HC Deb 29 November 1995 vol 267 cc1212-27 4.15 pm
The Secretary of State for Social Security (Mr. Peter Lilley)

With permission, Madam Speaker, I should like to make a statement on social security following my right hon. and learned Friend the Chancellor's Budget statement.

For half a century since the creation of the welfare state, expenditure on social security has, on average, grown 5 per cent. a year faster than inflation. As a result, it has taken an ever-growing share of national income and it has been an engine for rising taxes. Social security now costs the average working person £15 every working day.

That is why, when I became Secretary of State for Social Security, I launched my programme of step-by-step reforms. Those reforms are having an effect. During the next three years, spending should grow by little more than 1 per cent. per annum, well below the growth in the economy, so it will be a declining share of national income. It will leave scope for sustainable reductions in taxes. That in turn is the best of all ways to stimulate activity in the economy, to create jobs and to reduce benefit dependency.

Next year, planned spending on social security will be £90 billion. That is the figure I announced last year, and it is below the plans of two years ago. The figure includes nearly £3 billion to finance increased benefit rates. That is £600 million more than anticipated last year because it is based on the September inflation rate which jumped to 3.9 per cent., and has since fallen back to 3.2 per cent.

The measures that I am announcing today will save nearly £500 million in 1996–97 and more than £1 billion in 1998–99. Together, my reforms to date will save £3.5 billion next year. By the turn of the century, they will save £5 billion a year.

To be able to help those in need, we have to stop fraud. Despite tough control on overall running costs, I am channelling extra resources to the battle against fraud. Last year the Benefits Agency detected and stopped a record £700 million of fraud, and local authorities doubled their savings to £170 million, but prevention is better than detection and I am therefore pursuing an anti-fraud strategy based on prevention and deterrence.

In total my anti-fraud measures across all benefits will save £2.5 billion by 1998–99. The Benefits Agency has just started deploying one of the most powerful data matching systems in the world to identify suspicious claims. The agency will investigate claims and carry out more than 1 million home visits and other checks. It will tackle employers who collude with people who claim unemployment benefits while working. Next year, we will start computerising post offices and launch the benefit payment card.

Local authorities have responsibility for administering housing benefit. A recent study suggests that housing benefit fraud costs almost £1 billion a year, so I shall strengthen the financial incentives for local authorities to tackle fraud. I shall invite local authorities to compete for challenge funding for innovative anti-fraud measures. Next year, I shall introduce a national computer record of housing benefit claimants. That will stop people claiming from more than one local authority.

From October 1996, further changes in housing benefit will reduce abuse and waste. Some tenants abscond without making initial payments to landlords, so I shall enable local authorities to make the first giro payable to the landlord.

Most other benefits are already paid in arrears. I shall align housing benefit with them. That will stop the wrongful payments that can arise when housing benefit is paid in advance.

In October, I announced proposals to limit asylum seekers' access to benefits. Seventy per cent. of people who claim asylum do not arrive as refugees, but make a claim some while after entering the United Kingdom illegally, or as tourists, students or visitors.

From next year, I intend to allow benefit only for people who claim asylum as they enter the UK. When a claimant is found not to be a refugee, benefit will cease. My proposals will save £160 million next year. My right hon. and learned Friend the Home Secretary is speeding up asylum decisions, which will further reduce the benefit cost. We will offer refugees a sanctuary, but we will not be a soft touch for social security.

During the past two decades, there has been a huge increase both in the number of lone parents and in their cost to the taxpayer, which is expected to reach £9.4 billion this year—equivalent to more than £1,500 a year extra tax on each working family with children of their own to support.

The right approach is neither to penalise nor to promote lone parenthood. The benefit system, however, gives special assistance to lone parents, which couples do not have. In particular, two components of benefit for lone parents have no equivalent for couples—one-parent benefit and lone-parent premium. They cost about £600 million a year.

To start bringing treatment of one-parent and two-parent families more into line, I propose no increase in either benefit next April. My intention over time is to continue to narrow the gap between the benefits that go to lone parents and those that go to couples. At the same time, I intend to build on our existing measures to help lone parents back to work.

Family credit has been of particular benefit to lone parents and I have greatly improved it. I extended family credit to people working part time, gave an extra £10 a week to people working full time and introduced a £40 a week allowance for the cost of child care. I now propose to increase that allowance to £60 a week. That will be of particular benefit to those who want to return to full-time work and those with more than one child. The provision of nursery vouchers will be an additional help to parents of pre-school children.

Maintenance is also an important stepping stone to work. Even absent parents on benefit should contribute to their child's support, so I propose to double the minimum payment of child maintenance to £4.80 a week from April next year. In addition, from April 1997, I shall pilot a major new scheme, which will provide individual help for up to 25,000 lone parents to find jobs or training opportunities.

