the basis of grants, the amount of cash that we have would mean that the operation of the cash limit would be far more stringent than that which we operate at present.

The hon. Gentleman referred to the very large total expenditure on social security. That is a gauge of our commitment to the neediest and to those who are most affected by severe economic circumstances. The hon. Gentleman is right to say that the best help they can have is the recovery of the economy. I believe that the Chancellor's statement earlier today offers the best promise of achieving that recovery. I believe, too, that his statement will be welcomed as much by the beneficiaries of my Departments as by every hon. Member.

Mr. Patrick Nicholls (Teignbridge)

Does my right hon. Friend accept that the action that he has announced against new age travellers will he particularly welcomed on this side of the House? Does he also agree that the vast majority of people who honestly draw benefits find it peculiarly insulting when they see the nation's resources being squandered on an indolent, anarchic rabble?

Mr. Lilley

My hon. Friend makes an extremely good point. In the estimates that I have made of savings through tackling fraud, I have made no allowance for any deterrent effect that the announcements will have. I believe, however, that an example effect was created when people could see that perhaps only a small number of people were getting away with living on benefit. That must have tempted others to do likewise. Now that they know that we are bearing down on that practice, they will not be so tempted. That must be beneficial to the country as a whole.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

May I, like the hon. Member for Glasgow, Garscadden (Mr. Dewar), extend a grudging welcome to the statement? It is with some relief that we see that the Secretary of State has managed fully to index benefits. I acknowledge and welcome that fact. However, it drives a coach and horses through the contributory principle of the national insurance fund if the Secretary of State needs a Treasury grant to balance the books. It takes us all the way back to the old Treasury supplement days.

In his conference speech, the Secretary of State said that he intended to crack down on fraud. That is right and proper. However, can he give the House an assurance that the new techniques will not result in menace and intimidation? Many claimants are genuinely ignorant about the system and find it difficult to make claims.

As for the social fund, can the Secretary of State tell me how much of the announced money that he has adverted to this afternoon is real, new money and how much of it is due to the faster repayment of loans? The only effective way of measuring the size of the social fund budget is to measure it as an amount versus the number of income support claimants.

Can the Secretary of State also say a word about payments directed into bank accounts? He knows that many claimants do not have bank accounts. Very many post offices in rural areas and other areas will find it difficult to remain financially viable if the Secretary of State is too draconian about introducing that change too fast.

Mr. Lilley

I am grateful to the hon. Gentleman for his self-confessedly grudging welcome. He believes that it is a small matter fully to uprate the benefits throughout the system. Many other countries throughout Europe are finding it difficult or impossible to do so. I know that the hon. Gentleman wants us to follow Europe in every respect. Does he wish us to follow in that respect also? The hon. Gentleman said that the ability to top up the national insurance fund from taxation was unwelcome. I presume, therefore, that he wants us to put up contributions. We think that that would not be right at present.

I can assure the hon. Gentleman that there is no question of menace and intimidation in the pursuit of fraud. I agree that it would be entirely wrong to go down that route. None the less, it is right to use all the techniques and information that we have available, through the computerisation of the benefits system, to achieve that end.

As for the social fund, I can assure the hon. Gentleman that the increase in the budget in recent years and in next year's budget is in excess of the increase for people on income support. Therefore the amount of help available to people in that category is, effectively, increasing, even though the amount of new cash is quite small, but the recycling of cash through the repayment of loans earlier than was originally thought possible enables a 12 per cent. increase to be made in the coming year.

Mr. James Couchman (Gillingham)

I wholeheartedly congratulate my right hon. Friend on having uprated all benefits in line with inflation and on not imposing an additional burden on industry through increasing national insurance contributions. It must have been a strong temptation, which my right hon. Friend was very wise to put on one side at this time. The very many people who are on low incomes find it grossly offensive that people who earn money through the black economy make no contribution, either through taxes or insurance. My right hon. Friend's attack on fraud will be particularly welcomed by those low-income families who pay their tax and national insurance honestly.

Mr. Lilley

I am grateful to my hon. Friend for his congratulations. It has obviously been difficult for the Chancellor to achieve such a good settlement. I am delighted that he has been able to do so and that we have been able fully to uprate without increasing national insurance contributions. My hon. Friend is correct about fraud. No one resents fraud more than the genuine claimant of unemployment benefit when he sees someone else, who he knows has a job, fraudulently claiming unemployment benefit. That is intolerable and unsatisfactory. We shall do our best to root it out.

