§ [Relevant documents: Third Report from the Social Security Committee of Session 1994–95 on the Review of Expenditure on Social Security (House of Commons Paper No. 132) and the Social Security Departmental Report: The Government's Expenditure Plans 1995–96 to 1997–98 (Cm. 2813).]
Motion made, and Question proposed.
That a further sum, not exceeding £18,829,738,000, be granted to Her Majesty out of the Consolidated Fund to defray the charges that will come in course of payment during the year ending on 31st March 1996 for expenditure by the Department of Social Security on non-contributory retirement pensions, Christmas bonus payments to pensioners, pensions etc., for disablement or death arising out of war or service in the armed forces after 2nd September 1939 and on sundry other services, on attendance allowances, invalid care allowance, severe disablement allowance, disability living allowance; disability working allowance; on pensions, gratuities and sundry allowances for disablement and specified deaths arising from industrial causes; on income support, payments of spousal and child maintenance, child benefit, one parent benefit, family credit, and on the vaccine damage payment scheme.—[Dr. Liam Fox.]
§ Mr. Frank Field (Birkenhead)
I thank you, Madam Speaker, for calling me and I am grateful for the opportunity to debate this group of expenditure measures. It is perhaps a sign of the difficulties that the House has in coming to grips with expenditure that, just as we are about to debate a social security budget fast approaching £90 billion, those few hon. Members who were here have left. The House was moderately crowded for the defence statement, but the defence budget is small compared with the total social security budget.
We must try to apply our minds to where that £90 billion is going, how good a job of stewardship the Government have done in safeguarding the taxpayers' interest and, perhaps more important, how successful the Secretary of State has been in his stated objective of controlling public expenditure on social security.
As I wish to be somewhat critical of the Secretary of State's stewardship, perhaps I should begin with some complimentary remarks. When he was moved to the Department of Social Security, the media, who do not always possess the greatest intelligence, reported his move from Trade and Industry to Social Security as an example of a Minister being dumped by the Prime Minister. Slowly, they have woken up to the fact that if one is not fortunate enough to be Prime Minister or Chancellor of the Exchequer, the place to be for someone who wants to be a big player at the top end of Cabinet table is in charge of the social security brief.
The Secretary of State has brought clear ideas about what he wants to do with his budget. This is, I think, the first full-scale debate that we have had in which we can 1116 examine at ease his stated objectives and see how well he is achieving his goals. I should, however, sound a note of warning before we begin.
If we go back to Tory election manifestos and the excitement of election campaigns, we find that the talk was a little looser than it is today—it was about cutting social security expenditure; the goal then became to cut real growth in social security spending and it was limited to whether expenditure could be restrained so that it grew at a lower rate than the underlying rate of growth in the economy. I want to consider the Secretary of State's programme within that framework.
The Chancellor of the Exchequer said yesterday that he thought that the economy was growing at 4 per cent. a year. For the purposes of our debate, we should look carefully at the Government's record on growth and use it as our yardstick to compare how successful they have been in bringing the rate of growth of social security expenditure below the rate of growth of GDP.
Before I do so, I want to emphasise how important the debate is to many of our constituents. A short while ago, I was invited to write a column in The Sun and I willingly accepted. When I write a piece for the broadsheets, I am lucky if I get two or three letters—I am very lucky if I get two or three reasoned letters. I received about 50 letters as a result of that article in The Sun. One or two people said that if Labour had views like mine they were going to vote Tory.
I am not sure what they read into the article. A recent article in Nature suggested that the ear does not relay messages to the brain but that the brain controls what the ear hears. It is clear that the brain also controls what some people's eyes see. I received two outstanding letters, one of which I shall quote later. The other was written by one of my constituents and said how important it was that we consider carefully how our social security budget is spent. She wrote:I am 65 and have been a widow since 1985, but I am still working 3 full days each week with a Liverpool based company, which enables me to maintain my home (which I own) and to keep a reasonable standard of living.I realise I am lucky to have a job and an employer who is prepared to retain may services at my age, but because of my State pension, I am paying Income Tax to the tune of approximately £130 per month on my salary. Money, I may add, which I worked quite hard for and which, if it remained in my pocket, would make a considerable difference to my way of life.However, I look around and see, not far from me, people much younger than I who are not working, some possibly because they cannot get a job, but a great number of whom, I am sure, do not want to work, and do not see the necessity to work, whilst they are receiving such good benefits from the Welfare State, and I know that the tax I have to pay is helping to provide these benefits.We do not approach this debate in a light mood. We are very mindful of the fact that every day the welfare state has to be paid for by people in work such as my constituent, who is a pensioner and who pays £130 a month towards our welfare state. I shall return in a moment to how we should deal with a dependency culture and meet some of the other points in that letter.
Not long ago, the Secretary of State give the Mais lecture, in which he gripped his audience by saying that, on average, each day everybody in work pays £13 towards the cost of maintaining the welfare state. Less than 18 months later, he gave a similar lecture which updated his point to the Social Market Foundation. In it he said that, on average, every day people in work paid £15 towards the cost of underwriting our welfare state.
1117 We have a paradox. The Secretary of State—of whom, I should have thought, most of us now have the measure—is serious about reforming the welfare state and wishes to cut growth in expenditure on it. A range of Bills has scrapped earnings-related supplements to national insurance benefits, cut benefits for disabled people and scattered asunder the remains of SERPS, but the daily cost of the welfare state to those in work has risen.
On one criterion it does not appear that the Secretary of State is succeeding. Welfare bills are increasing, but we can look at those figures another way. We know that the Secretary of State has made cuts: I am not accusing him of dishonesty or deceit. At general election time, the Government have always been clear about their programme. If ever a Government have had a mandate for their programme, it is this one.
After the latest round of cuts, the real budget for social security in the period 1994–95 to 1997–98 will rise by 1.3 per cent. The hon. Member for Colchester, North (Mr. Jenkin) is a member of Social Security Select Committee. When we were drawing up the report that forms the backdrop to our debate, he noted that the rapid upward push in the cost of benefits is continuing. Between 1997–98 and the end of the century—not many years— the real cost of welfare will rise by 2.1 per cent. That is another criterion by which to judge the Government.
Over the period of the Government's stewardship since 1979, the growth in the economy has been 1.9 per cent. After the latest rounds of cuts in welfare provision, the real cost will go up by 2.1 per cent. The Government's much-modified objective of controlling expenditure to below the real rate of increase in the economy is going to fail. I look forward to hearing how the Secretary of State will reply to that.
Their failure, of course, is not across a broad canvas; it is a failure on quite a narrow focus, on which I wish to make my contribution. I hope that it will be followed up by many other hon. Members.
The welfare state has three forms of benefit—national insurance benefits, for which we pay into the national insurance fund; what are called non-contributory national insurance rates or non-contributory, non-means-tested benefits, which go to people in certain categories such as parents who claim child benefit; and benefits that go only to those whose income is low and who qualify after a test of income. It is crucial that we consider which benefits are growing fastest and cause the most concern among not only the Government and Opposition Front Benchers but people outside such as my constituent who have to pay the bill. They wonder, if the present strategy continues, what scenario will meet us shortly after the turn of the century.
Let me break down the figures. The Government's record up to 1992–93 shows that the real-terms growth in contributory benefits was 1.6 per cent. The increase in non-contributory benefits, many of which are disablement benefits, was 6.9 per cent.
What has been the real-terms rate of increase in the means-tested side of the welfare state? I hope that we shall note from the Secretary of State's response to this debate, if he is lucky enough to catch your eye, Mr. Deputy Speaker, that there has been a subtle change in the Treasury's approach to means testing. In the early 1118 Thatcher years, Ministers would wave their arms and legs and say that means testing was the way forward to concentrate help on those in greatest need and to target benefits. We hear a slightly different message from the Treasury Bench now, and I hope that we shall hear a development of that theme a little later in the debate.
Income support for pensioners has risen by 5 per cent. For those below retirement age, it has risen by 10.6 per cent. and for rent allowances it has risen by 15 per cent. Before the latest attempt to extend family credit to those without children, the figure for family credit had risen by more than 20 per cent. The Secretary of State's failure to control the social security budget is not a failure across the whole broad sweep of policy. His failure to meet his objective is caused by the great emphasis that the Government place on means-tested assistance.
Means-tested assistance is the destabilising part of the welfare state. The Secretary of State argued before the Select Committee that the present bill was not sustainable because of the impact that it would have on the functioning of the economy. There must clearly come a point when, if welfare bills are pushed up to a gigantic level, the economy is impaired. I think that the instability is caused by something much more important: the number of people whom we are now putting on means-tested assistance.
When I make a charge against that side of the welfare state, I make a charge against us—specifically the Treasury Bench. I am much tougher than the Secretary of State on fraud, and have no room for those who wrongly claim benefit. I am sure that other hon. Members will try to catch your eye, Mr. Deputy Speaker, and talk about how partial the Secretary of State still is to dealing with the issue as we would wish to see it dealt with, but he is a happy recidivist on that. Each time, he tries to take a tougher approach to deal with fraud and we are here to encourage him in that.
Means tests have a double effect on our constituents. First, they teach them to behave rationally and work the system—I shall give an example of that in a moment— and I do not blame my constituents or those from Colchester, where someone who wrote another letter is from, for doing so. They are behaving rationally within the framework that the House has set for them and in which they must operate.
On the other side of the coin, some people decide that income support and means-tested benefits should be some form of basic income and that they should claim it and continue to claim it while they work and do all sorts of other activities. I am now talking about how it destroys people's sense of worth, their desire to behave as decent citizens and the importance that we stress on working, saving and being honest.
The second letter says:I am 59 years of age and was made redundant in August, 1994 (for information this was the 7th time I have been made redundant since 1976). In the past, I have always managed to obtain employment, mainly due to my knowledge and management skills. However, although I have applied, written, and telephoned over 300 companies during the past 10 months seeking any form of employment, even down to collecting empty trolleys at supermarkets or cleaning offices/factories, I have had no success mainly due to my age.The person goes on:My wife and I have always been great believers in helping ourselves as against making claims against the State and, therefore, when I was unemployed in the past we used our savings, plus our 1119 then borrowing power, to pay our bills, rather than claim benefits. This obviously has meant that we have not had a holiday for over 10 years.As my wife presently works between 40 and 48 hours per week and has a net wage of an average of £100 per week we are unable to claim any benefits other than unemployment benefit. We are advised by the benefits agency that, due to my wife working over 16 hours per week, once my unemployment benefit ceases in August 1995, we shall have to exist on her wage, or, as suggested by the social benefits and employment offices, my wife should cease work and my claim for benefit would then be considered …I am informed that, based on current benefit figures, my wife and I would receive approximately £100 a week plus possible mortgage interest assistance, that being applicable when I reach 60 years of age in September of 1995.Is it not absurd that rather than that man's wife continuing to work for £100 a week, he can draw benefits of perhaps £125 or £150 a week if his wife stops working? Would not it be better for him to be able to continue to draw unemployment benefit and for his wife to continue working? The cost of that to the taxpayer would be a third of what will happen under the rules in September, when his wife will be forced out of work because they will be better off on benefit. They are skint, they have used their savings and they are afraid that their house will be repossessed. They continue in the letter:We have already had to live through the loss of our 2 daughters in 1969 and the loss of our home now would be more than we could stand.They will stop working and will draw three times as much in benefit. It will appear as a saving in one account but, the following week, it will appear as a deficit and help to explain why the Secretary of State cannot control the budget as he wishes. There is nothing dishonest about those people. As the House has just heard, they have worked hard all their lives, scrambled for jobs and used up their savings. They will now behave rationally within the rules that the Government have set. It often pays not to work and to work the system.