Finally, my right hon. Friend the Secretary of State for Education and Employment will extend the very successful scheme that has already created places to care for 50,000 children out of school hours, creating a further 18,000 places over the next three years.

As a result of the reforms already implemented, the proportion of lone parents in work has increased. The four measures that I have announced today will help more lone parents to become self-supporting.

Most young people starting out in work either stay with their parents, share a flat or find a bedsit, but those who are without a job can claim housing benefit and choose to occupy a better property than they could afford if in work, so for single people under 25 who are renting privately I propose to limit housing benefit to the average cost of shared accommodation in each locality. That will reduce disincentives to work, discourage young people from leaving home before they can afford to and reduce the attraction of moving to seaside resorts. The changes will apply from next October.

Couples, people with children and those exempted from the January housing benefit changes will not be affected. Local authorities will be given funds to prevent hardship in exceptional cases.

The new scheme should save more than £100 million over three years. Last year, I announced a scheme to continue maximum help with housing benefit during the first four weeks of work. I am now extending it to people who have been on a Government training course. In a separate measure, I intend to increase non-dependant deductions for housing costs.

The state system of social security provides decent help for those in need. However, the voluntary and charitable sectors provide extra help to cope with unusual circumstances. Voluntary bodies and charities can already pay £10 a week without the recipient losing benefit. I propose to double that limit to £20 a week. I believe that the change will be widely welcomed.

I propose some smaller measures to remove anomalies. I shall amend the industrial injuries benefit scheme so that those who receive reduced earnings allowance to compensate for loss of earnings should normally transfer to retirement allowance when they reach pension age. Separately, I shall align the mobility component of disability living allowance more closely with similar benefits that are withdrawn during hospital stays. I shall improve the information gathering used to make assessments for disability living allowance.

Britain already has one of the lowest non-wage labour costs in Europe. I intend to reduce it further. From April 1996, employers will qualify for one year's remission from their national insurance contributions for each person they take on who has been out of work for two years or more.

I am cutting the national insurance class 4 contributions for self-employed people by 1.3 per cent. from April 1996. This outweighs the loss of tax relief on these contributions announced by my right hon. and learned Friend the Chancellor. Finally, I intend to cut the main rate of employers' national insurance contributions by £500 million, some 0.2 per cent., from April 1997.

One of the main financial concerns facing elderly people is the prospect of needing long-term care. Providing for their needs in old age is, of course, one of the reasons why people save, but Age Concern and others have argued that the capital limits applying to people in residential and nursing care are tougher than the rules for people who stay in their own homes. They have urged us to raise the capital limits for residential and nursing care to those that apply to housing benefit.

We are going further than that. We are not just doubling the upper limit to £16,000 but more than tripling the lower limit. Under our proposals, people with up to £16,000 of assets will qualify for state help and people with capital of less than £10,000 will not be required to make any contribution from their capital towards the cost of basic residential care.

The new limits will apply from April 1996 at the latest to all people in long-term residential care or nursing homes. About 50,000 people should benefit in the first year. However, we also want to ensure that, in future, more people can afford care.

One of this country's major successes has been encouraging more private pension provision than any other European country. The challenge facing us now is to be equally successful in enabling people to make decent provision for long-term care. We are announcing three important proposals to stimulate the development of attractive savings and insurance schemes.

First, benefits from long-term care insurance will be tax free. Secondly, my right hon. and learned Friend the Chancellor is consulting on how occupational pension schemes can enable pensioners to defer some income early in retirement so that they have more income to help with the cost of long-term care. Thirdly, we will consult on partnership schemes that would enable people to retain even more of their assets in return for providing for a corresponding amount of their long-term care costs. That would encourage more people to make provision for themselves and it should help the insurance market to develop new products, as the risks would be limited.

Today's measures continue my step-by-step reforms of social security. I have protected the most vulnerable and I am creating a fairer and more modern benefit system, but our aim is to help more people off benefit altogether, and we are succeeding. We have fewer people out of work than any other major European country and more people in jobs.

My reforms will make a double contribution to that aim. They strengthen work incentives and encourage more people off welfare and into work. By controlling spending, they are easing the burden of taxes and helping to create a vibrant, free enterprise economy. That gives people the chance to find a job and provide for themselves, which is the best help that we can give them. It means that we can afford fair provision for those who are unable to work. My reforms give them a greater chance. I commend them to the House.

Mr. Chris Smith (Islington, South and Finsbury)

I remind the Secretary of State at the outset of the background against which his statement is delivered. It is a background of rising inequality in society. Earlier this year, the Joseph Rowntree trust inquiry into income and wealth showed that inequality in income had risen rapidly between 1977 and 1990 to reach a higher level than has been recorded at any time since the second world war. In Britain, the poor are getting poorer and the rich are getting richer.