Mr. Win Griffiths (Bridgend)

The Benefits Agency office in my constituency deals with the largest number of disability benefit claimants in the country. The Secretary of State's reference to tightening up the procedures implies that it will become more difficult for people to claim disability benefit. Many of my constituents will be shocked by that remark. One of my constituents heard only a fortnight ago, two years after making her application for disability benefit, that it had been approved. Thousands upon thousands of people throughout the country have been waiting for months and months—in this case for two years—to hear whether their application has been approved. Can the Secretary of State assure us that these measures will not lead to a reduction in the number of people who receive disability benefit?

Mr. Lilley

I can assure the hon. Gentleman, and I hope that he will reassure his constituents, that there is no question of harassing the vast majority of people who are entitled to this benefit and who will continue to receive it. We are proud of the fact that we helped twice as many people with this benefit as the Labour party and that we spend two and a half times as much upon it. However, we want to ensure that it goes where Parliament intended it to go. We have legal powers to check the medical basis upon which it is given. Anyone who fulfils those criteria has absolutely nothing to worry about, but it is right and proper that where referrals are made and there is a question about entitlement, we should investigate more of them than we do at present. I shall look into the two-year delay to which the hon. Member referred. He may have been referring to the disability living allowance, which is newer and with which there have been problems, but we have drafted in 800 extra people to get on top of them.

Mr. Lyles Brandreth (City of Chester)

Can my right hon. Friend confirm that his caring and balanced statement means that there will be no curtailment in the duration of unemployment benefits and no reduction in its real value? If so, will he use the opportunity to condemn the scaremongers on the Opposition Benches who have been having a heyday spreading rumours and, consequently, dismay? They must have had a disappointing afternoon, because they have a vested interest in bad news.

Mr. Lilley

My hon. Friend makes a valid point. I can confirm that there will be no reduction in the duration of entitlement to unemployment benefit. Rumours to that effect, fostered by Opposition Members, have proved ill-founded, as so many have in the past. Opposition Members' obvious delight in getting hold of any rumours or suggestions was matched only by the misery and disappointment on their faces when they realised that they were untrue.

Mr. Terry Rooney (Bradford, North)

Will the Secretary of State confirm that it is a condition of entitlement to benefit that an unemployed person must not only be available for work but actively seeking it? Will he therefore elucidate on the changes for which he said he is legislating today?

Mr. Lilley

Yes, I am happy to do so. Under existing rules, someone who is not actively seeking work is not entitled to the full rate of income support. It has been possible to secure the hardship rate, which is 40 per cent. lower, without actively seeking work. That entitlement has been removed from most categories where it clearly should not apply. A number of cases have been allowed to continue, where appropriate, partly on the advice of the advisory committee.

Mr. Charles Hendry (High Peak)

I welcome the comments that my right hon. Friend made about trying to make savings in his departmental budget by encouraging more people to have their benefit paid directly into their bank account. Will he confirm that that is possible only because of his Department's multi-billion pound investment in new technology, which shows that the Government are committed not only to maintaining the level of benefit but to improving the way in which it is delivered?

Mr. Lilley

That is absolutely correct. On the issue of encouraging people to have their benefit paid directly into their bank accounts, which was mentioned by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), I should point out that only those who have bank accounts and can be persuaded to use the facility will do so. There can be no question of claimants in rural areas who use the Post Office or whose bank is a long distance away switching from the Post Office. There is therefore no threat to rural sub-post offices.

Mr. Nigel Evans

I congratulate my right hon. Friend on his announcement, and especially on inflation-proofing benefits, contrary to the scare stories, which did not help people who are on benefit. I particularly welcome the announcement about the savings that have been achieved by targeting fraud—£1 billion is not an inconsiderable sum of money—which have been reinvested to the benefit of people in need. May we have an assurance that the campaign against fraud will continue and that any future savings will be reinvested in the social security programme?