Others, of course, feel differently and are not quite so conscientious as that person from Colchester; they feel that income support and housing benefit are there for the taking as of right. They think that it is a basic income that people should use, and they add to it whatever income they can get from work.
The means-tested side of the welfare state is the fastest growing side. It penalises people if they get a job, confiscates their savings and taxes honesty. It cannot be sensible for a country to have a welfare state, the fastest growing part of which has those effects on human character. We have lived through an important time in which the Secretary of State, with a clear vision of what he has wanted to do, has come to his Department, seen the enormous opportunity to apply his own ideas and ideology and bring about change. Yet as I said at the beginning, the figures do not look good given his objectives for the welfare state.
We can all learn lessons from this tale. I do not believe that we can control public expenditure, or the largest part of it—a third of all the money contributed by taxpayers— if we have a strategy like the one pursued by the Government, which pushes more and more people on to means tests and then finds it impossible to control that part of the budget. It is impossible to control it because, as I described using the example of the gentleman from Colchester, it is rational. The only option is to work the system, and doing so, in that instance and many others, 1120 increases the cost of welfare not onefold but threefold, and people feel a failure because they have been unable to get a job. They must now exist totally on benefit— something that the family from Colchester have fought all their lives.
Other people believe that welfare is an easy touch. I welcome the statement that the Secretary of State made recently—and, I believe, the other eight that he has made—on clamping down on fraud, but he has a long way to go.
The Select Committee is considering that matter with deadly seriousness. It is easy enough to pick on single mothers and those who work on the side—although the Secretary of State has not quite got the measure of either of those yet in the fraud clampdown that he has announced—but we are equally worried about the fraud that sophisticated gangs must be perpetrating against that £90 billion budget. It is inconceivable that the budget is somehow gated by behaviour characteristic of the garden of Eden. Given what we know about City fraud and fraud in financial institutions, it is unthinkable that similar techniques are not being used against our budget of £90,000 million.
I believe that we do not yet have the measure of people committing that type of fraud. I fear that the task will be fraught with danger for those officers who begin to get a grip on it. Not so long ago, some people were sentenced to life imprisonment for shooting officers who were checking up on MOT frauds. We shall be tackling very nasty, very vicious, very violent people who are uninterrupted in their activity in ripping off our £90,000 million social security budget on a mass scale.
For that reason, I call for officers of the highest quality—of Special Air Services quality and rewards—to undertake that task for us, for I fear that it may not be that long before the Secretary of State has to come to the Dispatch Box to announce what has happened to some of the officers in his Department when they do get to grips with fraud in that sector.
§ Mr. Malcolm Wicks (Croydon, North-West)
Does my hon. Friend agree that, if the Secretary of State's recent estimates about the scale of fraud are correct, it must mean that, during the stewardship—to use one of my hon. Friend's favourite words—of the present Government, billions and billions of pounds have been fraudulently used? Is that not a matter of great concern? In spite of the platform rhetoric at seaside resorts every year, the Government have effectively been soft on fraud.
§ Mr. Field
I like teasing the Secretary of State that he is soft on fraud and soft on the causes of fraud, but he is getting better and we should encourage him in that endeavour.
My hon. Friend is absolutely right. We have always heard such rhetoric from the Conservative party at elections and at party conferences. Given the partial nature of the current measures, if they had been introduced in 1979, not only would we have ensured that improved anti-fraud measures were now in place but huge tranches of money would have been saved for taxpayers. My constituent who pays £130 a month in taxes on her three days of work a week is the type of person who has been cheated.
1121 I do not believe that the Government have a strategy other than cutting entitlement and, late in the day, trying to screw down on fraud. If we are to bring the budget under control successfully, we must propose an alternative programme.
In conclusion, I shall mention three things that I believe that we must do. Before the millennium, we shall receive the full force of taxpayers' opinions about what they want to happen to public expenditure. The thought that we can maintain public expenditure at the present level is an illusion that politicians should not have.
Opposition Members may pretend that it will not happen—and allow public opinion to hit us in the face— or try to devise strategies whereby we leap ahead of where the electorate will be in a few years' time and set out an alternative stall.
I hope that we shall consider carefully the proposal of hiving off the national insurance side to a corporation or perhaps, to use a more friendly phrase, an organisation run by the punters themselves—both contributors, employers and employees—with the Government having' a say. That organisation would set rates of benefit and gradually take over what is currently the national insurance system.
It would cover the whole of that sector in time, but it would, for example, tackle the problems that the letter that I have just read reveals. If people could quickly requalify for insurance benefit when they were unemployed, as they could under the 1911 scheme, many more people would be prepared to take risky jobs, hoping that the job would last long enough that they at least got their insurance credits back so that they could again benefit. We know that, if they received benefit, their wives and other members of the family could continue to work and they would not get caught back on means-tested assistance. We know that, once most of our constituents are on means-tested assistance, it is almost impossible for them to break free.
The second long-running reform is to ensure that everyone has at least one pension other than the state retirement pension: in other words, universalise private provision of pensions; everyone will have to be in. If Tesco can run a pension scheme that admits part-time workers after the first hour of work, everyone can run an equivalent scheme, or at least allow people to opt into a national scheme that provides such coverage.
The final thing that we must do if we are ever to control the estimates that we are debating today is to change totally the culture of income support, which is that of a passive agency, paying out benefit, into one that is proactive, helping people back into the labour market.
I propose that everyone on income support who is below retirement age should be expected to draw up career plans and use their income support payments to achieve those objectives.
In previous debates, my hon. Friend the Member for Croydon, North-West (Mr. Wicks) has given us a powerful example of why that change should occur. He gave us the example of a single parent in his constituency, visiting her income support office, saying to officers that she wished to become a traffic warden. The officers fell about laughing. They said, "You've got it wrong, love. Our job's to pay out money; it's not to help you get a job."
1122 That is an appalling state of affairs. Those officers were behaving properly. Their job was to pay out money, not to help claimants achieve the objective of getting back into work.
I know that problems are involved with such a scheme, such as how to ensure that child care is available—which probably goes beyond giving a few people already receiving child care, vouchers worth £1,000 a year. However, we must change that culture of drawing benefit and then merely existing on benefit if we are to achieve significantly greater success than the Secretary of State in controlling growth in social security expenditure.
I finish as I began. The Government have made wild claims about the way in which the social security budget, the largest of any Government budget, will be controlled. Their first objective was to hack it back, then it was to cut it in real terms, then it was to control the increase in real terms and then it was to cut it enough so that in real terms it was growing slower than the real long-term growth in the economy.
The figures that I gave at the beginning show that the Government have failed on all those objectives. I do not present those figures merely to crow at the Government. This is an immensely serious debate. The social security budget is the largest part of expenditure to which taxpayers contribute each week with their hard-earned money, and the Government have failed to control it. I hope that, before the general election, we shall make proposals that show that there is an alternative to the present regime.
§ Ms Liz Lynne (Rochdale)
I want to praise the report by the Select Committee on Social Security. It is very constructive and it has a great deal of common sense in it, especially the call for more regular information on expenditure and growth and the recommendation for more research, which is needed for the wide range of benefits that we are discussing. The most radical idea in the report is that Government Departments should estimate the cost of their policy decisions on the social security budget. I sincerely hope that the Government will take that idea on board. There are so many areas that such estimates could cover, including housing and employment.
The abolition of the wages councils obviously had a tremendous effect on the social security budget. The Government spend £2 billion subsidising low-paying employers and they top up the earnings of 1.7 million people. Far from the Government learning from the abolition of the wages councils, they have taken matters a step further and we now have the jobseeker's allowance. On Report in another place on the Jobseekers Bill, the Government opposed an amendment that would have given the right to every person to turn down a job for which the wage was lower than benefit. In other words, the Government have rigged the labour market, because benefit will be stopped if the claimant does not take the low-paid job. Employers will be able to offer wages lower than the wages that they offer at the moment, because they know that unemployed people will have all their benefits cut unless they take the low-paid job.
For single people and couples with no children, the introduction of the jobseeker's allowance could mean that they will live below the poverty line. I know that the Government are introducing pilot schemes to look at 1123 benefits similar to family credit for those with no children and for single people. Already, however, couples with children have to have their earnings topped up by family credit and the family credit budget is continuing to soar; it has doubled in the past four years. Employers are exporting their wage bills to the taxpayer, which is totally unacceptable.
The same point applies to housing. If Government Departments had to estimate the cost of their policy decisions on the social security budget, would the control of council house receipts remain? I very much doubt it. If that policy were adopted, unemployed building workers could get back into work. Other employers would be able to take on people, because the knock-on effect of houses being built would be to the benefit of suppliers to the building industry. If councils were allowed to spend the receipts, there would be low-cost, local authority housing, which would stem the rise in the housing benefit bill. It must make economic sense for the Government to adopt that policy.
The Select Committee stressed the disturbing growth in means-tested benefits; it talked about the unemployment trap and about the low-income employment trap. The Committee looked, but it failed, unfortunately, to recommend that the tax system should be looked at at the same time as benefit reform. By close integration of the tax and benefit systems, the effects of unemployment and the poverty trap would be somewhat mitigated.
At the time of the Budget, the Liberal Democrats suggested that we should take 50,000 low-income earners out of the tax system, which would have helped with the family credit bill. I know that, with all the publicity last week, another report by the Select Committee on Social Security, which dealt with the compensation recovery unit, was somewhat ignored. Reforms would reduce the injustice suffered by personal injury victims and would mean that, instead of the money being clawed back by the Treasury from the victim, it would be clawed back from the employer. That proposal would be revenue-neutral for the Treasury. I would be grateful if the Minister, when summing up, would refer to the proposal.
Another area that has been well documented in the past few days is benefit fraud and I welcome the Government's initiative on that, although it has to be said that they have introduced many initiatives, but have not followed them through. The initiative will not be taken seriously by the claimants who are defrauding the system unless they can see that tax fraud is treated equally. I welcome the survey by the Department of Social Security and its estimates of the money that is lost in benefit fraud. I would like the Treasury to carry out a similar exercise on tax evasion. How can we persuade people in a lower income bracket and those who defraud the benefit system to be honest when people at the higher end defraud the tax system?