The recent report of the Organisation for Economic Co-operation and Development shows that that growth is greater in the United Kingdom than in any other advanced industrial country. The number of people who are dependent on benefit has doubled since 1979, from one in 12 people to one in six. One in five non-pensioner households has no one in work. That is the background against which the statement comes; it is the background of a divided Britain. This statement and the Budget will make those divisions worse rather than better.

The proposal to pay housing benefit in arrears rather than in advance will not only harm landlords, but make it extremely difficult for people who need to claim housing benefit in order to move into new accommodation to do so. The present situation is bad enough—deposits are sought for which no funding is available—but this change will make it even worse.

The limitation of housing benefit amounts for young people under the age of 25 will have a series of malign consequences. It will force young people out of bedsits and one-bedroom flats into inadequate, unregulated and potentially dangerous multi-occupation dwellings. It will also be particularly damaging for young people coming out of care. They are often vulnerable and already face huge difficulties—we do not need to be reminded of recent tragedies to appreciate the dangers faced by lonely and vulnerable young people.

The proposal will also create a new unemployment trap. People on existing housing benefit who take up a job that might not last very long will be faced with a lower benefit and the potential loss of a home if they lose their job. The proposal will surely act as a disincentive to people in that position taking up work. Young people face a double whammy because, for the second year running, there is an increase in the non-dependant deduction on housing benefit that is well above the inflation rate. It will provide an incentive for families to remove adult children from the family home—and that is the proposal of a party that is supposed to favour keeping families together.

On the subject of families, perhaps I might discuss the measures for single parents. Is there not a fundamental fallacy at the heart of what the Government are doing? Are not they telling us that the costs of bringing up a child or children are exactly the same for a single-parent household as for a two-parent household? It is patently obvious that that is not the case in a host of different ways, especially because the costs of child care fall to be met by one income alone. One can never rely on the unpaid help of the other member of the household if one is a single parent.

The Conservative Government used to recognise that obvious truth. The 1985 Green Paper on the reform of social security argued that one-parent benefit should be continued as a contribution to the additional costs"— additional costs— faced by lone parents in bringing up children alone". It approved the introduction of a lone-parent premium in order to recognise the extra pressures faced by lone parents. In 1985, the Government recognised that extra pressures and extra costs were faced by lone parents; now it would appear that they do not. What has changed in the meantime? In the White Paper that followed that Green Paper, the Government went even further. They emphasised that The principle of continued recognition of the need for specific further help for lone parents on top of that provided by the family premium has been welcomed. It is that specific further help that they are now in the business of removing.

When will Conservative Members wake up to the fact that single parents are real people with real needs, and are not to be scapegoated at every turn?

Freezing lone-parent premium and one-parent benefit is bad enough. How will the phasing out happen? Will lone-parent premium be reduced year by year as family premium is uprated? Will single parents be confronted with a complete standstill in premium income as a result?

It is especially malign to attack one-parent benefit. It is an in-work benefit; it provides a through train from benefit into work. It is one of the few bits of the present welfare system that acts as a genuine bridge into work. We need to be removing disincentives that affect the move from benefit to work, not removing one of the precious few incentives that there are in the system.

I should like also to ask about the increase in minimum maintenance payments, from £2.35 to £4.80, under the Child Support Act 1991. Is not that a payment from absent parents that will frequently go straight into the pockets of the Treasury rather than the hands of the child or the caring parent? Will not many children experience no benefit from that change? Will it not also represent an effective reduction in income support for a single person, who will lose £2.45 under that measure but gain only £1.40 in the uprating? How can the Secretary of State justify his saying that a person in that position should live below what even the Government accept is the basic poverty line?

The increase in child care disregard on family credit—I must correct the Secretary of State, it is not an allowance, it is a disregard and there is an important distinction between the two—is welcome, but I note in passing that many people in real need already receiving maximum family credit will not be able to benefit from the increase in the disregard. I also note the failure to uprate any of the other disregards on housing benefit, family credit and income support.

Of course we welcome the raising of the long-term care thresholds, but is that not a very small step that leaves the great majority unassisted? The homes of many who live alone will be counted as assets, and a £16,000 threshold will surely go nowhere towards meeting their needs. Will not many thousands still live in fear of losing their homes? The Secretary of State has told us that 50,000 people will benefit from the change. Does that figure include those who may still be forced to sell their homes as a result of the current system? I must point out that the existing threshold has been frozen since 1988. Does the Secretary of State intend to uprate it regularly hereafter?

Does the introduction of a measure relating to industrial injuries in fact mean that those who have suffered an injury at work through no fault of their own will be forced out of reduced earnings allowance and lose three quarters of that benefit as a result? Will the Secretary of State also confirm that, of the cases that currently go to adjudication, only 3 per cent. have resulted in the refusal or reduction of disability living allowance? Given that small degree of error, will the right hon. Gentleman's information-gathering exercise—of which we have been given no details—be cost-effective in any way?