Mr. Lilley

Had I not been able to offer the Treasury the assurance that we would make efforts to stop and get back the £1 billion that otherwise would be lost through fraud, we would have £1 billion less to pay in benefit. It would not have been possible, therefore, fully to uprate benefits. That is why some Labour Members who deride the attack on fraud and identify it with an attack on poverty are 180 deg wrong. The hon. Member for Brightside, who cast doubt on my reference to his quotes, has conveniently left, but in his paper to the national executive of the Labour party, he said fear of Labour arises when it tolerates the intolerable—anti-social behaviour, freeloaders and the like from whatever level of society. He is right; the rest of the party should listen to him.

Mrs. Margaret Ewing (Moray)

The Secretary of State has stated that he wants to introduce administrative ideas to control invalidity benefit. Does he see control as being more important than the award of invalidity benefit, and when he talks about difficulties in taxation with this aspect of social security benefit, is he advocating taxation or opposing it?

Mr. Lilley

There is no conflict between controlling a benefit and awarding it. We want to award benefit to those who are entitled to it and ensure that it is not indiscriminately available to those who are not. It would be wrong and contrary to the intentions of Parliament to award benefit to those who are not entitled to it, so we propose to check more cases that are referred to us for checking, to make better use of information and to have better relations and transfer of information with GPs, who often are not experts in social security law but who, in effect, have to comment on it. As a result, we shall better handle a very important benefit for many people and the money will go to the right people.

Mrs. Ewing

And taxation?

Mr. Lilley

I have made my position clear to the hon. Member for Garscadden: taxation is a matter for my right hon. Friend the Chancellor. We have a long-standing commitment to bring untaxed benefits, including this, into taxation, but that has not yet proved possible because of the difficulties surrounding it.

Mr. Frank Field (Birkenhead)

Has not the Secretary of State scored a first in persuading his Cabinet colleagues of the extent of social security abuse, which is so widely believed at Tory party conferences? I congratulate him on so exciting his colleagues that he managed successfully to steer through his total social security budget. Does he accept that, although he has been successful, Secretaries of State responsible for the public sector have allowed the lowest paid workers to suffer real cuts in living standards? Some of those workers earn about the same as or less than they could claim in benefit. Is there not something unsatisfactory about the public expenditure review when the living standards of the poor are dependent on the political skills of the masters around the Cabinet table?

Mr. Lilley

I am very grateful for the hon. Member's friendly remarks—perhaps "friendly" is the wrong word because he supports us only when we are right and a real friend would support us when we were wrong. We are right today and we have done the right thing. I am glad that he recognises that. He carries a lot of weight as Chairman of the Select Committee on Social Security and we always listen carefully to what he has to say. Inevitably, everyone who is dependent on public spending must keenly await the outcome of a public spending round. We always try to protect the poorest and most needy. I have made clear and explicit statements that that is our objective, including in my speech to the Conservative party conference. Others chose to listen to rumours rather than to my clear and open words.

Mr. David Willetts (Havant)

I congratulate my right hon. Friend on his conspicuous success in securing a full uprating of social security benefits. I congratulate him particularly on securing what is in effect an increase in the real value of income support. Is not that evidence of our ability to target help effectively on the poorest members of society? Our low inflation ensures that the real value of benefits is maintained properly during the year and that old and unemployed people do not suffer a 20 per cent. or 25 per cent. reduction in the real value of their benefits, as they did under the previous Labour Government.

Mr. Lilley

I am grateful to my hon. Friend for his thanks. It is true that we have increased the real value of benefits to the most needy. That is the best way of targeting. The Labour party is now committed to considering the means testing of all universal benefits. That is another way of targeting. We shall see how popular means testing proves to be.

My hon. Friend is right that inflation is the real thing that hits the poor. It destroys their savings. In the course of the year inflation can undermine purchasing power. If inflation is 20 per cent., on average purchasing power throughout the year is 10 per cent. less than it was at the start. That was the position under the Labour Government when we had an inflation rate of 20 per cent. That would be the position again if we were to give way to the Labour party's profligate and foolish policies.

Mr. Clifford Forsythe (Antrim, South)

I welcome the uprating and the other improvements that have been announced, especially as they relate to war pensions. Can the Minister reassure the House that, as a result of tightening up the invalidity benefit and other procedures, no one who is entitled to a benefit will be disadvantaged in any way? Will he take into account the many proposals that have been made to make the social fund more effective and fair, which it is not at present?

Mr. Lilley

I can give the hon. Gentleman an unequivocal assurance on invalidity benefits. Our intention is not to reduce the entitlements; it is simply to ensure that the benefit goes to those who are entitled.