The main aspect of the Select Committee report which I welcome is that all Government Departments should assess the cost of their policies on the social security budget. That is the way in which to get the social security budget down instead of penalising the people whom the Government penalise at the moment—the unemployed, who will be affected by the cut from 12 months to six months of benefit, and disabled people. I hope that the Government will look seriously at the initiatives set out in the Select Committee report, which I commend to them.
§ Mr. Tony Banks (Newham, North-West)
I say for the record that the London borough of Newham is the most deprived local authority area in England and Wales, according to statistics from the Department of the Environment. As someone who represents and lives in the area, I can bear witness to the general level of poverty in the east end of London—in Newham, Stratford, Upton Park and West Ham. Strangely, I get far angrier—it is not synthetic anger—than my constituents when I see the poverty that they have to deal with.
I am unmoved by talk of the need to crack down on fraud, not because I am in favour of fraud, but because I am far more concerned about people who do not receive benefits to which they are entitled. I am more concerned about them than I am about those who are trying to get more out of the system than they should. I am a great supporter of those who want to crack down on fraud, but I am an even greater supporter of those who want to make sure that the benefits go to those who need them most and that people are receiving what they are entitled to.
I do not understand how some people in my area exist from breakfast to dinner—assuming that they get either a breakfast or a dinner. They have to live on levels of income that Members of Parliament have no experience of whatever. Members of Parliament will spend more on the Terrace this evening—so will I—than some individuals have to spend in a week. I am not claiming that I am impoverished—far from it. However, when I hear Members of Parliament going on about levels of benefit and about how we need to ensure that they are appropriate, I realise that there is a great stench of hypocrisy, as ever, hanging around this place.
More than 18,000 people in Newham are unemployed and there is an unemployment rate of 19.5 per cent. Some 85,592 people in the borough depend on income support. Unemployed people make up 41 per cent. and lone parents make up 19 per cent. of income support claimants. Those figures show the extent of the poverty in my part of the east end. This evening I draw attention to the changes that will be introduced on 1 October in respect of mortgage interest payments.
§ Mr. Frank Field
The figures that my hon. Friend has cited from his borough are very interesting, because they are the exact opposite of the national figures, which show that the number of unemployed people drawing benefit is exceeded by the number of people heading single-parent families and trying to raise children on their own. That illustrates the fact that recent labour market policies have decimated jobs to the extent that inner-city areas do not reflect the national average, which shows that twice as many single parents are drawing benefits compared with unemployed people. In our areas, there are twice as many unemployed benefit claimants as lone parent benefit claimants.
§ Mr. Banks
As usual, my hon. Friend makes an excellent point and we all defer to his expertise in such matters.
Speaking as a lay person, I would like the Secretary of State and his Ministers to sit in my advice surgeries and hear what is going on. I want them to see the situation for themselves, instead of sitting in Departments and receiving advice from civil servants. I am not suggesting that the Secretary of State and his Ministers do not visit 1125 offices in their constituencies and listen to people's problems, but if they could visit the east end, be a fly on the wall and listen to people's stories, perhaps they might show greater concern for low levels of benefit rather than constantly making accusations and creating the impression that people are living the life of Riley on income support or social security benefit. It is certainly not the sort of life that I would want to lead—even on the most generous level of benefits currently available.
I want to ask the Secretary of State about some of the changes to come into effect on 1 October. It appears that most people under 60 years of age who buy a house or take out a loan for repairs after 1 October will receive no income support assistance with mortgage interest or service charges for nine months. That is outrageous. Ministers have been lobbied about the matter and some groups have been granted a reprieve. As I understand it, they will be classed as existing borrowers. But what about recently deserted or widowed people, who will be included in that group only if they have children? We believe that the decision will cause great hardship to many women in my area who have spent years as carers and so do not have any employment. The Minister must consider that point.
There is also the question of the standard rate of interest. Income support mortgage interest is currently calculated on the actual amount of interest. The change to a standard rate of interest for all claimants will be set at the average mortgage interest rate for probably an annual period. Those with high interest rates will have a shortfall, which benefit will not cover, and that will affect particularly those people on low incomes who end up with expensive loans. That will create enormous problems in my area.
Assistance with accumulated arrears is to be abandoned. Interest will no longer be paid for arrears built up during the initial non-payment period and that will lead to increased debt and homelessness. The Government's excuse for abandoning that assistance is that the calculations are very complex—but so are the calculations for child support, and it has not been abandoned. The calculations could be made if the Government had the political will to do it.
I return to the effect of the changes in Newham. After 1 October, they will take effect slowly and insidiously over two or three years as new claims are made and more people are affected by the restrictions. Last year, Bow county court dealt with 4,000 mortgage repossession cases. Where do people go after that? They turn to the local authority. I get very angry with the Government for deflecting those problems to the local authority, which then has a statutory obligation to try to house the people whose homes have been repossessed.
Bed-and-breakfast accommodation comes into play. We are still spending millions of pounds on the provision of short-term and bed-and-breakfast accommodation. The Government simply shift the problem from their jurisdiction to that of the local authority. Conservative Members then talk about high rent arrears and empty local authority housing stock. They say that the problems are the responsibility of the local authority and they ask why 1126 nothing is being done. The Government think that they are dealing with the problems, but they are not: they are simply shifting them somewhere else.
§ Mr. Field
I am grateful to my hon. Friend for giving way again. Last Friday I visited Salford, where the citizens advice bureau provides a service in the courts for people who face homelessness through repossession. That work underlines the point that my hon. Friend made earlier about people receiving the entitlements that they deserve. The CAB finds that many people who face eviction because of mounting debts—the situation will worsen when the changes are introduced—are not receiving their proper entitlements. There may be minor savings initially but, as my hon. Friend pointed out, there is a massive increase in public expenditure when people whose homes have been broken and whose families have been torn asunder are placed in bed-and-breakfast accommodation.
§ Mr. Banks
My hon. Friend represents a constituency that is not dissimilar to my own, and he has seen the evidence. We are not making up the stories. The changes will not affect our personal circumstances, but they will affect the people whom we represent. Members of Parliament have a duty to bring those facts to the Secretary of State's notice. Instead of listening to arid discourse from departmental staff, he should listen to those who represent the people who are most affected. That is why we bring our cases to the Secretary of State.
§ The Secretary of State for Social Security (Mr. Peter Lilley)
In addition to bringing the cases to my attention—I have listened attentively to his comments and I know that his argument has a great deal of force—has the hon. Gentleman had any success in persuading his own Front Bench to increase the level of benefits? Did he hear his leader say this week that benefits should be altered and that there should be massive reform of the welfare state, so that benefits out of work are less than what people receive in work?
§ Mr. Banks
Only time will tell whether I am having any success. I assure the Secretary of State that I would be far happier taking my case to a Secretary of State of my own political persuasion, because I am sure that my colleagues understand the problems better and would take a far more realistic approach to the level of benefit.
I shall be honest with the Secretary of State: my argument will not alter—in fact, I shall be twice as angry—if a Labour Government do not address the problems of the east end, because the people of the east end have loyally supported the Labour party for generations. They are entitled to expect assistance from a Labour Government whom they elect. I am sure that they will receive that satisfaction. But if they do not, I assure the Secretary of State that my voice will be raised most stridently on their behalf. However, I suspect that my support will not be needed to the same extent that it has been needed since 1983.
I shall not detain the House much longer. I seek clarification from the Secretary of State about two more issues in the context of the estimates debate. I understand that the new in-work benefit pilot, the earnings top-up, is a benefit like family credit, but for people without children. It is a means-tested top-up for people on low 1127 wages. It will pay up to £54 per week, with an average of £23 per couple and £19 for a single person aged 25 and over. It amounts to a subsidy for low wage rates.
Conservative Members ask what a minimum wage will cost, but what is it already costing the taxpayer to subsidise rotten employers who pay lousy, stinking, strip-out wages? No one in this place would work for such wages. They would laugh; they would not even get out of bed. If Members of Parliament were offered that sort of rate for a BBC or an ITV interview, they would turn it down. Of course, I would not turn it down; I would do it for free, as hon. Members well know—but that is another matter. Money does not interest me in the same way as it interests so many on the Government Benches. We are talking about ludicrous wage levels, and we are asking the taxpayer to subsidise rotten employers. The sooner we get a decent minimum wage in this country, the better. In the end, it would be a saving for the taxpayer.
In the earnings top-up pilot scheme, a number of areas have been selected, but none of those is in London. I would like to know rather more about that. Even though I do not over-approve of the idea of subsidising rotten wages, why has not any area in London been chosen? There are plenty of rotten, low wages paid in London.
The Secretary of State announced new initiatives to combat fraud on 11 July. I made the point at the beginning of my speech that I am not here to support fraud, but I am also not here to support this hue and cry about fraud and its use as a divisive mechanism in our society. The idea that, nudge, nudge, wink, wink, anyone receiving social security is on the fiddle, seems gradually to be creeping into the public consciousness. It is expressed so often in vulgar opinion. I might add that I heard my hon. Friend the Member for Birkenhead (Mr. Field) talk about his article in The Sun. I understand that it pays very well for articles, incidentally.
§ Mr. Banks
My hon. Friend is waiting to be paid. Perhaps he needs a good agent. I am quite prepared, for a reasonable remuneration, to hurry it along a bit.
The Sun is one of those newspapers that tends to suggest that somehow people who are on benefit are getting some sort of handout to which they are not entitled; it is really a fraud being perpetrated on the population at large. It is very dangerous to use such words and give that impression.
We understand that fraudulent claims cost the taxpayer £1.4 billion a year and it is absolutely right that something should be done about it. But when do we hear Ministers waxing about the number of people who fiddle their Inland Revenue claims, or employers who fiddle national insurance? Where are all the initiatives to bang that stuff out? Such white-collar fraud in the City, by employers and by those who are evading tax, amounts to billions and billions of pounds and makes the fraud on social security seem like money in the old back pocket.
I would be much more impressed by the Government's determination to crack down on fraud if they took an even-handed approach; if they were as rigorous in trying to deal with Inland Revenue and national insurance fraud as they are with respect to the payment of benefits.
I want to ask the Secretary of State a specific question about home visits, because I notice that, in the endeavour to cut fraud, there is talk of 300,000 extra home visits 1128 across the country. When a home visit is deemed to be required—for example, when the person involved is a single parent—are they planning to reduce income support until that visit has taken place? This is important. I want to know whether my constituents will lose while they wait for a home visit. Although 300,000 extra home visits are planned, I suspect that the Department will soon start saying that it has not got the staff for them. I do not want to find that potential claimants are penalised for waiting for a visit when there are simply not enough Benefits Agency staff to ensure that that visit takes place.
I return to the question of those who do not get the benefit to which they are entitled, as my hon. Friend the Member for Birkenhead said. From Government figures, we estimate that in Newham something like £12 million a year in means-tested benefits is simply not being taken up. What is the Secretary of State going to do about that? When he shows as much enthusiasm for ensuring that people who are entitled to benefit get benefit, I will be equally enthused by his attitude towards some of the other things that he constantly talks about, such as fraud and targeting benefits on people who are most entitled to them.