We consider the Secretary of State's proposals relating to asylum seekers to be inhumane and unjust. We do not believe that they will produce any real savings, especially in view of their impact on children and local authority care costs. We will oppose the proposals. We believe that the real way in which to tackle the problem is to speed up the assessment of applications. That is obviously not happening now, given that there is a backlog of 65,000—and it is growing.

I was pleased to note that the Government are to introduce tax exemption for compensation for mis-sold personal pensions for those who were wrongly advised to leave occupational pension schemes. That is a sensible measure: it represents the equivalent of a tax-free lump sum, and thus makes fiscal sense. What bearing has that proposal, however, on the position of those who may receive payments in respect of their having opted out of the state earnings-related pension scheme, rather than an occupational scheme, and what principles underlie the Secretary of State's approach in each case?

Today we have seen yet another relaunch of the fight against fraud. That fight is, of course, desperately important: every pound of which the system is defrauded is a pound less for someone in genuine need. Indeed, the Select Committee on Social Security recently told us that the figures were grossly underestimated, but why should we believe the targets that the Secretary of State has set today any more than the unachieved targets that he has announced in previous years? Last year, savings from the fight against fraud amounted to £717 million. The Red Book tells us that savings for 1998 will be £2.5 billion. Is the Red Book figure correct? How, precisely, will the Secretary of State achieve a 250 per cent. improvement in the tackling of fraud in the course of three years?

The Secretary of State has told us that there will be extra home visits each year. Even if the number reaches the 1 million home visits that the right hon. Gentleman anticipates, that figure will bring us barely above the 800,000 figure of 1989, and nowhere near the 6.6 million that took place in 1979. It is all very well to ring-fence special officers for fraud investigation, but should not every single member of DSS staff be part of the battle against fraud? If the administrative cost of the rest of the Secretary of State's Department is being squeezed, will that not damage the overall effort?

What about the level of errors? We know from the Comptroller and Auditor General's report that, in the last recorded year, £540 million was lost through departmental error in income support payments alone. Will not that be made worse, not better, by what is proposed in the statement? Will the Secretary of State now commit himself to implementing in full the Select Committee's recommendations on fraud?

Is not the statement just another example of the Government's approach to social security: not an overall coherent approach, just a piecemeal look, benefit by benefit, target group by target group—what can we take off mortgage payers or the unemployed one year and off young people and single parents the next? Surely the real way to set about reforming the welfare system and reducing the overall budget is not to harm the people concerned with benefit cut after benefit cut but to look at the system as a whole and put in place real measures to help them come off welfare and into work.

The statement showed precious little of the Chancellor's boasted social conscience. It has not protected the vulnerable. It does not come anywhere near a coherent benefit-to-work strategy. It deepens the divisions in a divided Britain. It is time for the Government who have created those divisions to go.

Mr. Lilley

How things have changed since the hon. Member for Glasgow, Garscadden (Mr. Dewar) was replaced by the hon. Member for Islington, South and Finsbury (Mr. Smith). The former was always careful to leave us entirely confused as to whether he was supporting or opposing what we had suggested. There is no doubt today that Labour has opposed every measure that we have introduced. The hon. Member for Islington, South and Finsbury has just chalked up a bill of £1 billion of savings forgone. How the Labour party can honour, "Vote in favour of our tax cuts" while opposing our savings remains to be seen. It is old Labour with a vengeance.

The hon. Gentleman began by referring to the Joseph Rowntree trust report. He clearly has not read the subsequent Institute for Fiscal Studies report which showed that, far from the poor getting poor and the rich getting richer, the poor have also got richer in the sense that the bottom 10 per cent. spend substantially more now than they did in 1979, and a high proportion of them move each year to higher deciles in income distribution.

The hon. Gentleman criticised our measures to restrict housing benefit for the under-25s to the sort of accommodation that most people who are paying for their housing when in work choose to occupy. I cannot see the logic of his position there.

The hon. Gentleman was worried about the danger of properties in multiple occupation. The answer to that is proper regulation and enforcement, not to try to manipulate the benefit system, which already leaves many people in such properties.

The hon. Gentleman referred to the difficulties that young people might have getting back to work. He clearly does not understand the run-on scheme, which I announced last year and which is being introduced from April. It will allow people to keep, for four weeks after returning to work, the maximum housing benefit even though they are in work and may no longer be entitled to it. That will be a major help for young people and others returning to work. There will, of course, be special provision for the more vulnerable groups, as there is in the changes that begin in January.

The hon. Gentleman does not seem to recognise that For decades politicians would not talk about the issue. Tax and benefit policy was squeezed to help single parents and childless couples. Single parents gained more help than did two parents. That policy has got to be reversed. Those are the words of the Chairman of the Social Security Select Committee in September this year, and I agree with him.