I will consider carefully the several reports that have been made on the social fund. I am not persuaded by any of the reports that we should move away from the underlying principles on which the fund is based. The underlying principles are that the fund must have a discretionary element to deal with the aspects of benefits which are not covered by the present complex system of rules, that it must include a loan element and that it must be cash-limited.

Mr. Bernard Jenkin (Colchester, North)

I add my congratulations to my right hon. Friend on the full uprating of all social security benefits. Does he agree that it is a bit rich for the hon. Member for Glasgow, Garscadden (Mr. Dewar) to spread fresh rumours about the erosion of the value of pensions in the future when the only Government ever to massage the real value of pensions downwards was a Labour Government? [Interruption.]

Mr. Lilley

From the squealing on the Opposition Front Bench, it is clear that my hon. Friend's bullet hit its target.

Mr. Paul Flynn (Newport, West)

While no one would defend claims by anyone who is not entitled to a benefit, does the Secretary of State note that in the valleys of south Wales there are a larger number of claims than usual for invalidity benefit? That is not because people cheat or doctors lie but because the area has a high incidence of silicosis, pneumoconiosis and bronchitis among people working in quarrying and mining.

If the Secretary of State wants to tighten up on scroungers, as he told the Conservative party conference in Brighton, should not he look to the royal travellers—the minor members of the royal family—who take substantial sums of public money to which they are not entitled? Should we re-examine the possibility of taxing the Queen?

Mr. Lilley

The hon. Gentleman spoilt a good point with a bad one at the end. He is right about the ill health and disability that is often experienced by miners. We have every intention of keeping invalidity benefit fully open to them.

The hon. Gentleman may have referred to remarks on the television. The views were those of the programme, not of any Minister. We did not participate in that programme, which made suggestions about miners in south Wales. I have not seen the programme but I know that there are problems in mining communities. We want the benefit to be available to miners.

Mr. David Nicholson (Taunton)

Is my right hon. Friend aware that the congratulations which are rightly due to him, as the hon. Member for Birkenhead (Mr. Field) pointed out, for piloting his budget through the Cabinet, should perhaps be shared with his predecessors, notably the Leader of the House, for the difficult decisions that they took in targeting the benefits programme? Does he agree that we should also congratulate the electorate on resisting the siren voices in the Labour party, which wanted to make extravagant promises that it could not possibly have afforded if it had come to government?

Is my right hon. Friend aware that his efforts to eliminate social security fraud will be welcome among Conservative Members, particularly those who represent parts of the country which were invaded this summer by new age travellers? I fear that, if the weather had been better this summer, we would have suffered rather more substantial and lengthy invasions by those travellers. As part of the programme of investigating fraud, will he examine the rents charged in constituencies such as mine for accommodation which is designed primarily for people on social security benefits? Certain local authorities feel that rents should be examined.

Mr. Lilley

I agree with my hon. Friend that it is impossible to overstate the amount that we owe to my predecessor both when he was Secretary of State for Social Security and now in his strategic location. I have only one thing against him: he weeded out many nonsenses which would otherwise have been available for me to weed out and for which I could claim credit.

My hon. Friend is right about new age travellers and others. We have nothing against the travelling mode of life as long as people obey the law, contribute to society and do not become leeches on it. Of course, I shall look into the matter of rents with local authorities.

Mrs. Audrey Wise (Preston)

The Secretary of State referred to a major research project into invalidity benefits and said that he was examining the results of it. Will he publish those results? Does the research include examining the fate of the many people who are deemed capable of light work, which is unspecified and usually unobtainable?

Mr. Lilley

Some results of the research are already coming through and more results will come through in the next few months and in 1993. I will certainly consider publishing them. It is my predisposition to publish, and that is the normal practice.

Obviously, the existing rules on light work will not be changed by what we have announced today.

Mr. Harold Elletson (Blackpool, North)

Does my right hon. Friend remember a motion that was passed at this year's Labour party conference which called for increases in—

Madam Speaker

Order. May I give a little guidance to the hon. Member? We are asking questions on a statement that has been made by the Secretary of State. The hon. Member must ask a question about the statement.