Perhaps those points put a little flesh on these bare estimates. They come as a witness from someone who has to deal with a whole range of poverty. The worst poverty of all that I have to experience in the east end is the poverty of expectation. The people I represent have a very low level of expectation. I want to ensure that their sights are heightened and that they have a vision of a better society in which they can receive a decent level of benefit when they need it. That is what we want, and I am quite sure that, when my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) is the Secretary of State for Social Security, that is exactly what we shall get.
§ Mr. Jeremy Corbyn (Islington, North)
It is a pleasure to follow my hon. Friend the Member for Newham, North-West (Mr. Banks), who explained well the plight of the people whom he represents and the poverty throughout the east end of London. Indeed, one would find similar levels of poverty in every inner-city region in England, Wales and Scotland. The Evening Standard report on the levels of poverty in London makes very grim reading. Within a 15-minute car journey from this House, one can find people living third-world levels of existence, health and expectation in a supposedly wealthy and prosperous society.
The Government complacently preside over a social security budget which they claim is growing very fast, and say that it cannot continue to do so, yet at the same time, statistics have shown that, since the Government came into office, the biggest growth in inequality of any industrialised country, the biggest growth in poverty among industrialised countries and the biggest growth of the super-rich among industrialised countries have all been in Britain.
That is a direct result of a taxation system and policy that has given huge tax breaks and rewards to the already very rich and soaked the poor to the extent that they now pay more in taxation than ever before. The poorest 10 per cent. of the population, who tend to reside in the inner cities, although not exclusively, have seen their living standards fall by at least 14 per cent. over the past decade and more, and it is getting considerably worse for them.
1129 Within that context, we must measure the Government's proposals and plans. I am fed up with social security debates being dominated by two factors: the costs of the social security system and the question of benefit fraud that goes with it. I have no time for fraud, any more than any other hon. Member. The speeches of my hon. Friends the Members for Birkenhead (Mr. Field) and for Newham, North-West outlined that. The Government have an obsession with dealing with the idea that somebody has over-claimed 10 quid on housing benefit or somebody has worked two hours more than he is allowed under the benefit rules and therefore is a serious fraudster.
Meanwhile, high levels of white-collar crime go on and huge syndicates are at work defrauding the housing benefit system. The London Labour boroughs got together as a consortium to try to sort that out, with precious little thanks or support from the Government for doing so. In fact, the Government condemned the boroughs for allowing such fraud to exist in the first place. It was not the assiduousness of the Department for Social Security or of the Secretary of State that sorted that out, but the inner-London boroughs.
§ Mr. Frank Field
Does my hon. Friend recall that some of the London boroughs wishing to bring prosecutions against landlords and landlords' agents who were ripping off the housing benefit budget to a tune which I do not think that the House yet properly understands, and were told when they presented their information to the Serious Fraud Office that it did not understand enough and that the boroughs should bring the cases. Yet those boroughs either have been rate-capped or face capping and therefore do not have the funds to bring the desired prosecutions. Is that not an extraordinary state of affairs?
The Government say that they are serious about fraud, but when certain London boroughs support them and become serious about tackling it, and there is a chance of bringing into court some very rich people who are taking enormous sums out of the housing benefit budget, the case falls to the ground because nobody wants to foot the bill for the prosecution.
§ Mr. Corbyn
My hon. Friend is right. He makes a very important point with which I hope that the Secretary of State will deal when he replies. Those big fraudsters should be taken to court and the Government should ensure that the resources are available and that the Serious Fraud Office takes the cases. Whenever there is a growing problem to the extent that the Government cannot handle or control it, they pass it to local authorities. At the same time, the Government make damn sure that local authorities do not have the resources necessary, then criticise them for not solving the problem. Local authorities are the perfect enemy for a Tory Government. It is like an obsession for them.
The large increase in housing benefit expenditure does not benefit the tenant. The budget has grown because of rent deregulation in the private sector, the rapid increase in housing association rents and the almost as rapid increase in local authority rents. Local authorities do not benefit from administering the housing benefit budget but are penalised for so doing. I am glad that the Select Committee will examine the burden on local authorities 1130 of administering a housing benefit budget and all the grief that goes with it, when those authorities are not given the resources to perform that task.
It is extremely depressing that, any time that we want to examine part of the welfare state, yet another agency is created. Such agencies have succeeded in ensuring large job losses, with fewer people doing the work—often, less efficiently than in the past. The Government's attitude to people who have dedicated much of their lives to making the social security system work is to make sure that those people end up working for an agency, then to change their contracts of employment and conditions of service.
Government statistics often claim that UK pensioners are at least 33 per cent. better off than they were when the Government came into office. That figure varies— depending on which Minister one talks to, or on which television or radio programme he appears—between a low of 32 per cent. and a high of more than 45 per cent. I have never met pensioners who are better off to that extent. I do not doubt that some extremely wealthy pensioners are doing better than average, but the majority do not have huge occupational pension incomes—if they did, they would be taxed on them anyway.
Many elderly widows have no income other than their state pension and housing benefit and are often badly off. They have been penalised by the breach in the link with earnings made by Geoffrey Howe in 1980, who called it his greatest achievement as Chancellor of the Exchequer. We can imagine his aspiration. He succeeded in robbing every pensioner in the country of about £20 per week by breaking the earnings link and substituting one with the retail price index.
Ministers predict that the pension level will become nugatory by the end of this century. That is a standing invitation to everyone in middle age to make some sort of private pension arrangement, because that is the only way of guaranteeing a reasonable income on retirement. That attacks the principle of the state pension. Likewise, we witnessed the Government's use—or abuse—of the Government Actuary in the 1980s, to reduce the value of SERPS and thereby increase market opportunities for the private pensions industry.
I do not apologise for strongly supporting the principle of a high-level state pension and a fully funded SERPS that can eliminate poverty in retirement years. There is no security in private pension schemes sold by high-pressure salesmen working only for commission. A lot of tragedies are waiting to happen in the next 15 or 20 years. I hope that someone will be around to pick up the tab for the tragedies that will occur as those schemes collapse.
The Government have done much to make the benefits system more complicated and less effective, including the tragic removal of benefits from 16-to 17-year-olds, changes in the housing benefit system, family credit and now the publication "Piloting change in Social Security: Helping people into work". The Government deregulated the labour market so that hourly wage rates, particularly for young people in service industries, are shameful and a disgrace.
People throughout the country are being pushed into jobs offering wages of £2 per hour or less. The Government know that it is immoral for people to work for such low pay but, instead of doing something about it, such as restoring the wages council system or supporting a national minimum wage, the Government—to assuage 1131 their guilt—introduced family credit and now propose a wider variety of top-up measures, to subsidise low-wage employers. That is a disgraceful vista.
Some extremely prosperous and profitable firms are deliberately paying low wages because they know that they can get away with it. People in the worst situations will have to apply for social security benefits to top up those low wages, and that is wrong. I strongly support a national minimum wage, which should be fixed at half male average earnings, at about £4.20 per hour.
Large numbers of people who suffered accidents at work and became invalids now face the most rigorous medical checks possible in the interests of cutting their immediate and long-term benefits. Government expenditure predictions show that they expect to spend less and less on invalidity benefits, mainly in respect of injuries arising from accidents at work.
Will the Secretary of State comment on the operation of the habitual residence test, which he introduced after his idiotic speech to the Tory party conference, when he said that he would stamp out benefit tourists from Italy? He tried to put on an Italian accent and to speak Italian. He used xenophobic arguments to introduce his test.
I will tell the right hon. Gentleman how it works. People who go abroad to visit their families, work, or see sick relatives in west Africa, the Caribbean or anywhere else return to this country to be told that they do not merit benefits. They lose income support and the right to receive housing benefit. They can become homeless and children may go hungry—all to appease a xenophobic audience at a Tory party conference.
§ Mr. Tony Banks
What happens then is that such people turn up at the borough council's social services department to seek assistance. Again, the problem is shifted to the local authority as a result of Government policy. It is all very well for the Government to claim that they are dealing with the issue, but they are not. They are transferring responsibility to hard-pressed local authorities, which is a disgrace.
§ Mr. Corbyn
My hon. Friend is right. If people can get through the maze of appealing against a habitual residence test decision, in many instances the result can be reversed, but the family has to suffer the heartache and headache for weeks and weeks, if not months and months. All that was the result of the horrible atmosphere of xenophobia encouraged by the Secretary of State in his Tory party conference speech.
We have witnessed in our own lifetimes the development of a comprehensive welfare state designed to insure people against poverty, poverty in old age and poverty when out of work. Over the past 15 years, we have seen a systematic attack on those principles. The Government keep saying that the current level of welfare spending is unsustainable—that there are too many elderly and poor people and too many demands on the system. There are not. The Government are more interested in reducing tax for the already rich and redistributing wealth in favour of the wealthy, while letting the poor rot and creating an underclass.
The Government are fond of quoting international comparisons, but those comparisons show that this country spends rather less on the welfare state than do most western European countries. International comparisons also point up the big con that the 1132 Government are perpetrating as a way of cutting back the welfare state. I believe strongly in the principle of a community that supports those in need at all times, not a community that punishes them for being poor and needy.
We heard a great deal about the international competitive market in the course of the social security inquiry. We were told that our marginal rates of tax are too high in Britain and that we can no longer afford the welfare state. We cannot go on playing ducks and drakes with people's poverty around the world—large employers say that wages are too high in Britain so they will move their firms to Spain unless British workers are prepared to drop their demands. Then the people in Spain are told the same; then the workers in the far east will be told the same, and so it goes on.
We need international comparisons that eliminate, not create, poverty. We need comparisons that guarantee security instead of creating misery and insecurity. I hope that an incoming Labour Government will reverse the policies of this Government and introduce instead a poverty, or redistribution of wealth, index. Thus, instead of looking at the bald costs of a service, we shall look at the effects of that service and the effects of the social security system as it eliminates serious poverty. I look forward to that.
Like my hon. Friend the Member for Newham, North-West and others, I see far too much poverty around me. I see far too many children unable to achieve at school because their families are so poor, with all the attendant poverty of expectations. There are many brilliant minds wasting away on dole queues, many children growing up in overcrowded accommodation—all of which leads to under-achievement at school.
Our benefits system is failing the people, and the Government are deliberately making sure that it fails them.
§ 6.1 pm
§ Mr. Malcolm Wicks (Croydon, North-West)
Much of the debate so far has dealt with past and current trends. We need also to recognise, looking ahead only 10 years or so, that there will be many demands on the social security budget and some newly recognised needs that will need to be taken fully into account. If any Government fail to go in for some radical thinking and some radical restructuring of the social security programme, their leaders, Conservative or Labour, will be left as frustrated Ministers.