The hon. Gentleman does not seem to realise that one-parent benefit, when it was originally introduced by Barbara Castle—as both the Chairman of the Select Committee and Barbara Castle herself made clear—was never part of any strategy. It was merely an attempt at a quick fix. Barbara Castle said that it was an interim benefit for the one-parent family "for a year" and that it would cease when the child benefit scheme came into effect.

The hon. Gentleman argued that one-parent benefit is necessary as a work incentive. Since we are treating lone-parent premium—which is the counterpart to the out-of-work benefits—in parallel with one-parent benefit, there is no problem with any change in work incentives. We believe that the right approach is to encourage people back into work. We are doing that by increasing the child care disregard and by the range of other measures that I have announced today. Indeed, I calculate that the expansion of nursery care vouchers will almost cost more than the savings that we are achieving initially from our lone-parent measures. Once again, the Opposition would not be able to finance desirable schemes because they refuse to make the savings necessary for them.

The hon. Gentleman was completely silent on what Labour proposes to do about long-term care. He hinted that the Labour party was proposing to spend billions of pounds more of public subsidy. We believe that it is right to try to achieve as much success in enabling people to finance long-term care as we have had enabling them to finance decent pension provision. That is the burden of the various measures that the Chancellor and I are introducing.

The reduced earnings allowance, as its name suggests, is a compensation for people who have suffered injuries that have reduced their earning capacity. The allowance is intended to apply to people during their working lives. Because of some anomalies, it does not stop for all people when they reach retirement age. We are trying to ensure that, in the majority of cases, the allowance will stop and be replaced by the retirement allowance, which is appropriate in retirement.

Mr. Smith

When they have less income.

Mr. Lilley

Of course most people have less income when they retire than when they are at work, but they none the less get some compensation through the retirement allowance to acknowledge the fact that they have been able to make less provision during their working life because of the industrial injury.

A fair structure of benefits has been agreed by Parliament and we are now trying to implement that properly through regulations.

The hon. Gentleman says that all we should do for asylum seekers is to speed up the process. The Home Secretary is doing a great deal to that end. I understand that the Opposition are opposing the measures that would enable my right hon. and learned Friend to speed up the process. As long as we are a honeypot attracting people for benefit reasons, we will find it impossible to give proper consideration to the genuine refugees who reach our shores—whom we all want to help.

I am not surprised that the hon. Gentleman chooses to try to ridicule the changes that have been made to assist detection of fraud. He said that our previous targets have not been achieved. He is wrong. Our target for the current year was about £648 million of fraud detected and stopped by the Benefits Agency. The actual figure was £717 million, just by the Benefits Agency. Fraud savings have also been made by local authorities and by the Employment Service's fraud department, which has now merged with my Department. That is why there is an apparent disparity in the figures that the hon. Gentleman quoted.

There will be a substantial increase in the fraud savings because of the extra resources that I have devoted to it and the strategy that I am pursuing, which the Labour party appears to oppose. I remind the hon. Gentleman that the hon. Member for Sheffield, Brightside (Mr. Blunkett) has said that Labour has too long been associated with the freeloaders.

Several hon. Members


Madam Speaker

Order. That initial exchange has taken 37 minutes. I must now insist that hon. Members put brisk questions. I equally insist on brisk answers because we have other business to conduct in the House today.

Sir Andrew Bowden (Brighton, Kemptown)

I welcome the announcement on long-term care. Will my right hon. Friend enlarge a little on partnership schemes? Does he foresee those schemes including the ability to purchase a room in a residential home or some sort of equity in a residential home so that a person who moves into a home can retain some capital for his or her family in the future?

Mr. Lilley

My right hon. Friends and I will issue a paper to consult on the possibility of proceeding with partnership schemes. It would be wrong to speculate now on the full extent of them, but I note the point that my hon. Friend has made. I know of his great interest in this matter and I am sure that we shall receive helpful and extremely well-informed contributions from him once the proposal is in the public domain.

Mr. Simon Hughes (Southwark and Bermondsey)

My question, too, is about how the Secretary of State's announcement affects older people. Why has not he altered the insulting additional 25p payment for over-80 pensioners, which has remained in place for so long? Why, after 23 years, has he still not adjusted the Christmas bonus, which remains at £10? Was not the Chancellor's residential care announcement yesterday a giveaway, as it increased capital allowances? Will not we have a takeaway from the Secretary of State for the Environment tomorrow when he announces that local authority funds will be cut? Is not this an attempt at a getaway by the Secretary of State for Social Security because he is not increasing the special transitional grant for community care?

Mr. Lilley

I can answer that question briskly. Unlike the Opposition, we are in serious government and cannot afford to hand out money like confetti.

Mr. Tim Smith (Beaconsfield)

May I congratulate my right hon. Friend on the meticulous and patient way in which he has carried out his comprehensive review of social security spending since 1992? What would total spending have been if none of the changes had been made, and what would have been the cost to the taxpayer?