Mr. Elletson

In the light of the announcement today of increases in income support and support for pensioners and other categories of people, does my right hon. Friend remember a motion that was passed at this year's Labour party conference which called for increases in pensions? Can he confirm that the hon. Member for Glasgow, Garscadden (Mr. Dewar) admitted that such increases could cost the taxpayer up to 25 per cent.—

Madam Speaker

Order. I try to help hon. Members who have not been here very long, but I am afraid that I cannot accept that question. We must now move on.

Mr. Jeremy Corbyn (Islington, North)

Will the Secretary of State take this opportunity to confirm that the breaking of the link between the state old-age pension and earnings in 1980 and the substitution of a link with the retail prices index has cost pensioners about £15 per week, if not more? Do the Government intend to recompense pensioners for the money that has been stolen from them in the past 13 years and restore fully the link that existed under the last Labour Government?

Mr. Lilley

The simple fact is that the living standards of pensioners have increased five times as rapidly under this Government as they did under the last Labour Government. I believe that most pensioners are glad that we have pursued our policies, not those of the Labour party. The Labour party often makes reckless pledges and commitments and then breaks them. My hon. Friend the Member for Blackpool, North referred to a pledge that was passed at the Labour party conference. The deputy leader of the Labour party says that the Labour conference makes Labour policy. At the Labour conference the hon. Member for Garscadden said that such a pledge would cost about £25 billion, and added that he saw it as a commitment by the conference, and supported it as an aspiration. It is an aspiration which it would be impossible for any Labour Government to fulfil—certainly not while doing all that was announced in my statement as well.

Mr. Michael Stephen (Shoreham)

Does my right hon. Friend accept that his statement will he warmly welcomed in the country? In the depths of a world economic recession it is a fine achievement. Does my right hon. Friend also accept that there is no monopoly of compassion among Opposition Members, and that in supporting his statement Conservative Members are every bit as committed to giving the elderly and sick and the disadvantaged the best help that we can. The difference between us and them is that we know that there is no crock of gold at the end of the rainbow out of which all demands on the public purse can be met.

Does my right hon. Friend recall that the Labour Government could not even muster the resources to pay pensioners their £10 Christmas bonus?

Mr. Lilley

My hon. Friend makes a good point. Any pretence that the Labour party ever made to be the friend of the needy was blown apart by the miserable looks on Labour Members' faces when the Chancellor of the Exchequer announced, and I repeated, that all benefits would be uprated in full. I hope that those miserable faces will be seen on the nation's television screens. Never have I seen gloomier faces on the Opposition Benches.

Mrs. Maria Fyfe (Glasgow, Maryhill)

I would suggest that our faces wore expressions of doubt, disbelief and mistrust rather than of gloom. When we talk about scaremongering, the Secretary of State must know that his colleagues in the Ministry of Agriculture, Fisheries and Food produced a study whose findings appalled the nation, with its ideas on how much it was reasonable to expect a person to live on per week, and the kind of diet that would result. Will he now tell us that he rejects those findings, and would expect people to have a better standard of living?

The Secretary of State mentioned that people's money should not be paid by giros or by order book. I hope that he realises that many people cannot have bank accounts —banks will not accept large one-off payments because the bank managers do not expect such people to be able to sustain bank accounts, so they are turned away. Will the Secretary of State tackle that problem?

Mr. Lilley

We believe that income support is sufficient, and in effect, as I explained, this year we have increased the real purchasing power of those who receive it by removing the requirement to pay 20 per cent. of the council tax. Thus we leave people free to spend that money as they choose, on different necessities of life.

I propose to encourage people to receive benefits by automated credit transfer into their bank accounts, but clearly people without bank accounts will not be able to do so. I should he happy to discuss the matter with the banks if, as the hon. Lady suggests, there is evidence that they refuse my customers bank accounts. I would tell them that they should not refuse, because social security payments are reliable, social security is good money, and if people wish to receive their benefits in that way that is better than benefits being paid by more expensive means.

Dr. Robert Spink (Castle Point)

Will my right hon. Friend spell out for us—in simple language that even the hon. Member for Islington, North (Mr. Corbyn) can understand—the Government's continued commitment to basic state pensions and child benefits, which has been demonstrated by his statement?

Does my right hon. Friend agree that the only party which threatens universal benefits with means testing is the Labour party, which proposes a commission on social justice? Such a commission would produce not social justice but the opposite—[Interruption.]—and would threaten the basic pension and child benefit—[HON. MEMBERS: "Speech."]