One newly recognised need that I have in mind is the need for long-term care. If Sir William Beveridge were writing his famous report today and assessing, as he did in 1942, the risks that people face over their lifetimes— injury, sickness, unemployment and the likelihood of retirement—I think that he would argue that one of the risks that should be built into our social insurance system is the eventuality that a person will need, if not conventional care, then what we now call long-term care. Many of us who survive into our 80s or 90s will become frail, not necessarily needing urgent medical attention in hospital but needing intensive social care, in our own homes or, failing that, in various kinds of residential institution.
We all know that many of our constituents need long-term care requiring the payment of thousands of pounds a year, and many of them watch as their lifetime 1133 savings disappear because they have to pay for the care if they are not protected by the social security system or social services departments. There is a strong argument for building into our social security system protection against that sort of risk. That will be debated a great deal in the coming months and years; we need such a debate, and we need to examine the different options. If we do cater for that risk, it will place new demands on our social security and national insurance system—
§ Mr. Frank Field
One of the other letters that I received was from a woman of 67 whose husband is 72. They have worked hard all their lives and are proud of the way that they brought up their children. They know, however, that, life expectancy being what it is, one or both of them may eventually need long-term care: and they know what the costs will be. They also know what the effects will be on their children; no doubt they will be supportive, but this couple are worried, with fees running at between £300 and £500 a week, that they may outlive any insurance policy that they have. It is not very nice for such people to feel that they may become a burden on their children, who in turn might begin to wish that they would "move over". The family's assets would certainly be endangered.
The lady writes in her letter that everyone says that she should be insured, but she wonders with whom to insure. It is one thing to know that any money not used up will be paid into the health service; it is quite another to think of a private company benefiting if people die before they need the care. Those problems face many of our constituents, who are worried about losing the free care in the health service for which they have paid but which has been taken away over the past 15 years.
§ Mr. Wicks
I thank my hon. Friend. He reminds us that the goalposts have been moved, partly by the Government. Once upon a time, many people spent their final months, when they were ill, in cottage hospitals. Now, increasingly, although we know more about the impact of the wider environment on health care, our national health service is—paradoxically—being encouraged to take an ever narrower view of its responsibilities towards the sick.
§ Mr. Andrew Rowe (Mid-Kent)
The goalposts have been moved, but not exactly in the way suggested. Owing to an extraordinary distortion in investment over the years, property has been regarded as by far the best place to put money. An enormous number of people have put almost all their assets into their homes.
Secondly, the age at which children can expect to inherit has risen so much that it has greatly changed many people's need to inherit. Both aspects are ingredients in a debate which, I entirely agree, we desperately need to hold, because this is an important subject.
§ Mr. Wicks
I thank the hon. Gentleman. By an historical fluke, inheritance now affects a much greater proportion of the population than it did even 30 years ago—at the very time when long-term care has become much more important. That can set up some delicate problems between the generations.
My hon. Friend the Member for Birkenhead (Mr. Field) is keen on examining the correlation between the social security system and behaviour—how some policies 1134 promote bad behaviour and others, one hopes, promote good. While some people, through no fault of their own, cannot accumulate assets, others who can, encouraged by the Government and indeed by all parties, own their own homes, or save and invest. It is therefore quite wrong that they should lose all those assets during the last few years of their lives, and watch them being swallowed up simply because they did the right thing and behaved in an economically responsible way.
Our political parties are turning their attention to this issue now: we are going to hear far more about it in future. One option relates to the social security system, but I must not get sidetracked into a wider debate about long-term care. My thesis is that there will inevitably be new demands on the system in future, so it behoves us to take a radical look at how we spend our social security pound. The needs of families with children, although hardly new, will be discussed much more in the coming months. We are increasingly aware that, in middle England—to use that over-worked phrase—many two-parent families who are not near the poverty line are struggling to bring up children. Increasingly, the costs of children go into the teens, into the university years, yet we are expecting families to pay those costs with less support from the state.
It is not surprising that people elsewhere in Europe are very worried about low birth rates. It is not surprising that European men, but particularly European women, are finding it too expensive to have babies, which is why on average the birth rate in the European Union nations is now as low as 1.5 or 1.6. In the early 1970s, it was 2.5 or 2.6—that is one child fewer because of the dramatic decline in birth rates. That has come about partly because the women of Europe—less so the women of Britain, where our birth rate is slightly higher—are discovering that it is very expensive to have children. Increasingly, Governments—I know that this Government are doing it in private—are looking at how they can enhance the economic well-being of such families.
If we want to turn again, so many years after Eleanor Rathbone, to develop a new partnership between the family and the state, that would put added pressures on Government expenditure on social security. Yet social security is already at record levels. Who would have believed 16 years ago—those foolish enough to believe the rhetoric that public spending was going to come tumbling down and that the social security budget would be constrained—that a Secretary of State for Social Security from the new right would be presiding over record levels of public spending in his Department? That is something that will tease the historians in future.
I believe that there is scope for a radical restructuring of the social security budget. I am not convinced—it would be worrying if one were—by the public expenditure tables and accounts that every social security pound is being spent effectively on what the House would regard as sensible social security objectives. Spending is out of kilter. I shall give three examples.
My first concerns housing benefit. It is quite extraordinary that the social security programme is so way out of control. Let us remind ourselves of the figures for rent allowances. In 1994–95, we are already spending £4.7 billion on rent allowances. By 2000–01, it will increase to a staggering £8.1 billion. It is quite extraordinary that we are spending that amount on housing benefit. If I, and, indeed, the House, could be convinced that that was 1135 sensible social security and housing policy, that would be one thing, but I am not so convinced. The Department of Social Security has been a victim of a housing policy that has neglected the idea of subsidising and encouraging bricks and mortar, and it has, through a means-tested system, with all the problems of the poverty trap that that occasions, decided to subsidise the individual. That has been a green light for the exploitative landlord.
In my advice surgery some two months ago, although he did not have an appointment, a gentleman rang to say, "I must see you as my MP." He came in with a henchman and said that his problem as the local landlord—a well-known landlord—was that he was no longer getting the money through from Croydon council as quickly as he had in the past. I said, "What do you mean? The housing benefit does not belong to you." He said, "Yes, but I always get my tenants to sign an agreement that the money will come direct to me." I told him that it should not be like that. His complaint was that the council was tightening up and toughening up a bit, was doing some checks and as a result he was not getting his cheques through on time. He was seeking my representations on that.
I do not believe that the taxpayer supports a housing benefit system that encourages inflated rents, and which in this particular case—it cannot be an exception— involves a cheque going from the public purse straight to the new Rachman landlords of the 1990s, who have been encouraged by the Government's policy.
§ Mr. Frank Field
Those cheques are not going only to the landlord, of whatever kind, as they are often for fictitious tenants.
§ Mr. Lilley
I am grateful to the hon. Gentleman for giving way, and he is making a thoughtful contribution. This specific issue has featured in a number of contributions. Housing benefit is the one benefit that is handled by local authorities. It was not until the Conservative Government introduced incentives for local authorities to crack down on fraud, and penalties when they do not, that they began to take the issue seriously, as they are now doing. I trust that the hon. Gentleman will also welcome the measures that we are taking to give tenants a stake in getting rents down on above-average rented properties from 2 January next year.
§ Mr. Wicks
Because of Government policy, there is a massive housing benefit system, administered by local authorities. We heard a well-earned tribute to those London Labour councils that are not just talking about fraud, because talk comes easy, but are being tough on fraud. Given the Secretary of State's keen interest in this, will he take the opportunity now—I am happy to give way again—to assure us that local authorities will be able to employ the staff to be tough on fraud in the future?
§ Mr. Lilley
I can certainly give that assurance. Indeed, they are required to do so. It was the Conservative 1136 Government who provided the computer system for 24 London boroughs to co-operate together in combating fraud in London.
§ Mr. Wicks
I am encouraged to hear that, but it contrasts rather sharply with some of the evidence that the Select Committee on Social Security is hearing from the Secretary of State's offices. On the one hand we hear evidence that every fraud officer saves the taxpayer a substantial amount of money; on the other we are told that the Benefits Agency is not able to employ more fraud staff because of some extraordinary constraints. The economics needs to be looked at. The rapidly increasing amounts that are spent on housing benefit neither enhance true social security nor represent sensible housing policy.
Let me move on to another example. Hon. Members have made reference to family credit. I remember when Keith Joseph introduced family income supplement in the House. I was not here, but read about it as a student of social policy. I recall that the cost was some £4 million or £6 million in the first year or so. I do not think that he would have ever dared imagine that spending on family credit would be heading toward £2 billion in a few years' time. We have stumbled into a hole, an expensive new social security policy that is about subsidising the exploitative employer. We cannot easily persuade our constituents as taxpayers that the social security pound should be spent on subsidising low wages.
There is a clear difference between the political parties. Our arguments for a decent employment policy and a minimum wage are mainly about justice and the fairness of the case, but they are also about using social security pounds effectively. If social security pounds are going to be scarce in the future, as they will be under any Government, it is absurd that we are developing new initiatives to introduce social security programmes for single and childless couples in recognition of low wages.
Another paradox of new right politics is that the belief that we should not intervene economically and in the labour market, and certainly not make employers pay decent minimum wages, means that the state, commanded by the new right, has to intervene socially through the social security system in a massive way which no Labour Government would ever have dreamed of doing. Soon, almost £2 billion will be spent on family credit because of Britain's low wage policy.
The third example is income support. Beveridge envisaged national assistance, later supplementary benefit, simply as a safety net. There was to be a national insurance framework and, if people fell through that, for a period of weeks or months they would receive national assistance. Income support has now become in part a major and often long-term social security programme to support one-parent families. Life on income support is a grim life for such families. I do not believe, as saloon bar homily would have us believe, that income support provides a good standard of living, a life of Riley. It provides a terrible standard of living for those mothers and their children, yet, this day, seven out of 10 one-parent families are dependent on income support. The Government have never said that one of their social security objectives is to use income support in that way. It has happened partly because Britain has failed to develop a decent family policy.
We are having to spend increasing amounts of different social security benefits on what is essentially, yet implicitly, an early retirement programme. Increasingly, 1137 many adults, particularly men, are thrown out of the labour market in their 50s. They then have to get by on invalidity benefit or income support with no prospect of work, waiting for their retirement pension. We are now spending substantial amounts of money on that, and again that is a misuse of social security policy.
We need to liberate the language of social security from social security jargon. The issue is how we promote true social security in Britain. That is an important question when a feel-good factor is absent because there is a feel-insecure factor. If one is concerned about social security, it should not be confused with social security benefits. One starts not with state benefits but with the foundations of social security in a society. The two crucial ones are employment and a strong family.