Mr. Lilley

I am grateful to my hon. Friend. If none of the changes had been made, expenditure next year would have been about £3.5 billion higher than it will be; by the end of the century it would have been £5 billion higher; and in the next century it would have been three times that figure—nearer £15 billion higher.

Mr. Frank Field (Birkenhead)

As every statement by the Secretary of State is incomplete until he has announced new anti-fraud measures, when does he expect to have an adequate anti-fraud programme in place? When will it be safe for taxpayers to trust him with their £90 billion contribution?

Mr. Lilley

We can make greater progress than any previous Government because of our benefit reviews, which enable us to identify, measure and investigate the different kinds of fraud. Those reviews are taking place benefit by benefit. Provisional results from the review of housing benefit show a substantial amount of fraud there. That information enables us to carry forward anti-fraud measures against housing benefit with local authorities. I imagine that the other benefits are likely to show a lower level of fraud. The answer to the hon. Gentleman's final question is that there is greater security with this Government, and me in charge of the anti-fraud campaign, than there would be with anyone else, with the possible exception of the hon. Gentleman.

Mr. John Townend (Bridlington)

Will my right hon. Friend accept my congratulations on all the savings that he has made? I am slightly mystified, however, in view of the great number of savings that he has outlined to the House, that page 126 of the Red Book shows that social security spending has gone up, compared with plans for 1996–97, by £1,040 million and that, for 1997–98, it is proposed that the increase from previous plans be a further £550 million.

Mr. Lilley

I am grateful to my hon. Friend. I think that I can help him with the figures. They refer to the control total, which forms only part of the actual total and excludes all cyclical benefits in my Department. Offsetting savings have been made in some areas of cyclical benefits, which are not included in the control total. We excluded cyclical benefits because we thought that it was right to let the cyclical effect of increased spending occur during the recession and be fully financed by extra taxation. As I said this morning, only two things drive up taxes—recession and a Labour Government. We are coming out of recession; let us ensure that we do not have a Labour Government. We can then be certain of sustained lower taxes.

Mr. Terry Rooney (Bradford, North)

The Secretary of State will be aware that one of the greatest areas of fraud is among corrupt employers who work in the black economy. Why has he cut Contributions Agency field inspectors by 60 per cent.?

Mr. Lilley

I said in my statement, quite contrary to what the hon. Gentleman says, that with the integration of the Employment Service fraud officers and my Benefits Agency staff, there will be a special effort to crack down on collusion between employers and employees. I am glad to have the hon. Gentleman's support for that.

Mr. Peter Luff (Worcester)

In my constituency and around the country the elderly and those approaching retirement will welcome the measures that my right hon. Friend has announced for long-term care and those that my right hon. and learned Friend the Chancellor announced yesterday about tax on savings. Will my right hon. Friend continue with research to find ways to reward rather than penalise those who have been prudent enough to prepare for their old age?

Mr. Lilley

I am grateful to my hon. Friend for his welcome. He is right to say that, going beyond the measures that I have announced and including those announced by my right hon. and learned Friend the Chancellor, this is a Budget for everybody but specifically for the prudent and the elderly. We think that those who are prudent enough to save for retirement should be encouraged to do that, hence the lower tax on savings, measures to promote investment for long-term care and the recognition of the comparative harshness of the previous capital rules.

Mr. Dennis Skinner (Bolsover)

Does the Secretary of State recall that in the past few weeks, the nation has been aghast at the stories, emanating from around Gloucester and elsewhere, of young women in particular roaming the streets and being picked up by Rose and Fred West? By proposing to take away some of the housing benefit from under-25s, he will create a situation in which thousands of young people will be roaming the streets. Any decent Government would withdraw that proposal. If he wants to do something about high rents, he should tackle the landlords—his friends.

Mr. Lilley

Even by the hon. Member's standards, that is a distasteful attempt to exploit a ghastly tragedy for party political ends. We propose to continue housing benefit for the under-25s but to restrict it to the level that is payable for shared accommodation. That is only right and proper. A number of the measures that we have announced will prevent abuse by both landlords and tenants.

Mr. Bernard Jenkin (Colchester, North)

Is it not disturbing that total spending on social security is still rising despite all my right hon. Friend's efforts to curb it? Does not that demonstrate that, unless we continue to reform social security and tackle fraud, the burden will continue to rise and threaten the country's prosperity?

Mr. Lilley

I agree that further work needs to be done. I spelt out that there would be a step-by-step, sector-by-sector review of social security. That is the way in which we have approached it. None the less, it is worth noting that the average growth- in real terms of social security spending over its first 50 years was 5 per cent. a year, while over the next three years it is expected to be a little over 1 per cent. That is a major change, and this must be one of the very few countries in the developed world that can expect social security to take a declining proportion of national income in the years to come, thereby reducing taxes and the burdens on creating jobs.