Mr. Corbyn

rose—

Mr. Lilley

My hon. Friend has made his point in an admirably clear, concise fashion, which I think brought a measure of understanding to the hon. Member for Islington, North, who obviously wished to show his support. What my hon. Friend said is absolutely correct.

Mr. Bob Cryer (Bradford, South)

Does the Secretary of State accept that we oppose fraud, whether in city boardrooms, in Lloyd's of London, in insurance companies or of welfare benefits? However, does he accept that his explanation of welfare fraud omitted the fact that in order to obtain the figures his Department multiplies by 32 all fraudulently claimed money recovered, which somewhat exaggerates the total?

Does the right hon. Gentleman also agree that the House would not be happy to entrust a tax on fraud to such a scaremongering Minister as himself? At the Tory party conference the right hon. Gentleman said that there were girls who got pregnant in order to cheat on housing queues, and councillors who cheated by obtaining benefits and attendance allowances at the same time. Neither his Department nor the Department of the Environment has any statistics for either of those categories. The Secretary of State has no figures whatever to prove his false, malicious, scaremongering smear. He should withdraw it now and apologise to the House.

Mr. Lilley

I unreservedly agree with the first part of what the hon. Gentleman said: we too oppose fraud in all aspects of life, whether in the benefits system, in commerce or in taxation—indeed, I believe that the whole House opposes it. On the hon. Gentleman's second point, to be accused of scaremongering by him is an accolade indeed.

Mr. Iain Duncan-Smith (Chingford)

I congratulate my right hon. Friend on his excellent statement. I understand that behind that statement lies a recent success, on which my right hon. Friend may like to comment. He won a recent court case on national insurance contributions and saved £500 million, which has enabled him to uprate pensions. Will he also tell us whether that was the first time that we have won such a case?

Mr. Lilley

My hon. Friend is right. We won a case in the European Court of Justice, which preserved revenues of £500 million a year which we would not otherwise have had, or which we would have had to obtain elsewhere, so we would have found it that much more difficult to meet the uprating bill. My hon. Friend is correct to say that that was the first such case that the Government have ever won in the European Court of Justice in our 20 years of membership. However, my Department has won two more cases since then, so clearly we are on a winning streak.

Mr. Malcolm Wicks (Croydon, North-West)

If we are to have a public sector pay freeze, which will include the wages of poor families with children, at a time when social security benefits are being uprated, what will the effect of the one be on the other? If there is to be more poverty in real terms, what are the implications for social security entitlement, and therefore for public expenditure projections? There must be a connection.

Similarly, what implications will abolishing the wages councils have for projections of social security expenditure?

Mr. Lilley

The interrelationship between my statement and the tight control of public sector pay is clear. It is because we have exercised tight control of public sector pay, and because of the other rigorous measures that the Chancellor of the Exchequer has adopted, that the Chancellor has been able to secure the position of the less well-off, the most needy, and to increase resources for those in greatest need—and also to generate more resources, which will increase the number of jobs in the future.

We believe that in the long run the abolition of wages councils will increase the number of jobs, and so diminish the burden of expenditure on my Department. It is possible that some of those jobs may be low-paid, so that those who do them will be helped by family credit. That is what family credit is there for.

Mr. Peter L. Pike (Burnley)

What adjustments does the Secretary of State intend to make to housing benefit to ensure that those on benefit who pay rent do not receive money from the Government with one hand and have to pay it straight back with the other in increased rent?

Mr. Lilley

To the extent that rents increase, people on low incomes are protected through the operation of housing benefit—that is what it is there for.

Mr. Keith Bradley (Manchester, Withington)

May I press the point made by my hon. Friend the Member for Croydon, North-West (Mr. Wicks)? The announcement that public sector pay will be kept down at 1.5 per cent. means that many low-paid workers will receive a very small increase in their wages. Has the Department estimated the number of people who will then be eligible to claim other means-tested benefits, particularly family credit, housing benefit and council tax benefit because those people will fall into that category and become eligible for means-tested benefit?

Mr. Lilley

The hon. Gentleman should not dismiss the point that I made in response to the hon. Member for Croydon, North-West (Mr. Wicks). If those in work take only moderate increases, we can help those who are out of work and help generate the jobs to bring them back into work. The net effect of the changes that we have announced will be beneficial in terms of my budget and in terms of the well-being of the population as a whole.