Employment has to be the major social security policy. If employment prospects are wrecked and worklessness encouraged, social insecurity is promoted. I mentioned the men thrown out of the labour market. Let me give a statistic because, unlike other hon. Members, I believe that statistics should promote good argument. At present, one in three men aged between 55 and 59—not the five years before retirement, but earlier than that—are not in work. Only two in three are in employment. Yet we have futile debates in the House about whether the retirement age should be 60, 63 or 65, as if that had meaning for the vast proportion of our people. One in three of those men are out of work. A minority of that group are technically unemployed, the others are called economically inactive.
If some of the economically inactive are new lottery winners, good luck to them. Frankly, new lottery winners will need a good deal of luck if the lottery prize is not to destroy their lives, but most of them are people who have either had to take redundancy packages or have been forced out of work. What we have seen is the rise of the inactive society in Britain. Because of the failure to move back towards full employment, simply too many of our citizens are economically inactive. That is bad news for them and for their families—most do not want it—but it is also bad news for the economy and the social security budget.
I bring my remarks to a conclusion. [Interruption.] I welcome the encouragement of the Opposition Whip, who I know would like me to go on longer, but I will not. I shall disappoint him as usual. Never please the Whips all the time.
The role of the Department of Social Security in the future is as a promoter of social security in the wider sense at which I have hinted. The Department of Social Security should not just be obsessed with state benefits. It should ask what are the trends in our society that make for social insecurity and what is the role of Government in promoting social security. The great failure to develop a family policy in Britain is a classic example. The rise of the single, unmarried mother is consuming more and more of the social security budget. Who in Government is taking hold of that issue and asking what are the preventative policies? [Interruption.] Apparently the Minister of State is. If so, he must be less silent on the issue. Who is asking what can be done about that trend, what are the implications for education in schools and for family planning, and what are the wider implications?
1138 One could say that that is not the job of the Department of Social Security. The problem is that it is no one's job. In the old days, we had a thing called the joint approach to social policy. The Department of Social Security must become the major advocate for a joint approach to social security in the future. There is an absence now of clear social security objectives. If we could agree on clear objectives, we would see, as I hope that I have argued, that much of the billions of pounds of expenditure is now wasted; it is not used usefully.
I end with this point. At the moment, there is a correlation between the highest-ever levels of social security spending at a time of record levels of social insecurity. How we move away from that is the key challenge for the future.
§ Mr. David Shaw (Dover)
I begin by congratulating two people without whom tonight's debate would not have been possible. First, I congratulate my right hon. Friend the Secretary of State on his Mais lecture speech— it seems like ages ago now, but I believe that it was two years ago—when he started the debate and we began to realise that there were real questions about the affordability of our social security system, especially if changes were not made.
Some of those changes have been made and some of them have been tough for the Government. One will not please all the people all the time if one is having to say that there will not be benefits for certain groups of people in the future, or that benefits will be curtailed or restrained. Those are tough decisions that must be taken sometimes if one is to run a country on a fair and just basis so that everyone has opportunities in the future.
I also congratulate the hon. Member for Birkenhead (Mr. Field) who chairs the Select Committee. He has given us a most enjoyable time discussing this particular subject. We have dealt with many subjects, but on this one we have been able to range widely. We have had much enjoyable debate. There have been times when the hon. Gentleman has been put on the far right of, dare I say, every member of the Committee, and there have been times when the hon. Gentleman has resumed his traditional political position and his position in the centre of the Committee. It has been stimulating. We are confident that the hon. Gentleman finds it easy to stand in for any member of the Committee who may be absent on occasion and put his point of view no matter at which end of the political spectrum that member of the Committee is. Therefore, we have been able to ensure that virtually every perspective has been discussed.
Having said that, I find it sad that our report should cost £28 while the Department's annual report costs £16.35, a total of £34.35. Most people on social security will not be able to buy those reports. It is ludicrous that something that affects so many millions of people cannot be brought into their households because they cannot afford it.
Parliament and the Department must consider how to make the reports more widely available. I note from parliamentary answers that no more than 1,000 copies are sometimes available to a population of 57 million. I do not imagine that every man, woman and child in the country will want to read the third report of the Select Committee on Social Security, but many millions might be interested. I have long promoted the Internet and the 1139 information super-highway, and I hope that the Department, the Select Committee and the House as a whole will consider ways of providing a wider population with the reports by electronic means.
Our report started from the beginning, as it were, and asked, "Where is it all going?" Social security currently costs the country some £85 billion; the figure was heading towards £100 billion by the end of the decade before certain changes were made, and it may still touch that amount then. Social security spending amounts to nearly one third of public expenditure, and it has a habit of growing regardless. More people try to claim each year, and although many may cease to be eligible as a result of a change in their circumstances, claimants nevertheless form a never-ending group.
That causes problems. The main purpose of the original system was to help those in genuine need, but, given the fraud and abuse statistics, there is no doubt that it has failings. It does not always help people in genuine need; it provides money for households where the need does not exist, or is not as great as the claim suggests. We must do more to ensure that those in genuine need benefit.
We must also ensure that those in temporary need do not become permanent claimants. In many parts of the United States, two-year limits are being suggested in regard to certain types of benefit. Although such limits would clearly not be appropriate for, for instance, the disabled, they would be appropriate for other groups. We should provide incentives to encourage people to work, especially those on income support and unemployment-related benefits.
As the report points out, one of the main problems is that the social security bill has grown enormously as a proportion of gross domestic product. In the mid-1970s, when we last had a Labour Government, the proportion was 7.4 per cent.; today, even after many years of Conservative government, it is 12.6 per cent. I freely accept that that is an appalling state of affairs. The fact is that, regardless of which party has been in office, the social security bill has increased.
One good aspect of the way in which the bill has increased under a Conservative Government, however, is the fact that we are now putting nine times as much into benefits for the disabled as Labour did in 1979, the year in which we came to office. Some of that growth has benefited worthy recipients—genuine people whom we wanted to help. None the less, there is no doubt that some of the increase relates to less deserving groups.
The Joseph Rowntree Foundation and others produce reports suggesting that the growth in the social security bill can continue, but I question the validity of their assumptions. I do not believe that the vast bulk of people want the growth to continue; they recognise that we must invest in industry, technology and business, and that we cannot afford to put ever more money into social security. We must consider our international competitiveness.
We must also consider the way in which incentives operate. Many would say that, rather than being designed to help people to go to work, they are often designed to help them to stay away from work. Many would say that they are designed to help people to claim, rather than cease to claim. Many would say that they are designed to promote personal irresponsibility rather than personal responsibility. We should deal with such issues increasingly as the social security debate continues, as our Committee intends it to do.
1140 In our report, we tried to take account of the possibility of gaining knowledge from other countries, in the context of our competitiveness in business, industry and public expenditure. If our expenditure is too great compared with that of other countries, our taxes and other disincentives will also be too great. We found that in Japan few if any single mothers are kept by the state: the family takes much more responsibility. We also found that the elderly are often cared for by their families, and do not impose a cost on the state.
There is no doubt that Sweden has a wonderful social security system, but the Swedes do not pay much for it. They have borrowed heavily from overseas, but they must pay the bills in the next century. There are doubts about whether they can afford to do so, as their national debt is now more than 100 per cent. of their national income. Ours is less than half our national income.
Many problems will arise in the next century, especially in relation to the elderly, owing to the demographic structures that now exist in many European countries. Reference is often made to the inter-generational contract, whereby one generation's contributions pay for the pensions of elderly people. That will be questioned in the future, however, simply because there has not been enough provision in the past for the pensions of the future. We must consider how we are to meet some of the commitments that have been made. My right hon. Friend the Secretary of State has already amended the state earnings-related pension scheme for purposes of affordability.
I should have liked to say more, but my main point is this. I hope that we shall consider ways in which the private sector can make a greater contribution in the future. Will contributory, non-contributory or income-related benefits point the way forward, or will the state have a smaller role? Will savings and the private sector provide more? I hope that my right hon. Friend the Secretary of State will come up with low-cost saving schemes in the next few years, and that the Chancellor will support them, so that many more people can have pensions in the future—especially those on low incomes.
I thank the hon. Member for Birkenhead for a report— much of it the result of unanimity—which, I hope, will take the social security debate into a new phase. I trust that we shall have many similar discussions in which we can explore one of the most important issues facing the nation in the next decade and beyond.
§ Mr. Donald Dewar (Glasgow, Garscadden)
Like everyone else, I welcome the fact that this debate has taken place. It has not been over-well attended, but I congratulate the Ministers on the Front-Bench team. They are all loyally in their place, especially the new recruits on parade. The meaning of flexible labour and labour mobility has been given a new definition by the experiences of the Department of Social Security team in recent times. I thought that perhaps the Department was being used as a boot camp under the watchful eye of the Secretary of State for Social Security to put the younger raw material into some sort of shape.
At any event, I congratulate everyone who has attended the debate today and especially my hon. Friend the Member for Newham North-West (Mr. Banks)—who left just one minute ago but who has sat loyally throughout 1141 the debate and who made a speech—because he is the only one who could not, in social security terms, be described as a usual suspect in our exchanges.
I seriously congratulate my hon. Friend the Member for Birkenhead (Mr. Field) and the Select Committee on Social Security. Its report is a valuable analysis. In conveniently packaged and presented form, it gathers together some important facts, and some opinions that, as he, I think, justifiably recorded, were held with remarkable vehemence by the various combatants during their evidence. The report must look forward because it is incomplete. It is a starting point and not a finishing point and it raises issues that are of fundamental importance.
Sustainability has become something of a buzz word for politicians in a number of sectors, but it is important as a defining factor in social security as well. There is an argument about what it means, and about whether there is a point of no return for social security expenditure and, if there is, where that point is reached. It is not possible to define it in that way as clearly there are burdens that are hard to bear and that one may feel one must bear as a Government and community. Clearly, the point of no return is a combination of the fiscal pain, the political will and the social judgment about the social casualties that may result if that burden is not shouldered.
All those problems interrelate and bear on each other. They cannot, of course, be reduced into one formula that can be applied irrespective of circumstances at any given time. I take the simple view that there is not a predetermined proportion of gross domestic product that one can say must never be breached, and where, when one has reached it—if one has brought expenditure down to it—one can rest in peace for ever and a day.
I was interested in the exchanges in our economic debate yesterday, when the Chief Secretary to the Treasury paid his touching tribute to the late R. A. Butler for having in 1955 brought public expenditure as a share of GDP down to 33.5 per cent. Then, in a gracious but inevitable anti-climax, he said that he did not think that he could achieve the same thing. Of course, he is right: he cannot achieve that and none of us could achieve that. It is wrong to conduct the debate in that way.
We must consider the problems. Some interesting points have been made about some of the new problems and difficulties that will emerge. We must try and balance them against the ways in which they can be tackled, both in the private and public sectors, because, of course, both have a role to play, and we must try to tackle them against the fiscal circumstances that the Government of the day face.
I am strongly in favour—it would be astonishing if I was not—of further information and having a debate that is based on public information and a well-informed public. It will, I hope, not discourage the Secretary of State to know that "The Growth of Social Security" is a document from which I probably quote more often than any other, because it does, especially if one reads the small print at the foot of the tables, give a fairer picture than is sometimes given of the position in which we find ourselves. I also often quote and find useful the document that the Department produced on international comparisons.