Ms Angela Eagle (Wallasey)

Given that the Government have admitted that lone parents face extra costs, can the Secretary of State explain why the children of lone parents should be made to suffer because of the marital status of their parents, which after all is not their fault?

Mr. Lilley

Lone parents receive extra money relative to couples in a number of ways and not just through lone-parent premium and lone-parent benefit. The lone parent receives £10 a week more in her or his personal allowance than when she or he was part of a couple. That reflects the greater cost of living alone. There are a number of other changes, the most important of which is the introduction of family credit. It is heavily weighted to the benefit of lone parents and has significantly increased the chances of lone parents returning to work. We must build on that.

Mr. Nick Hawkins (Blackpool, South)

The measures announced by my right hon. Friend will certainly be welcome in many seaside resort constituencies, not least because of the help that he has announced for those who are in long-term care, his raising of capital limits and his continuing support for the most vulnerable pensioners. Is he surprised to know that, contrary to what the hon. Member for Bolsover (Mr. Skinner) said, Labour councillors in many seaside resorts own and run houses in multiple occupation and benefit as unscrupulous landlords? That is the record of Labour in power.

Mr. Lilley

My hon. Friend speaks with great knowledge of this matter and I am sure that his remarks will bite home among Opposition Members. I am grateful to him for his welcome, and I know that the measures that I have announced will be well received not just in Blackpool but in many other seaside and inland resorts.

Mr. Alan Howarth (Stratford-on-Avon)

What assessment has the Secretary of State made of the cost to public expenditure of his decision to cut the value of lone-parent benefit, thus making it harder for lone parents to be in work? What assessment has he made of the effect of reducing the lone-parent premium which, through impoverishing households, means that more children are likely to be taken into care? On what evidence does he justify his decision to erode lone-parent premium which was introduced by his predecessor in 1988 in recognition of the additional costs and pressures faced by lone parents? Why does the Conservative party insist on stigmatising lone parents?

Mr. Lilley

That is nonsense, as my hon. Friend—well, he is a friend, though not in the technical sense that he was before—used to know. The hon. Gentleman is talking absolute nonsense. We are moving lone-parent premium and one-parent benefit in parallel and there is thus no change in work incentives. We are simultaneously improving rewards for work through changes to family credit, making it available to part-time workers, increasing its value for full-time workers and covering more generously the cost of child care. He should recognise and welcome those changes. When he has considered them, perhaps he will review which side of the House he should sit on.

Dr. Robert Spink (Castle Point)

In welcoming my right hon. Friend's reduction, albeit marginal, in non-wage labour costs, may I ask him to resist Opposition policies that would increase not just non-wage labour costs through the adoption of the social chapter but direct labour costs because of the minimum wage? That would happen at all salary levels because the policies advocated by those on the Opposition Benches would put people out of work.

Mr. Lilley

Far more important than anything that we can do directly to improve the benefits system are measures that increase the number and availability of jobs for those who would otherwise depend on the benefits system. We have been more successful than our counterparts in Europe in getting unemployment down and getting people into work. We have about 68 per cent. of people of working age in work. On the continent the average is 60 per cent. If we had the same average as that on the continent, which the policies of the Opposition might well achieve, there would be 3 million fewer people in work in this country. That is a measure of how important it is to stay out of the social chapter and continue to reduce taxes and the costs of creating jobs.

Ms Roseanna Cunningham (Perth and Kinross)

Does the Minister recall the warnings prior to the removal of benefit for 16 and 17-year-olds that its abolition would simply result in an increase in homelessness? Does he not understand that because of that there is widespread support for the restoration of that benefit, particularly in Scotland? I am happy to say that my party is in favour of that. Does he not understand that there will be further widespread revulsion at the cuts in housing benefit because they are likely to lead to yet another increase in homelessness? People will be afraid that instead of seeing a "Big Issue" vendor on every street corner they will see one in every doorway as a direct result of the Government's policy.

Mr. Lilley

I understand that the Opposition think that the working of the rules that we introduced to remove automatic entitlement to benefit from 16 and 17-year-olds and instead give guaranteed training places should be extended to everybody under the age of 25. Therefore they have found evidence opposite to that of the hon. Lady, or at least the hon. Member for Dunfermline, East (Mr. Brown) finds the opposite sort of evidence because he thinks that young people under 25 should have benefit removed if they do not fulfil his edicts. However, I gather that that view is not universally shared by his Front-Bench colleagues.

Mr. Anthony Coombs (Wyre Forest)

Does my right hon. Friend agree that, in my constituency, few things annoy thrifty pensioners more than seeing young people touring the country on virtually unlimited housing benefit? Does he therefore agree that those pensioners will welcome the idea that there should be a limit to the costs of housing benefit on the basis of locally shared accommodation for under-25s? How will that be calculated?