1142 It is possible to argue that the European Union is spendthrift in its approach to social protection expenditure. That is a fair point to make, although I do not necessarily accept it, but it is still interesting and important to recognise, as someone mentioned earlier, that social protection expenditure as a percentage of GDP in this country is lower than in the European Union in general.
It is important that we do not forget the pressures that demographic factors will bring to bear, at least until 2030 to 2040, but it also worth remembering—to quote from paragraph 35 of the Select Committee on Social Security report—thatThis country is forecast to move from having one of the most burdensome dependency ratios in 1980 to one of the least severe in 2040.There is nothing permanent about these states, although it is important that those factors are always borne in mind. I am therefore strongly in favour of information. It helps me, so it is a selfish point, but I hope that it will help the debate as well.
I also appreciate—I do not have time and it would be wrong to run them through them in detail—the report's points about particular sectors of interest and pressure. Housing benefit has been mentioned. Of course housing benefit is a great growth area of expenditure and it is common ground between myself and the Secretary of State that, whether the policy was right or wrong, it can be traced back directly to Government policy.
Of course, I want the problems in relation to lone parents to be addressed, but I would state the problems, not in terms of a judgmental condemnation, and certainly not in terms of the scapegoating politics that appeared at least in some parts of Government some 18 months ago, but much more in terms of why, for example, over the years, the number of lone parents in work as a percentage of the total has dropped so substantially. Why has that happened? Given that it has happened, if we can understand why, does it help us to find out how we can get over the problem by offering opportunity to those in that group?
My hon. Friend the Member for Birkenhead has probably a more directive view of the social security system than me and possibly the Secretary of State, who has fairly said that he does not believe that one can necessarily change social habits by diktat or Government exhortation. I think that paragraph 57 of the report contains an interesting hint that may or may not represent the mind of the Committee. It remarks, in discussing the group of lone parents who have not had a long-standing relationship that has broken down to produce lone parenthood:How to question the wisdom of this trend, while not blaming the single parents as a group, will call for great political skill. The Committee will be looking in its future sessions at ways by which their route to (never married) single parenthood can be closed.I do not know what inference is to be drawn from "can be closed", but I await with some interest how that will be achieved. It is a phrase that has already been commented on to me by quite a number of interested groups, usually with some lack of favour, but of course we will wait to see what emerges at the end of the day.
In its preliminary description, the Committee is right to draw attention to the fact that, for example, some member of at least half of this country's households receives means-tested benefits. It is right to draw attention by 1143 implication—and I am glad that the hon. Member for Dover (Mr. Shaw) and figures of great respectability in terms of their dryness have signed the report—to the fact that a contradiction may exist between the condemnation of the growth of means-tested benefits and the by-products of the introduction of, for example, jobseeker's allowance and, to a large degree, incapacity benefit. There are therefore many interesting and important matters to be considered.
Unfortunately, I do not have time to talk about fraud at any length. I have said already in other forums that it is unfortunate that it has taken us so long to get down to the interesting and important job of trying to define what fraud consists of. The Public Accounts Committee considered that problem in its 58th report published on 27 October 1993. At that time, we were told that efforts would be made for the first time to define the types of fraud. It has happened only now and it is a little belated, but from it some interesting points flow.
I was slightly surprised to discover that the front-line attack on fraud would come from home visits. I endorse the point that, as some of my hon. Friends said, if there are to be home visits, they should be ensuring not only that fraud and abuse do not exist, but, at the same time, that proper entitlement that has not been taken up is taken up.
There should be a double purpose for home visits, but I cannot help saying to the Secretary of State that, from contact with the Benefits Agency, my understanding, and I may be wrong, is that, over recent years, home visits have positively disappeared as a result of Government policy. It is a little strange that we are now told that they are to be revived because they are an essential way of fighting fraud. The best thing that we can deduce from that is that fundamental errors have been made in the past.
§ Mr. Dewar
If my hon. Friend will forgive me, I am under pressure and I have given an undertaking to allow the Secretary of State some time to reply.
If the findings of the survey on fraud are accurate, in that only about 12 or 13 per cent. of the total fraud loss came from impersonation, forgery or the stealing of order books and giros—I do not believe that my hon. Friend the Member for Birkenhead would accept that, judging by his passage on organised fraud—it puts a question mark against the savings that the Secretary of State expects to achieve with his benefit payment cards system. The vast majority of the fraud identified involves people who are working and claiming what they are not entitled to or people who pretend to be single when they are in fact cohabiting. Those things will not be dealt with by the benefit payment cards system.
I am not taking a hard line on this but, given that the vast majority of fraud will not be touched by that system, the expected saving from the 19 million cards that are to be issued, at an initial cost of £135 million and an estimated running cost of £77 million, could usefully be reassessed.
I am sorry that my speech has to be so brief, but perhaps we can find another forum in which we can discuss this. It would be helpful if the Minister could say a word or two about a subject raised in the report, which provoked—if that is the right word—the Committee's visit to Switzerland. I am talking about the suggestion about localisation which followed the Mais lecture.
1144 I remember the arguments about that and I thought that they had been laid to rest, particularly the arguments about different levels of benefit in different parts of the country. It was raised again on 9 July in The Independent on Sunday. It was a prominent story entitled:Tories plan 'regional dole rates'".It said that the cost of living in London is 17 per cent. higher than the national average, and that in Newcastle it is 12 per cent. lower. It suggested that the Secretary of State was considering whether that differential should be reflected in the rate of unemployment and other benefits.
I understood that that was not on the Secretary of State's agenda, but it would be worth hearing that from him again. It is unusual for a story such as that to appear without at least some prompting—[Interruption.] Well, the Secretary of State can deal with the matter quickly. In the original Mais lecture, the Secretary of State said:It is harder to mobilise local pride"—that is, under the present system—to generate positive alternatives to welfare dependence.Although I approve of the sentiment that we want to end welfare dependence, given the recurrence of the story, it might look as if that principle still lives. If it does, it should be the subject of an important debate. It would be helpful if the Secretary of State could say a word or two about it.
I am sure that the House will believe me when I say that I would like to have covered many other things. The Committee's report is descriptive, not prescriptive. It draws attention to the framework for the future and for a continuing debate, which I welcome. There is a long way to go.
I was interested in paragraph 101, which neatly sets out the future work pattern for the Committee and answers some of the questions with which we are familiar—by "we", I mean those of us who have read the latest book by my hon. Friend the Member for Birkenhead, "Making Welfare Work". That book gives a hint about the future of the social insurance principle and so on. It outlines what my hon. Friend thinks should be the future shape of events. It will be interesting to see whether he can carry his Committee down that road as things unfold. Although he expresses his belief in the social insurance principle in a much stiffer way, its general outline is very much in line with what was said by the Commission on Social Justice.
I recognise that there is great public and political anxiety about where we are going. I may be wrong, but I imagine that the Secretary of State will be saying a word about the Labour party's position. He is not a man who can always resist temptation and I believe that I am safe in that assumption. The Labour party is in hot water with the Secretary of State because it persistently refuses to live up to the caricature that he loves to think is alive and well. The right hon. Gentleman is learning the hard and painful way that it will not sit up to be shot at just to please the Secretary of State.
The Secretary of State intervened briefly to suggest that the Labour party was in some way being unreasonable by continuing to stress that work should be worth while and that people should not find it financially advantageous to remain on benefit or give up work to remain on benefit. If he thinks that that is unreasonable, he must get used to that sort of unreason from the Labour party. I believe that that is a common-sense approach and that it is right for the future of the welfare system and for those who, at least on a temporary basis, have to use it.
1145 We shall continue to argue a responsible approach based upon social need and a system which we hope will reward those who take up the opportunity that it offers while protecting families, children and the vulnerable.
A number of detailed plans have already been unveiled on welfare into work, and more will follow. The argument is still to unwind, but the general approach set out by myself, my right hon. Friend the Leader of the Opposition and others is right. The application will be different from that which is emerging in Government policy. However, we all believe that that is a matter for the electorate to settle, and on that basis I watch future developments with some confidence.
§ The Secretary of State for Social Security (Mr. Peter Lilley)
This has been an interesting debate and the standard of speeches, notably—as one would expect— from members of the Select Committee, has been high. Speeches have been made by the hon. Member for Birkenhead (Mr. Field), the Chairman of the Committee, by the hon. Member for Croydon, North-West (Mr. Wicks) and by my hon. Friend the Member for Dover (Mr. Shaw).
There have been some nostalgic speeches from old Labour in the shape of the hon. Members for Newham, North-West (Mr. Banks) and for Islington, North (Mr. Corbyn). There was the customary elegant speech from the hon. Member for Glasgow, Garscadden (Mr. Dewar). With his characteristic courtesy, he curtailed his remarks so that I would have time to reply. I am grateful to him and the least I can do is respond to his specific question about localisation and the reports in the newspapers.
The hon. Gentleman expressed the belief that, when something appears in the newspapers, it might automatically have some foundation. I can assure him that that has not been my experience. I do not know the origin of the story, but the hon. Gentleman is correct: when I talk about the proposition that, whenever we make a change, we should see whether there is any scope for localisation of the delivery and handling of the benefit, I am not thinking in regional terms or of differences in regional rates. The regional variations in living costs to which the article referred represent mainly the difference in housing costs. The system already reflects that difference through the fact that housing benefit is related to the level of rents in each area.
I am looking much more to the type of changes that we have introduced on a large scale, through community care, and on a smaller scale, through the changes that I have announced in housing benefit that give greater discretion to local authorities in the handling of that benefit from January next year.
I particularly welcome the Committee's report on the review of social security expenditure. That report and much of today's debate show how dramatically views on the reform of social security have changed since I called for a national debate in my Mais lecture two years ago. At that time, there was a widespread view that all that our system required was a removal of any restraints on higher spending. In his report "The Future of Welfare—A guide to the Debate", the Labour academic John Hills blithely suggested that there would be nothing wrong, in the long 1146 term, with spending an additional 5 per cent. of gross domestic product on social security. By contrast, in this report, a Labour-chaired Select Committee now accepts that thegrowth of Social Security spending is a cause for concern.I recognise that the more realistic position taken by the Committee owes a lot to the hon. Member for Birkenhead, who is almost the only Labour Member who is prepared to face the facts. The very fertility of his ideas should shame his Front-Bench colleagues out of their reluctance to come up with some new policy ideas. To be fair, there were some hints from the hon. Member for Garscadden that they would be more forthcoming in future. I welcome that.
My medium-term objective when I announced the review of social security spending was not to cut spending, but to stop it outstripping the nation's ability to pay. As I never tire of pointing out, on average, just financing social security costs every working person almost £15 every working day. The cost was set to grow faster than gross domestic product, as it had been doing. Reform obviously takes time. As the hon. Member for Birkenhead said in his recent book:changing the social security budget can be compared to navigating a great oil tanker … once a decision is taken it is a full three miles before any further impact can be made on the direction of the ship.The hon. Gentleman granted himself a rather generous 20-year horizon for his programme for reform of the welfare state.
Reform takes time because most change requires legislation. If, as I usually prefer, changes affect only new claimants, their impact takes time to build up. Nevertheless, the changes that have already been announced should reduce the growth of spending by £4 billion a year by the end of the century and by more than three times as much in the longer term. As it happens, growth in social security spending in real terms during my first three years—which the hon. Member for Birkenhead suggested marked a period of failure—has been less than the underlying rate of 3.3 per cent. a year, although I accept that that is as much to do with the economic recovery as to do with the initial impact of my reforms, which will take a considerable time to build up.
The real measure of success against which I wish to be judged will be the reduction in the underlying rate of growth in social security. The measures that I have announced should cut the rate from 3.3 per cent. a year faster than inflation to just 1.3 per cent. a year over the next three years, settling at about 2 per cent. thereafter. I do not pretend that that is necessarily enough, but it does mean that the share of GDP taken by social security, which has almost trebled since the war, should decline gently henceforth.
If Opposition Members complain that spending is still growing too rapidly, they should remember that the Labour party has opposed almost every reform that I have introduced. In effect, the Opposition are telling taxpayers that they want them to cough up the best part of £4 billion a year extra during the next Parliament and £14 billion a year extra in the long term—and that is before implementing any of their, I regret to say, still profligate spending plans.
The Select Committee was right to recognise that the growth of social security spending is a matter of concern not just because of the tax burden it imposes on people, but because it reflects a growth in welfare dependency. I 1147 hope that all of us would prefer people not to be dependent on benefit, but to be self-sufficient. The report illustrates the extent of dependency with the claim, which I am happy to say is mistaken, that half of all households contain someone on income-related benefits. That is incorrect. Some 27 per cent. of all benefit units contain someone on income-related benefits and about 30 per cent. of households do. That is still too high, but it is well short of the 50 per cent. suggested in the report.
§ Mr. Frank Field
The right hon. Gentleman should convey that view to the Prime Minister, who used those figures in an article in The Daily Telegraph the day before his re-election as party leader.
§ Mr. Lilley
I have a feeling that my right hon. Friend the Prime Minister was generously quoting the hon. Gentleman, thinking that his figure had been audited. I am happy to put the record straight.
I want to take this opportunity to address a specific issue raised by the hon. Member for Birkenhead in his recent book, which was mentioned in the Select Committee report. The book "Making Welfare Work" is, like everything the hon. Gentleman writes, full of erudition, fascinating insight and interesting analysis and I agree with much of it, but in the final section he makes a number of assertions, as he did in his speech today, about the role of means-tested and contributory benefits which I venture to suggest are mistaken.
The hon. Gentleman states that the Government have pursued a policy of increasing the number of people on means-tested benefits at the expense of contributory benefits. I do not think that that was ever a deliberate policy of this Government—or, indeed, of previous Governments of most complexions, as there has been an increase in the number of people on means-tested benefits over a long period.
The hon. Gentleman knows that that growth primarily reflects three things—first, the growth in lone parents, which is the largest single cause of the increase, and he does not suggest that that could be replaced by contributory benefits; secondly, the impact of the earnings dispersion affecting lower-skilled workers, a subject with which I have detained the House frequently and which I spelt out at some length in my Ulster lecture; and, thirdly, the transfer of support for housing from bricks and mortar to housing benefit, which is a means-tested benefit.
I have certainly not had a preference for extending means testing as an end in itself. In my Mais lecture I criticised thoseproponents of means tested benefits who emphasise the fiscal savings but tend to ignore the disincentives on claimants.I emphasised that other methods of targeting benefits were usually preferable to means testing. As a result, most of the reforms that I have made have involved such methods—changing or tightening up on conditions of entitlement other than people's financial means and making benefits, where appropriate, more conditional.
For example, my main changes involve equalising the age of entitlement to state pensions for men and women and ensuring that incapacity benefit goes to those genuinely incapable of work. Both remain contributory benefits. Only a tiny fraction of the £14 billion of savings announced so far—some £200 to £300 million—arises from the one reduction in the contributory element, that 1148 which relates to the jobseeker's allowance. That will be offset by other measures that will reduce reliance on means-tested benefits.
I have explicitly ruled out means testing the state pension because that would penalise and discourage people who make additional provision for retirement. The contributory basic pension provides a platform on which people can—and, I am happy to say, increasingly do— build extra pension provision. Indeed, as a result of that, the proportion of pensioners who rely on income support has fallen since income support was introduced. That is an area in which there has been less reliance on a means-tested benefit.
The hon. Member for Birkenhead is not being remotely realistic when he suggests that contributory benefits could replace means-tested benefits for everyone who is out of work, thereby—as he implied—restoring incentives, eliminating fraud and saving money. In the first place, any form of unemployment benefit, whether contributory or not, must be means tested against earnings. Both unemployment benefit and income support are withdrawn if people earn more than a certain amount. Consequently, both contributory and non-contributory benefits for people who are out of work are equally likely to act as a disincentive to work and to create opportunity for fraud through working without declaring the work.
The suggestion that replacing income support and housing benefit by contributory benefits could save money is simply untenable. All of us who look realistically at social security know that there is a great prize to be gained if the budget can be curbed, but we also know that there is a political cost to be borne from those who have to forgo the money that we save.
We would all love to find a philosopher's stone that enabled us to spend less without creating losers. The hon. Member for Birkenhead seems to think that replacing means-tested benefits with contributory benefits is the stone. If it was, I should have no hesitation in stealing it from him, but, alas, there is no such thing in the sphere of social security as a philosopher's stone that would enable us to curb benefits without creating some losers.
A switch from means-tested to contributory benefits could save money only if some people who currently get means-tested benefits did not get the contributory benefit that replaced it. I am sure that the hon. Gentleman does not seriously propose to let people who have not been able to pay contributions starve or go without benefit. He plans to pay their contributions for them out of taxation so that they would still get benefits. It would be much like the present system, but with the names changed.
I will believe that the hon. Gentleman's system offers me the prospect of savings when he tells me who will be the losers from it. He is more forthcoming about who will be the winners. He implies that people who are not in work but excluded from benefit because they have a working spouse or sufficient savings to support themselves will be entitled to benefit. The cost of that would be very considerable indeed.
I hope that we can all agree that the best way to save money, and the way in which we are all obliged to seek to save money in the social security system, is by curbing fraud and abuse. I am glad that all hon. Members who have mentioned the subject have supported that view. The attack on fraud has always been a priority for me, and the Department has been increasingly successful in detecting 1149 and stopping it. The figures that I announced this week show that some £717 million of fraud was detected—well over £60 million ahead of the target that we set ourselves.
A couple of hon. Members suggested that we are not being sufficiently vigorous on housing benefit fraud; it is expected that an additional £170 million—double the savings last year—will be saved in the current year. That is in addition to the savings made by the Benefits Agency and is the result of the changes that we have introduced to incentivise local authorities to set about combating fraud in their areas. Many of them simply were not doing so before. In future, they will be penalised if they do not. They will be helped by the computer system that we have provided, initially for the London boroughs but which will possibly be extended nationwide, if it works, to help combat cross-border housing benefit fraud.
However, prevention is better than cure. We have been developing a strategy that is a quantum leap from a system based on detecting fraud that has already happened to one that prevents and deters it. In the past, we have been hamstrung by our ignorance of how much fraud there was and what sorts of fraud were going on. Unfortunately, those who defraud the system do not report to us. No one reports fraud as people report other crimes.
No other country has, up to now, found a means of measuring the amount of fraud. I have been wrestling with the problem since I came to the Department. During the past year or so, we have been carrying out pilot studies. We have tried to involve outside research bodies.
We have finally developed a system of benefit reviews which, I believe, represents a breakthrough, nationally and internationally, in providing us with a measure of fraud and a baseline against which we will be able to measure future success in preventing it. That, in turn, has enabled us to spell out our strategy and the three main methods that we are proposing in a programme of 20 different projects, details of which I have put in the Library.
First is the benefit payments card, which is designed, first and foremost, to stop abuse of the payments order book system. It will also contribute to the elimination of identity fraud, but the savings on abuse of the order book system—the giro system—will provide substantial savings that, alone, are sufficient to justify the change we are making.
The second method is more home visits and checks on people to ensure that they do not make a fraudulent or false claim initially and do not subsequently become false claimants through failure to report a change in circumstances which renders the original claim invalid. The third string to our bow is more data matching and the use of information technology so that we can identify false claims and focus our effort on areas where false claiming is greatest.
1150 The programme that I have announced has generated a very positive response nationwide, as have the changes and reforms that I have introduced in the welfare state as a whole. Indeed, I found myself the recipient of rather unfamiliar praise from newspapers such as the Independent and the Evening Standard. That seems to have provoked the Leader of the Opposition into a speedy attempt to sing our song in another outbreak of karaoke conservatism, as I have labelled it in the past.
Hon. Members will recall that, last October, the Commission on Social Justice published its report. Most commentators rightly dismissed it as 400 pages of uncosted waffle, but the right hon. Member for Sedgefield (Mr. Blair) begged to differ. After all, it had been commissioned by his predecessor and was the product of almost three years work by 16 prominent Labour sympathisers. He described the report asa remarkable piece of work … undoubtedly the most significant and comprehensive analysis of the welfare state since Beveridge … The Labour party",he pledged,will now discuss the proposals themselves.Yesterday, the right hon. Member for Sedgefield gave another speech on welfare. He did not mention the commission or its proposals. Instead of 400 pages of uncosted waffled, it contained only 400 words of—hon. Members have guessed it—uncosted waffle.
The right hon. Gentleman went on to indulge in imitation—which, I am told, is the sincerest form of flattery—of my approach to the welfare problem. He first followed me by setting out six principles. He then tried to do so by aping Tory language, but Labour's approach has only three principles. The first is to mimic Tory rhetoric. The second is to oppose any policies that are actually consistent with that rhetoric, and the third is to avoid any commitment to specific policies of its own. In short, Labour's only consistent welfare policy is hypocrisy.
As the hon. Member for Birkenhead said, reform of the welfare state is becoming the central issue of the politics of our time. It is the key problem facing all Governments worldwide. It will be a key issue in the forthcoming general election, as it was in the major election upset in the United States. This debate has shown that we are winning the welfare debate. I believe that that bodes well for my party and for the country.
§ Mr. Frank Field
The debate has shown, at least to me—and this is a surprising finding—how limited is the Secretary of State's view of the impact of social security changes on people's character. While he may worry about new Labour, we clearly have no need to worry about old Toryism. I think that we will continue this debate on Monday.
§ Question deferred, pursuant to paragraph (4) of Standing Order No. 52 (Consideration of Estimates).