Mr. Lilley

I am grateful to my hon. Friend for his welcome. The proposal is that the structure set in place by the January changes, under which rent officers will assess the average reference rent for each type of property in each region, will apply to shared accommodation. Rent officers will set a reference—effectively, the average level of such properties in each locality. That will be the maximum to which people under 25 will be entitled to claim housing benefit.

Mr. Jeff Rooker (Birmingham, Perry Barr)

Why is it possible, even after this statement, for a landlord owning and renting property and receiving an income to receive housing benefit personally? Why do not the same capital disregard rules apply to that landlord as apply to elderly people who may, even after the statement, have to dispose of their property to go into care? Why do we featherbed landlords so that they may obtain housing benefit? The Secretary of State looks so surprised: he does not even know about it.

Mr. Lilley

The hon. Gentleman might be right. He might have found something that I did not know about, in which case I shall be only too happy learn, but I am not sure that there is any such rule as he suggests, unless he is merely saying that landlords receive rent paid from housing benefit, which of course they do. If they did not, they would not rent out their properties to people on housing benefit. We could discuss that matter afterwards. I would be only too happy to become better informed on that matter.

Mr. Tam Dalyell (Linlithgow)

What is the estimated cost to the Treasury, to the nearest £5 million please, of making benefits from long-term care insurance tax free'? There must be a notional sum in the brief somewhere.

Mr. Lilley

There must be but, that being a tax matter, it is not a figure that I carry in my head and no Treasury Minister is within earshot, so I shall have to write to tell the hon. Gentleman what the number is. [HON. MEMBERS: "It is in the Red Book."] It may well be in the Red Book, but I am sorry—I cannot give the figure to the hon. Gentleman off the cuff.

Mr. Harry Barnes (North-East Derbyshire)

One of the Government's objectives is to get rid of inheritance tax. One of the few elements that many pensioners hold that could be an inheritance in future is their homes, which they are proud of, but which are small and would not bring much on the market. They could bring more, however, than the £16,000 that the Minister has mentioned within the changes, if they take place. Will he not consider protecting the inheritance that elderly people have, so that it is not ripped off by people in private nursing homes?

Mr. Lilley

As I mentioned, and as the Chancellor mentioned yesterday, we are considering schemes whereby people would be able to protect an additional element of their capital by making prior provision for a certain amount of long-term care costs. If they have to activate that and spend that money, or the insurance company on their behalf has to spend that money, there will be a corresponding increase in the capital limit applying to them—that is the rough structure of the proposal. We are open to discussion about how it should work in detail, but it is precisely the sort of thing that the hon. Gentleman suggests his constituents would like, and I am sure that, as a result, they will be voting Tory.

Mr. Paul Flynn (Newport, West)

Will the Secretary of State instruct his anti-fraud staff to read his statement today to discover whether it is fraudulent to deny any increases on 30 benefits, including the widow's payment, which is £1,000, but would be £1,881 if it had been increased along with earnings'? Will he include in the Official Report a full statement on all benefits that have not been increased today? Some of them have never been increased. They replace benefits that were increased by inflation. Will he explain his reasons for freezing them?

Mr. Lilley

If all benefits had been uprated in the way in which the hon. Gentleman suggests, the cost would run into billions. Like the hon. Member for Southwark and Bermondsey (Mr. Hughes), he belongs to the confetti tendency of public expenditure. Any responsible party or Government simply cannot do all the things that he would like to do.

Mr. Jeremy Corbyn (Islington, North)

Will the Secretary of State consider that his naked appeal to the xenophobia of the Tory party has brought us the habitual residence test and all the misery that goes with it? He now proposes to take benefits away from asylum seekers from next year. Bearing it in mind that Britain has fewer asylum seekers than any other European country and the lowest number of acceptances, he is appealing to the racism of his party. His proposals will lead to destitution among people who are fleeing oppression.

Mr. Lilley

With respect, this is not a racial issue, but a benefits issue. The people who play the racial card are those who want to divide for their own reasons. That is monstrous and irresponsible. We believe that it is not right that people who enter the country as tourists, business men or other types of visitor on the understanding that they will not be a burden on public funds, who have been here for some while and who decide, typically when their visa runs out, to lodge a claim for asylum, should become entitled to benefits. As for the treatment of asylum seekers who have had their claim rejected by the Home Office, we treat their right to benefits during the period of appeal on the same basis as we treat the right of British citizens who appeal against refusal of benefit. Far from being racist, therefore, we are putting people on an equal footing.

Madam Speaker

We now come to the statement by the Secretary of State for Scotland.

Mr. Dalyell

On a point of order on this statement, Madam Speaker.

Madam Speaker

I cannot take a point of order at this stage. Other hon. Members are waiting to hear the statement and it is usual for points of order to be taken at the end of statements.